UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2020

 

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from          to

 

Commission File Number: 001-36745

 

Applied DNA Sciences, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware 59-2262718
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
   
50 Health Sciences Drive  
Stony Brook, New York 11790
(Address of principal executive offices) (Zip Code)

 

631-240-8800

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.001 par value   APDN   The Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x   Yes    ¨    No

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

x   Yes    ¨    No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): 

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer x Smaller reporting company x
  Emerging Growth Company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨   Yes    x    No

 

On July 31, 2020, the registrant had 5,142,779 shares of common stock outstanding.

 

 

 

 

 

 

Applied DNA Sciences, Inc.

 

Form 10-Q for the Quarter Ended June 30, 2020

 

Table of Contents

 

    Page
PART I - FINANCIAL INFORMATION    
     
Item 1 - Condensed Consolidated Financial Statements (unaudited)   1
     
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations   19
     
Item 3 - Quantitative and Qualitative Disclosures About Market Risk   29
     
Item 4 - Controls and Procedures   30
     
PART II - OTHER INFORMATION    
     
Item 1 – Legal Proceedings   31
     
Item 1A – Risk Factors   31
     
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds   31
     
Item 3 – Defaults Upon Senior Securities   31
     
Item 4 – Mine Safety Disclosures   31
     
Item 5 – Other Information   31
     
Item 6 – Exhibits   32

 

 

 

 

Part I - Financial Information 

Item 1 – Financial Statements

 

APPLIED DNA SCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    June 30,
2020
    September 30,
2019
 
      (unaudited)          
ASSETS                
Current assets:                
Cash and cash equivalents   $ 10,924,968     $ 558,988  
Accounts receivable, net of allowance of $26,131 at June 30, 2020 and $4,500 at September 30, 2019, respectively     231,192       839,951  
Inventories     444,640       142,629  
Prepaid expenses and other current assets     554,693       604,740  
Total current assets     12,155,493       2,146,308  
                 
Property and equipment, net     750,532       226,221  
                 
Other assets:                
Deferred offering costs     -       109,698  
Deposits     95,027       62,351  
Goodwill     285,386       285,386  
                 
Intangible assets, net     688,594       734,771  
Total Assets   $ 13,975,032     $ 3,564,735  
                 
                 
LIABILITIES AND EQUITY (DEFICIT)                
Current liabilities:                
Accounts payable and accrued liabilities (including related party of $27,097 at June 30, 2020)   $ 1,640,552     $ 1,616,997  
Promissory notes payable-current portion     376,351       -  
Deferred revenue     431,214       628,993  
Total current liabilities     2,448,117       2,245,990  
                 
Long term accrued liabilities     785,435       621,970  
Promissory notes payable-long term portion     470,438       -  
Secured convertible notes payable, related party. net of debt issuance costs     1,492,292       1,442,497  
Secured convertible notes payable, recorded at fair value     -       102,777  
Total liabilities     5,196,282       4,413,234  
                 
Commitments and contingencies (Note H)                
                 
Applied DNA Sciences, Inc. Stockholders’ Equity (Deficit) :                
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; -0- shares issued and outstanding as of June 30, 2020 and September 30, 2019, respectively     -       -  
Series A Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; -0- issued and outstanding as of June 30, 2020 and September 30, 2019, respectively     -       -  
Series B Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; -0- issued and outstanding as of June 30, 2020 and September 30, 2019, respectively     -       -  
                 
Common stock, par value $0.001 per share; 500,000,000 shares authorized; 4,968,197 and 1,207,993 shares issued and outstanding as of June 30, 2020 and September 30, 2019, respectively     4,969       1,208  
Additional paid in capital     274,493,010       255,962,922  
Accumulated deficit     (265,712,717 )     (256,805,589 )
Applied DNA Sciences, Inc. stockholders’ equity (deficit):     8,785,262       (841,459 )
Noncontrolling interest     (6,512 )     (7,040 )
Total equity (deficit)     8,778,750       (848,499 )
                 
Total liabilities and equity (deficit)   $ 13,975,032     $ 3,564,735  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

  1  

 

 

APPLIED DNA SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

    Three Months Ended June 30,     Nine Months Ended June 30,  
    2020     2019     2020     2019  
Revenues:                                
                                 
Product     56,911     $ 392,599       492,582     $ 885,736  
Service     374,605       1,660,858       1,124,926     $ 2,830,511  
Total revenues     431,516       2,053,457       1,617,508       3,716,247  
                                 
Cost of revenues     154,804       270,883       566,417       557,508  
                                 
Operating expenses:                                
Selling, general and administrative     2,589,042       2,407,223       7,247,999       8,018,516  
Research and development     814,599       719,668       2,082,043       2,080,610  
Depreciation and amortization     61,865       87,315       203,469       320,039  
                                 
Total operating expenses     3,465,506       3,214,206       9,533,511       10,419,165  
                                 
LOSS FROM OPERATIONS     (3,188,794 )     (1,431,632 )     (8,482,420 )     (7,260,426 )
                                 
Other (expense) income:                                
Interest expense (including related parties interest of $26,267 and $75,577 for the three and six months ended June 30, 2019, respectively)     (28,624 )     (38,177 )     (86,811 )     (107,206 )
Other expense, net     (72,694 )     (8,102 )     (334,527 )     (31,356 )
                                 
Loss before provision for income taxes     (3,290,112 )     (1,477,911 )     (8,903,758 )     (7,398,988 )
                                 
Provision for income taxes     -       -       -       -  
                                 
NET LOSS     (3,290,112 )     (1,477,911 )     (8,903,758 )     (7,398,988 )
Less: Net loss (income) attributable to noncontrolling interest     662       -       (528 )     -  
NET LOSS attributable to Applied DNA Sciences, Inc.     (3,289,450 )     (1,477,911 )     (8,904,286 )     (7,398,988 )
Deemed dividend related to warrant modifications     -       -       2,842       -  
NET LOSS applicable to common stockholders   $ (3,289,450 )   $ (1,477,911 )   $ (8,907,128 )   $ (7,398,988 )
                                 
Net loss per share applicable to common stockholders-basic and diluted   $ (0.72 )   $ (1.55 )   $ (2.54 )   $ (8.46 )
                                 
Weighted average shares outstanding-basic and diluted     4,577,997       952,835       3,512,149       874,272  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

  2  

 

 

APPLIED DNA SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

 

For the Nine Month Period Ended June 30, 2019
        Common     Additional          
    Common     Stock     Paid in     Accumulated        
    Shares     Amount     Capital     Deficit     Total  
Balance, October 1, 2018     752,802     $ 753     $ 249,119,833     $ (248,366,083 )   $ 754,503  
                                         
Common stock issued in public offering, net of offering costs     137,500       137       2,262,234       -       2,262,371  
Impact of adoption of new accounting pronouncements included in accumulated deficit     -       -       -       493,223       493,223  
Stock based compensation expense     -       -       490,244       -       490,244  
Net loss     -       -       -       (3,234,320 )     (3,234,320 )
Balance, December 31, 2018     890,302       890       251,872,311       (251,107,180 )     766,021  
                                         
Common stock issued in public offering, net of offering costs     12,500       13       201,207       -       201,220  
Exercise of warrants     40,578       41       718,023       -       718,064  
Stock based compensation expense     -       -       267,094       -       267,094  
Net loss     -       -       -       (2,686,757 )     (2,686,757 )
Balance, March 31, 2019     943,380       944       253,058,635       (253,793,937 )     (734,358 )
Exercise of warrants     14,798       15       269,422       -       269,437  
Stock based compensation expense     -       -       154,304       -       154,304  
Net loss     -       -       -       (1,477,911 )     (1,477,911 )
Balance, June 30, 2019     958,178     $ 959     $ 253,482,361     $ (253,793,937 )   $ (1,788,528 )

 

For the Nine Month Period Ended June 30, 2020
        Common     Additional              
    Common     Stock     Paid in     Accumulated     Noncontrolling        
    Shares     Amount     Capital     Deficit     Interest     Total  
Balance, October 1, 2019     1,207,993       1,208       255,962,922       (256,805,589 )     (7,040 )     (848,499 )
Common stock issued in public offering, net of offering costs     2,285,000       2,285       10,527,745       -       -       10,530,030  
Deemed dividend - warrant repricing     -       -       2,842       (2,842 )     -       -  
Stock based compensation expense     -       -       205,490       -       -       205,490  
Net loss     -       -       -       (2,662,711 )     (30 )     (2,662,741 )
Balance, December 31, 2019     3,492,993       3,493       266,698,999       (259,471,142 )     (7,070 )     7,224,280  
Exercise of warrants     566,950       567       2,767,566       -               2,768,133  
Stock based compensation expense     -       -       227,268       -               227,268  
Net loss     -       -       -       (2,952,125 )     1,220       (2,950,905 )
Balance, March 31, 2020     4,059,943       4,060       269,693,833       (262,423,267 )     (5,850 )     7,268,776  
Exercise of warrants     908,254       909       4,434,358       -               4,435,267  
Stock based compensation expense     -       -       364,819       -               364,819  
Net loss     -       -       -       (3,289,450 )     (662 )     (3,290,112 )
Balance, June 30, 2020     4,968,197     $ 4,969     $ 274,493,010     $ (265,712,717 )   $ (6,512 )   $ 8,778,750  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

3

 

 

APPLIED DNA SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

    Nine Months Ended  
    June 30,  
    2020     2019  
Cash flows from operating activities:                
Net loss   $ (8,903,758 )   $ (7,398,988 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     203,469       320,039  
Stock-based compensation     797,577       911,642  
Amortization of debt issuance costs     19,195       13,947  
Provision for bad debts     21,880       (8,633 )
Change in operating assets and liabilities:                
Accounts receivable     586,879       1,251,014  
Inventories     (302,011 )     (88,377 )
Prepaid expenses and other current assets and deposits     17,371       83,947  
Accounts payable and accrued liabilities     (402,777 )     384,607  
Deferred revenue     (197,779 )     (554,328 )
                 
Net cash used in operating activities     (8,159,954 )     (5,085,130 )
                 
Cash flows from investing activities:                
                 
Purchase of property and equipment     (19,657 )     (68,486 )
Purchase of intangible asset     (36,525 )     -  
                 
 Net cash used in investing activities     (56,182 )     (68,486 )
                 
Cash flows from financing activities:                
                 
Proceeds from Promissory notes (related parties $550,000)     -       550,000  
Proceeds from Promissory notes     846,789       -  
Net proceeds from exercise of warrants     7,203,401       987,498  
 Net proceeds from sale of common stock and warrants     10,639,728       2,463,700  
Repayment of convertible notes     (107,802 )     -  
Net cash provided by financing activities     18,582,116       4,001,198  
                 
Net increase (decrease) in cash and cash equivalents     10,365,980       (1,152,418 )
Cash and cash equivalents at beginning of period     558,988       1,659,564  
Cash and cash equivalents at end of period   $ 10,924,968     $ 507,146  
                 
Supplemental Disclosures of Cash Flow Information:                
Cash paid during period for interest   $ 45,354     $  
Cash paid during period for income taxes   $     $  
                 
Non-cash investing and financing activities:                
Impact of adoption of new accounting pronouncements included in accumulated deficit   $ -     $ 493,223  
Interest paid in kind (related party of $51,824 for the nine month period ended June 30, 2019)   $ 35,625     $ 65,090  
Offering costs incurred, and included in accounts payable   $ -     $ -  
Property and equipment acquired, and included in accounts payable   $ 611,046     $ -  
Deemed dividend-warrant repricing   $ 2,842     $ -  
Deferred offering costs reclassified to additional paid in capital   $ 109,698     $ -  
Intangible asset costs incurred, and included in accounts payable   $ 14,375     $ -  

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

4

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE A — NATURE OF THE BUSINESS

 

Applied DNA Sciences, Inc. (“Applied DNA,” or the “Company”) develops and markets DNA-based technology solutions utilizing its LinearDNATM large-scale polymerase chain reaction (“PCR”) based manufacturing platform which is capable of producing large scale DNA. The Company’s proprietary platform produces large quantities of DNA for use in the nucleic acid-based in vitro diagnostics and preclinical nucleic-acid based drug development and manufacturing markets including its patent-pending diagnostic (LineaTM COVID-19 Assay Kit) used to detect the presence of SARS-COV-2. The Company also produces large quantities of DNA for supply chain security, anti-counterfeiting and anti-theft applications. The Company is also developing its invasive circulating tumor cell capture and identification technology (“iCTC Technology”) which uses a patented functional assay to capture live invasive circulating tumor cell and associated lymphocytes that can be identified and expanded for further analysis. Applied DNA’s LinearDNATM PCR platform is capable of producing large scale DNA.

 

Applied DNA is currently engaged in the large scale production of DNA via its LinearDNATM platform for two primary lines of services:

 

Biotherapeutic Contract Research and Manufacturing

 

The Company’s patented continuous flow PCR systems and other proprietary PCR-based production technologies allow for the large-scale production of specific DNA sequences. The Company has the ability to manufacture DNA sequences for use in nucleic acid-based therapeutics such as adoptive cell therapies (CAR T and TCR therapies), DNA vaccines, RNA therapies, gene therapy and nucleic acid-based in vitro diagnostics.

 

  · Nucleic Acid Therapeutic and Diagnostic Manufacturing: The Company uses its LinearDNATM platform to rapidly produce customized DNA for use by its customers engaged in preclinical nucleic acid-based drug development. Through the Company’s proprietary technology it produces large quantities of DNA used in various nucleic acid-based drug candidates including adoptive cell therapies, vaccines (including anti-viral and cancer), gene therapies, RNA-based therapies, clustered regularly interspaced short palindromic repeats (CRISPR) based therapies and other nucleic acid-based therapies. In addition, the Company uses its LinearDNATM platform to produce very large gram-scale quantities of DNA for the in vitro diagnostic market where the Company’s DNA is used for both commercially available diagnostics and diagnostics under development.  The Company has also developed a patent-pending nucleic acid-based in vitro diagnostic (LineaTM COVID-19 Assay Kit) to detect the presence of SARS-CoV-2 (the virus that causes COVID-19) RNA in patient specimens. During April 2020, the Company entered into an agreement with Stony Brook University Hospital for the validation of its LineaTM COVID-19 Assay Kit. On May 13, 2020 the Company received Emergency Use Authorization (“EUA”) from the FDA for the clinical use of the Linea COVID-19 Assay Kit for the qualitative detection of nucleic acid from SARS-CoV-2 in respiratory specimens including anterior nasal swabs, self-collected at a healthcare location or collected by a healthcare worker, and nasopharyngeal  and oropharyngeal swabs, mid-turbinate nasal swabs, nasopharyngeal washes/aspirates or nasal aspirates, and bronchoalveolar lavage specimens collected by a healthcare worker from individuals who are suspected of COVID-19 by their healthcare provider. Under the EUA, testing is limited to laboratories certified under the Clinical Laboratory Improvement Amendments of 1988, 42 U.S.C. §263a, that meet requirements to perform high complexity tests which certification the Company has applied for but has not yet obtained.  Subsequently, during July 2020, the Company was granted two EUA amendments that expand the installed base of PCR equipment platforms on which the Company’s LineaTM COVID-19 Assay Kit can be processed and increases the throughput of the LineaTM COVID-19 Assay Kit through the use of automated RNA extraction. The scope of the EUA, as amended, is expressly limited to use consistent with the Instructions for Use by authorized laboratories, certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) to perform high complexity tests. The EUA will be effective until the declaration that circumstances exist justifying the authorization of the emergency use of in vitro diagnostics for detection and/or diagnosis of COVID-19 is terminated or until the EUA’s prior termination or revocation. The Company’s LineaTM COVID-19 Assay Kit has not been FDA cleared or approved, and the EUA’s limited authorization is only for the detection of nucleic acid from SARS-CoV-2, not for any other viruses or pathogens.

 

  · Contract Research: The Company provides preclinical contract research services for the preclinical nucleic acid-based therapeutic markets. The Company works with biotech and pharmaceutical companies to adapt plasmid-based and/or viral transduction-based preclinical biotherapeutics into PCR produced linear DNA-based forms that can be manufactured on its LinearDNATM platform. In addition, the Company provides contract research services to RNA therapeutic biotechnology customers for preclinical studies. These services include the design, development and manufacture of PCR-produced DNA templates for RNA therapeutic candidates.

 

5

 

 

Non-Biological Tagging and Related Services

 

The Company’s supply chain security business allows its customers to use non-biologic DNA (molecular) tags, manufactured via its LinearDNATM platform, to mark objects, and then identify these objects by detecting the absence or presence of the molecular tag. The Company’s core products include:

 

  · SigNature® Molecular Tags produced by the Company’s LinearDNATM platform, provide an approach to authenticate goods within large and complex supply chains for materials such as cotton, and leather, in-home textiles and apparel, pharmaceuticals and nutraceuticals, cannabis and other products.

 

  · SigNify® IF portable DNA readers and SigNify consumable reagent test kits provide definitive real-time authentication of molecular tags in the field, providing a front-line solution for supply chain integrity backed with forensic-level molecular tag authentication. Applied DNA’s software platform enables customers to track materials throughout a supply chain or product life.

 

  · CertainT® trademark indicates the use of Applied DNA’s tagging, testing and tracking platforms and solutions, enabling manufacturers, brands and trade organizations to convey proof of their product claims.

 

6

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE A — NATURE OF THE BUSINESS (continued)

 

iCTC Technology

 

The Company recently acquired technology that uses a patented functional assay to capture live invasive circulating tumor cell and associated lymphocytes. Currently, the Company’s iCTC Technology is being used in a human cancer drug candidate clinical trial. The Company seeks to further develop and commercialize this technology and to potentially integrate aspects of the iCTC Technology with the LinearDNATM platform for cancer research and nucleic-acid based drug development.

 

Clinical Testing Laboratory

 

On June 12, 2020 the Company formed Applied DNA Clinical Labs, LLC (“ADCL”) as a wholly owned subsidiary of Applied DNA. Under ADCL, the Company has applied to the New York State Department of Health for all necessary licensing to operate a New York State clinical diagnostics laboratory. These applications are currently pending. Through ADCL, the Company seeks to further commercialize its EUA approved Linea COVID-19 Assay Kit and its iCTC Technology.

 

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

 

Interim Financial Statements 

 

The accompanying condensed consolidated financial statements as of June 30, 2020 and for the three and nine month periods ended June 30, 2020 and 2019 are unaudited. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and are presented in accordance with the requirements of Regulation S-X of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.

 

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended June 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2020. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the fiscal year ended September 30, 2019 and footnotes thereto included in the Annual Report on Form 10-K of the Company filed with the SEC on December 12, 2019, as amended.

 

Principles of Consolidation

 

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, APDN (B.V.I.) Inc., Applied DNA Sciences Europe Limited, and Applied DNA Sciences India Private Limited, Applied DNA Clinical Labs LLC and its majority-owned subsidiary, LineaRx, Inc. (“LRx”). Applied DNA Clinical Labs LLC was formed in Delaware on June 12, 2020. Significant inter-company transactions and balances have been eliminated in consolidation. To facilitate comparison of information across periods, certain reclassifications have been made to prior year amounts to conform to the current year’s presentation. The condensed consolidated balance sheet as of September 30, 2019 contained herein has been derived from the audited consolidated financial statements as of September 30, 2019 but does not include all disclosures required by GAAP.

 

On October 31, 2019, the Company filed a Certificate of Amendment of its Certificate of Incorporation with the Secretary of State of the State of Delaware that effected a one-for-forty (1:40) reverse stock split of its common stock, par value $.001 per share (“Common Stock”), effective November 1, 2019. All warrant, option, share, and per share information in the condensed consolidated financial statements gives retroactive effect to a one-for-forty reverse stock split that was affected on November 1, 2019.

 

Liquidity

 

The Company has recurring net losses, which have resulted in an accumulated deficit of $265,712,717 as of June 30, 2020. The Company incurred a net loss of $8,907,128 and generated negative operating cash flow of $8,159,954 for the nine month period ended June 30, 2020. At June 30, 2020 the Company had cash and cash equivalents of $10,924,968 and working capital of $9,707,376.

 

The Company has historically financed its activities through the sale of Common Stock and warrants. Through June 30, 2020, the Company has dedicated most of its financial resources to research and development, including the development and validation of its own technologies as well as, advancing its intellectual property, and general and administrative activities.

 

As discussed in Note F, on November 15, 2019, the Company closed on an underwritten public offering of 2,285,000 shares of Common Stock and warrants to purchase up to an aggregate of 2,285,000 shares of Common Stock. Each share of Common Stock was sold together with one warrant to purchase one share of Common Stock at a combined effective price to the public of $5.25 per share and accompanying warrant. Gross proceeds, before underwriting discounts and commissions and estimated offering expenses, were approximately $12.0 million. After deducting underwriting discounts and commissions and other offering expenses, the total net proceeds were $10.5 million. In addition, during the nine month period ended June 30, 2020, 1,475,204 of these warrants were exercised, resulting in net proceeds to the Company of approximately $7.2 million. Subsequent to June 30, 2020 an additional $852 thousand of net proceeds was received from the exercise of these warrants.

 

The Company expects to finance its operations primarily through cash received from the November 2019 underwritten public offering and the subsequent warrant exercises, discussed above, as well as collection of its accounts receivable. The Company estimates that it will have sufficient cash and cash equivalents to fund operations for the next twelve months from the date of filing of this quarterly report. Historically, the Company has financed its operations principally from the sale of equity and equity-linked securities.

 

  6  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES (continued)

 

The Company may require additional funds to complete the continued development of its products, product manufacturing, and to fund expected additional losses from operations until revenues are sufficient to cover its operating expenses. In addition, if the Company is successful with any of its preclinical vaccine candidates, the Company would require additional funds to complete the vaccine candidate development. If revenues are not sufficient to cover the Company’s operating expenses, and if the Company is not successful in obtaining the necessary additional financing, the Company will most likely be forced to reduce operations.

 

COVID-19 Risks and Uncertainties

 

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States. The Company is monitoring this, and although operations have not been materially affected by the COVID-19 outbreak as of and for the three and nine months ended June 30, 2020, we are unable to predict the impact that COVID-19 will have on our future financial position and operating results due to numerous uncertainties. The Company believes that the COVID-19 pandemic adversely impacted the global textile industry, which may have resulted in a reduction of textile related revenues. On March 7, 2020 the Governor of New York declared a health emergency and issued an order (as amended) to close all nonessential businesses, which was followed by a phased reopening. Portions of the Company’s business were deemed to be an essential business, such as its government and pharmaceutical contracts, as well as its vaccine and diagnostic candidate development. However, we have experienced, and may continue to experience in the future, facility closures related to our “nonessential” businesses, and pursuant to the government order, the Company reduced the scope of its operations. As discussed in Note E below, the Company received a loan of approximately $847 thousand on May 1, 2020 from Bank of America as lender pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (See Note E for further details).

 

As a result of COVID-19 the Company has experienced a decline in revenues from non-biological tagging and related services. Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company's future operations and liquidity is uncertain as of the date of this quarterly report.  While there could ultimately be a material impact on operations and liquidity of the Company, at the time of issuance, the impact could not be determined.

 

Use of Estimates

 

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The most complex and subjective estimates include revenue recognition, recoverability of long-lived assets, including the values assigned to goodwill, intangible assets and property and equipment, fair value calculations for stock-based compensation and convertible promissory notes, contingencies, allowance for doubtful accounts and management’s anticipated liquidity. Management reviews its estimates on a regular basis and the effects of any material revisions are reflected in the condensed consolidated financial statements in the period they are deemed necessary. Accordingly, actual results could differ from those estimates. 

 

The impact of the COVID-19 pandemic as of and for the three and nine months ended June 30, 2020 did not have a material impact on the valuation of the Company’s intangible assets or reporting units that contain goodwill. As such, we concluded that a triggering event, which would require interim impairment testing for any intangible assets, or reporting units that contain goodwill, did not occur. The Company will continue to evaluate the nature and extent of impacts related to COVID-19 on its business and any impact they may have on management's estimates. The duration and severity of the outbreak and its long-term impact on the Company’s business is uncertain at this time.

 

Revenue Recognition

 

The Company follows Financial Accounting Standards Board (“FASB”) issued accounting standard updates which clarify the principles for recognizing revenue arising from contracts with customers (“ASC 606” or “Topic 606”).

 

  7  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES (continued)

 

Revenue Recognition, continued

 

The core principle of the revenue standard is that an entity recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 applies a five-step model for revenue measurement and recognition and also requires increased disclosures including the nature, amount, timing, and uncertainty of revenue and cash flows related to contracts with clients.

 

The Company measures revenue at the amounts that reflect the consideration to which it is expected to be entitled in exchange for transferring control of goods and services to customers. The Company recognizes revenue either at the point in time or over the period of time that performance obligations to customers are satisfied. The Company’s contracts with customers may include multiple performance obligations (e.g. taggants, maintenance, authentication services, research and development services, etc.). For such arrangements, the Company allocates revenues to each performance obligation based on their relative standalone selling price.

 

The Company recognizes revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration it expects to receive for those goods or services, including any variable consideration.

 

Due to the short-term nature of the Company’s contracts with customers, it has elected to apply the practical expedients under Topic 606 to: (1) expense as incurred, incremental costs of obtaining a contract and (2) not adjust the consideration for the effects of a significant financing component for contracts with an original expected duration of one year or less.   

 

Product Revenues and Authentication Services

 

The Company’s PCR-produced linear DNA products, are manufactured in accordance with contracts with customers. The Company recognizes revenue upon satisfying its promises to transfer goods or services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time the Company transfers control of the goods to the customer, which in nearly all cases is when title to and risk of loss of the goods transfer to the customer. The timing of transfer of title and risk of loss is dictated by customary or explicitly stated contract terms. The Company does not consider payment terms of a performance obligation for customers with contractual terms that are one year or less and has elected the practical expedient. Nearly all of the Company’s sales contracts reflect market pricing at the time the contract is executed, or are one year or less, and generally provide for shipment within 30 to 60 days after the price has been agreed upon with the customer. The Company invoices customers upon shipment, and its collection terms range, on average, from 30 to 60 days. The cotton ginning season in the United States takes place between September and March each year; therefore, revenues from these customer contracts may be seasonal and are recognized primarily during the first and fourth quarters of the Company’s fiscal year.

 

Authentication Services

 

The Company recognizes revenue for authentication services upon satisfying its promises to provide services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time the Company services are complete, which in nearly all cases is when the authentication report is released to the customer.

 

  8  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES (continued)

 

Revenue Recognition, continued

 

Research and Development Services

 

The Company records revenue for its research and development contracts using the over-time revenue recognition model. Revenue is primarily measured using the cost-to-cost method, which the Company believes best depicts the transfer of control to the customer.  Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation.

 

Revenues are recorded proportionally as costs are incurred. For contracts where the total costs cannot be estimated, revenues are recognized for the actual costs incurred during a period until the remaining costs to complete a contract can be estimated. The Company has elected to not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

 

Disaggregation of Revenue

 

The following table presents revenues disaggregated by our business operations and timing of revenue recognition:

 

    Three Month Period Ended:  
    June 30,
2020
    June 30,
2019
 
Research and development services (over-time)   $ 343,624     $ 1,608,448  
Product and authentication services (point-in-time):                
Supply chain     4,358       161,926  
Asset marking     83,534       140,562  
Large scale DNA production     -       142,521  
Total   $ 431,516     $ 2,053,457  

 

    Nine Month Period Ended:  
    June 30,
2020
    June 30,
2019
 
Research and development services (over-time)   $ 996,597     $ 2,657,560  
Product and authentication services (point-in-time):                
Supply chain     35,678       406,543  
Asset marking     303,261       469,035  
Large scale DNA production     281,972       183,109  
Total   $ 1,617,508     $ 3,716,247  

 

Contract balances

 

As of June 30, 2020, the Company has entered into contracts with customers for which revenue has not yet been recognized. Consideration received from a customer prior to revenue recognition is recorded to a contract liability and is recognized as revenue when the Company satisfies the related performance obligations under the terms of the contract. The Company’s contract liabilities, which are reported as deferred revenue on the condensed consolidated balance sheet, consist almost entirely of research and development contracts where consideration has been received and the development services have not yet been fully performed.

 

The opening and closing balances of the Company’s contract balances are as follows:

 

    Balance sheet classification   October 1,
2019
    June 30,
2020
    $
change
 
Contract liabilities   Deferred revenue   $ 628,993     $ 431,214     $ 197,779  

 

For the three and nine month periods ended June 30, 2020, the Company recognized $252,658 and $610,933, respectively, of revenue that was included in Contract liabilities as of October 1, 2019.

 

  9  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES (continued)

 

Inventories

 

Inventories, which consist primarily of raw materials, and finished goods, are stated at the lower of cost or net realizable value, with cost determined by using the first-in, first-out (FIFO) method.

 

Income Taxes

 

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction.

 

In its interim financial statements, the Company follows the guidance in ASC 270, “Interim Reporting” and ASC 740 “Income Taxes”, whereby the Company utilizes the expected annual effective tax rate in determining its income tax provisions for the interim periods. That rate differs from U.S. statutory rates primarily as a result of a valuation allowance related to the Company’s net operating loss carryforward as a result of the historical losses of the Company.

 

Net Loss Per Share

 

The Company presents loss per share utilizing a dual presentation of basic and diluted loss per share. Basic loss per share includes no dilution and has been calculated based upon the weighted average number of common shares outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company’s stock options, warrants and secured convertible notes.

 

For the three and nine month periods ended June 30, 2020 and 2019, common stock equivalent shares are excluded from the computation of the diluted loss per share as their effect would be anti-dilutive.

 

Securities that could potentially dilute basic net income per share in the future were not included in the computation of diluted net loss per share because to do so would have been anti-dilutive for the three and nine month periods ended June 30, 2020 and 2019 are as follows: 

 

    2020     2019  
Warrants     1,213,501       423,089  
Stock options     321,357       198,237  
Secured convertible notes     70,963       104,865  
      1,605,821       726,191  

 

  10  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES (continued)

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation for employees, directors and nonemployees in accordance with ASC 718, Compensation (“ASC 718”). ASC 718 requires all share-based payments, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. Under the provisions of ASC 718, stock-based compensation costs are measured at the grant date, based on the fair value of the award, and are recognized as expense over the requisite service period (generally the vesting period of the equity grant). The fair value of the Company’s common stock options are estimated using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life. The Company expenses stock-based compensation by using the straight-line method. In accordance with ASC 740, excess tax benefits realized from the exercise of stock-based awards are classified as cash flows from operating activities. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income tax expense or benefit in the condensed consolidated statements of operations.

 

Concentrations

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and cash equivalents with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.

 

The Company’s revenues earned from sale of products and services for the three month period ended June 30, 2020 included an aggregate of 10%, 17% and 42% from three customers, respectively. The Company’s revenue earned from sale of products and services for the nine month period ended June 30, 2020 included an aggregate of 10%, 11%, 13%, 13% and 15% from five customers, respectively.

 

The Company’s revenues earned from sale of products and services for the three month period ended June 30, 2019 included an aggregate of 55% and 12% from two customers, respectively. The Company’s revenues earned from sale of products and services for the nine month period ended June 30, 2019 included an aggregate of 37%, 20%, and 11% from three customers, respectively.

 

Four customers accounted for 37%, 16%, 17% and 11% of the Company’s accounts receivable at June 30, 2020 and one customer accounted for an aggregate of 77% of the Company’s accounts receivable at September 30, 2019.

 

  11  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES (continued)

  

Recent Accounting Standards

 

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company adopted Topic 842 as of October 1, 2019 utilizing the modified retrospective approach. The adoption of Topic 842 did not have a significant impact on its condensed consolidated financial statements, as the Company does not currently have any long-term lease obligations. The Company has elected the short-term lease measurement and recognition exemption as all of the Company’s leases are for twelve months or less.

 

  12  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE C — INVENTORIES

 

Inventories consist of the following:

 

    June 30,
2020
    September 30,
2019
 
      (unaudited)          
Raw materials   $ 421,300     $ 87,886  
Finished goods     23,340       54,743  
Total   $ 444,640     $ 142,629  

 

  13  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE D — ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

Accounts payable and accrued liabilities are as follows:

 

    June 30,
2020
    September 30,
2019
 
      (unaudited)          
Accounts payable   $ 1,131,427     $ 1,152,103  
Accrued salaries payable     305,630       319,260  
Other accrued expenses     203,495       145,634  
Total   $ 1,640,552     $ 1,616,997  

 

NOTE E —NOTES PAYABLE

 

CARES Act Loan

 

The Company received a loan of approximately $847 thousand on May 1, 2020 from Bank of America as lender pursuant to the PPP of the CARES Act.

 

All or a portion of the loan may be forgiven by the U.S. Small Business Administration (“SBA”) upon application by the Company beginning 60 days but not later than 130 days after loan approval and upon documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the covered period as defined by the CARES Act.  Applied DNA intends to use all proceeds from the loan to retain employees, maintain payroll and make lease and utility payments. 

 

For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. 

 

The loan matures on May 1, 2022 and bears interest at a rate of 1% per annum. Payments of principal and interest commence in November 2020. The loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

 

Secured Convertible Notes Payable

 

During December 2019, the remaining outstanding balance of the secured convertible notes payable, including accrued interest, entered into during August and November 2018 (the “Existing Notes”), for a total of $107,802, was repaid by the Company.

 

During the three and nine month periods ended June 30, 2020, the Company reclassified $0 and $35,625, respectively from accrued liabilities to senior secured notes payable to represent interest due to noteholders that was paid in kind and therefore increased the convertible note balance outstanding at June 30, 2020.

 

The Company incurred $64,608 of debt issuance costs based on the cost incurred to issue the secured convertible notes payable that were issued during July 2019 (the “July 2019 Notes”). As disclosed in Note F, the holder of the July 2019 Notes also participated in the November 15, 2019 underwritten public offering. During the three and nine month periods ended June 30, 2020 the Company amortized $6,691 and $19,195, respectively, of debt issuance costs resulting in unamortized debt issuance costs of $40,503 and the secured notes payable of $1,492,292 at June 30, 2020. During the three and nine month period ended June 30, 2019 the Company amortized $4,826 and $13,947, respectively.  The debt issuance cost will be amortized over the life of the July 2019 Notes. During the three and nine month periods ended June 30, 2020, the Company incurred $22,677 and $67,707 of interest expense, respectively. The effective interest rate for the three and nine month periods ended June 30, 2020 was 8.0%. During the three and nine month periods ended June 30, 2019, the Company incurred $33,351 and $94,745, respectively of interest expense. The effective interest for the three and nine month periods ended June 30, 2019 was 7.0%.

 

  14  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE F — CAPITAL STOCK

 

On November 15, 2019, the Company closed an underwritten public offering (the “Offering”) in which, pursuant to the Underwriting Agreement dated November 13, 2019 by and between the Company and Maxim Group LLC (“Maxim”), as Representative of the Underwriters, the Company issued and sold 2,285,000 shares of the Company’s Common Stock and 2,285,000 accompanying warrants each with the right to purchase one share of Common Stock at an exercise price of $5.25 per share (the “Common Warrants”). The shares of Common Stock and accompanying Common Warrants were sold at a combined offering price of $5.25 before underwriting discounts. The Common Stock and the Common Warrants are collectively referred to herein as the “Securities.” As part of the Offering, the Company granted Maxim a 45-day option to purchase an additional 342,750 shares of Common Stock and/or additional Common Warrants to purchase 342,750 shares of Common Stock (the “Option Warrants”, together with the Common Warrants, the “Warrants”) at the public offering price, less discounts and commissions, to cover any over-allotments made by the Underwriters in the sale and distribution of the Securities.

 

On December 17, 2019, the Company closed on the Underwriters’ partial exercise of its over-allotment option for 342,750 Common Warrants for gross proceeds of $3,428.

 

The total number of Common Stock and Warrants issued under this offering, including the exercise of the over-allotment option was 2,285,000 and 2,627,750, respectively. The gross proceeds to us were approximately $12.0 million and net proceeds after deducting underwriting expenses and other estimated offering expenses was approximately $10.5 million.

 

Pursuant to the Warrant Agreement, each Common Warrant will be exercisable beginning on the date of issuance thereof and ending on November 15, 2024.

 

The Common Warrants include an adjustment provision that, subject to certain exceptions, reduces their exercise price if the Company issues Common Stock or Common Stock equivalents at a price lower than the then-current exercise price of the Common Warrants, subject to a minimum exercise price of $1.47 per share.

 

Subject to limited exceptions, a holder of a Common Warrant will not have the right to exercise any portion of its Common Warrant if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, 9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that upon 61 days’ prior notice to us, the holder may increase the Beneficial Ownership Limitation, provided that in no event shall the Beneficial Ownership Limitation exceed 9.99%.

 

The exercise price and number of the shares of Common Stock issuable upon the exercise of the Common Warrant will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrant Agreement.

 

As a result of this financing, the exercise price of the 8,375 remaining warrants issued during December 2018 was reduced to an exercise price of $5.60 per share in accordance with the adjustment provision contained in the Warrant Agreement. The incremental change in fair value of these warrants as a result of the triggering event was $2,842.

 

During the nine-month period ended June 30, 2020, 1,475,204 of the Common Warrants were exercised, resulting in net proceeds to the Company of approximately $7.2 million.

 

Subsequent to June 30, 2020, an additional 174,582 warrants were exercised for total net proceeds, of approximately $852 thousand.

 

  15  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE G —WARRANTS AND STOCK OPTIONS

 

Warrants

 

The following table summarizes the changes in warrants outstanding. These warrants were granted in lieu of cash compensation for services performed or as financing expenses in connection with the sales of the Company’s Common Stock.

 

Transactions involving warrants (see Note F) are summarized as follows:

 

    Number of
Shares
   

Weighted Average Exercise

Price Per Share

 
Balance at October 1, 2019     263,592     $ 131.12  
Granted     2,636,125       5.25  
Exercised     (1,475,204 )     5.25  
Cancelled or expired     (211,012 )     135.01  
Balance at June 30, 2020     1,213,501     $ 10.03  

 

Options

 

During the three month period ended June 30, 2020 the Company granted a total of 20,895 options to officers of the Company. These options have a ten year term and vested immediately on the date of grant. During the three month period ended June 30, 2020, the Company also granted a total of 80,628 options to certain members of its board of directors as their annual compensation. These options have a ten year term and vest on the one year anniversary of their grant date.

 

During the nine months ended June 30, 2020 the Company granted a total of 41,620 options to Mr. Scott L. Anchin, a member of the Company’s board of directors for his consulting services (see Note I). Also during the nine months ended June 30, 2020, the Company granted a total of 20,895 options to officers of the Company, and the Company also granted a total of 80,628 options to certain members of its board of directors as their annual compensation, in each case as detailed above.

 

NOTE H — COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

The Company leases office space under an operating lease in Stony Brook, New York for its corporate headquarters. The lease is for a 30,000 square foot building. The term of the lease commenced on June 15, 2013 and expired on May 31, 2017, with the option to extend the lease for two additional three-year periods. The Company has exercised its option to extend the lease for one additional three-year period ending May 31, 2019. The base rent during the additional three-year period is $458,098 per annum. During November 2019, the Company extended this lease until January 15, 2020. In addition to the office space, the Company also has 2,200 square feet of laboratory space. On January 20, 2020, the Company entered into an agreement to amend both of these leases, extending the term for the corporate headquarters as well as the laboratory space until January 15, 2021, with a one-year renewal option. The Company also has a satellite testing facility in Ahmedabad, India, which occupies 1,108 square feet for a three-year term beginning November 1, 2017. The base rent is approximately $6,500 per annum. The Company’s total short-term lease obligation as of June 30, 2020 is $347,297.

 

The total rent expense for the three and nine month periods ended June 30, 2020 were $150,353 and $437,603, respectively. Total rent expense for the three and nine month periods ended June 30, 2019 were $129,250 and $387,672, respectively.

 

  16  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE H — COMMITMENTS AND CONTINGENCIES (continued)

 

Litigation

 

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the recorded liability includes probable and estimable legal costs associated with the claim or potential claim. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. There is no pending litigation involving the Company at this time.

 

  17  

 

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

 

NOTE I — RELATED PARTY TRANSACTIONS

 

On December 12, 2019, the Company entered into a consulting agreement, with Meadow Hill Place, LLC (“Meadow Hill”), a company wholly owned by Scott L. Anchin (“Mr. Anchin”), a board member, whereby Meadow Hill will provide certain advisory services to the Company. The initial term of the agreement ended on June 12, 2020. The agreement provided for compensation in the form of both cash and equity. Meadow Hill was eligible to receive $125,000 for the initial six month term. In addition, in satisfaction of the equity compensation portion of the agreement, (i) the Company granted an option to purchase 20,834 shares of its Common Stock to Mr. Anchin on December 12, 2019 at an exercise price equal to $4.26 per share, which vested on June 12, 2020, and (ii) the Company granted an option to purchase 20,786 shares of its Common Stock to Mr. Anchin on January 2, 2020 at an exercise price equal to $4.43 per share, of which 9,121 vested on July 2, 2020. The consulting agreement was completed on June 12, 2020 in full satisfaction of all obligations. As a result, the agreement was not extended and therefore expired on June 12, 2020. As a result, 11,665 of the options granted on January 2, 2020, which were related to the extension period, did not vest and were cancelled on June 12, 2020.

 

  18  

 

 

Item 2. — Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-Looking Statements

 

This Quarterly Report (“Quarterly Report”) on Form 10-Q (including but not limited to this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are intended to qualify for the “safe harbor” created by those sections. In addition, we may make forward-looking statements in other documents filed with or furnished to the Securities and Exchange Commission (“SEC”), and our management and other representatives may make forward-looking statements orally or in writing to analysts, investors, representatives of the media and others. Forward-looking statements can generally be identified by the fact that they do not relate strictly to historical or current facts and include, but are not limited to, statements using terminology such as “can”, “may”, “could”, “should”, “assume”, “forecasts”, “believe”, “designated to”, “will”, “expect”, “plan”, “anticipate”, “estimate”, “potential”, “position”, “predicts”, “strategy”, “guidance”, “intend”, “budget”, “seek”, “project” or “continue”, or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future, including risks relating to the recent outbreak of the coronavirus (COVID-19). You should read statements that contain these words carefully because they:

 

  discuss our future expectations;

 

  contain projections of our future results of operations or of our financial condition; and

 

  state other “forward-looking” information.

 

We believe it is important to communicate our expectations. However, forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry and are subject to known and unknown risks, uncertainties and other factors. Accordingly, our actual results and the timing of certain events may differ materially from those expressed or implied in such forward-looking statements due to a variety of factors and risks, including, but not limited to, those set forth in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report, those set forth from time to time in our other filings with the SEC, including our Annual Report on Form 10-K, as amended for the fiscal year ended September 30, 2019, and the following factors and risks:

 

  adverse impact of COVID-19 pandemic on our business, financial operations and results of operations due to, reduction in scope of operations and customer demand;
     
  our lack of significant revenues;

 

  our operating and financial performance and prospects;

 

  our quarterly or annual earnings or those of other companies in our industry or those that investors deem comparable to us;

 

  our limited experience in commercializing, marketing, and distributing our products including our large-scale polymerase chain reaction (“PCR”) based manufacturing platform;

 

  our history of net losses, which may continue, and our potential inability to achieve profitability;

 

  our difficulty in obtaining or inability to obtain, additional financing if such financing becomes necessary;

 

  public reactions to our press releases, other public announcements and filings with the SEC;

 

  changes in financial estimates or recommendations by securities analysts, or their ceasing to publish research or reports about our business;

 

  the possibility we may fail to make timely payment on our secured convertible notes and as a result, the noteholder enforcing its remedies and ultimately realizing on its collateral which includes substantially all of our assets, including our intellectual property;

 

  the appeal and current level of investor interest in the biotechnology/biopharmaceutical capital market sector and in companies in general with business, research strategies and product development pipelines which are similar to us;

 

  our commercial opportunities in pharmaceuticals and biologics may be limited;

 

  our dependence on a limited number of key customers;

 

  lack of acceptance of our products and services by potential customers and potential failure to introduce new products and services;

 

  loss of strategic relationships, including with suppliers;

 

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  expenses or losses associated with lack of widespread market acceptance of our solutions;  
 
  difficulty or failure in expanding and/or maintaining our sales, marketing and support organizations and our distribution arrangements necessary to enable us to reach our goals with respect to increasing market acceptance of our products and services;    
 
  inability to attract and retain qualified scientific, production and managerial personnel, including Dr. James A. Hayward, our Chairman, Chief Executive Officer and President (“CEO”);  
 
  conflicts of interest with affiliates and related parties with whom we have engaged or entered into transactions;  

 

  competition from products and services provided by other companies, including competition in the principal markets for our drug and biologic candidates and linear DNA;

 

  seasonality in revenues related to our cotton customer contracts;

 

  fluctuations in quarterly results due to adverse changes in worldwide or domestic economic, political or business conditions;

 

  inability to obtain and maintain regulatory approval in the pharmaceutical and biologic markets;

 

  inability of our collaborators, licensees, and customers to develop, obtain approval for and successfully commercialize products that incorporate our technology;

 

  inability of us, our collaborators or customers to develop and timely manufacture complex biologic products and their components to exacting quality and safety standards;

 

  dependence on our collaborators’ and customers’ demand for our manufacturing services;

 

  inability to compete effectively in the industries in which we operate;

 

  lack of success in our research and development efforts for new products;

 

  inability to license new technologies;

 

  failure to manage our growth in operations and acquisitions of new technologies and businesses;

 

  various uncertainties and risks should we or our competitors explore or engage in future business combinations or other transactions;

 

  economic, political, regulatory, legal, operational, and other risks as a result of our international operations;

 

  inability to attract qualified scientific, production and managerial personnel;

 

  inability to protect our intellectual property rights;

 

  intellectual property litigation against us or other legal actions or proceedings in which we may become involved;

 

  accidents related to our use of hazardous materials;

 

  potential product liability claims;

 

  litigation brought by customers, former employees, officers and directors, former distributors and sales representatives, former consultants and vendors and service providers;

 

  business disruption due to natural or manmade disaster or other business interruptions;

 

  general weakening or decline in the global economy or a period of economic slowdown;

 

  unauthorized disclosure of sensitive or confidential data (including customer data) and cybersecurity breaches;

 

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  the effective increase in the number of shares of our Common Stock available for issuance as a result of our November 2019 reverse stock split could result in further dilution to our existing stockholders and have anti-takeover implications;

 

  failure to maintain the listing on, or the delisting of our securities from, The Nasdaq Stock Market LLC (“Nasdaq”);

 

  unpredictability of regulatory approval as it relates to our product candidates;

 

  potential difficulties and failures in clinically developing and manufacturing our products, or causation of undesirable side effects;

 

  variance in regulatory approval across jurisdictions;

 

  regulatory scrutiny of our products, including with respect to our LineaTM COVID-19 Assay Kit and our joint efforts to develop vaccine candidates;

 

  healthcare legislative measures;

 

  noncompliance with regulatory standards and requirements;

 

  noncompliance with healthcare legislation;

 

  noncompliance with laws or regulatory standards by our suppliers;

 

  sales of Common Stock by us, our directors, officers or large stockholders;

 

  the large number of shares of Common Stock underlying outstanding options and warrants and potential repurchase requirements of certain warrants;

  

  the possibility that we may require additional financing, which may involve the issuance of additional shares of Common Stock or securities exercisable for Common Stock and dilute the percentage of ownership held by our current stockholders;

 

  changes in our capital structure;

 

  dilution to our stockholders due to conversion of our convertible notes into Common Stock;

 

  the occurrence of any potential material weakness in internal controls over financial reporting;

 

  changes in accounting standards, policies, guidance, interpretations or principles;

 

  future short selling and/or manipulation of the price of our Common Stock; and

 

  volatility in the price and/or trading volume of our Common Stock, or other securities we may issue from time to time.

 

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All forward-looking statements and risk factors included in this Quarterly Report are made as of the date hereof, and all forward-looking statements and risk factors included in documents incorporated herein by reference are made as of their original date, in each case based on information available to us as of the date hereof, or in the case of documents incorporated by reference, the original date of any such document, and we assume no obligations to update any forward-looking statement or risk factor, unless we are required to do so by law. If we do update one or more forward-looking statements, no inference should be drawn that we will make updates with respect to other forward-looking statements or that we will make any further updates to those forward-looking statements at any future time.

 

Forward-looking statements may include our plans and objectives for future operations, including plans and objectives relating to our products and our future economic performance, projections, business strategy and timing and likelihood of success. Assumptions relating to the forward-looking statements included in this Quarterly Report involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, and the time and money required to successfully complete development and commercialization of our technologies, all of which are difficult or impossible to predict accurately and many of which are beyond our control.

 

Any of the assumptions underlying the forward-looking statements contained in this Quarterly Report could prove inaccurate and, therefore, we cannot assure you that any of the results or events contemplated in any of such forward-looking statements will be realized. Based on the significant uncertainties inherent in these forward-looking statements, the inclusion of any such statement should not be regarded as a representation or as a guarantee by us that our objectives or plans will be achieved, and we caution you against relying on any of the forward looking-statements contained herein. 

 

Our trademarks currently used in the United States include Applied DNA Sciences®, SigNature® molecular tags, SigNature® T molecular tags, fiberTyping®, DNAnet®, SigNify®, Beacon®, CertainT®,LinearDNATM and LineaTM COVID-19 Assay Kit. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. All trademarks, service marks and trade names included or incorporated by reference in this Quarterly Report are the property of the respective owners.

 

Introduction

 

Applied DNA’s proprietary PCR-based DNA LinearDNATM manufacturing platform produces large quantities of DNA for use in the nucleic acid-based in vitro medical diagnostics and preclinical nucleic acid-based drug development and manufacturing markets (“Biotherapeutic Research and Manufacturing”) and for supply chain security, anti-counterfeiting and anti-theft technology purposes (“Non-Biologic Tagging”). The Company is also developing an invasive circulating tumor cell capture and identification technology (“iCTC Technology”) which uses a patented functional assay to capture live invasive circulating tumor cell and associated lymphocytes that can be identified and expanded for further analysis.

 

Applied DNA’s LinearDNATM PCR platform is capable of producing large scale DNA, which we believe offers many benefits over the limitations of other large scale DNA manufacturing systems, including:

 

  · Speed – Production of DNA via the LinearDNATM platform can be measured in terms of hours, not days and weeks like other large scale DNA manufacturing platforms.

 

  · Scale – The LinearDNATM platform is flexible and can be adapted to encompass large quantity production.

 

  · Purity – DNA produced via PCR is pure, resulting in only large quantities of the target DNA sequence. Unwanted DNA sequences such as bacterially-derived DNA is not present.

 

  · Customization – DNA produced via PCR can be easily chemically modified to suit specific customer applications.

 

Biotherapeutic Contract Research and Manufacturing

 

Our patented continuous flow PCR systems and other proprietary PCR-based production technology and post-processing systems that comprise the LinearDNATM platform allow for the large-scale production of specific DNA sequences. The LinearDNATM platform is currently being used in a patent pending nucleic acid based in vitro diagnostic (LineaTM COVID-19 Assay Kit) to detect the presence of SARS-COV-2 RNA and by customers as components of in vitro diagnostic tests and for preclinical nucleic acid-based drug development in the fields of adoptive cell therapies (CAR T and TCR therapies), DNA vaccines (anti-viral and cancer), RNA therapies, clustered regularly interspaced short palindromic repeats (CRISPR) based therapies and gene therapies. We believe our LinearDNATM platform confers a distinct competitive advantage in cost, cleanliness, and time-to-market as compared to other DNA manufacturing systems.

 

The Company provides preclinical contract research and manufacturing services for the nucleic acid-based therapeutic markets. We work with biotech and pharmaceutical companies to convert plasmid-based and/or viral transduction-based preclinical biotherapeutics into PCR-produced linear DNA-based forms that can be produced on our LinearDNATM platform. In addition, we provide contract research services to RNA based drug and biologic customers for preclinical studies. These services include the design, development and manufacture of PCR-produced DNA templates for RNA. In addition, we also use our LinearDNATM platform to produce very large gram-scale quantities of DNA for the in vitro diagnostic market where our DNA is used for both commercially available diagnostics and diagnostics under development.

 

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During April 2020, we entered into an agreement with Stony Brook University Hospital for the validation of our LineaTM COVID-19 Assay Kit. On May 13, 2020 we received Emergency Use Authorization (“EUA”) from the FDA for the clinical use of the Linea COVID-19 Assay Kit for the qualitative detection of nucleic acid from SARS-CoV-2 in respiratory specimens including anterior nasal swabs, self-collected at a healthcare location or collected by a healthcare worker, and nasopharyngeal and oropharyngeal swabs, mid-turbinate nasal swabs, nasopharyngeal washes/aspirates or nasal aspirates, and bronchoalveolar lavage specimens collected by a healthcare worker from individuals who are suspected of COVID-19 by their healthcare provider. Under the EUA, testing is limited to laboratories certified under the Clinical Laboratory Improvement Amendments of 1988 , 42 U.S.C. §263a, that meet requirements to perform high complexity tests, which certification we have applied for but have not yet obtained. Subsequently, during July 2020, we were granted EUA amendments that expand the installed base of PCR equipment platforms on which our LineaTM COVID-19 Assay Kit can be processed and significantly increases the daily testing capacity of the LineaTM COVID-19 Assay Kit through the use of automation. The scope of the EUA, as amended, is expressly limited to use consistent with the Instructions for Use by authorized laboratories, certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) to perform high complexity tests. The EUA will be effective until the declaration that circumstances exist justifying the authorization of the emergency use of in vitro diagnostics for detection and/or diagnosis of COVID-19 is terminated or until the EUA’s prior termination or revocation. Our LineaTM COVID-19 Assay Kit has not been FDA cleared or approved, and the EUA’s limited authorization is only for the detection of nucleic acid from SARS-CoV-2, not for any other viruses or pathogens.

 

We also seek to develop, acquire, and commercialize, ourselves or with partners, a diverse portfolio of nucleic acid-based therapeutics based on PCR-produced linear DNA to improve existing nucleic acid-based therapeutics or to create new nucleic acid-based therapeutics that address unmet medical needs. We are currently directly engaged in preclinical drug candidate development activities focusing on therapeutically-relevant DNA constructs manufactured via our LinearDNATM platform in the fields of DNA-based anti-viral and anti-cancer vaccines, as well as CAR-T cell immunotherapy.

 

iCTC Technology

 

We seek to further develop, manufacture and commercialize our Vita-AssayTM iCTC Technology recently acquired from Vitatex, Inc. in August 2019. Our iCTC Technology uses a patented functional assay to capture live invasive circulating tumor cell and associated lymphocytes that can be identified and expanded for further analysis, including genetic sequencing. We believe our iCTC Technology can be used as an early cancer diagnostic tool, to facilitate cancer disease progression monitoring, to assess metastatic tumor risk and to discover epitopes to serve as targets for nucleic-acid based immunotherapies. Our iCTC Technology has been used and is currently being used in a human cancer drug candidate clinical trial to monitor cancer disease progression in the trial subjects as a Research Use Only diagnostic assay. We believe our iCTC Technology has several advantages over existing in vitro circulating tumor cell diagnostic technologies that do not capture live iCTC cells. The Company seeks to further develop and commercialize this technology and to potentially integrate aspects of the iCTC Technology with the LinearDNATM platform for cancer research and nucleic-acid based drug development.

 

Clinical Testing Laboratory

 

On June 12, 2020 we formed Applied DNA Clinical Labs, LLC (“ADCL”) as a wholly owned subsidiary of Applied DNA. Under ADCL, we have applied to the New York State Department of Health for all necessary licensing to operate a New York State clinical diagnostics laboratory. These applications are currently pending. Through ADCL, we seek to further commercialize our EUA approved Linea COVID-19 Assay Kit and the iCTC Technology.

 

Non-Biologic Tagging and Security Products and Services

 

Our supply chain security business allows our customers to use non-biologic DNA (molecular) tags manufactured on our LinearDNATM platform to mark objects in a unique manner and then identify these objects by detecting the absence or presence of the molecular tag. We believe our molecular tags are not economically feasible nor practical to replicate, and that our disruptive tracking platform offers broad commercial relevance across many industry verticals.

 

The underlying strategy in our tagging business is to become an authenticity and traceability platform provider for large complex supply chains, particularly in process industries in which contracts for our products and services are typically larger and recurring over longer duration as compared to our historic norms, where the benefits to customers and consumers are more significant, and where our forensic security and traceability offer a unique and protected value. Using our tagging products and technology, manufacturers, brands, and other stakeholders can ensure authenticity and protect against diversion throughout a product’s journey from manufacturer to use.

 

SigNature® Molecular Tags, SigNature® T Molecular Tags, fiberTyping®, SigNify® Beacon® and CertainT® comprise our principal non-biologic tagging and security technology platform.

 

Signature Molecular Tags

 

SigNature® molecular tags manufactured via our LinearDNATM platform form the core of our supply chain security technology platform. We believe SigNature® molecular tags to be nature’s ultimate means of authentication applied to supply chain security. They provide forensic power and protection for a wide array of applications. Highly secure, robust and durable, SigNature® molecular tags are an ingredient that can be used to fortify brand protection efforts; strengthen supply chain security; and mark, track and convict criminals. Through our SigNature® molecular tags, custom DNA sequences can be embedded into a wide range of host carriers including natural and synthetic materials such as cotton, leather, cannabis, ink, varnish, thread, metal coatings, and pharmaceuticals and nutraceuticals. SigNature® molecular tag formulations are made to be resistant to challenging environments such as heat, cold, vibration, abrasion, organic solvents, chemicals, UV radiation and other extreme environmental conditions, and can be identified for numerous years after being embedded directly into or on an item. The sequence of each individual molecular tag is recorded and stored in a secure database so that we can later detect it to obtain definitive proof of the presence or absence of a specific molecular tag using a simple in-field test, or in our laboratories. Our in-lab forensic testing capability delivers Certificate of DNA Authentication (“CODA”) or an expert witness report, with expert witness services for some cases. Because DNA can be amplified with high fidelity, only minute quantities of our molecular tags extracted from our customers’ goods are necessary for successful analysis and authentication. As a result, SigNature® molecular tags can fold seamlessly into production and logistics workflows at extremely low concentrations.

 

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SigNature® molecular tags have been subjected to rigorous testing by the Idaho National Laboratory, a U.S. National Laboratory, by CALCE (the Center for Advanced Life Cycle Engineering), the largest electronic products and systems research center focused on electronics reliability, and by verified procedures in both our laboratories and those of our customers. The molecular tag has passed all tests across a broad spectrum of materials and substrates and has met key military stability standards. SigNature® molecular tags have also passed a strenuous “red-team” vetting on behalf of the U.S. Defense Logistics Agency.

 

Our SigNature® molecular tags can be uniquely designed for specific industries. For example, our SigNature® T molecular tags, designed for textiles and apparel industry, are specially engineered to adhere tenaciously to textile substrates, which make them resistant to standard textile production conditions. The result is an enduring forensic level molecular tag that remains present from the fiber stage through to the finished product. Overall SigNature® molecular tags now exist on hundreds of millions of commodity goods ranging from consumer product packaging to microcircuits to cotton and synthetic fibers.

 

SigNify®

 

SigNify® IF portable DNA readers and SigNify® consumable reagent test kits provide definitive real-time authentication of molecular tags in the field, providing a front-line solution for supply chain integrity backed with forensic-level molecular tag authentication.

 

CertainT®

 

CertainT® trademark indicates the use of Applied DNA’s tagging, testing and tracking platforms and solutions, enabling manufacturers, brands and trade organizations to convey proof of their product claims.

 

CertainT® and other customer applications include the use of a software platform that enables customers to manage the security of company-marked goods from point of marking to point of authentication or validation to end of life. The base platform is configurable to customer requirements. Basic functions offered include molecular tag inventory management, program training and communications, a database of marked items information, associated documents and images, chain of custody and location tracking, sample authentication processing and CODA downloads, and other administrative functions.

 

Plan of Operations

 

General

 

We seek to leverage our proprietary PCR-based DNA LinearDNATM manufacturing platform to further grow and monetize both our Biotherapeutic Research and Manufacturing” and Non-Biologic Tagging businesses.

 

To date, the substantial portion of our revenues has been generated from sales pursuant to our non-biological tagging and related services, principally related to our supply chain security and product authentication solutions, including our SigNature® molecular tags produced via our LinearDNATM platform. We expect to grow revenues from sales of our LineaTM COVID-19 Assay Kit, SigNature® molecular tags, SigNify® and CertainT® offerings as we work with companies and governments to secure supply chains for various types of products and product labeling throughout the world. In addition, using our LinearDNATM platform, we expect to continue to grow revenues from our biotherapeutic contract research and nucleic acid therapeutic manufacturing. We have continued to incur expenses in expanding our business to meet current and anticipated future demand. We have limited sources of liquidity. Our products and services are offered in the United States, Europe and Asia. At the present time, we are focusing our efforts on PCR-produced linear DNA products for use in biotherapeutic applications, as well as services for nucleic acid-based in vitro medical diagnostics, preclinical biotechnology research and preclinical biotherapeutic manufacturing, including our LineaTM COVID-19 Assay Kit and our joint efforts to develop vaccine candidates, textiles for home and apparel, pharmaceuticals and nutraceuticals, and legal cannabis and hemp products. Historically, approximately 35% of our annual revenue has come from the textile market. The basic technology we use in various markets is very similar, and we believe our solutions are adaptable for many types of products and markets. The cotton ginning season in the United States takes place between September and March each year; therefore, revenues from our cotton customer contracts may be seasonal and recognized primarily during our first and fourth fiscal quarters, which may cause operating results to fluctuate significantly quarterly and annually. 

 

Critical Accounting Policies and Recently Issued Accounting Pronouncements

 

See Note B to the accompanying unaudited condensed consolidated financial statements for our critical accounting policies and recent accounting pronouncements.

 

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Comparison of Results of Operations for the Three Month Periods Ended June 30, 2020 and 2019

 

Revenues

 

Product revenues

 

For the three month periods ended June 30, 2020 and 2019, we generated $56,911 and $392,599, respectively in revenues from product sales. Product revenue decreased by $355,688 or 86% for the three month period ended June 30, 2020 as compared to the three month period ended June 30, 2019. The decrease in product revenues was primarily due to a decrease of approximately $143,000 in biotherapeutic revenues due to the timing of shipments during the quarter ended June 30, 2020 as compared to the same period in the prior fiscal year. There was also a decrease of approximately $140,000 in revenues from the textile industry. This decrease in revenues for the textile industry is primarily due to the Company having recognized $121,000 for shipments of DNA concentrate and DNA transfer systems relating to the cotton supply chain during the three month period ended June 30, 2019. Further decreases include $37,000 within Cash and valuables in transit (“CVIT”), primarily as a result of global stay at home orders due to the COVID-19 global pandemic.

 

Service revenues

 

For the three month periods ended June 30, 2020 and 2019, we generated $374,605 and $1,660,858 in revenues from sales of services, respectively. The decrease in service revenues was $1,286,253 or 77% for the three month period ended June 30, 2020 as compared to the same period in the prior fiscal year. The decrease is attributable to a decrease in revenue from a licensing agreement in the cannabis industry of $1,000,000 as well as cannabis feasibility pilots of $136,716 during three months ended June 30, 2019. The decrease also relates to a decline in revenues of approximately $212,576 from the government development contract award that expired during the second half of fiscal 2019. These decreases were offset by an increase of $70,364 attributable to our biotherapeutic contract research business, primarily from two validation studies.

 

Costs and Expenses

 

Cost of Revenues

 

Cost of revenues for the three month period ended June 30, 2020 decreased by $116,079 or 43% from $270,883 for the three month period ended June 30, 2019 to $154,804 for the three month period ended June 30, 2020. Cost of revenues as a percentage of product revenues was 272% and 69% for the three month periods ended June 30, 2020 and 2019, respectively. This increase in cost of revenues as a percentage of product revenues is due to certain fixed costs such as rent, and payroll not being fully absorbed as a result of the low product revenue during the three month period ended June 30, 2020. The increase in cost of revenues as a percentage of product revenues also relates to the change in product sales mix as the product revenues during the three months ended June 30, 2019 were primarily comprised of cotton revenue, which is at a higher gross margin.

 

Selling, General and Administrative

 

Selling, general and administrative expenses for the three month period ended June 30, 2020 increased by $181,819 or 8% from $2,407,223 for the three month period ended June 30, 2019 to $2,589,042 for the three month period ended June 30, 2020. This increase is attributable to an increase in stock compensation expense of $210,000 of which approximately $150,000 related to grants of options to the officers of the company that vested immediately, the remainder of the increase related to expense incurred for consultant and board member options. The increase also related to an increase in consulting fees of $44,000. These increases were offset by decreases of $81,000 and $86,000 in investor relations and travel, respectively.

 

Research and Development

 

Research and development expenses increased to $814,599 for the three month period ended June 30, 2020 from $719,668 for the three month period ended June 30, 2019, an increase of $94,931 or 13%. This increase is primarily due to increased development costs in relation to our biotherapeutic contract research and manufacturing, as it relates to the development of our LineaTM COVID-19 Assay Kit.

 

Depreciation and Amortization

 

In the three month period ended June 30, 2020, depreciation and amortization decreased by $25,450 or 29% from $87,315 for the three month period ended June 30, 2019 to $61,865 for the three month period ended June 30, 2020. The decrease is related to assets becoming fully depreciated during fiscal 2019.

 

Interest expense

 

Interest expense for the three month periods ended June 30, 2020 and 2019, was $28,624 and $38,177, respectively related to interest incurred on the secured convertible notes payable.

 

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Other income (expense)

 

Other income (expense) for the three month periods ended June 30, 2020 and 2019, was expense of $72,694 and $8,102, respectively. The increase of $64,592 is due to an increase in an accrual for annual franchise taxes during the three month period ended June 30, 2020.

 

Net Loss Attributable to Common Stockholders

 

Net loss increased by $1,811,539 or 123% from a loss of $1,477,911 for the three month period ended June 30, 2019 to a loss of $3,289,450 for the three month period ended June 30, 2020, due to the factors noted above.

 

Comparison of Results of Operations for the Nine Month Periods Ended June 30, 2020 and 2019

 

Revenues

 

Product revenues

 

For the nine month periods ended June 30, 2020 and 2019, we generated $492,582 and $885,736, respectively, in revenues from product sales. Product revenue decreased by $393,154 or 44% for the nine month period ended June 30, 2020 as compared to the same period in the prior fiscal year. This decrease in product revenues was primarily from a decrease in textiles of $341,030 due to a shipment of DNA concentrate for protecting the supply chain during the nine month period ended June 30, 2019, as well as decreases in consumer asset marking of $87,351 and CVIT of $64,394. These decreases were offset by an increase of approximately $65,000 in biotherapeutic revenue for bulk DNA for the use by a customer in in-vitro diagnostics.

  

Service revenues

 

For the nine month periods ended June 30, 2020 and 2019, we generated $1,124,926 and $2,830,511, respectively, in revenues from sales of services. The decrease in service revenues of $1,705,585 or 60% for the nine month period ended June 30, 2020 as compared to the same period in the prior fiscal year is attributable to a decrease in revenue of approximately $612,890 associated with the completion of a government contract award, which was completed during the second half of fiscal 2019, as well as decreases of approximately $135,000 in textiles and $1,185,869 in cannabis due to a decline in licensing and feasibility projects year over year. These decreases were offset by an increase in our biotherapeutic contract research business of $250,438 relating to validation studies.

 

Costs and Expenses

 

Cost of Revenues

 

Cost of revenues for the nine month period ended June 30, 2020 increased by $8,909 or 2% from $557,508 for the nine month period ended June 30, 2019 to $566,417 for the nine month period ended June 30, 2020. Cost of revenues as a percentage of product revenues was 115% and 63% for the nine month periods ended June 30, 2020 and 2019, respectively. This increase in cost of revenues as a percentage of product revenues is due to product sales mix, as sales during the nine month period ended June 30, 2019 included textiles sales, which are at a higher gross margin.

 

Selling, General and Administrative

 

Selling, general and administrative expenses for the nine month period ended June 30, 2020 decreased by $770,517 or 10% from $8,018,516 for the nine month period ended June 30, 2019 to $7,247,999 for the nine month period ended June 30, 2020. The decrease is attributable to a decrease in payroll expenses of approximately $269,000 related to headcount reductions. The decrease is also due to a decrease in stock based compensation expense of approximately $114,000. The decrease in stock based compensation was primarily associated with stock option grants modifications during the nine month period ended June 30, 2019. In addition, there was a decrease in legal and professional fees of approximately $106,000, consulting fees of approximately $90,000, and reduced travel expenses of approximately $196,000.

 

Research and Development

 

Research and development expenses remained fairly constant at $2,082,043 for the nine month period ended June 30, 2020 as compared to $2,080,610 for the nine month period ended June 30, 2019.

 

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Depreciation and Amortization

 

 In the nine month period ended June 30, 2020, depreciation and amortization decreased by $116,570 or 36% from $320,039 for the nine month period ended June 30, 2019 to $203,469 for the nine month period ended June 30, 2020. The decrease is related to assets becoming fully depreciated during fiscal 2019.

 

Interest expense

 

Interest expense for the nine month periods ended June 30, 2020 and 2019, was $86,811 and $107,206, respectively related to interest incurred on the secured convertible notes payable.

 

Other income (expense)

 

Other income (expense) for the nine month periods ended June 30, 2020 and 2019, was expense of $334,527 and $31,356, respectively. The increase of $303,171 is due to an increase in franchise taxes during the nine month period ended June 30, 2020.

 

Net Loss Attributable to Common Stockholders

 

Net loss increased by $1,508,140 or 20% from $7,398,988 for the nine month period ended June 30, 2019 to $8,907,128 for the nine month period ended June 30, 2020, due to the factors noted above.

 

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Liquidity and Capital Resources

 

Our liquidity needs consist of our working capital requirements and research and development expenditure funding. As of June 30, 2020, we had working capital of $9,707,376. For the nine month period ended June 30, 2020, we used cash in operating activities of $8,159,954 consisting primarily of our loss of $8,903,758 net with non-cash adjustments of $203,469 in depreciation and amortization charges, $797,577 in stock-based compensation expense, $19,195 in amortization of debt issuance costs and $21,880 in bad debt expense. Additionally, we had a net decrease in operating assets of $302,239 and a net decrease in operating liabilities of $600,556. Cash provided by financing activities was $18,852,116, which included net proceeds from the November 2019 sale of Common Stock and warrants of $10,639,728, net proceeds from the exercise of warrants of $7,203,401, proceeds received from the PPP loan of $846,789 and the repayment of secured convertible promissory notes of $107,802.

 

We have recurring net losses, which have resulted in an accumulated deficit of $265,712,717 as of June 30, 2020. At June 30, 2020, we had cash and cash equivalents of $10,924,968.

 

Historically we have financed our activities through the sale of Common Stock and warrants. Through June 30, 2020, we have dedicated most of our financial resources to research and development, including the development and validation of our own technologies as well as, advancing our intellectual property, and general and administrative activities.

 

As discussed in Note F, to the accompanying unaudited condensed consolidated financial statements, on November 15, 2019, we closed on an underwritten public offering of 2,285,000 shares of Common Stock and warrants to purchase up to an aggregate of 2,285,000 shares of Common Stock. Each share of Common Stock was sold together with one warrant to purchase one share of Common Stock at a combined effective price to the public of $5.25 per share and accompanying warrant. Gross proceeds, before underwriting discounts and commissions and estimated offering expenses, were approximately $12.0 million. After deducting underwriting discounts and commissions and other offering expenses, the total net proceeds were $10.5 million. In addition, during the nine month period ended June 30, 2020, 1,475,204 of these warrants were exercised, resulting in net proceeds to the Company of approximately $7.2 million. Subsequent to June 30, 2020 an additional $852,000 of net proceeds was received from the exercise of these warrants.

 

We expect to finance our operations primarily through cash received from the November 2019 underwritten public offering and the subsequent warrant exercises, discussed above, as well as collection of our accounts receivable. We estimate that we will have sufficient cash and cash equivalents to fund operations for the next twelve months from the date of filing of this quarterly report. Historically, we have financed our operations principally from the sale of equity and equity-linked securities.

 

We may require additional funds to complete the continued development of our products, product manufacturing, and to fund expected additional losses from operations until revenues are sufficient to cover our operating expenses. In addition, if we are successful with any of our preclinical vaccine candidates, we would require additional funds to complete their development. If revenues are not sufficient to cover our operating expenses, and if we are not successful in obtaining the necessary additional financing, we will most likely be forced to reduce operations.

 

COVID-19 Risks and Uncertainties

 

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States. We continue to monitor this pandemic, and although operations have not been materially affected by the COVID-19 outbreak as of and for the three and nine months ended June 30, 2020, we are unable to predict the impact that COVID-19 will have on our future financial position and operating results due to numerous uncertainties. We believe that the COVID-19 pandemic adversely impacted the global textile industry, which may have resulted in a reduction of our textile related revenues. On March 7, 2020 the Governor of New York declared a health emergency and issued an order (as amended) to close all nonessential businesses, which was followed by phased reopening. Portions of the Company’s business were deemed to be an essential business, such as its government and pharmaceutical contracts, as well as its vaccine and diagnostic candidate development. However, we have experienced, and may continue to experience in the future, facility closures related to our “nonessential” businesses, and pursuant to the government order, the Company reduced the scope of its operations. As discussed in Note E in the accompanying condensed consolidated financial statements, the Company received a loan of approximately $847 thousand on May 1, 2020 from Bank of America as lender pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

 

As a result of COVID-19 the Company has experienced a decline in revenues from non-biological tagging and related services. Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company's future operations and liquidity is uncertain as of the date of this quarterly report.  While there could ultimately be a material impact on operations and liquidity of the Company, at the time of issuance, the impact could not be determined. 

 

28

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Inflation

 

The effect of inflation on our revenue and operating results was not significant.

 

Item 3. — Quantitative and Qualitative Disclosures About Market Risk.

 

Information requested by this Item is not applicable as we are electing scaled disclosure requirements available to smaller reporting companies with respect to this Item.

 

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Item 4. — Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2020, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

During the fiscal quarter ended June 30, 2020, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

30 

 

 

Part II — Other Information

 

Item 1. — Legal Proceedings.

 

None.

 

Item 1A. — Risk Factors.

 

We are supplementing the risk factors described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, 2019, with the additional risk factors set forth below, which supplement, and to the extent inconsistent, supersede such risk factors.

 

The COVID-19 global pandemic may materially and adversely impact our business, financial condition and results of operations.

 

Our business could be materially and adversely affected by the outbreak of a widespread health epidemic. The present coronavirus (or COVID-19) pandemic has disrupted our operations and has affected our business, as government authorities impose mandatory closures, work-from-home orders and social distancing protocols or impose other restrictions that could materially adversely affect our ability to adequately staff and maintain our operations. Portions of our business are considered “essential” such as our government and pharmaceutical contracts, as well as our vaccine and diagnostic candidate development. However, we have experienced, and may continue to experience in the future, facility closures related to our “nonessential” businesses, and pursuant to the government order, the Company has reduced the scope of its operations and where possible, certain workers are telecommuting from their homes. As a result of COVID-19 we have experienced a decline in revenues from non-biological tagging and related services. As the COVID-19 outbreak and responses to it continue to evolve, we may experience further adverse impacts on our operations, including our ability to secure supplies, and our ability to access capital on favorable terms, or at all, may be impaired. There may also be long-term effects on our customers in and the economies of affected countries. Although the duration and ultimate impact of these factors is unknown at this time, the decline in economic conditions due to COVID-19, or another disease-causing similar impacts, may adversely affect our business, financial condition and results of operations and such impact may be material.

 

Our joint pursuit of a potential vaccine for SARS-CoV-2 is at an early stage and may be unable to produce a vaccine that successfully treats the virus in a timely manner, if at all.

 

In response to the global outbreak of coronavirus, we are jointly pursuing the development of linear DNA vaccine candidates in collaboration with Takis S.R.L. and its wholly-owned subsidiary, Evvivax S.R.L. (“Takis/Evvivax”). Our joint development of vaccine candidates is in early stages, and we may be unable to produce a successful vaccine candidate in a timely manner, if at all. Additionally, development of an effective vaccine candidate depends on the success of our and our partner’s manufacturing capabilities, and we may face challenges in clinical trials, licensing, distribution channels, intellectual property disputes or challenges, and the need to establish teams of people with the relevant skills worldwide. We may also face challenges with sourcing a sufficient amount of raw materials to support the demand for a vaccine. We may be unable to effectively create a supply chain for any vaccine candidate that will adequately support demand.

 

We would require additional funding in order to enable us to have sufficient capacity to respond to a global health challenge.  Our commitment of financial resources and personnel to the joint development of these vaccine candidates may cause delays in or otherwise negatively impact our other development programs, despite uncertainties surrounding the longevity and extent of coronavirus as a global health concern.  Our business could be negatively impacted by our allocation of significant resources, including managerial and financial, to a global health threat that is unpredictable and could rapidly dissipate or against which our jointly-developed vaccine candidate may not be partially or fully effective and may ultimately prove unsuccessful or unprofitable. Furthermore, there are no assurances that any vaccine candidate would be approved at all or for inclusion in government stockpile programs, which may be material to the commercial success of a product candidate, either in the United States or abroad.

 

In addition, another party may be successful in producing a more efficacious vaccine or other treatment for COVID-19 which may also lead to the diversion of funding away from us and toward other companies. In particular, given the widespread media attention on the current COVID-19 pandemic, there are efforts by public and private entities to develop a COVID-19 vaccine as fast as possible, including by AstraZeneca, GlaxoSmithKline, Johnson & Johnson, Moderna, Pfizer, and Sanofi. Those other entities may develop COVID-19 vaccines that are more effective than any we may jointly develop, may develop a COVID-19 vaccine that becomes the standard of care, may develop a COVID-19 vaccine at a lower cost or earlier than we are able to jointly develop any COVID-19 vaccine, or may be more successful at commercializing a COVID-19 vaccine. These other organizations are much larger than we are and have access to larger pools of capital and broader manufacturing infrastructure. The success or failure of other entities, or perceived success or failure, may adversely impact our ability to obtain any future funding for our joint COVID-19 vaccine development efforts or for us to ultimately commercialize any vaccine candidate, if approved. In addition, we may not be able to compete effectively if our product candidates do not satisfy government procurement requirements with respect to biodefense products.

 

The regulatory pathway of a potential vaccine for SARS-CoV-2 is continually evolving, and may result in unexpected or unforeseen challenges.

 

The speed at which all parties are moving to create, test and approve a vaccine for COVID-19 is highly unusual, and evolving or changing plans or priorities at the FDA, including based on new knowledge of COVID-19 and how the disease affects the human body, may significantly affect the regulatory pathway for any of our potential vaccine candidates. For example, any results from clinical testing may raise new questions and require us to redesign proposed clinical trials, including revising proposed endpoints or adding new clinical trial sites or cohorts of subjects. In addition, the FDA’s analysis of any clinical data may differ from our interpretation and the FDA may require that we conduct additional analyses.

 

The FDA has the authority to grant an EUA to allow unapproved medical products to be used in an emergency to diagnose, treat, or prevent serious or life-threatening diseases or conditions when there are no adequate, approved, and available alternatives. If we are granted an EUA for any vaccine candidate, we would be able to commercialize it prior to FDA approval. The FDA may revoke an EUA where it is determined that the underlying health emergency no longer exists or warrants such authorization, and we cannot predict how long, if ever, an EUA would remain in place.

 

Item 2. — Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. — Defaults Upon Senior Securities.

 

None.

 

Item 4. — Mine Safety Disclosures.

 

None.

 

Item 5. — Other Information.

 

As disclosed in the Company’s Current Report on Form 8-K filed with the SEC on July 28, 2020 (the “July 8-K”) and in the Company’s definitive proxy statement, as filed with the SEC on August 3, 2020 (the “Proxy Statement”), the Company plans to hold its 2020 Annual Meeting of Stockholders (the “2020 Annual Meeting”) on September 16, 2020 at 10:00 a.m., Eastern Time. The 2020 Annual Meeting will be held in a virtual format only, via the Internet, with no physical in-person meeting. Additional details regarding the location via the Internet and matters to be voted on at the 2020 Annual Meeting are available in the Proxy Statement.

 

The Company’s 2019 Annual Meeting of Stockholders (the “2019 Annual Meeting”) was held on May 16, 2019. Because the date of the 2020 Annual Meeting represents a change of more than 30 days from the anniversary date of the 2019 Annual Meeting, the Company disclosed in the July 8-K a new deadline for the submission of stockholder proposals. In accordance with Rule 14a-5(f) of the Exchange Act and consistent with the ByLaws of the Company, the Company informed stockholders that a proposal or notice on Schedule 14N under Rule 14a-18 under the Exchange Act (i) intended to be included in the Proxy Statement under Rule 14a-8 under the Exchange Act or (ii) intended to be presented at the 2020 Annual Meeting other than by inclusion in the Proxy Statement, must be received by the Company on or prior to 5:00 p.m. Eastern Time on August 10, 2020 to be considered timely. Any proposal or nomination received after such date will be considered untimely.

 

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Item 6. — Exhibits. 

 

Exhibit
No.
  Exhibit Description  
10.1*†   Consulting Agreement, dated as of December 12, 2019, by and between Applied DNA Sciences, Inc. and Meadow Hill Place, LLC  
10.2*   Agreement of Lease, dated November 1, 2015, by and between Applied DNA Sciences, Inc. and Long Island High Technology Incubator, Inc.  
10.3*   Temporary Lease Extension Agreement, dated August 9, 2019, by and between Applied DNA Sciences, Inc. and Long Island High Technology Incubator, Inc.  
10.4*   Amendment to Leases, dated November 4, 2019, by and between Long Island High Technology Incubator, Inc. and Applied DNA Sciences, Inc.  
10.5*   Amendment to Leases, dated January 17, 2020, by and between Long Island High Technology Incubator, Inc. and Applied DNA Sciences, Inc.  
31.1*   Certification of Chief Executive Officer, pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  
31.2*   Certification of Chief Financial Officer, pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  
32.1**   Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  
32.2**   Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  
101 INS*   XBRL Instance Document  
101 SCH*   XBRL Taxonomy Extension Schema Document  
101 CAL*   XBRL Taxonomy Extension Calculation Linkbase Document  
101 DEF*   XBRL Taxonomy Extension Definition Linkbase Document  
101 LAB*   XBRL Extension Label Linkbase Document  
101 PRE*   XBRL Taxonomy Extension Presentation Linkbase Document  

 

* Filed herewith.

** Furnished herewith.

 

Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act or the Exchange Act, except as otherwise stated in any such filing.

† Indicates a management contract or any compensatory plan, contract or arrangement.

 

32 

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Applied DNA Sciences, Inc.
   
Dated: August 6, 2020 /s/ JAMES A. HAYWARD
  James A. Hayward, Ph. D.
  Chief Executive Officer
  (Duly authorized officer and principal executive officer)
   
  /s/ BETH JANTZEN
Dated: August 6, 2020 Beth Jantzen, CPA
  Chief Financial Officer
  (Duly authorized officer and
  principal financial and accounting officer)

 

33 

 

Exhibit 10.1

 

 

CONSULTING AGREEMENT

 

This Consulting Agreement (“Agreement”) is entered into as of December 12th, 2019 (the “Effective Date”) by and between Applied DNA Sciences, Inc. a Delaware corporation located at 50 Health Sciences Drive, Stony Brook, New York, 11790 (the “Company”) and Meadow Hill Place, LLC, with an address of [intentionally omitted] (“Consultant”). The Company desires to retain Consultant as an independent contractor to perform consulting services for the Company, and Consultant is willing to perform such services, on the terms described below.

 

In consideration of the mutual promises contained herein, the parties agree as follows:

 

1. Consulting Services

 

Subject to the terms and conditions of this Agreement, the Company hereby retains Consultant as a consultant to perform the consulting services specifically set out in Exhibit A attached to this Agreement and made a part hereof (hereafter referred to as the “Services”), and Consultant agrees, subject to the terms and conditions of this Agreement, to render such Services during the term of this Agreement.

 

2. Compensation

 

In consideration of the Services to be provided by Consultant to the Company during the Initial Term, the Company shall compensate Consultant as described in Exhibit B. Consultant’s compensation for any Renewal Term shall also be as described in Exhibit B.

 

3. Independent Contractor Status.

 

It is expressly agreed that Company and Consultant shall be independent contractors and that the relationship between the parties shall not constitute a partnership, joint venture or agency. Neither Company nor Consultant shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other party, without the prior written consent of the other party.

 

4. Intellectual Property

 

(a) Consultant, its agents and employees, agree that all items prepared or originated in connection with the Services, regardless of medium, and including but not limited to all materials, software, notes, records, drawings, designs, inventions, proposals, improvements, developments, discoveries and trade secrets conceived, discovered, developed or reduced to practice by Consultant, solely or in collaboration with others, during the Term of this Agreement that relate in any manner to the business of the Company that Consultant may be directed to undertake, investigate or experiment with or that Consultant may become associated with while performing the Services or through access to Company Confidential Information (collectively, “Inventions”), are the sole property of the Company. Consultant hereby agrees to assign (or cause to be assigned) and hereby assigns fully to the Company, all Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating to all Inventions. Consultant whether upon Company’s request or voluntarily, shall promptly disclose to the Company all Inventions that Consultant has created.

 

 

 

 

(b) Consultant acknowledges and agrees that any work of authorship relating to any Invention shall be deemed to be a "Work Made for Hire," to the extent permitted by the United States Copyright Act. To the extent that any such work of authorship may not be deemed to be a Work Made for Hire, Consultant hereby irrevocably assigns all ownership rights in and to such work to the Company. If any such work of authorship cannot be assigned, Consultant hereby grants to the Company an exclusive, assignable, irrevocable, perpetual, worldwide, sub-licensable (through one or multiple tiers), royalty-free, unlimited license to use, copy, reproduce, distribute, modify, adapt, alter, translate, improve, create derivative works of, practice, publicly perform, publicly display and digitally perform and display such work in any media now known or hereafter known. To the extent moral rights may not be assignable under applicable law and to the extent the following is allowed by the laws in the various countries where moral rights exist, Consultant hereby irrevocably waives such moral rights and consents to any action of the Company that would violate such moral rights in the absence of such consent.

 

(c) Consultant, its agents and employees, agree to assist Company, or its designee, to secure the Company’s rights, titles and all interest in and to all Inventions and/or other intellectual property rights relating to all Inventions, at the Company’s expense, in any and all countries, the execution of all documents, applications, specifications, oaths, assignments and all other instruments that the Company may deem necessary in order to apply for and obtain such rights and in order to assign and convey to the Company, its successors, assigns and nominees the sole and exclusive right, title and interest in and to all Inventions, and/or other intellectual property rights relating to all Inventions. Consultant also agrees that Consultant’s obligation to execute or cause to be executed any such instrument or papers shall continue after the termination of this Agreement.

 

(d) Consultant, its agents and employees, agree that if the Company is unable because of Consultant’s unavailability, dissolution, mental or physical incapacity, or for any other reason, to secure Consultant’s signature for the purpose of securing the Company’s rights, titles and all interest in and to all Inventions and/or other intellectual property rights relating to all Inventions, Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Consultant’s agent and attorney-in-fact, to act for and on Consultant’s behalf to execute and file any such documents and instruments and to do all other lawfully permitted acts to further the securing of the Inventions and/or other intellectual property rights relating to all Inventions, with the same legal force and effect as if executed by Consultant.

 

(e) Consultant, its agents and employees, acknowledge that the Company does not desire to acquire any trade secrets, know-how, confidential information, or other intellectual property that the Consultant may have acquired from or developed for any third party (“Third-Party IP”). The Company agrees that in the course of providing the Services, the Consultant shall not be required to use or disclose any Third-Party IP, including without limitation any intellectual property of (i) any former or current employer, (ii) any entity for whom the Consultant has performed or currently performs consulting services, or (iii) any other person to whom the Consultant has a legal obligation regarding the use or disclosure of such intellectual property.

 

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5. Indemnification

 

(a) Consultant agrees to indemnify and hold harmless the Company and its directors, officers and employees from and against all losses, damages, liabilities, costs and expenses, including attorneys’ fees and other legal expenses, arising directly or indirectly from or in connection with (i) any grossly negligent, reckless or intentionally wrongful act of Consultant or Consultant’s employees or agents; or (ii) any breach by the Consultant or Consultant’s employees or agents of any of the representations, warranties, covenants and/or obligations contained in this Agreement.

 

The Company, agrees, accepts and acknowledges that any legal proceedings arising from or in connection with this Agreement must be commenced within eighteen (18) months from the termination of this Agreement, and that no action or claim will be brought against any member, manager, interest holder, employee, officer, partner or agent of Consultant, unless a court of competent jurisdiction deems Consultant to be a mere alter ego of any said member, manager, interest holder, employee, officer, partner or agent. The Company agrees that no action or claims may be brought against of Consultant’s employees, officers, directors, members, managers, advisors, partners or contractors personally, unless a court of competent jurisdiction deems Consultant to be a mere alter ego of any said employees, officers, directors, members, managers, advisors, partners or contractors.

 

The Company shall indemnify Consultant, and its directors, officers and employees (collectively, the “Consultant Indemnified Persons”) from and against any and all claims, demands, suits, investigations, proceedings, judgments, awards, liabilities, losses, damages, fees and expenses paid or incurred by any Consultant Indemnified Person in connection with, arising out of or related to (whether from direct claims or third party claims) any breach by the Company of this Agreement (including but not limited to any Consultant Indemnified Person’s reasonable external counsel fees and expenses when incurred). The foregoing indemnification obligations shall not apply in the event that a court of competent jurisdiction fully and finally determines that such claims resulted directly from the gross negligence, willful misconduct or fraudulent acts of Consultant.

 

6. Confidential Information

 

(a) The parties acknowledge that in connection with Consultant’s Services, the Company may disclose to Consultant confidential and proprietary information and trade secrets of the Company, and that Consultant may also create such information within the scope and in the course of performing the Services (hereinafter “Company Confidential Information”). Such information may take the form of, for example: data concerning scientific discoveries made by the Company; the Company’s know-how; the Company’s customer lists and customers; the Company’s manufacturing strategies and processes; the Company’s marketing plans; data from the Company’s pilots or other studies; the Company’s past, present and future business plans and pricing; the Company DNA amplification technology; the Company’s strategy for or status of regulatory approval; or the Company’s forecasts of sales and sales data.

 

(b) Consultant recognizes that the Company has received, and in the future will receive, confidential or proprietary information of third parties that is subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. Such third-party confidential information shall be deemed Company Confidential Information and shall be subject to all covenants and restrictions of this Section 6.

 

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(c) Subject to the terms and conditions of this Agreement, Consultant hereby agrees that during the term of this Agreement and for a period of ten (10) years thereafter: (i) Consultant shall not publicly divulge, disseminate, publish or otherwise disclose any Company Confidential Information to third-party without the Company’s prior written consent; and (ii) Consultant shall not use any such Company Confidential Information for any purposes other than the Services. Notwithstanding the above, the Company and Consultant acknowledge and agree that the obligations set out in this Section 6 shall not apply to any portion of Company Confidential Information which: (i) was at the time of disclosure to Consultant part of the public domain by publication or otherwise; (ii) became part of the public domain after disclosure to Consultant by publication or otherwise, except by breach of this Agreement by Consultant; (iii) was already properly and lawfully in Consultant’s possession without obligation of confidentiality at the time it was received from the Company as evidenced by contemporaneous written records; (iv) was or is lawfully received by Consultant from a third party who was under no obligation of confidentiality with respect thereto as evidenced by contemporaneous written records; or (v) is required to be disclosed by law, regulation or valid judicial or administrative process.

 

(d) Upon termination of the Agreement, or any other termination of Consultant’s Services for the Company, all records, drawings, notebooks and other documents pertaining to any Company Confidential Information, whether prepared by Consultant or others, and any material, specimens, equipment, tools or other devices owned by the Company then in Consultant’s possession, and all copies of any documents, shall be returned to the Company.

 

7. Insider Information

 

In the course of the performance of Consultant’s Services, it is expected that Consultant will receive information that is considered material inside information within the meaning and intent of the U.S. federal securities laws, rules and regulations. Consultant will not disclose this information directly or indirectly to any third party, nor will Consultant buy, sell or otherwise deal in the securities of Company in violation of applicable law.

 

8. Term

 

(a) The term of this Agreement will begin on the Effective Date and will continue for a period of six (6) months (the “Initial Term”). This Agreement may be renewed for an additional 6 month term (the “Renewal Term”) at the option of the Company. The Company shall provide written notice to Consultant of its election of the Renewal Term at least thirty (30) days before the expiration of the Initial Term.

 

(b) Notwithstanding Section 8(a), above, during any Renewal Term, either party may terminate this Agreement upon 30 days’ prior written notice to the other party. This Agreement may also be terminated by the Company during the Initial Term or any Renewal Term immediately and with 30 days prior written notice if Consultant refuses to or is unable to perform the Services or is in breach of any material provision of this Agreement.

 

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(c) Sections 2, 3, 4, 5, 6, 7, 8, 9 and 10 will survive termination of this Agreement

 

9. Non-solicitation/Non-Competition

 

(a) From the date of this Agreement until six (6) months after the termination of this Agreement (the “Restricted Period”), Consultant shall not, without the Company’s prior written consent, directly or indirectly, as an owner, principal, partner, member, shareholder, independent contractor, agent, finder, consultant, joint venture, investor, licensor, lender, employee or in any other capacity whatsoever, alone, or in association with any other person: (a) carry on, be engaged or take part in, or render services or advice to, own, share in the earnings of, invest in the stocks, bonds or other securities of, or otherwise become financially interested in, any person, firm, corporation or other business organization engaged in business that competes with the Company (other than by owning of record or beneficially up to two percent (2%) of the shares of any third-party firm, corporation or other business organization whose shares are publicly traded on a national securities exchange or in the over-the-counter market), or (b) solicit or encourage any employee or contractor of the Company or its affiliates to terminate employment with, or cease providing services to, the Company or its affiliates. During the Restricted Period, Consultant will not, whether for Consultant’s own account or for the account of any other person, firm, corporation or other business organization, intentionally interfere with any person who is or during the period of Consultant’s engagement by the Company was a partner, supplier, customer or client of the Company or its affiliates. The Restricted Period will extend to twelve (12) months after the termination of this Agreement at such time as Consultant has been engaged by the Company for a period of more than 6 months. For the purposes of this Section 9, a person, firm, corporation or other business organization shall be deemed to compete with the Company if they provide molecular and/or DNA based product or supply chain security/traceability systems, products and/or services, and/or nucleic-acid based biotherapeutics incorporating non-plasmid derived DNA.

 

(b) In view of Consultant’s access to the Company’s trade secrets and proprietary know-how, Consultant agrees that Consultant will not, without Company’s prior written approval, design identical or substantially similar designs as those owned, sold or under development by the Company during the term of this Agreement and the Restricted Period. Consultant acknowledges that the obligations in this Section 9(b) are ancillary to Consultant’s nondisclosure/nonuse obligations under Section 6.

 

(c) Consultant acknowledges that the foregoing restrictions are a reasonable and appropriate means of protecting Company’s proper interests, which will not unreasonably interfere with Consultant’s ability to make a living. If any Court determines that the foregoing restrictions are excessive in duration or scope, or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the Court to render it enforceable to the maximum extent permitted by law.

 

10. Warranties

 

Consultant represents and warrants that: (a) Consultant has full right, power, and authority to enter into and perform this Agreement without the consent of any third party; (b) Consultant, its agents and employees, have the full right, power, and authority to comply with the obligations of Section 4; and (c) Consultant will not, in the course of performing the Services, infringe or misappropriate any intellectual property right of any third party.

 

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11. Conflicting Obligations

 

Consultant certifies that Consultant has no outstanding agreement or obligation that conflicts with any of the provisions of this Agreement or that would preclude Consultant from complying with the provisions of this Agreement. Consultant will not enter into any such conflicting agreement during the term of this Agreement. Consultant’s violation of this Section will be considered a material breach under Section 8(b).

 

12. Miscellaneous

 

(a) Any notice or other communication required or permitted by this Agreement to be given to a party shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by U.S. registered or certified mail (return receipt requested), or sent via facsimile (with receipt of confirmation of complete transmission) to the party at the party’s address or facsimile number written below or at such other address or facsimile number as the party may have previously specified by like notice. If by mail, delivery shall be deemed effective 3 business days after mailing in accordance with this Section.

 

If to the Company, to:

 

Applied DNA Sciences, Inc.

Attn: Beth Jantzen, CFO

50 Health Sciences Drive,

Stony Brook, New York 11790

Telephone: (631) 240-8800

Facsimile: (631) 240-8900

 

If to the Consultant, to

 

Scott Anchin

Meadow Hill Place, LLC

[intentionally omitted]

 

(b) This Agreement (a) contains the entire understanding between the parties with respect to subject matter hereof, (b) supersedes all prior communications and understandings with respect thereto, whether written or oral, (c) may not be modified in any manner, except by written amendment duly executed by the authorized representatives of each party hereto, and (d) may be executed by facsimile or electronic signature which shall be deemed to be an original for all purposes. It is further understood and agreed that no failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. The headings and subheading contained herein shall not be considered a part of this Agreement.

 

  5  

 

 

(c) Although the restrictions and terms contained in this Agreement are considered by the parties to be reasonable for the protection of Company’s proper interests, if any such restriction and/or term is found by a court of competent jurisdiction to be unenforceable, such provision will be modified, rewritten or interpreted to include as much of its nature and scope as will render it enforceable. If it cannot be so modified, written or interpreted to be enforceable in any respect, it will not be given effect, and the remainder of the Agreement will be enforced as if such provision was not included.

 

(d) This Agreement shall be construed in accordance with the laws of the State of New York without regard to any provisions of conflicts of laws. The New York State Supreme Court, County of New York, or the United States District Court for the Southern District of New York shall have exclusive jurisdiction to adjudicate any dispute arising in connection with this Agreement and each party hereby consents to such jurisdiction. This Agreement may not be assigned by a party without the advance written consent of the other party.

 

[Signature Page Follows]

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the dates indicated below.

 

APPLIED DNA SCIENCES, INC.   MEADOW HILL PLACE, LLC
     
By: /s/ James A. Hayward   By: /s/ Scott L Anchin
Name:  James A. Hayward   Name:  Scott Anchin
Title:    CEO   Date:    12/9/19
Date:   12/9/2019    

 

  6  

 

 

EXHIBIT A

 

Services

 

Intentionally omitted. 

 

  7  

 

 

EXHIBIT B

 

Consultant Compensation

 

Intentionally omitted. 

 

  8  

 

Exhibit 10.2

 

  

AGREEMENT OF LEASE

 

LONG ISLAND HIGH TECHNOLOGY INCUBATOR, INC

 

APPLIED DNA SCIENCES, INCORPORATED

 

November 1, 2015 - October 31, 2016

 

 

  Page 1 of 12  

 

 

AGREEMENT OF LEASE

 

This Lease dated this First day of November, Two Thousand Fifteen is by and between LONG ISLAND HIGH TECHNOLOGY INCUBATOR, INC., a nonprofit educational corporation existing under the laws of the State of New York, having its principal place of business located at 25 Health Sciences Drive, Stony Brook, New York 11790, hereinafter referred to as " Landlord," and APPLIED DNA SCIENCES, INCORPORATED , having its principal place of business located at 25 Health Sciences Drive, Stony Brook, New York 11790, hereinafter referred to as" Tenant".

 

WHEREAS, by terms of a certain ground lease Agreement between the State University of New York and Landlord, the State University of New York has granted to Landlord the authority to construct a facility on certain land on the campus of Stony Brook, hereinafter referred to as the "Incubator," and to lease space in such facility for emerging high technology enterprises. Such space, specifically suites 103, and 112 are the designated premises under this Lease; and

 

WHEREAS, the Tenant has developed competence and expertise in encryption technology , the Field (as hereinafter defined); and

 

WHEREAS, Landlord wishes to promote and foster economic development in the Field, and

 

WHEREAS, Landlord wishes to make available to the faculty and students, at the State University of New York at Stony Brook (SBU), additional opportunities for practical application and study in the Field; and

 

WHEREAS, the Tenant qualifies as a start-up company in the area of technology, as provided in the January 22, 1986 Resolution of the State University of New York Board of Trustees "Use of University Facilities by Emerging Technology Enterprises" (SUNY Document Number 5604; furnished upon request); and the Incubator Guidelines and Procedures of the State University of New York at Stony Brook (furnished upon request); and

 

WHEREAS, Tenant agrees to provide information on revenues and employment during occupancy and for a period of 5 years following graduation from the program. This information will be combined with data from other graduate companies and used in aggregate form for the purposes of demonstrating economic development success of the Incubator; and

 

WHEREAS, Tenant wishes to stimulate future companies in the Incubator program and will make every effort to contribute to the Incubator corporation in some fashion following graduation; and

 

NOW, THEREFORE, Landlord and Tenant hereby agree as follows:

 

  Page 2 of 12  

 

 

1.            Grant

 

Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, upon and subject to the terms and conditions contained herein, the Premises (as hereinafter defined)

 

2.            Premises

 

The Premises are more particularly described under the State University Board of Trustees resolution of January 22, 1986 and further referenced in paragraph (b) of the Patents and Inventions Policy of State University of New York dated September 19, 1979, and amended November 16, 1988 such facilities are considered Tenant facilities and not State University facilities for purposes of patent and copyright ownership (documents furnished upon request).

 

3.            Term

 

The terms of this Lease shall be for one year commencing November 1, 2015 and ending October 31, 2016. The Incubator Selection and Review Committee (ISRC) will review your business annually prior to lease renewal. Any concerns about the incubator management and operations may be brought directly to the ISRC Chair or any member of the ISRC. Current information on the membership of the ISRC and their contact information are posted on the LIHTI website (www.lihti.org). In the event that the Landlord determines in its sole discretion that the Incubator project is abandoned or that an order is received from a government agency to vacate the Premises, the ending date may be accelerated to such date as determined to be reasonable by the Landlord. However, under no circumstances will the lease be terminated without "Cause" (as defined in 14a) unless 60 days written notice is provided to Tenant.

 

4.            Rent

 

a) The rent payable hereunder is $49,500 per year, which sum shall be payable in monthly installments of $4,125 due on the first day of each month during the term. Rent payable by Tenant under this Lease shall be paid when due without prior demand therefore, without any deductions or setoffs or counterclaims whatsoever. Rent will be due on the first day of the month and a 5% late fee on balance due will be charged for any rent that is not received by the 15th of each month.

 

b) Tenant shall pay before delinquency all taxes, assessments, license fees and public charges levied, assessed or imposed upon its business operation, as well as upon its leasehold interest, trade fixtures, furnishings, equipment, leasehold improvements made by Tenant, alterations, changes and additions made by Tenant, merchandise and personal property of any kind owned, installed or used by Tenant in, on or upon the Premises. Tenant shall be responsible for making any necessary returns for and paying any other property taxes separately levied or assessed against the improvements constructed by Tenant on the Premises.

 

  Page 3 of 12  

 

 

5.            Indemnification and Hold Harmless

 

a) Tenant agrees to save Landlord harmless from, and indemnify Landlord against, any and all injury, loss or damage and any and all claims for injury, loss or damage, caused by, resulting from, or claimed to have been caused by or to have resulted from (i) the use, occupancy, or enjoyment of the Premises or (ii) any act, omission or negligence of Tenant or anyone claiming under Tenant (including, without limitation, employees, contractors, invitees, successors and assigns or Tenant).

 

i) Comprehensive general liability insurance will be held by Tenant in the amount of $2,000,000 combined single limit. Such policy shall name the Long Island High Technology Incubator, Inc. (Landlord), SUNY at Stony Brook, and the State of New York as an additional insured and loss payee.

ii) Workers Compensation Insurance and New York State Disability Insurance according to and in amounts required under New York State laws.

 

b) All policies of insurance provided for in this Section shall be issued in a form acceptable to Landlord by insurance companies qualified to do business in the State of New York. Each such policy shall be issued in the names of Landlord and Tenant and any other party listed above. Said policies shall be for the mutual and joint benefit and protection of Landlord and Tenant and any such other parties in interest, and executed copies of each such policy of insurance or a certificate thereof shall be delivered to each of Landlord within ten (10) days after delivery of possession of the Premises to Tenant and renewals or replacements thereof shall be so delivered at least thirty (30) days prior to the expiration of each said policy. All such policies of insurance shall contain a provision that the company writing said policy will give to Landlord and other said parties in interest at least ten (10) days prior written notice of any cancellation, lapse, or reduction in the amounts of insurance. All such policies shall contain a provision that Landlord and any such other parties in interest, although named as an insured, shall nevertheless be entitled to recover under said policies for any loss occasioned to it, its servants, agents and employees by reason of the negligence of Tenant.

 

c) Tenant shall not do nor suffer to be done, nor keep nor suffer to be kept anything in, upon or about the Premises which could (i) contravene Landlord's policies insuring against loss or damage by fire or other hazards, (ii) prevent Landlord from procuring such policies from companies acceptable to Landlord (iii) cause an increase in the insurance rates upon any portion of the Premises. If Tenant violates any prohibition provided for in the first sentence of this Section, Landlord may without notice to Tenant, correct the same at Tenant's expense. Tenants shall pay to Landlord as additional rent forthwith upon demand the amount of any increase in premiums for insurance resulting from any violation of the first sentence of this Section, even if Landlord shall have consented to the doing of, or keeping of, anything on the Premises which constituted such a violation (but the payment of such additional rent shall not entitle Tenant to violate the provisions of the first sentence of this paragraph.)

 

  Page 4 of 12  

 

 

6.           Security

 

a) Tenant shall have deposit with Landlord a security deposit equal to two (2) months' rent. If rent changes, Landlord will bill Tenant so security deposit is maintained as two (2) months of updated rent.

 

b) If Tenant pays the rent and performs all of its other obligations under this Lease, Landlord will return the unused portion of this security deposit within thirty (30) days after the end of the term.

 

7.            Services

 

Landlord shall provide the following services to Tenant; all ordinary and necessary water, gas, electrical services, heating, cooling, sewage and internet access services. Telephone services will be provided in accordance with SBU policy at the expense of the Tenant. Tenant may avail itself of other campus facilities and services at the established third-party rates.

 

Tenant understands and agrees that services offered by SBU to Tenant shall be equivalent to those provided to campus academic and administrative offices, unless otherwise agreed in writing by both parties. All activities of the Tenant involving facilities and services of SBU will be consistent with applicable policies and guidelines of SBU.

 

8.            Use of Premises

 

a) Tenant may only use the Premises for an office or laboratory in accordance with the terms hereof and the rules and regulations now or hereafter adopted by Landlord for the Incubator.

 

b) Tenant agrees to keep the Premises in good order and condition during the term of this agreement.

 

c) Tenant shall use the Premises only in connection with the Tenant's business; as such business was described and presented to the Executive Director, or the Incubator Selection and Review Committee, and for no other business without Landlord's prior, written consent.

 

d) Tenant specifically agrees not to hold itself out as representing the State of New York, The State University of New York, or SBU in connection with the use of State-owned property to which this Lease relates, nor shall the name of the State of New York, the State University of New York, or SBU be used by Tenant for any purpose without prior, specific written approval of the party whose name is to be used.

 

  Page 5 of 12  

 

 

e) Tenant shall meet with Landlord & ISRC at least annually, at a time determined by Landlord, for the purpose of reviewing the Tenant's business plan or part thereof and compare the proposed plan of action against reality. Should the Tenant fail to develop a business plan or equivalent the lease may not be renewed.

 

f) Tenant will contract through the Research Foundation of the State University of New York, hereinafter referred to as the "Foundation", for any business and research-related tasks to be performed by faculty or staff of SBU utilizing University facilities. Faculty and staff are permitted to consult with Tenant in accordance with the SUNY Policy (Title J. Patents, Inventions and Copyright Policy, furnished upon request); described in SUNY Policies of the Board of Trustees, 2006 (amended July 26, 2006), and also described by the SBU Office of Technology Licensing and Industry Relations.

 

g) Tenant may seek and submit proposals for collaborative efforts and joint ventures to Economic Development Groups at SBU for mutual benefit. Accepted proposals will be administered by separate contracts which shall in no way diminish or change any provision of this Lease. The failure of Tenant to fulfill its obligations herewith or the breach of any of the terms hereof or any misrepresentation made by Tenant in connection with this Lease shall constitute a default hereunder and Landlord shall have the right, at its option, to terminate this Lease, in addition to any and all other remedies and rights available to it in equality and at law.

 

9.            Right of Entry

 

a) Contact information for tenant representative should be posted next to laboratory entry door along with MSDS information about materials and potential safety risks within the Premises for businesses that have chemicals or materials. Landlord or Landlord's agents shall have the right (but shall not be obligated) to enter the Premises in any emergency at any time, and, at other reasonable times, to examine the same and to make such repairs, replacements and improvements as Landlord may deem necessary and reasonably desirable to the Premises or to any other portion of the Building or which Landlord may elect to perform. Fire Marshall inspections will not be scheduled but will be performed at least annually with escort by Landlord or Landlords agents. In an emergency Landlord or Landlord's agents, will make best efforts to contact the tenant representative at the time of the emergency, and prior to entry. If Tenant is not present to open and permit an entry into the Premises, Landlord or Landlord's agents may enter the same whenever such entry may be necessary or permissible by master key or forcibly and provided reasonable care is exercised to safeguard Tenant's property. Landlord will communicate information about entry if any emergency entry does take place.

 

b) Landlord or Landlord's agents will make best efforts to contact the tenant representative to schedule repairs and maintenance in advance. Throughout the term hereof Landlord shall have the right to enter the Premises at reasonable hours for the purpose of showing the same to visitors, prospective purchasers or mortgagees of the Building, and during the last six months of the term for the purpose of showing the same to prospective tenants. Landlord will schedule these visits in advance with Tenant to determine a mutually agreed upon time during which a Tenant representative will be present on site. Tenant agrees that it will exercise good faith efforts to schedule visits for these purposes.

 

  Page 6 of 12  

 

 

c) Tenant agrees that Landlord may conduct construction work in the immediate area surrounding the demised Premises. Landlord agrees that it will exercise good faith efforts to conduct such construction work so as not to unreasonably interfere with Tenant.

 

10.          No Assignment or Sublease

 

Due to the fact that the LIHTI Incubator is intended to benefit specific types of companies in the developmental stages, and because Tenant has been specifically approved for participation in the LIHTI Incubator project, Tenant agrees that it cannot assign this agreement, or sublease the Premises nor any portion thereof without Landlord's consent, which may be granted or withheld in Landlord's sole discretion.

 

11.         Alterations

 

Tenant may make no changes in or to the Premises of any nature without Landlord's prior written consent. All fixtures and all paneling, partitions, railings and like installations, installed in the Premises at any time, either by Tenant or by Landlord on Tenant's behalf, shall, upon installation, become the property of Landlord and shall remain upon and be surrendered with the Premises unless Landlord, by notice to Tenant no later than twenty days prior to the date fixed as the termination of this Lease, elects to relinquish Landlord's right thereto and to have them removed by Tenant, in which event the same shall be removed from the Premises by Tenant prior to the expiration of this Lease at Tenant's expense. Upon removal of such installations as may be required by Landlord; Tenant shall immediately and at its expense, repair and restore the Premises to the condition existing prior to installation and repair any damage to the Premises or the Building due to such removal. All property permitted or required to be removed by Tenant at the end of the term remaining in the Premises after Tenant's removal shall be deemed abandoned and may, at the election of Landlord, either be retained as Landlord's property or may be removed from the Premises by Landlord, at Tenant's expense.

 

12.         Rules and Regulations

 

Tenant agrees to adhere to and abide by any rules and regulations that may be adopted or modified by the Landlord.

 

a) Tenant shall not install any signage; awnings or structure of any kind whatsoever in the interior or exterior of the Building without Landlord's written consent.

 

b) Tenant shall not connect any apparatus, equipment or device to the water, plumbing, and HVAC lines without first obtaining the written consent of the Landlord.

 

  Page 7 of 12  

 

 

c) Tenant shall not operate any electric powered machines or equipment, except normal office equipments such as copiers, calculators, personal computers, or printers, without first obtaining the written consent of the Landlord.

 

d) Tenant shall not operate or permit to be operated any musical or sound-producing device, which may be heard outside of Tenant's Premises. Tenant shall not bring or permit to be brought into the building any animals or birds whether alive or dead. SBU has an authorized animal control facility for such use.

 

e) No toxic or hazardous substances shall be used, stored or brought into the Building by Tenant without written declaration.

 

f) Tenant shall not perform or hire any contractors or installation technicians rendering any construction or building services including, but not limited to, electrical, installation of electrical devices, plumbing, HVAC, and installation of any and every nature affecting floors, walls, ceilings, equipment or other physical portions or services of the Building. No outside telecommunications service or provider will be permitted to install communications equipment on Premises without prior written approval.

 

g) Tenant assumes all risk of damage to any and all articles moved or installed, as well as all injury to any person or property in such movement, and hereby agrees to indemnify Landlord against any loss resulting there from.

 

h) Landlord shall not be responsible for any loss or stolen property, equipment, money, jewelry from the leased Premises or the public areas of the Building or grounds.

 

i) Landlord shall have the right to determine the maximum weight and proper position of any heavy equipment, including safes, large files, etc. that are to be placed in the Building, and only those which, in the opinion of the Landlord, will not do damage to the floors, structures or elevators may be moved into the Building.

 

j) Tenant shall not allow any violation of fire or safety regulations. Tenant agrees at its own expense to comply with, and to indemnify and hold Landlord harmless with respect to any violation of, all recommendations and requirements with respect to the Premises, or its use or occupancy, of the insurance underwriters or any similar public or private body, and any governmental authority, having jurisdiction over insurance rates with respect to the use or occupancy of the Building.

 

k) Appliances including but not limited to refrigerators, freezers, cooking equipment (microwaves) are not permitted without first obtaining the consent of the Landlord.

 

  Page 8 of 12  

 

 

13.         Mechanics' Liens

 

Tenant will not permit to be created or to remain undischarged any lien, encumbrance or charge arising out of any work done or materials or supplies furnished by any contractor, mechanic, laborer or materialman by or for Tenant or any mortgage, conditional sale, security agreement or chattel mortgage. If any such lien shall be filed against the Building or any part thereof, Tenant will cause the same to be discharged of record by payment, deposit, bond, order of a court of competent jurisdiction or otherwise within thirty (30) days after the filing thereof. If Tenant shall fail to cause such lien or notice of lien to be discharged within the period aforesaid, then, in addition to any other right or remedy Landlord may, but shall not be obligated to, discharge the same either by paying the amounts claimed to be due or by procuring the discharge of such lien by deposit or by bonding proceedings and in any such event Landlord shall be entitled, if Landlord so elects, to compel the prosecution of an action for the foreclosure of such lien by the lienor and to pay the amount of judgment in favor of the lienor with the interest, costs and allowances. Any amount so paid by Landlord and all costs and expenses, including attorney's fees, incurred by Landlord in connection therewith, shall constitute Additional Rent payable by Tenant under this Lease and. Shall be paid by Tenant to Landlord on demand.

 

14.         Termination

 

a) This Lease shall be terminated by:

 

i) expiration of this agreement or

 

  ii) revocation by the Landlord, subject to the provision of 60 days notice in writing to the Tenant unless revocation is for non-payment of rent, repeat code and lease term violations or other such breaches of the Tenancy Agreement.

  

b) In the event this agreement is terminated and the Tenant fails to vacate the Premises, the Tenant agrees to pay holdover rental in the amount of $40 per square foot of the Premises and allocated Common Area Space.

 

15.         Notice

 

Any Notice hereunder must be in a signed writing and served by certified mail, return receipt requested as follows:

 

a)   Landlord:

 

Long Island High Technology Incubator, Inc,
25 Health Sciences Drive, Mail Box 100
Stony Brook, NY 11790-3350
Attn.: Executive Director

 

b) Tenant:

 

James A. Hayward, Ph.D.

Chairman, President and CEO
Applied DNA Sciences, Inc.
50 Health Sciences Drive
Stony Brook, NY 11790

 

  Page 9 of 12  

 

 

16.         No Encumbrances

 

Tenant agrees that it cannot mortgage nor encumber neither the Premises nor any portion thereof.

 

17.         Default

 

a) Failure of Tenant to pay rent by the 15th day of any month or to otherwise adhere to the terms and conditions herein shall be deemed an event of default.

 

b) Landlord's Remedies. If any Event of Default occurs, then and in each such case, Landlord may treat the occurrence of such Event of Default as a breach of this Lease, and in addition to any and all other rights or remedies of Landlord in this Lease or by law or in equity provided, Landlord shall have, in its option, without further notice of demand of any kind to Tenant or any other person:

 

i) the right to charge late fees;
ii) the right to terminate this Lease;

iii) the right to bring suit for the collection of Rent, as it accrues pursuant to the terms of this Lease, and damages (including without limitation)

 

18.         No Modification

 

This Agreement may not be changed, amended or modified except in a writing duly executed by all parties herein.

 

19.         No Waiver

 

Failure of the Landlord to exercise a right or remedy to which it is entitled to exercise pursuant to this agreement shall not be deemed a waiver of its right to later exercise the right or remedy.

 

20.         Estoppel Certificates

 

Within ten (10) days after Tenant takes possession of the Premises, and from time to time thereafter within ten (10) days after request in writing there for from Landlord, Tenant agrees to execute and deliver to Landlord, or to such other addressee or addressees as Landlord may designate (and any such addressee may rely thereon), a statement in writing in a form and substance prepared by Landlord, certifying (i) that this Lease is unamended and in full force and effect (or identifying any amendments), (ii) whether either party hereto is in default hereof (and specifying any such default), (iii) the date(s) to which Rent has been paid, and (iv) such other matters as Landlord shall reasonably request. In the event that Tenant fails to provide such statement within ten (10) days after Tenant takes possession of the Premises and from time to time thereafter within ten (10) days after Landlord's written request therefore, Tenant does hereby irrevocably appoint Landlord as attorney-in-fact of Tenant, coupled with an interest, in Tenant's name, place and stead so to do in each and every case.

 

  Page 10 of 12  

 

 

21.         Subordination

 

Tenant agrees that this Lease and the Tenant's interest herein shall be subordinate to any mortgage, deed of trust, ground or underlying lease, or any method of financing or refinancing now or hereafter placed against the Premises and/or any or all of the Building of which the Premises is a part and/or the land upon which the Building is located; and to all renewals, increases, modifications, replacements, consolidations and extensions thereof. Upon request of Landlord, Tenant agrees to execute and deliver any and all documents as Landlord shall request to evidence such subordination as aforesaid.

 

22.         Destruction

 

In the event of the destruction of the Building to such a degree that Landlord shall elect to demolish or substantially renovate or rehabilitate the Building, Landlord shall have the right to terminate this Lease upon notice to Tenant.

 

23.         Building Alterations and Management

 

Landlord shall have the right at anytime without the same constituting an eviction and without incurring liability to Tenant therefore to change the arrangement and/or location of public entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or other public parts of the Building and to change the name, number or designation by which the Building may be known.

 

There shall be no allowance to Tenant for dimmution of rental value and no liability on the part of Landlord by reason of inconvenience, annoyance or injury to business arising from Landlord or other Tenants making any repairs in the Building or any such alterations, additions and improvements.

 

  Page 11 of 12  

 

 

Agreement of Lease: Signature page September, 2015

 

Long Island High Technology Incubator, Inc.

(Landlord)

 

Applied DNA Sciences, Inc.

(Tenant)

     
By: /s/ Jeffrey K. Saelens   By: /s/ James A. Hayward
  Jeffrey K. Saelens, Ph.D.     James A. Hayward, Ph.D.
  Interim Executive Director     Chairman, President & CEO
         
Date: 10/2/2015   Date: 10/16/2015

 

  Page 12 of 12  

 

 

Exhibit 10.3

 

 

TEMPORARY LEASE EXTENSION AGREEMENT
August 09, 2019

 

This Agreement, executed by mutual signature, hereby provides an additional temporary extension of Applied DNA Sciences Inc. Lease, dated June 14, 2013 with the below amendments, notifications and terms.

 

The Term of this extension is from August 10, 2019 through September 15, 2019.

 

It is hereby restated that Applied DNA Sciences did not exercise its right to renew.

 

By this Temporary Lease Extension, Applied DNA Sciences acknowledges that, in accordance with the terms of the Lease, any right to renew has expired, no right to renew exists, and this extension does not confer or provide any such right.

 

Any and all other rights that may have existed by way of the previous lease have additionally since expired.

 

/s/ James A. Hayward, PhD   Date: August 12 2019
Jim Hayward, PhD      
Chairman, President and CEO      
Applied DNA Sciences Inc      
50 Health Sciences Drive      
Stony Brook, NY 11790      

 

/s/ Matthew Stadler   Date: August 9th 2019
Matthew Stadler, PhD      
Executive Director and COO      
Long Island High Technology Incubator, Inc      
25 Health Sciences Drive      
Stony Brook, NY 11790      

 

 

LIHTI.org  25 Health Sciences Drive, Stony Brook, NY 11790 (631) 444 - 8800

 

 

 

Exhibit 10.4

 

Amendment to Leases

dated the 14th of June, 2013 and

the 1st of November, 2015

by and between

Long Island High Technology Incubator, Inc., as Landlord,

and Applied DNA Sciences, Inc., as Tenant.

 

This Amendment to Leases (the "Amendment") made as of the 4th of November 2019, by and between Long Island High Technology Incubator, Inc., a nonprofit education corporation existing under the laws of the State of New York having its principal place of business located at 25 Health Sciences Drive, Stony Brook NY 11790 (the "Landlord") and Applied DNA Sciences, Inc., having its principal place of business located at 25 Health Sciences Drive, Stony Brook, NY 11790 (the "Tenant");

 

WITNESSETH:

 

WHEREAS Landlord and Tenant entered into a certain Lease Agreement (the "Original Lease") dated the 14th of June, 2013 to lease approximately 30,000 rentable square feet of space within and forming a part of the building known as 50 Health Sciences Drive, Stony Brook NY (the "Original Demised Premises"); and

 

WHEREAS Landlord and Tenant entered into a certain Lease Agreement (the "Second Lease"; collectively, along with the Original Lease, the "Lease") dated November 1, 2015 to lease approximately 1,500 rentable square feet of space designated as Suites 103 and 112 within and forming a part of the building known as 25 Health Sciences Drive, Stony Brook NY (the "Additional Demised Premises"; collectively, along with the Original Demised Premises, the "Demised Premises"); and

 

WHEREAS the Second Lease had been extended; and

 

WHEREAS the parties wish to amend the Lease, clarify the parties' rights and obligations set forth in the Lease and modify the terms of the Lease;

 

NOW THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, notwithstanding anything to the contrary contained in the Lease, the parties hereinafter agree as follows:

 

1. The expiration of the Lease shall be modified to expire on January 15, 2020. Tenant acknowledges and agrees that Landlord has given Tenant no assurances of Tenant's right to remain at the Demised Premises past January 15, 2020.

 

2. Commencing November 1, 2019, Tenant's Monthly Base Rent shall be forty four hundred sixty five and 26/100 dollars ($40,465.26) per month for the Original Demised Premises, calculated per the Original Lease using the Consumer Price Index - New York - Newark - Jersey City, NY - NJ - PA (1982-84 - 100) for Urban Wage Earners and Clerical Workers - (CPI-W), and four thousand five hundred ($4,500) per month for the Additional Demised Premises, calculated at $36 per square foot per year- an aggregate rental amount of forty four thousand nine hundred sixty five and 26/100 dollars ($44,965.26) per month.

 

  Page 1 of 3  

 

 

3. Additionally, Tenant shall continue to pay its utility costs for the Original Demised Premises.

 

4. Tenant acknowledges and agrees that that it does not have a right of first refusal to lease the Demised Premises nor does Tenant have any options to renew the Lease.

 

5. Tenant agrees that Landlord should make the various repairs at the Demised Premises and/or in the buildings that house the Demised Premises (the "Repairs"). Tenant acknowledges that such repairs would otherwise be Tenant's responsibility and accordingly, Tenant authorizes and consents to Landlord's use of Tenant's Security Deposit for the cost of making the Repairs.

 

6. Tenant's Security Deposit shall be adjusted to an amount equal to two (2) months' Total Rent, which is eighty nine thousand nine hundred thirty and 51/100 dollars ($89,930.51). Currently Landlord is holding a Security Deposit in the amount of fifty eight thousand seven hundred fifty and 00/100 dollars ($58,750). Additionally, Landlord intends to use a portion of Security Deposit to make the Repairs. Tenant shall pay the balance owed for the Security Deposit, currently thirty one thousand one hundred eight and 51/100 dollars ($31,180.51), in monthly installments as determined, but not to exceed twelve thousand four hundred seventy two and 21/100 dollars ($12,472.21) per month during period of this Amendment, in Landlord's discretion.

 

7. Landlord shall reimburse Tenant for the documented, direct costs incurred by Tenant during the period between 01/01/2017 - 12/31/18 due to basement flooding within thirty (30) days of receiving reasonable and appropriate backup supporting such costs.

 

8. Notwithstanding anything to the contrary in this Amendment, all other terms and conditions of the Lease, shall remain in full force and effect and shall apply equally to the Additional Space. All terms and conditions of the Lease and any amendments shall be construed in accordance with same.

 

[signature page to follow]

 

  Page 2 of 3  

 

 

IN WITNESS WHEREOF, the parties have respectively signed and sealed this Amendment to the Leases as of the day and year first above written.

 

WITNESS   Long Island High Technology Incubator, Inc.
     
/s/ Mary Walton   /s/ Matthew Stadler
Mary Walton   Matthew Stadler
Secretary of the Board   Executive Director

 

WITNESS

 

  Applied DNA Sciences, Inc.
     
/s/ Beth Jantzen
By: Beth Jantzen
Title: CFO

 

  Page 3 of 3  

 

 

Exhibit 10.5

 

Amendment to Leases
dated the 14th of June, 2013 and
the 1st of November, 2015
by and between
Long Island High Technology Incubator, Inc., as Landlord,
and Applied DNA Sciences, Inc., as Tenant.

 

This Amendment to Leases (the "Amendment") made as of the 17th of January 2020, by and between Long Island High Technology Incubator, Inc., a nonprofit education corporation existing under the laws of the State of New York having its principal place of business located at 50 Health Sciences Drive, Stony Brook NY 11790 (the "Landlord") and Applied DNA Sciences, Inc., having its principal place of business located at 50 Health Sciences Drive, Stony Brook, NY 11790 (the "Tenant");

 

WITNESSETH:

 

WHEREAS Landlord and Tenant entered into a certain Lease Agreement (the "Original Lease") dated the 14th of June, 2013 to lease approximately 30,000 rentable square feet of space within and forming a part of the building known as 50 Health Sciences Drive, Stony Brook NY (the "Original Demised Premises"); and

 

WHEREAS Landlord and Tenant entered into a certain Lease Agreement (the "Second Lease"; collectively, along with the Original Lease, the "Lease") dated November 1, 2015 to lease approximately 1,500 rentable square feet of space designated as Suites 103 and 112 within and forming a part of the building known as 25 Health Sciences Drive, Stony Brook NY (the "Additional Demised Premises"; collectively, along with the Original Demised Premises, the "Demised Premises"); and

 

WHEREAS the Second Lease had been extended; and

 

WHEREAS the parties entered into an additional Lease Amendment on November 4, 2019 whereby, among other things, the expiration date of the Lease was modified to January 15, 2020; and

 

WHEREAS the parties wish to extend, amend and modify the terms of the Lease;

 

NOW THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, notwithstanding anything to the contrary contained in the Lease, the parties hereinafter agree as follows:

 

1. The expiration of the Lease shall be modified to expire on January 15, 2021.

 

2. Tenant shall have the option to extend the term of the Lease for one additional year by providing Landlord with written notice no less than three (3) months prior to the expiration of the Lease, TIME BEING OF THE ESSENCE, but only provided:

 

Page 1 of 3

 

 

a. Tenant is current with all costs of occupancy, including all rents, additional rent, utilities and additional security deposits.

 

b. At the time Tenant exercises its option to extend, Tenant provides Landlord with documentation that, in Landlord's reasonable judgment, demonstrates Tenant's financial means to honor the obligations of the Lease; and

 

c. Tenant has not filed for bankruptcy or receivership prior to commencement of the extension period.

 

d. Tenant has not committed any defaults under the Lease.

 

3. Tenant shall lease an additional 700 square feet of space located in Suite 120 in addition to its current Demises Premises (the "Additional Space"). Tenant shall pay two thousand one hundred and 00/100 dollars ($2,100.00) per month for the Additional Space and make an additional security deposit in the amount of four thousand, two hundred and 00/100 dollars ($4,200).

 

4. All other rents, additional rents, utility payments and security deposits shall remain at their current amount.

 

5. Notwithstanding anything to the contrary in this or any other amendment, all other terms and conditions of the Original Lease shall be deemed to govern the Lease and shall remain in full force and effect. All terms and conditions of the Lease and any amendments shall be construed in accordance with same.

 

[signature page to follow]

 

Page 2 of 3

 

 

IN WITNESS WHEREOF, the parties have respectively signed and sealed this Amendment to the Leases as of the day and year first above written.

 

WITNESS   Long lsland High Technology Incubator, Inc.
     
    /s/ Matthew Stadler
Mary Walton   Matthew Stadler
Secretary of the Board   Executive Director
    January, 17, 2020
     
     
WITNESS   Applied DNA Sciences, Inc.
     
    /s/ Beth Jantzen
    Beth Jantzen
    CFO
    Date: 1/20/2020                         

 

 

Page 3 of 3

 

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO RULE 13 a -14(a) OR 15 d -14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, James A. Hayward, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Applied DNA Sciences, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: August 6, 2020    
     
  By: /s/ JAMES A. HAYWARD
    James A. Hayward
    Chief Executive Officer
    Applied DNA Sciences, Inc.

 

 

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO RULE 13 a -14(a) OR 15 d -14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Beth Jantzen, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Applied DNA Sciences, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: August 6, 2020    
     
  By: /s/ BETH JANTZEN
    Beth Jantzen, CPA
    Chief Financial Officer
    Applied DNA Sciences, Inc.

 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned, James A. Hayward, Chief Executive Officer of Applied DNA Sciences, Inc. (the “Company”), in connection with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2020 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, hereby certifies pursuant to the requirements of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that

 

the Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934, and

 

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

This certification is being provided pursuant to 18 U.S.C. 1350 and is not to be deemed a part of the Report, nor is it to be deemed to be “filed” for any purpose whatsoever.

 

  By: /s/ JAMES A. HAYWARD
    James A. Hayward
    Chief Executive Officer
    Applied DNA Sciences, Inc.
    Dated: August 6, 2020

 

 

 

 

 

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned, Beth Jantzen, Chief Financial Officer of Applied DNA Sciences, Inc. (the “Company”), in connection with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2020 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, hereby certifies pursuant to the requirements of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that

 

the Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934, and

 

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

This certification is being provided pursuant to 18 U.S.C. 1350 and is not to be deemed a part of the Report, nor is it to be deemed to be “filed” for any purpose whatsoever.

 

  By: /s/ BETH JANTZEN
    Beth Jantzen, CPA
    Chief Financial Officer
    Applied DNA Sciences, Inc.
    Dated: August 6, 2020