NOTES PAYABLE	9 Months Ended
Jun. 30, 2020
NOTES PAYABLE
NOTES PAYABLE	NOTE E — NOTES PAYABLE CARES Act Loan The Company received a loan of approximately $847 thousand on May 1, 2020 from Bank of America as lender pursuant to the PPP of the CARES Act. All or a portion of the loan may be forgiven by the U.S. Small Business Administration (“SBA”) upon application by the Company beginning 60 days but not later than 130 days after loan approval and upon documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the covered period as defined by the CARES Act. Applied DNA intends to use all proceeds from the loan to retain employees, maintain payroll and make lease and utility payments. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. The loan matures on May 1, 2022 and bears interest at a rate of 1% per annum. Payments of principal and interest commence in November 2020. The loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Secured Convertible Notes Payable During December 2019, the remaining outstanding balance of the secured convertible notes payable, including accrued interest, entered into during August and November 2018 (the “Existing Notes”), for a total of $107,802, was repaid by the Company. During the three and nine month periods ended June 30, 2020, the Company reclassified $0 and $35,625, respectively from accrued liabilities to senior secured notes payable to represent interest due to noteholders that was paid in kind and therefore increased the convertible note balance outstanding at June 30, 2020. The Company incurred $64,608 of debt issuance costs based on the cost incurred to issue the secured convertible notes payable that were issued during July 2019 (the “July 2019 Notes”). As disclosed in Note F, the holder of the July 2019 Notes also participated in the November 15, 2019 underwritten public offering. During the three and nine month periods ended June 30, 2020 the Company amortized $6,691 and $19,195, respectively, of debt issuance costs resulting in unamortized debt issuance costs of $40,503 and the secured notes payable of $1,492,292 at June 30, 2020. During the three and nine month period ended June 30, 2019 the Company amortized $4,826 and $13,947, respectively. The debt issuance cost will be amortized over the life of the July 2019 Notes. During the three and nine month periods ended June 30, 2020, the Company incurred $22,677 and $67,707 of interest expense, respectively. The effective interest rate for the three and nine month periods ended June 30, 2020 was 8.0%. During the three and nine month periods ended June 30, 2019, the Company incurred $33,351 and $94,745, respectively of interest expense. The effective interest for the three and nine month periods ended June 30, 2019 was 7.0%.

NOTE E — NOTES PAYABLE

CARES Act Loan

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

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

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

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

Secured Convertible Notes Payable

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

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

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