10-Q

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 March 31, 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 May 8, 2020, the registrant had 4,651,843 shares of common stock outstanding.

 

 

Applied DNA Sciences, Inc.

Form 10-Q for the Quarter Ended March 31, 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

	March 31, 2020			September 30, 2019
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	8,662,889		$	558,988
Accounts receivable, net of allowance of $4,500 at March 31, 2020 and September 30, 2019, respectively		549,123			839,951
Inventories		88,941			142,629
Prepaid expenses and other current assets		678,120			604,740
Total current assets		9,979,073			2,146,308
Property and equipment, net		265,400			226,221
Other assets:
Deferred offering costs		-			109,698
Deposits		76,085			62,351
Goodwill		285,386			285,386
Intangible assets, net		720,953			734,771
Total Assets	$	11,326,897		$	3,564,735
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities (including related party of $40,000 at March 31, 2020)	$	1,178,358		$	1,616,997
Deferred revenue		671,526			628,993
Total current liabilities		1,849,884			2,245,990
Long term accrued liabilities		722,564			621,970
Secured convertible notes payable, related party. net of debt issuance costs		1,485,673			1,442,497
Secured convertible notes payable, recorded at fair value		-			102,777
Total liabilities		4,058,121			4,413,234
Commitments and contingencies
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 March 31, 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 March 31, 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 March 31, 2020 and September 30, 2019, respectively		-			-
Common stock, par value $0.001 per share; 500,000,000 shares authorized; 4,059,943 and 1,207,993 shares issued and outstanding as of March 31, 2020 and September 30, 2019, respectively		4,060			1,208
Additional paid in capital		269,693,833			255,962,922
Accumulated deficit		(262,423,267	)		(256,805,589	)
Applied DNA Sciences, Inc. stockholders’ equity (deficit):		7,274,626			(841,459	)
Noncontrolling interest		(5,850	)		(7,040	)
Total equity (deficit)		7,268,776			(848,499	)
Total liabilities and equity (deficit)	$	11,326,897		$	3,564,735

See the accompanying notes to the unaudited condensed consolidated financial statements

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APPLIED DNA SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,						Six Months Ended March 31,
	2020			2019			2020			2019
Revenues:
Product	$	197,801		$	119,036		$	435,671		$	440,747
Service		354,672			659,432			750,321		$	1,222,044
Total revenues		552,473			778,468			1,185,992			1,662,791
Cost of revenues		179,582			133,141			411,613			286,626
Operating expenses:
Selling, general and administrative		2,285,544			2,528,914			4,658,957			5,611,295
Research and development		703,018			651,377			1,267,444			1,360,941
Depreciation and amortization		66,537			97,673			141,604			232,724
Total operating expenses		3,055,099			3,277,964			6,068,005			7,204,960
LOSS FROM OPERATIONS		(2,682,208	)		(2,632,637	)		(5,293,626	)		(5,828,795	)
Other (expense) income:
Interest expense (including related parties interest of $25,840 and $49,310 for the three and six months ended March 31, 2019, respectively)		(29,096	)		(37,417	)		(58,187	)		(69,028	)
Other expense, net		(239,601	)		(16,703	)		(261,833	)		(23,254	)
Loss before provision for income taxes		(2,950,905	)		(2,686,757	)		(5,613,646	)		(5,921,077	)
Provision for income taxes		-			-			-			-
NET LOSS		(2,950,905	)		(2,686,757	)		(5,613,646	)		(5,921,077	)
Less: Net (income) loss attributable to noncontrolling interest		(1,220	)		-			(1,190	)		-
NET LOSS attributable to Applied DNA Sciences, Inc.		(2,952,125	)		(2,686,757	)		(5,614,836	)		(5,921,077	)
Deemed dividend related to warrant modifications		-			-			2,842			-
NET LOSS applicable to common stockholders		(2,952,125	)		(2,686,757	)		(5,617,678	)		(5,921,077	)
Net loss per share applicable to common stockholders-basic and diluted	$	(0.79	)	$	(3.22	)	$	(1.76	)	$	(6.51	)
Weighted average shares outstanding-basic and diluted		3,758,512			834,990			3,196,616			909,623

See the accompanying notes to the unaudited condensed consolidated financial statements

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APPLIED DNA SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

For the Six Month Period Ended March 31, 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

For the Six Month Period Ended March 31, 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	)

See the accompanying notes to the unaudited condensed consolidated financial statements

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APPLIED DNA SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	March 31,
	2020			2019
Cash flows from operating activities:
Net loss	$	(5,613,646	)	$	(5,921,077	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		141,604			232,724
Stock-based compensation		432,758			757,338
Amortization of debt issuance costs		12,576			9,120
Provision for bad debts		-			(8,633	)
Change in operating assets and liabilities:
Accounts receivable		290,828			1,178,367
Inventories		53,688			(93,306	)
Prepaid expenses and other current assets and deposits		(87,114	)		37,393
Accounts payable and accrued liabilities		(424,631	)		157,493
Deferred revenue		42,533			(151,444	)
Net cash used in operating activities		(5,151,404	)		(3,802,025	)
Cash flows from investing activities:
Purchase of property and equipment		(8,227	)		(63,986	)
Purchase of intangible asset		(36,525	)		-
Net cash used in investing activities		(44,752	)		(63,986	)
Cash flows from financing activities:
Proceeds from Promissory notes (related parties $550,000)		-			550,000
Net proceeds from exercise of warrants		2,768,133			718,064
Net proceeds from sale of common stock and warrants		10,639,728			2,479,524
Repayment of convertible notes		(107,802	)		-
Net cash provided by financing activities		13,300,059			3,747,588
Net increase (decrease) in cash and cash equivalents		8,103,903			(118,423	)
Cash and cash equivalents at beginning of period		558,988			1,659,564
Cash and cash equivalents at end of period	$	8,662,891		$	1,541,141
Supplemental Disclosures of Cash Flow Information:
Cash paid during period for interest	$	—		$	—
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 $35,550 for the six month period ended March 31, 2019)	$	35,625		$	48,816
Offering costs incurred, and included in accounts payable	$	-		$	15,933
Property and equipment acquired, and included in accounts payable	$	109,423		$	-
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

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APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 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 LinearDNA^TM large-scale polymerase chain reaction (“PCR”) based manufacturing platform. 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, and 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 LinearDNA^TM PCR platform is capable of producing large scale DNA.

Applied DNA is currently engaged in the large scale production of DNA via its LinearDNA^TM 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.

· 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 LinearDNA^TM 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.

· Nucleic Acid Therapeutic and Diagnostic Manufacturing: The Company uses its LinearDNA^TM 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. The Company has also developed a patent-pending nucleic acid diagnostic (Linea ^TM COVID-19) to detect in diagnostic samples the presence of SARS-CoV-2, the virus that causes the disease, COVID-19.

Non-Biological Tagging and Related Services

The Company’s supply chain security business allows its customers to use non-biologic DNA (molecular) tags, produced via its LinearDNA^TM 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 LinearDNA^TM 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.

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APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 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 LinearDNA^TM platform for cancer research and nucleic-acid based drug development.

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

Interim Financial Statements 

The accompanying condensed consolidated financial statements as of March 31, 2020 and for the three and six-month periods ended March 31, 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 six-month periods ended March 31, 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, and its majority-owned subsidiary, LineaRx, Inc. (“LRx”). 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 $262,423,267 as of March 31, 2020. The Company incurred a net loss of $5,617,678 and generated negative operating cash flow of $5,151,404 for the six month period ended March 31, 2020. At March 31, 2020 the Company had cash and cash equivalents of $8,662,889 and working capital of $8,129,189.

The Company has historically financed its activities through the sale of Common Stock and warrants. Through March 31, 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 three month period ended March 31, 2020, 566,950 of these warrants were exercised, resulting in net proceeds to the Company of approximately $2.77 million. Subsequent to the three month period ended March 31, 2020 an additional $2.91 million 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.

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APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 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. 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 six months ended March 31, 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. On March 7, 2020 the Governor of New York declared a health emergency and issued an order to close all nonessential businesses until at least May 15, 2020. Portions of the Company’s business are 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 has reduced the scope of its operations and where possible, certain workers are telecommuting from their homes. As discussed in Note J 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”).

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 six months ended March 31, 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

In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting standard updates which clarified principles for recognizing revenue arising from contracts with customers (“ASC 606” or “Topic 606”) and superseded most current revenue recognition guidance, including industry-specific guidance.

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APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 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, including molecular taggants, 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.

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APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 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:
	March 31, 2020		March 31, 2019
Research and development services (over-time)	$	286,598	$	593,588
Product and authentication services (point-in-time):
Supply chain		12,646		20,234
Asset marking		110,697		158,078
Large scale DNA production		142,532		6,568
Total	$	552,473	$	778,468

	Six Month Period Ended:
	March 31, 2020		March 31, 2019
Research and development services (over-time)	$	653,431	$	1,092,117
Product and authentication services (point-in-time):
Supply chain		31,320		244,803
Asset marking		219,269		319,303
Large scale DNA production		281,972		6,568
Total	$	1,185,992	$	1,662,791

Contract balances

As of March 31, 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		March 31, 2020		$ change
Contract liabilities	Deferred revenue	$	628,993	$	671,526	$	42,533

For the three and six month periods ended March 31, 2020, the Company recognized $113,791 and $358,275, 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

March 31, 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 and warrants.

For the three and six month periods ended March 31, 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 six month periods ended March 31, 2020 and 2019 are as follows: 

	2020		2019
Warrants		2,121,755		422,136
Stock options		241,557		161,455
Secured convertible notes		70,963		104,112
		2,434,275		687,703

10

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 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 March 31, 2020 included an aggregate of 18%, 18% and 19% from three customers, respectively. The Company’s revenue earned from sale of products and services for the six month period ended March 31, 2020 included an aggregate of 10%, 12%, 14% and 21% from four customers, respectively.

The Company’s revenues earned from sale of products and services for the three month period ended March 31, 2019 included an aggregate of 14% and 31% from two customers, respectively. The Company’s revenue earned from sale of products and services for the six month period ended March 31, 2019 included an aggregate of 10%, 14%, 15% and 29% from four customers, respectively

One customer accounted for 45% of the Company’s accounts receivable at March 31, 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

March 31, 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

March 31, 2020

(unaudited)

NOTE C — INVENTORIES

Inventories consist of the following:

	March 31, 2020		September 30, 2019
	(unaudited)
Raw materials	$	65,816	$	87,886
Finished goods		23,125		54,743
Total	$	88,941	$	142,629

13

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

(unaudited)

NOTE D — ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities are as follows:

	March 31, 2020		September 30, 2019
	(unaudited)
Accounts payable	$	699,963	$	1,152,103
Accrued salaries payable		317,304		319,260
Other accrued expenses		161,091		145,634
Total	$	1,178,358	$	1,616,997

NOTE E — SECURED CONVERTIBLE NOTES PAYABLE

During December 2019, the remaining outstanding balance of the secured convertible notes payable 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 six month periods ended March 31, 2020, the Company reclassified $0 and $32,795 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 March 31, 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 six month periods ended March 31, 2020 the Company amortized $6,419 and $12,608, respectively, of debt issuance costs resulting in unamortized debt issuance costs of $47,107 and the secured notes payable of $1,484,819 at March 31, 2020. During the three and six month periods ended March 31, 2019 the Company amortized $4,630 and $9,120 of debt issuance costs, respectively. The debt issuance cost will be amortized over the life of the July 2019 Notes. During the three and six month periods ended March 31, 2020, the Company incurred $22,677 and $45,030 of interest expense, respectively. The effective interest rate for the three and six month periods ended March 31, 2020 was 8.0%. During the three and six month periods ended March 31, 2019, the Company incurred approximately $32,788 and $59,908 of interest expense. The effective interest for the three and six month period ended March 31, 2019 was 7.0%.

14

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 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. The gross proceeds of the offering, before deducting Underwriter discounts and commissions and other offering expenses, were approximately $12.0 million.

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 three and six-month periods ended March 31, 2020, 566,950 of these warrants were exercised, resulting in net proceeds to the Company of approximately $2.77 million.

Subsequent to the three month period ended March 31, 2020, an additional 596,400 warrants were exercised for total net proceeds, of approximately $2.91 million.

15

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

(unaudited)

NOTE G —WARRANTS

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		(566,950	)		5.25
Cancelled or expired		(211,012	)		135.01
Balance at March 31, 2020		2,121,755		$	7.98

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 March 31, 2020 is $496,420.

The total rent expense for the three and six month periods ended March 31, 2020 were $153,645 and $287,250, respectively. Total rent expense for the three and six month periods ended March 31, 2019 were $129,228 and $258,422, respectively. 

16

 

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 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

March 31, 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 will continue through June 12, 2020 and may be renewed by the Company at its option for an additional six months through December 12, 2020. The agreement provides for compensation in the form of both cash and equity. Meadow Hill will be eligible to receive up to $125,000 for the first six months of the term, with the option to renew. 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 is eligible to vest on June 12, 2020, subject to Meadow Hill providing services to the Company through such date, 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 are eligible to vest on July 2, 2020 and 11,665 are eligible to vest on December 12, 2020, in each case subject to Meadow Hill providing services to the Company through the applicable date.

NOTE J — SUBSEQUENT EVENTS

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 90 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 25% 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.

Biotherapeautic Contract Research and Manufacturing

During April 2020 the Company entered into an agreement with Stony Brook University Hospital for the validation of our patent-pending nucleic acid-based in vitro diagnostic (Linea ^TM COVID-19) to detect the presence of SARS-CoV-2 (the virus that causes COVID-19) RNA in patient specimens.

On May 13, 2020, the Company received Emergency Use Authorization for its COVID-19 diagnostic Assay kit from the U.S. FDA. Clinical laboratories in the United States certified under Clinical Laboratory Improvement Amendments can immediately begin ordering and using the Linea^TM COVID-19 assay kit to detect SARS-CoV-2, the virus that causes COVID-19.

18

 

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

Forward-Looking Statements

This 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 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; 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;

19

 

• 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;

20

 

• 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;

• 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 possibility we may fail to make timely payments 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.

• 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.

21

 

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® and LinearDNA^TM. 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 LinearDNA^TM 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 LinearDNA^TM 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 LinearDNA^TM platform can be measured in terms of hours, not days and weeks like other large scale DNA manufacturing platforms.

· Scale The LinearDNA^TM platform is flexible and can be adapted to encompass large batch production.

· Safety – 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 LinearDNA^TM platform allow for the large-scale production of specific DNA sequences. The LinearDNA^TM platform is computer-controlled, self-contained and modular. DNA sequences produced via the LinearDNA^TM platform are currently being used 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 LinearDNA^TM platform confreres 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 LinearDNA^TM 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 LinearDNA^TM 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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We have also developed a patent-pending nucleic acid-based in vitro diagnostic (Linea ^TM COVID-19) to detect the presence of SARS-CoV-2(the virus that causes COVID-19) RNA in patient specimens. Also, during April 2020, we entered into an agreement with Stony Brook University Hospital for the validation of our COVID-19 diagnostic kits.

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 LinearDNA^TM 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-Assay^TM invasive circulating tumor cell capture and identification technology (the “iCTC Technology”) recently acquired from Vitatex, Inc. 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 LinearDNA^TM platform for cancer research and nucleic-acid based drug development.

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 LinearDNA^TM platform to mark objects in a unique manner that we believe are not economically feasible nor practical to replicate, and then identify these objects by detecting the absence or presence of the molecular tag. We believe 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 LinearDNA^TM 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 including 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 using a simple in-field test, or in our laboratories to obtain definitive proof of the presence or absence of a specific molecular tag. 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 is one of the densest information carriers known, and can be amplified with high fidelity, only minute quantities of our molecular tags 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 our laboratories. 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 quantities 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.

Applied DNA Sciences Portal 

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 LinearDNA^TM 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 LinearDNA^TM platform. We expect to grow revenues from sales of our 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 LinearDNA^TM 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 and textile and apparel, pharmaceuticals and nutraceuticals, microcircuits and other electronics, and legal cannabis. 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 March 31, 2020 and 2019

Revenues

Product revenues

For the three month periods ended March 31, 2020 and 2019, we generated $197,801 and $119,036, respectively in revenues from product sales. Product revenue increased by $78,765 or 66% for the three month period ended March 31, 2020 as compared to the three month period ended March 31, 2019. The increase in product revenues was primarily due to an increase of approximately $107,000 in biopharmaceuticals revenues during the quarter ended March 31, 2020, as well as an increase of approximately $11,000 in revenues from a nutraceutical customer during the three month period ended March 31, 2020. These increases were offset by decreases in Cash and Valuables in Transit (“CVIT”) of approximately $25,000 and approximately $21,000 in consumer asset marking.

Service revenues

For the three month periods ended March 31, 2020 and 2019, we generated $354,672 and $659,432 in revenues from sales of services, respectively. The decrease in service revenues of $304,760 or 46% for the three month period ended March 31, 2020 as compared to the same period in the prior fiscal year is attributable to a decrease of approximately $200,000 in revenue from the government development contract award that expired during the second half of fiscal 2019. The decrease also related to a decline in revenues from precommercial feasibility projects in textiles of approximately $136,000 and cannabis of approximately $100,000 during the three month period ended March 31, 2020 as compared to the same period in fiscal 2019.  

Costs and Expenses

Cost of Revenues

Cost of revenues for the three month period ended March 31, 2020 increased by $46,441 or 35% from $133,141 for the three month period ended March 31, 2019 to $179,582 for the three month period ended March 31, 2020. Cost of revenues as a percentage of product revenues was 91% and 112% for the three month periods ended March 31, 2020 and 2019, respectively. This decrease in cost of revenues as a percentage of product revenues is due to the change in product sales mix as well as an inventory adjustment during the second fiscal quarter of 2019.

Selling, General and Administrative

Selling, general and administrative expenses for the three month period ended March 31, 2020 decreased by $243,370 or 10% from $2,528,914 for the three month period ended March 31, 2019 to $2,285,544 for the three month period ended March 31, 2020. This decrease is attributable to a decrease in professional fees of approximately $183,000 due to reduced legal fees. To a lesser extent, the decrease relates to a reduction of approximately $64,000 in travel fees as result of travel restrictions associated with COVID-19.

Research and Development

Research and development expenses increased to $703,018 for the three month period ended March 31, 2020 from $651,377 for the three month period ended March 31, 2019, an increase of $51,641 or 8%. This increase is primarily due to increased development costs in relation to our biotherapeutic contract research customers, of approximately $100,000, $38,000 of increased development costs for pharmaceuticals as well as increased payroll of $55,000, offset by a decrease of approximately $160,000 in development costs incurred in relation to the government development contract award that expired during the second half of fiscal 2019.

Depreciation and Amortization

In the three month period ended March 31, 2020, depreciation and amortization decreased by $31,136 or 32% from $97,673 for the three month period ended March 31, 2019 to $66,537 for the three month period ended March 31, 2020. The decrease is related to assets becoming fully depreciated during fiscal 2019.

Interest expense

Interest expense for the three month periods ended March 31, 2020 and 2019, was $29,096 and $37,417, 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 March 31, 2020 and 2019, was expense of $239,601 and $16,703, respectively. The increase of $222,898 is due to an increase in franchise taxes during the three month period ended March 31, 2020.

Net Loss Attributable to Common Stockholders

Net loss increased by $265,368 or 10% from a loss of $2,686,757 for the three month period ended March 31, 2019 to a loss of $2,952,125 for the three month period ended March 31, 2020, due to the factors noted above.

Comparison of Results of Operations for the Six Month Periods Ended March 31, 2020 and 2019

Revenues

Product revenues

For the six month periods ended March 31, 2020 and 2019, we generated $435,671 and $440,747, respectively, in revenues from product sales. Product revenue decreased by $5,076 or 1% for the six month period ended March 31, 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 approximately $196,000 due to a shipment of DNA concentrate for protecting the supply chain during the six month period ended March 31, 2019. This decrease was offset by an increase of approximately $242,000 in biopharmaceutical revenue during the first half of fiscal 2020.

Service revenues

For the six month periods ended March 31, 2020 and 2019, we generated $750,321 and $1,222,044, respectively, in revenues from sales of services. The decrease in service revenues of $471,723 or 39% for the six month period ended March 31, 2020 as compared to the same period in the prior fiscal year is attributable to a decrease in revenue of approximately $400,000 associated with the completion of the government contract award, which was completed during the second half of fiscal 2019, as well as decreases of approximately $136,000 in textiles and approximately $49,000 in cannabis due to a decline in feasibility projects year over year. These decreases were offset by an increase in our biotherapeutic contract research business of approximately $145,000.

Costs and Expenses

Cost of Revenues

Cost of revenues for the six month period ended March 30, 2020 increased by $124,987 or 44% from $286,626 for the six month period ended March 31, 2019 to $411,613 for the six month period ended March 31, 2020. Cost of revenues as a percentage of product revenues was 94% and 65% for the six month periods ended March 31, 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 six month period ended March 31, 2019 included textiles sales, which are at a higher gross margin.

Selling, General and Administrative

Selling, general and administrative expenses for the six month period ended March 31, 2020 decreased by $952,338 or 17% from $5,611,295 for the six month period ended March 31, 2019 to $4,658,957 for the six month period ended March 31, 2020. The decrease is attributable to a decrease in payroll expenses of approximately $272,000 related to headcount reductions. The decrease is also due to a decrease in stock based compensation expense of approximately $262,000. The decrease in stock based compensation was primarily associated with stock option grants modifications during the six month period ended March 31, 2019. In addition, there was a decrease in legal and professional fees of approximately $139,000, consulting fees of approximately $121,000, reduced travel expenses of approximately $110,000 and filing fees of approximately $45,000.

Research and Development

Research and development expenses decreased to $1,267,444 for the six month period ended March 31, 2020 from $1,360,941 for the six month period ended March 31, 2019, a decrease of $93,497 or 7%. This decrease is primarily due to a decrease in development costs incurred in relation to the government development contract of approximately $336,000, offset by increased biotherapeutic development of approximately $115,000, approximately $43,000 for pharmaceuticals, and an increase of approximately $36,000 in payroll.

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Depreciation and Amortization

In the six month period ended March 31, 2020, depreciation and amortization decreased by $91,120 or 39% from $232,724 for the six month period ended March 31, 2019 to $141,604 for the six month period ended March 31, 2020. The decrease is related to assets becoming fully depreciated during fiscal 2019.

Interest expense

Interest expense for the six month periods ended March 31, 2020 and 2019, was $58,187 and $69,028, respectively related to interest incurred on the secured convertible notes payable.

Other income (expense)

Other income (expense) for the six month periods ended March 31, 2020 and 2019, was expense of $261,833 and $23,254, respectively. The increase of $238,579 is due to an increase in franchise taxes during the six month period ended March 31, 2020.

Net Loss Attributable to Common Stockholders

Net loss decreased by $303,399 or 5% from $5,921,077 for the six month period ended March 31, 2019 to $5,617,678 for the six month period ended March 31, 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 March 31, 2020, we had working capital of $8,129,189. For the six month period ended March 31, 2020, we used cash in operating activities of $5,151,404 consisting primarily of our loss of $5,613,646 net with non-cash adjustments of $141,604 in depreciation and amortization charges, $432,758 in stock-based compensation expense, and $12,576 in amortization of debt issuance costs. Additionally, we had a net decrease in operating assets of $257,402 and a net decrease in operating liabilities of $382,098. Cash provided by financing activities was $13,300,059, 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 $2,768,133 and the repayment of secured convertible promissory notes of $107,802.

We have recurring net losses, which have resulted in an accumulated deficit of $262,423,267 as of March 31, 2020. At March 31, 2020, we had cash and cash equivalents of $8,662,889.

Historically we have financed our activities through the sale of common stock and warrants. Through March 31, 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 three month period ended March 31, 2020, 566,950 of these warrants were exercised, resulting in net proceeds to the Company of approximately $2.77 million. Subsequent to the three month period ended March 31, 2020 an additional $2.91 million 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. 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. 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 six months ended March 31, 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. On March 7, 2020 the Governor of New York declared a health emergency and issued an order to close all nonessential businesses until at least May 15, 2020. Portions of the Company’s business are 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 has reduced the scope of its operations and where possible, certain workers are telecommuting from their homes. As discussed in Note J to the accompanying condensed consolidated financial statements, we 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.

Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on our operations and liquidity is uncertain as of the date of this report. As a result of COVID-19 we have experienced a decline in revenues from non-biological tagging and related services. 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.

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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 March 31, 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 March 31, 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.

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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 30 September 2019 with the additional risk factor set forth below, which supplements, and to the extent inconsistent, supersedes 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 could affect 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. While portions of our business are considered “essential” such as our 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 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.

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.

None.

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Item 6. — Exhibits.

			Incorporated by Reference to SEC Filing				Filed with
Exhibit No.	Filed Exhibit Description	Form		Exhibit No.	File No.	Date Filed	this Form 10-Q
4.1*	Description of Securities						X
10.1	Applied DNA Sciences, Inc. 2005 Incentive Stock Plan, as amended and restated	DEF 14A		Appendix A	001-36745	04/04/2019
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						X
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						X
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						X
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						X
101 INS*	XBRL Instance Document						X
101 SCH*	XBRL Taxonomy Extension Schema Document						X
101 CAL*	XBRL Taxonomy Extension Calculation Linkbase Document						X
101 DEF*	XBRL Taxonomy Extension Definition Linkbase Document						X
101 LAB*	XBRL Extension Label Linkbase Document						X
101 PRE*	XBRL Taxonomy Extension Presentation Linkbase Document						X

* 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.

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Signatures

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

	Applied DNA Sciences, Inc.
Dated: May 14, 2020	/s/ JAMES A. HAYWARD
	James A. Hayward, Ph. D.
	Chief Executive Officer
	(Duly authorized officer and principal executive officer)
	/s/ BETH JANTZEN
Dated: May 14, 2020	Beth Jantzen, CPA
	Chief Financial Officer
	(Duly authorized officer and
	principal financial and accounting officer)

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EX-4.1

 Exhibit 4.1

Description of THE REGISTRANT’S Securities

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

As of May 8, 2020, Applied DNA Sciences, Inc. (the “Company”, “we”, “us” or “our”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which consists of common stock, $0.001 par value per share. The following is a summary of information concerning our common stock. The summary and description below does not purport to be a complete statement of the relevant provisions of our certificate of incorporation, as amended (the “Certificate of Incorporation”) and our by-laws (“By-Laws”) and are entirely qualified by these documents. The Delaware General Corporation Law (“DGCL”) may also affect the terms of these securities.

As of May 8, 2020, our authorized capital stock consists of 500,000,000 shares of common stock, par value $0.001 per share, of which 4,651,843 shares were issued and outstanding, held by approximately 468 stockholders of record and 10,000,000 shares of preferred stock, par value $0.001 per share, of which no shares were issued and outstanding. The actual number of stockholders is greater than the number of stockholders of record and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. In addition, as of March 31, 2020, there were issued and outstanding options to purchase 243,646 shares of common stock, warrants to purchase 2,121,755 shares of our common stock, 70,963 shares of our common stock issuable upon conversion of secured convertible notes and 117,726 shares available for grant under our 2005 Incentive Stock Plan, as amended and restated as of January 21, 2015, and as further amended on May 16, 2019. The authorized and unissued shares of common stock and preferred stock are available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange on which our securities may be listed. Unless approval of our stockholders is so required, our board of directors will not seek stockholder approval for the issuance and sale of our common stock.

Common Stock

Holders of our common stock are entitled to one vote for each share issued and outstanding held on all matters to be voted upon by the stockholders. Our shares of common stock have no preemptive, conversion, or redemption rights. The rights, preferences, and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock we may issue in the future. Upon the sale of substantially all of our stock or assets or dissolution, liquidation or winding up, and after all liquidation preferences payable to any series of preferred stock entitled thereto have been satisfied, our remaining assets shall be distributed to all holders of common stock and any similarly situated stockholders who are not entitled to any liquidation preference or, if there be an insufficient amount to pay all such stockholders, then ratably among such holders. All of our issued and outstanding shares of common stock are fully paid and non-assessable. The holders of shares of our common stock will be entitled to such dividends and other distributions in cash, stock or property from our assets or funds legally available for such purposes as may be declared from time to time by our board of directors.

Our common stock is listed on The Nasdaq Capital Market under the symbol “APDN.” American Stock Transfer & Trust Company is the transfer agent and registrar for our common stock.

Preferred Stock

Our Certificate of Incorporation provides that our board of directors may, by resolution, designate classes of preferred stock in the future. The designated series of preferred stock shall have such powers, designations, preferences and relative, participation or optional or other special rights and qualifications, limitations or restrictions as shall be expressed in the resolution adopted by the board of directors. Once designated by our board of directors, each series of preferred stock will have specific financial and other terms described in the documents that govern the preferred stock, which include our Certificate of Incorporation and any certificates of designation that our board of directors may adopt. Prior to the issuance of shares of each series of preferred stock, the board of directors is required by the DGCL and our Certificate of Incorporation to adopt resolutions and file a certificate of designation with the Secretary of State of the State of Delaware. The certificate of designation fixes for each class or series the designations, powers, preferences, rights, qualifications, limitations and restrictions, including, but not limited to, some or all of the following:

 

· the number of shares constituting that series and the distinctive designation of that series, which number may be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the board of directors;

· the dividend rate and the manner and frequency of payment of dividends on the shares of that series, whether dividends will be cumulative, and, if so, from which date;

· whether that series will have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such voting rights;

· whether that series will have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the board of directors may determine;

· whether or not the shares of that series will be redeemable, and, if so, the terms and conditions of such redemption;

· whether that series will have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

· whether or not the shares of the series will have priority over or be on a parity with or be junior to the shares of any other series or class in any respect;

· the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights or priority, if any, of payment of shares of that series; and

· any other relative rights, preferences and limitations of that series.

Although our board of directors has no intention at the present time of doing so, it could authorize the issuance of a series of preferred stock that could, depending on the terms of such series, impede the completion of a merger, tender offer or other takeover attempt.

Possible Anti-Takeover Effects of Delaware Law and our Certificate of Incorporation and By-Laws

Our Certificate of Incorporation and By-Laws contain provisions that could make it more difficult to acquire control of our company by means of a tender offer, open market purchases, a proxy contest or otherwise. A description of these provisions is set forth below.

Anti-Takeover Effects of Delaware Law

Companies incorporated in Delaware are subject to the provisions of Section 203 of the DGCL unless the corporation has “opted out” of these provisions with an express provision in its original certificate of incorporation or an express provision in its certificate of incorporation or by-laws resulting from a stockholders’ amendment approved by at least a majority of the outstanding voting shares. We have opted out of Section 203 with an express provision in our Certificate of Incorporation. Therefore, the anti-takeover effects of Section 203 do not apply to us.

Generally, Section 203 prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested stockholder status, 15% or more of the corporation’s voting stock.

Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions: before the stockholder became interested, the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances; or at or after the time the stockholder became interested, the business combination was approved by the board of directors of the corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

Election and Removal of Directors

Directors will be elected by a plurality of the voting power of the shares present in person or represented by proxy at the stockholders meeting and entitled to vote on the election of directors. Our Certificate of Incorporation does not provide for a classified board of directors or for cumulative voting in the election of directors. Under Article VIII of the Certificate of Incorporation and Section 3.13 of the By-Laws, directors may be removed by the stockholders of the Company only for cause, and in such case only by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of capital stock of the Company then entitled to vote in the election of directors. On December 21, 2015, the Court of Chancery of the State of Delaware invalidated as a matter of law certain provisions of the certificate of incorporation and bylaws of VAALCO Energy, Inc. (“VAALCO”), a Delaware corporation, that permitted the removal of VAALCO’s directors by its stockholders only for cause. In In re VAALCO Energy, Inc. Stockholder Litigation, Consol. C.A. No. 11775-VCL (Del. Ch. Dec. 21, 2015), the Court ruled from the bench to hold that, in the absence of a classified board of directors or cumulative voting, VAALCO’s “only for-cause” director removal provisions conflict with Section 141(k) of the DGCL and are therefore invalid. Because the Company’s Certificate of Incorporation and By-Laws contain similar “only for-cause” director removal provisions and the Company does not have a classified board of directors or cumulative voting, the Company will not attempt to enforce the foregoing “only for-cause” director removal provision in light of the VAALCO decision.

 

Size of Board of Directors and Vacancies

The authorized number of directors may be determined by the board of directors, provided the board shall consist of at least one (1) member. No decrease in the number of directors constituting the board of directors shall shorten the term of any incumbent director.

Vacancies occurring on our board of directors for any reason and newly created directorships resulting from an increase in the authorized number of directors may be filled only by a vote of a majority of the remaining members of the board of directors, although less than a quorum, or by a sole remaining director, at any meeting of the board of directors.

Amendment

The Certificate of Incorporation may be amended in the manner prescribed by the DGCL. The board of directors is authorized to adopt, amend, alter or repeal the By-Laws by the affirmative vote of at least a majority of the board of directors then in office. No amendment to the Certificate of Incorporation or the By-Laws may adversely affect any indemnification right or protection of any director, officer, employee or other agent existing at the time of such amendment, repeal or adoption of an inconsistent provision for or in respect of any act, omission or other matter occurring, or any action or proceeding accruing or arising prior to such amendment, repeal or adoption of an inconsistent provision.

Authorized but Unissued Shares of Common Stock and of Preferred Stock

We believe that the availability of the “Blank Check” preferred stock under our Certificate of Incorporation provides us with flexibility in addressing corporate issues that may arise. The board of directors has the power, subject to applicable law, to issue series of preferred stock that could, depending on the terms of the series, impede the completion of a merger, tender offer or other takeover attempt that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then prevailing market price of the stock. Our board of directors may issue preferred stock with voting rights or conversion rights that, if exercised, could adversely affect the voting power of the holders of common stock.

The authorized shares of preferred stock, as well as shares of common stock, will be available for issuance without further action by our stockholders, unless action is required by applicable law or the rules of any stock exchange on which our securities may be listed. Having these authorized shares available for issuance allows us to issue shares without the expense and delay of a special stockholders’ meeting. We may use additional shares for a variety of purposes, including future public offerings to raise additional capital, to fund acquisitions and as employee compensation. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of our company by means of a proxy contest, tender offer, merger or otherwise. The above provisions may deter a hostile takeover or delay a change in control or management of our company.

Advance Notice Procedure

Our By-Laws provide an advance notice procedure for stockholders to nominate director candidates for election or to bring business before an annual meeting of stockholders. Only persons nominated by, or at the direction of, our board of directors or by a stockholder of record who has given proper and timely notice to our secretary prior to the meeting at which such stockholder is entitled to vote and appears, will be eligible for election as a director. In addition, any proposed business other than the nomination of persons for election to our board of directors must constitute a proper matter for stockholder action pursuant to a proper notice of meeting delivered to us. For notice to be timely, it must generally be delivered to our secretary not less than 90 nor more than 120 calendar days prior to the first anniversary of the previous year’s annual meeting (or if the date of the annual meeting is more than 30 calendar days before or more than 60 calendar days after the anniversary date of the previous year’s annual meeting, not earlier than the 120th calendar day prior to such meeting and not later than either the 90th calendar day prior to such meeting or the 10th calendar day after public disclosure of the date of such meeting is first made by us). These advance notice provisions may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempt to obtain control of us.

Special Meetings of Stockholders

Our By-Laws provide that special meetings of stockholders may be called only by the Chairman of the Board, the Chief Executive Officer, or the board of directors pursuant to a resolution adopted by a majority of the board of directors.

EX-31.1

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: May 14, 2020
	By:	/s/ JAMES A. HAYWARD
		James A. Hayward
		Chief Executive Officer
		Applied DNA Sciences, Inc.

EX-31.2

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: May 14, 2020
	By:	/s/ BETH JANTZEN
		Beth Jantzen, CPA
		Chief Financial Officer
		Applied DNA Sciences, Inc.

EX-32.1

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 March 31, 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: May 14, 2020

EX-32.2

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 March 31, 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: May 14, 2020

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Mar. 31, 2020	Sep. 30, 2019
Current assets:
Cash and cash equivalents	$ 8,662,889	$ 558,988
Accounts receivable, net of allowance of $4,500 at March 31, 2020 and September 30, 2019, respectively	549,123	839,951
Inventories	88,941	142,629
Prepaid expenses and other current assets	678,120	604,740
Total current assets	9,979,073	2,146,308
Property and equipment, net	265,400	226,221
Other assets:
Deferred offering costs		109,698
Deposits	76,085	62,351
Goodwill	285,386	285,386
Intangible assets, net	720,953	734,771
Total Assets	11,326,897	3,564,735
Current liabilities:
Accounts payable and accrued liabilities (including related party of $40,000 at March 31, 2020)	1,178,358	1,616,997
Deferred revenue	671,526	628,993
Total current liabilities	1,849,884	2,245,990
Long term accrued liabilities	722,564	621,970
Secured convertible notes payable, related party. net of debt issuance costs	1,485,673	1,442,497
Secured convertible notes payable, recorded at fair value		102,777
Total liabilities	4,058,121	4,413,234
Commitments and contingencies
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 March 31, 2020 and September 30, 2019, respectively
Common stock, par value $0.001 per share; 500,000,000 shares authorized; 4,059,943 and 1,207,993 shares issued and outstanding as of March 31, 2020 and September 30, 2019, respectively	4,060	1,208
Additional paid in capital	269,693,833	255,962,922
Accumulated deficit	(262,423,267)	(256,805,589)
Applied DNA Sciences, Inc. stockholders' equity (deficit):	7,274,626	(841,459)
Noncontrolling interest	(5,850)	(7,040)
Total equity (deficit)	7,268,776	(848,499)
Total liabilities and equity (deficit)	11,326,897	3,564,735
Series A Preferred Stock [Member]
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 March 31, 2020 and September 30, 2019, respectively
Series B Preferred Stock [Member]
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 March 31, 2020 and September 30, 2019, respectively

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Noncontrolling Interest [Member]	Total
Balance at Sep. 30, 2018	$ 753	$ 249,119,833	$ (248,366,083)		$ 754,503
Balance (in shares) at Sep. 30, 2018	752,802
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued in public offering, net of offering costs	$ 137	2,262,234			2,262,371
Common stock issued in public offering, net of offering costs (in shares)	137,500
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 at Dec. 31, 2018	$ 890	251,872,311	(251,107,180)		766,021
Balance (in shares) at Dec. 31, 2018	890,302
Balance at Sep. 30, 2018	$ 753	249,119,833	(248,366,083)		754,503
Balance (in shares) at Sep. 30, 2018	752,802
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss					(5,921,077)
Balance at Mar. 31, 2019	$ 944	253,058,635	(253,793,937)		(734,358)
Balance (in shares) at Mar. 31, 2019	943,380
Balance at Dec. 31, 2018	$ 890	251,872,311	(251,107,180)		766,021
Balance (in shares) at Dec. 31, 2018	890,302
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued in public offering, net of offering costs	$ 13	201,207			201,220
Common stock issued in public offering, net of offering costs (in shares)	12,500
Exercise of warrants	$ 41	718,023			718,064
Exercise of warrants (in shares)	40,578
Stock based compensation expense		267,094			267,094
Net loss			(2,686,757)		(2,686,757)
Balance at Mar. 31, 2019	$ 944	253,058,635	(253,793,937)		(734,358)
Balance (in shares) at Mar. 31, 2019	943,380
Balance at Sep. 30, 2019	$ 1,208	255,962,922	(256,805,589)	$ (7,040)	$ (848,499)
Balance (in shares) at Sep. 30, 2019	1,207,993				1,207,993
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued in public offering, net of offering costs	$ 2,285	10,527,745			$ 10,530,030
Common stock issued in public offering, net of offering costs (in shares)	2,285,000
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 at Dec. 31, 2019	$ 3,493	266,698,999	(259,471,142)	(7,070)	7,224,280
Balance (in shares) at Dec. 31, 2019	3,492,993
Balance at Sep. 30, 2019	$ 1,208	255,962,922	(256,805,589)	(7,040)	$ (848,499)
Balance (in shares) at Sep. 30, 2019	1,207,993				1,207,993
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss					$ (5,613,646)
Balance at Mar. 31, 2020	$ 4,060	269,693,833	(262,423,267)	(5,850)	$ 7,268,776
Balance (in shares) at Mar. 31, 2020	4,059,943				4,059,943
Balance at Dec. 31, 2019	$ 3,493	266,698,999	(259,471,142)	(7,070)	$ 7,224,280
Balance (in shares) at Dec. 31, 2019	3,492,993
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of warrants	$ 567	2,767,566			2,768,133
Exercise of warrants (in shares)	566,950
Stock based compensation expense		227,268			227,268
Net loss			(2,952,125)	1,220	(2,950,905)
Balance at Mar. 31, 2020	$ 4,060	$ 269,693,833	$ (262,423,267)	$ (5,850)	$ 7,268,776
Balance (in shares) at Mar. 31, 2020	4,059,943				4,059,943

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BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES - Contract liabilities (Details) - USD ($)	3 Months Ended	6 Months Ended
	Mar. 31, 2020	Mar. 31, 2020	Oct. 01, 2019	Sep. 30, 2019
Liabilities and (deficit) equity
Contract liabilities	$ 671,526	$ 671,526		$ 628,993
Revenue recognized in contract liabilities	113,791	358,275
Deferred Revenue
Liabilities and (deficit) equity
Contract liabilities	671,526	$ 671,526	$ 628,993
Increase (Decrease) in Contract with Customer, Liability	$ 42,533

XML

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)

6 Months Ended

Mar. 31, 2020

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Schedule of accounts payable and accrued liabilities

	March 31,		September 30,
	2020		2019
	(unaudited)
Accounts payable	$	699,963	$	1,152,103
Accrued salaries payable		317,304		319,260
Other accrued expenses		161,091		145,634
Total	$	1,178,358	$	1,616,997

XML

SUBSEQUENT EVENTS

6 Months Ended

Mar. 31, 2020

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE J — SUBSEQUENT EVENTS

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 90 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 25% 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.

Biotherapeautic Contract Research and Manufacturing

During April 2020 the Company entered into an agreement with Stony Brook University Hospital for the validation of our patent-pending nucleic acid-based in vitro diagnostic (Linea TM COVID-19) to detect the presence of SARS-CoV-2 (the virus that causes COVID-19) RNA in patient specimens.

On May 13, 2020, the Company received Emergency Use Authorization for its COVID-19 diagnostic Assay kit from the U.S. FDA. Clinical laboratories in the United States certified under Clinical Laboratory Improvement Amendments can immediately begin ordering and using the LineaTM COVID-19 assay kit to detect SARS-CoV-2, the virus that causes COVID-19.

XML

CAPITAL STOCK

6 Months Ended

Mar. 31, 2020

CAPITAL STOCK

CAPITAL STOCK

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. The gross proceeds of the offering, before deducting Underwriter discounts and commissions and other offering expenses, were approximately $12.0 million.

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 three and six-month periods ended March 31, 2020, 566,950 of these warrants were exercised, resulting in net proceeds to the Company of approximately $2.77 million.

Subsequent  to the three month period ended March 31, 2020, an additional 596,400 warrants were exercised for total net proceeds, of approximately $2.91 million.

XML

BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

6 Months Ended

Mar. 31, 2020

BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

Interim Financial Statements

The accompanying condensed consolidated financial statements as of March 31, 2020 and for the three and six-month periods ended March 31, 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 six-month periods ended March 31, 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, and its majority-owned subsidiary, LineaRx, Inc. (“LRx”). 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 $262,423,267 as of March 31, 2020. The Company incurred a net loss of $5,617,678 and generated negative operating cash flow of $5,151,404 for the six month period ended March 31, 2020. At March 31, 2020 the Company had cash and cash equivalents of $8,662,889 and working capital of $8,129,189.

The Company has historically financed its activities through the sale of Common Stock and warrants. Through March 31, 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 three month period ended March 31, 2020, 566,950 of these warrants were exercised, resulting in net proceeds to the Company of approximately $2.77 million. Subsequent to the three month period ended March 31, 2020 an additional $2.91 million  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.

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. 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 six months ended March 31, 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.  On March 7, 2020 the Governor of New York declared a health emergency and issued an order to close all nonessential businesses until at least May 15, 2020. Portions of the Company’s business are 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 has reduced the scope of its operations and where possible, certain workers are telecommuting from their homes.   As discussed in Note J 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”). 

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 six months ended March 31, 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

In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting standard updates which clarified principles for recognizing revenue arising from contracts with customers (“ASC 606” or “Topic 606”) and superseded most current revenue recognition guidance, including industry-specific guidance.

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, including molecular taggants, 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.

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:
	March 31,		March 31,
	2020		2019
Research and development services (over-time)	$	286,598	$	593,588
Product and authentication services (point-in-time):
Supply chain		12,646		20,234
Asset marking		110,697		158,078
Large scale DNA production		142,532		6,568
Total	$	552,473	$	778,468

	Six Month Period Ended:
	March 31,		March 31,
	2020		2019
Research and development services (over-time)	$	653,431	$	1,092,117
Product and authentication services (point-in-time):
Supply chain		31,320		244,803
Asset marking		219,269		319,303
Large scale DNA production		281,972		6,568
Total	$	1,185,992	$	1,662,791

Contract balances

As of March 31, 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:

		October 1,		March 31,		$
	Balance sheet classification	2019		2020		change
Contract liabilities	Deferred revenue	$	628,993	$	671,526	$	42,533

For the three and six month periods ended March 31, 2020, the Company recognized $113,791 and $358,275, respectively, of revenue that was included in Contract liabilities as of October 1, 2019.

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 and warrants.

For the three and six month periods ended March 31, 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 six month periods ended March 31, 2020 and 2019 are as follows:

	2020	2019
Warrants	2,121,755	422,136
Stock options	241,557	161,455
Secured convertible notes	70,963	104,112
	2,434,275	687,703

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 March 31, 2020 included an aggregate of 18%,  18% and 19% from three customers, respectively.  The Company’s revenue earned from sale of products and services for the six month period ended March 31, 2020 included an aggregate of 10%,  12%,  14% and 21% from four customers, respectively.

The Company’s revenues earned from sale of products and services for the three month period ended March 31, 2019 included an aggregate of 14% and 31% from two customers, respectively.  The Company’s revenue earned from sale of products and services for the six month period ended March 31, 2019 included an aggregate of 10%,  14%,  15% and 29% from four customers, respectively

One customer accounted for 45% of the Company’s accounts receivable at March 31, 2020 and one customer accounted for an aggregate of 77% of the Company’s accounts receivable at September 30, 2019.

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.

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WARRANTS - Transactions involving warrants (Details)	6 Months Ended
	Mar. 31, 2020 $ / shares shares
Number of Shares
Balance at October 1, 2019 | shares	263,592
Granted | shares	2,636,125
Exercised | shares	(566,950)
Cancelled or expired | shares	(211,012)
Balance at March 31, 2020 | shares	2,121,755
Weighted Average Exercise Price Per Share
Balance at October 1, 2019 | $ / shares	$ 131.12
Granted | $ / shares	5.25
Exercised | $ / shares	5.25
Cancelled or expired | $ / shares	135.01
Balance at March 31, 2020 | $ / shares	$ 7.98

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WARRANTS

6 Months Ended

Mar. 31, 2020

WARRANTS

WARRANTS

NOTE G —WARRANTS

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:

		Weighted
		Average
		Exercise
	Number of	Price Per
	Shares	Share
Balance at October 1, 2019	263,592	$	131.12
Granted	2,636,125		5.25
Exercised	(566,950)		5.25
Cancelled or expired	(211,012)		135.01
Balance at March 31, 2020	2,121,755	$	7.98

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INVENTORIES

6 Months Ended

Mar. 31, 2020

INVENTORIES

INVENTORIES

NOTE C — INVENTORIES

Inventories consist of the following:

	March 31,		September 30,
	2020		2019
	(unaudited)
Raw materials	$	65,816	$	87,886
Finished goods		23,125		54,743
Total	$	88,941	$	142,629

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BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES (Policies)

6 Months Ended

Mar. 31, 2020

BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

Interim Financial Statements

Interim Financial Statements

The accompanying condensed consolidated financial statements as of March 31, 2020 and for the three and six-month periods ended March 31, 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 six-month periods ended March 31, 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

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, and its majority-owned subsidiary, LineaRx, Inc. (“LRx”). 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

Liquidity

The Company has recurring net losses, which have resulted in an accumulated deficit of $262,423,267 as of March 31, 2020. The Company incurred a net loss of $5,617,678 and generated negative operating cash flow of $5,151,404 for the six month period ended March 31, 2020. At March 31, 2020 the Company had cash and cash equivalents of $8,662,889 and working capital of $8,129,189.

The Company has historically financed its activities through the sale of Common Stock and warrants. Through March 31, 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 three month period ended March 31, 2020, 566,950 of these warrants were exercised, resulting in net proceeds to the Company of approximately $2.77 million. Subsequent to the three month period ended March 31, 2020 an additional $2.91 million  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.

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. 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

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 six months ended March 31, 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.  On March 7, 2020 the Governor of New York declared a health emergency and issued an order to close all nonessential businesses until at least May 15, 2020. Portions of the Company’s business are 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 has reduced the scope of its operations and where possible, certain workers are telecommuting from their homes.   As discussed in Note J 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”). 

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

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 six months ended March 31, 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

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting standard updates which clarified principles for recognizing revenue arising from contracts with customers (“ASC 606” or “Topic 606”) and superseded most current revenue recognition guidance, including industry-specific guidance.

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, including molecular taggants, 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.

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:
	March 31,		March 31,
	2020		2019
Research and development services (over-time)	$	286,598	$	593,588
Product and authentication services (point-in-time):
Supply chain		12,646		20,234
Asset marking		110,697		158,078
Large scale DNA production		142,532		6,568
Total	$	552,473	$	778,468

	Six Month Period Ended:
	March 31,		March 31,
	2020		2019
Research and development services (over-time)	$	653,431	$	1,092,117
Product and authentication services (point-in-time):
Supply chain		31,320		244,803
Asset marking		219,269		319,303
Large scale DNA production		281,972		6,568
Total	$	1,185,992	$	1,662,791

Contract balances

As of March 31, 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:

		October 1,		March 31,		$
	Balance sheet classification	2019		2020		change
Contract liabilities	Deferred revenue	$	628,993	$	671,526	$	42,533

For the three and six month periods ended March 31, 2020, the Company recognized $113,791 and $358,275, respectively, of revenue that was included in Contract liabilities as of October 1, 2019.

Inventories

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

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

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 and warrants.

For the three and six month periods ended March 31, 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 six month periods ended March 31, 2020 and 2019 are as follows:

	2020	2019
Warrants	2,121,755	422,136
Stock options	241,557	161,455
Secured convertible notes	70,963	104,112
	2,434,275	687,703

Stock-Based Compensation

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

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 March 31, 2020 included an aggregate of 18%,  18% and 19% from three customers, respectively.  The Company’s revenue earned from sale of products and services for the six month period ended March 31, 2020 included an aggregate of 10%,  12%,  14% and 21% from four customers, respectively.

The Company’s revenues earned from sale of products and services for the three month period ended March 31, 2019 included an aggregate of 14% and 31% from two customers, respectively.  The Company’s revenue earned from sale of products and services for the six month period ended March 31, 2019 included an aggregate of 10%,  14%,  15% and 29% from four customers, respectively

One customer accounted for 45% of the Company’s accounts receivable at March 31, 2020 and one customer accounted for an aggregate of 77% of the Company’s accounts receivable at September 30, 2019.

Recent Accounting Standards

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.

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CAPITAL STOCK (Details) - USD ($)				1 Months Ended	3 Months Ended	6 Months Ended
	Apr. 01, 2020	Dec. 17, 2019	Nov. 15, 2019	Dec. 31, 2018	Mar. 31, 2020	Mar. 31, 2020	Sep. 30, 2019
Share-Based Compensation Arrangement By Share-Based Payment Award [Line Items]
Number of warrants outstanding					2,121,755	2,121,755	263,592
Offering
Share-Based Compensation Arrangement By Share-Based Payment Award [Line Items]
Common stock issued in private placement, net of offering costs (in shares)		2,285,000	2,285,000
Number of common stock called by warrants		2,627,750	2,285,000
Number of common shares that each warrant has right to purchase			1
Public offering price for each share together with warrant			$ 5.25
Exercise price of warrants (in dollars per share)			$ 5.25	$ 5.60
Additional number of common stock called by warrants		342,750	342,750
Warrants exercisable expiration period			45 days
Gross proceeds of offering before underwriter discounts, commissions and other offering expenses		$ 12,000,000	$ 12,000,000
Amount of common shares issued under underwriters partial exercise of over-allotment option		$ 3,428
Net proceeds from offering after deducting underwriting fees and other expense			$ 10,500,000
Minimum exercise price			$ 1.47
Beneficial Ownership Limitation (as a percent)			4.99%
Beneficial Ownership Limitation, at the election of the holder (as a percent)			9.99%
Prior notice period to increase beneficial ownership			61 days
Number of warrants outstanding				8,375
Incremental change in fair value of warrants				$ 2,842
Number of warrants exercised					566,950	566,950
Proceeds from exercise of warrants					$ 2,770,000	$ 2,770,000
Offering | Subsequent event
Share-Based Compensation Arrangement By Share-Based Payment Award [Line Items]
Number of warrants exercised	596,400
Proceeds from exercise of warrants	$ 2,910,000

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SUBSEQUENT EVENTS (Details) - PPP Loan - Subsequent event	May 01, 2020 USD ($)
Subsequent Event [Line Items]
Loan amount received	$ 847,000
Interest rate (as a percent)	1.00%
Prepayment penalties	$ 0

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
Allowance on accounts receivable (in dollars)	$ 4,500	$ 4,500
Accounts payable and accrued liabilities, related parties (in dollars)	$ 40,000
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	4,059,943	1,207,993
Common stock, shares outstanding	4,059,943	1,207,993
Series A Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Series B Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Net loss	$ (5,613,646)	$ (5,921,077)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	141,604	232,724
Stock-based compensation	432,758	757,338
Amortization of debt issuance costs		9,120
Provision for bad debts	0	(8,633)
Change in operating assets and liabilities:
Accounts receivable	290,828	1,178,367
Inventories	53,688	(93,306)
Prepaid expenses and other current assets and deposits	(87,114)	37,393
Accounts payable and accrued liabilities	(424,631)	157,493
Deferred revenue	42,533	(151,444)
Net cash used in operating activities	(5,151,404)	(3,802,025)
Cash flows from investing activities:
Purchase of property and equipment	(8,227)	(63,986)
Purchase of intangible asset	(36,525)	0
Net cash used in investing activities	(44,752)	(63,986)
Cash flows from financing activities:
Proceeds from Promissory notes (related parties $550,000)	0	550,000
Net proceeds from exercise of warrants	2,768,133	718,064
Net proceeds from sale of common stock and warrants	10,639,728	2,479,524
Repayment of convertible notes	(107,802)	0
Net cash provided by financing activities	13,300,059	3,747,588
Net increase (decrease) in cash and cash equivalents	8,103,903	(118,423)
Cash and cash equivalents at beginning of period	558,988	1,659,564
Cash and cash equivalents at end of period	8,662,891	1,541,141
Supplemental Disclosures of Cash Flow Information:
Cash paid during period for interest	0	0
Cash paid during period for income taxes	0	0
Non-cash investing and financing activities:
Impact of adoption of new accounting pronouncements included in accumulated deficit	0	493,223
Interest paid in kind (related party of $35,550 for the six month period ended March 31, 2019)	35,625	48,816
Offering costs incurred, and included in accounts payable	0	15,933
Property and equipment acquired, and included in accounts payable	109,423	0
Deemed dividend-warrant repricing	2,842	0
Deferred offering costs reclassified to additional paid in capital	109,698	0
Intangible asset costs incurred, and included in accounts payable	$ 14,375	$ 0

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BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES - Summary of potential stock issuances under various options, and warrants (Details) - shares	6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from the computation of diluted net loss per share	2,434,275	687,703
Warrant
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from the computation of diluted net loss per share	2,121,755	422,136
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from the computation of diluted net loss per share	241,557	161,455
Secured convertible notes
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from the computation of diluted net loss per share	70,963	104,112

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WARRANTS (Tables)

6 Months Ended

Mar. 31, 2020

WARRANTS

Schedule of transactions involving warrants

		Weighted
		Average
		Exercise
	Number of	Price Per
	Shares	Share
Balance at October 1, 2019	263,592	$	131.12
Granted	2,636,125		5.25
Exercised	(566,950)		5.25
Cancelled or expired	(211,012)		135.01
Balance at March 31, 2020	2,121,755	$	7.98

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ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable	$ 699,963	$ 1,152,103
Accrued salaries payable	317,304	319,260
Other accrued expenses	161,091	145,634
Total	$ 1,178,358	$ 1,616,997

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COMMITMENTS AND CONTINGENCIES - Operating Leases (Details)			3 Months Ended		6 Months Ended
	Nov. 01, 2017 USD ($) ft²	Jun. 15, 2013 USD ($) ft²	Mar. 31, 2020 USD ($)	Mar. 31, 2019 USD ($)	Mar. 31, 2020 USD ($)	Mar. 31, 2019 USD ($)
COMMITMENTS AND CONTINGENCIES
Area of property under operating lease | ft²		30,000
Extended operating lease for additional period		3 years
Base rent during initial lease term per annum		$ 458,098
Area of laboratory space | ft²		2,200
Lease for satellite testing | ft²	1,108
Term lease	3 years
Base rent	$ 6,500
Short-term lease obligation			$ 496,420		$ 496,420
Total lease rental expenses			$ 153,645	$ 129,228	$ 287,250	$ 258,422

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RELATED PARTY TRANSACTIONS

6 Months Ended

Mar. 31, 2020

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

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 will continue through June 12, 2020 and may be renewed by the Company at its option for an additional six months through December 12, 2020. The agreement provides for compensation in the form of both cash and equity. Meadow Hill will be eligible to receive up to $125,000 for the first six months of the term, with the option to renew.  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 is eligible to vest on June 12, 2020, subject to Meadow Hill providing services to the Company through such date, 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 are eligible to vest on July 2, 2020 and 11,665 are eligible to vest on December 12, 2020, in each case subject to Meadow Hill providing services to the Company through the applicable date.

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SECURED CONVERTIBLE NOTES PAYABLE

6 Months Ended

Mar. 31, 2020

SECURED CONVERTIBLE NOTES PAYABLE

SECURED CONVERTIBLE NOTES PAYABLE

NOTE E — SECURED CONVERTIBLE NOTES PAYABLE

During December 2019, the remaining outstanding balance of the secured convertible notes payable 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 six month periods ended March 31, 2020, the Company reclassified $0 and $32,795 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 March 31, 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 six month periods ended March 31, 2020 the Company amortized $6,419 and $12,608, respectively, of debt issuance costs resulting in unamortized debt issuance costs of $47,107 and the secured notes payable of $1,484,819 at March 31, 2020. During the three and six month periods ended March 31, 2019 the Company amortized $4,630 and $9,120 of debt issuance costs, respectively.   The debt issuance cost will be amortized over the life of the July 2019 Notes. During the three and six month periods ended March 31, 2020, the Company incurred $22,677 and $45,030 of interest expense, respectively. The effective interest rate for the three and six month periods ended March 31, 2020 was 8.0%.  During the three and six month periods ended March 31, 2019, the Company incurred approximately $32,788 and $59,908 of interest expense. The effective interest for the three and six month period ended March 31, 2019 was 7.0%.

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INVENTORIES (Details) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
INVENTORIES
Raw materials	$ 65,816	$ 87,886
Finished goods	23,125	54,743
Total	$ 88,941	$ 142,629

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BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES - Summary of revenues disaggregated by our business operations and timing of revenue recognition (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Disaggregation of Revenue [Line Items]
Total	$ 552,473	$ 778,468	$ 1,185,992	$ 1,662,791
Research and development services (over-time)
Disaggregation of Revenue [Line Items]
Total	286,598	593,588	653,431	1,092,117
Product and authentication services (point-in-time):
Disaggregation of Revenue [Line Items]
Total	0	0	0	0
Supply chain
Disaggregation of Revenue [Line Items]
Total	12,646	20,234	31,320	244,803
Asset marking
Disaggregation of Revenue [Line Items]
Total	110,697	158,078	219,269	319,303
Large scale DNA production
Disaggregation of Revenue [Line Items]
Total	$ 142,532	$ 6,568	$ 281,972	$ 6,568

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INVENTORIES (Tables)

6 Months Ended

Mar. 31, 2020

INVENTORIES

Schedule of inventories

	March 31,		September 30,
	2020		2019
	(unaudited)
Raw materials	$	65,816	$	87,886
Finished goods		23,125		54,743
Total	$	88,941	$	142,629

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NATURE OF THE BUSINESS

6 Months Ended

Mar. 31, 2020

NATURE OF THE BUSINESS

NATURE OF THE BUSINESS

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. 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, and 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.

•     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.

•     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. The Company has also developed a patent-pending nucleic acid diagnostic (Linea TM COVID-19) to detect in diagnostic samples the presence of SARS-CoV-2, the virus that causes the disease, COVID-19. 

Non-Biological Tagging and Related Services

The Company’s supply chain security business allows its customers to use non-biologic DNA (molecular) tags, produced 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.

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.

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Document and Entity Information - shares	6 Months Ended
	Mar. 31, 2020	May 08, 2020
Cover [Abstract]
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Entity Registrant Name	APPLIED DNA SCIENCES INC
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Trading Symbol	APDN
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,651,843
Entity Central Index Key	0000744452
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parentheticals) - USD ($)	3 Months Ended	6 Months Ended
	Mar. 31, 2020	Mar. 31, 2020
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Interest (expense) income, related party interest	$ 25,840	$ 49,310

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BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES (Details)							3 Months Ended				6 Months Ended
	May 01, 2020 USD ($)	Apr. 01, 2020 USD ($) shares	Mar. 31, 2020 USD ($) $ / shares	Dec. 17, 2019 USD ($) shares	Nov. 15, 2019 USD ($) $ / shares shares	Oct. 31, 2019 $ / shares	Mar. 31, 2020 USD ($) $ / shares shares	Dec. 31, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($) $ / shares	Mar. 31, 2020 USD ($) $ / shares shares	Mar. 31, 2019 USD ($)	Sep. 30, 2019 USD ($) $ / shares
Liquidity And Managements Plan [Line items]
Accumulated deficit			$ 262,423,267				$ 262,423,267				$ 262,423,267		$ 256,805,589
Net loss			(5,617,678)				(2,950,905)	$ (2,662,741)	$ (2,686,757)	$ (3,234,320)	(5,613,646)	$ (5,921,077)
Negative operating cash flow											5,151,404	$ 3,802,025
Cash and cash equivalents			8,662,889				8,662,889				8,662,889		$ 558,988
Working capital			$ 8,129,189				$ 8,129,189				$ 8,129,189
Reverse stock split of its common stock						0.025
Common Stock, Par Or Stated Value Per Share | $ / shares			$ 0.001			$ 0.001	$ 0.001				$ 0.001		$ 0.001
PPP Loan | Subsequent event
Liquidity And Managements Plan [Line items]
Loan amount received	$ 847,000
Offering
Liquidity And Managements Plan [Line items]
Common stock issued in private placement, net of offering costs (in shares) | shares				2,285,000	2,285,000
Number of common stock called by warrants | shares				2,627,750	2,285,000
Number of common shares that each warrant has right to purchase | shares					1
Number of shares per warrant | shares					1
Exercise price of warrants (in dollars per share) | $ / shares					$ 5.25					$ 5.60
Public offering price for each share together with warrant | $ / shares					$ 5.25
Gross proceeds of offering before underwriter discounts, commissions and other offering expenses				$ 12,000,000	$ 12,000,000
Net proceeds of offering after underwriter discounts, commissions and other offering expenses					$ 10,500,000
Additional number of common stock called by warrants | shares				342,750	342,750
Warrants exercisable expiration period					45 days
Number of warrants exercised | shares							566,950				566,950
Proceeds from exercise of warrants							$ 2,770,000				$ 2,770,000
Offering | Subsequent event
Liquidity And Managements Plan [Line items]
Number of warrants exercised | shares		596,400
Proceeds from exercise of warrants		$ 2,910,000

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BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES (Tables)

6 Months Ended

Mar. 31, 2020

BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

Schedule of operations and timing of revenue recognition

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

	Three Month Period Ended:
	March 31,		March 31,
	2020		2019
Research and development services (over-time)	$	286,598	$	593,588
Product and authentication services (point-in-time):
Supply chain		12,646		20,234
Asset marking		110,697		158,078
Large scale DNA production		142,532		6,568
Total	$	552,473	$	778,468

	Six Month Period Ended:
	March 31,		March 31,
	2020		2019
Research and development services (over-time)	$	653,431	$	1,092,117
Product and authentication services (point-in-time):
Supply chain		31,320		244,803
Asset marking		219,269		319,303
Large scale DNA production		281,972		6,568
Total	$	1,185,992	$	1,662,791

Schedule of opening and closing contract balances

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

		October 1,		March 31,		$
	Balance sheet classification	2019		2020		change
Contract liabilities	Deferred revenue	$	628,993	$	671,526	$	42,533

Schedule of anti-dilutive securities not included computation of net loss per share

	2020	2019
Warrants	2,121,755	422,136
Stock options	241,557	161,455
Secured convertible notes	70,963	104,112
	2,434,275	687,703

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BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES - Concentrations (Details) - Customer Concentration Risk - customer	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2019
Total Revenue
Concentration Risk [Line Items]
Number of customers	3	2	4	4
Total Revenue | One customer
Concentration Risk [Line Items]
Concentration risk percentage	18.00%	14.00%	10.00%	10.00%
Total Revenue | Two customer
Concentration Risk [Line Items]
Concentration risk percentage	18.00%	31.00%	12.00%	14.00%
Total Revenue | Three customers
Concentration Risk [Line Items]
Concentration risk percentage	19.00%		14.00%	15.00%
Total Revenue | Four customer
Concentration Risk [Line Items]
Concentration risk percentage			21.00%	29.00%
Accounts Receivable | One customer
Concentration Risk [Line Items]
Concentration risk percentage			45.00%		77.00%
Number of customers			1		1

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Revenues:
Total revenues	$ 552,473	$ 778,468	$ 1,185,992	$ 1,662,791
Cost of revenues	179,582	133,141	411,613	286,626
Operating expenses:
Selling, general and administrative	2,285,544	2,528,914	4,658,957	5,611,295
Research and development	703,018	651,377	1,267,444	1,360,941
Depreciation and amortization	66,537	97,673	141,604	232,724
Total operating expenses	3,055,099	3,277,964	6,068,005	7,204,960
LOSS FROM OPERATIONS	(2,682,208)	(2,632,637)	(5,293,626)	(5,828,795)
Other (expense) income:
Interest expense (including related parties interest of $25,840 and $49,310 for the three and six months ended March 31, 2019, respectively)	(29,096)	(37,417)	(58,187)	(69,028)
Other expense, net	(239,601)	(16,703)	(261,833)	(23,254)
Loss before provision for income taxes	(2,950,905)	(2,686,757)	(5,613,646)	(5,921,077)
Provision for income taxes	0	0	0	0
NET LOSS	(2,950,905)	(2,686,757)	(5,613,646)	(5,921,077)
Less: Net (income) loss attributable to noncontrolling interest	(1,220)		(1,190)
NET LOSS attributable to Applied DNA Sciences, Inc.	(2,952,125)	(2,686,757)	(5,614,836)	(5,921,077)
Deemed dividend related to warrant modifications			(2,842)
NET LOSS applicable to common stockholders	$ (2,952,125)	$ (2,686,757)	$ (5,617,678)	$ (5,921,077)
Net loss per share applicable to common stockholders-basic and diluted	$ (0.79)	$ (3.22)	$ (1.76)	$ (6.51)
Weighted average shares outstanding-basic and diluted (in shares)	3,758,512	834,990	3,196,616	909,623
Product
Revenues:
Total revenues	$ 197,801	$ 119,036	$ 435,671	$ 440,747
Service
Revenues:
Total revenues	$ 354,672	$ 659,432	$ 750,321	$ 1,222,044

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CONSOLIDATED STATEMENT OF CASH FLOWS (Parentheticals)	6 Months Ended
	Mar. 31, 2019 USD ($)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Interest paid in kind, related party	$ 35,550

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SECURED CONVERTIBLE NOTES PAYABLE (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Debt Instrument [Line Items]
Reclassified amount from accrued liabilities to senior secured notes payable	$ 0		$ 32,795
Repayment of convertible notes			(107,802)	$ 0
Amortization of debt issuance costs	6,419	$ 4,630		9,120
Unamortization of debt issuance costs			47,107
Secured notes payable	1,484,819		1,484,819
Interest expense	$ 22,677	$ 32,788	$ 45,030	$ 59,908
Effective interest rate	8.00%	7.00%	8.00%	7.00%
Secured Convertible Notes ("Existing Notes")
Debt Instrument [Line Items]
Debt issuance costs based on financing			$ 64,608

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RELATED PARTY TRANSACTIONS (Details) - USD ($)	Dec. 12, 2020	Jul. 02, 2020	Jan. 02, 2020	Dec. 12, 2019
Meadow Hill
Related Party Transaction [Line Items]
Renewal term of the agreement	6 months
Eligible amount receivable by related party for the first month of the term	$ 125,000
Stock options granted (in shares)				20,834
Exercise price per share of options granted				$ 4.26
Mr. Anchin
Related Party Transaction [Line Items]
Stock options granted (in shares)			20,786
Exercise price per share of options granted			$ 4.43
Subsequent event | Mr. Anchin
Related Party Transaction [Line Items]
Stock options eligible to vest (in shares)	11,665	9,121

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Mar. 31, 2020

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

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 March 31, 2020 is $496,420.

The total rent expense for the three and six month periods ended March 31, 2020 were $153,645 and $287,250, respectively.  Total rent expense for the three and six month periods ended March 31, 2019 were $129,228 and $258,422, respectively.

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.

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ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

6 Months Ended

Mar. 31, 2020

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

NOTE D — ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities are as follows:

	March 31,		September 30,
	2020		2019
	(unaudited)
Accounts payable	$	699,963	$	1,152,103
Accrued salaries payable		317,304		319,260
Other accrued expenses		161,091		145,634
Total	$	1,178,358	$	1,616,997