NATURE OF THE BUSINESS

9 Months Ended

Jun. 30, 2021

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 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 (“Biotherapeutic Contract Research and Manufacturing”) and for supply chain security, anti-counterfeiting and anti-theft technology purposes (“Non-Biologic Tagging”). In response to the SARS-CoV-2 (“COVID-19”) pandemic, the Company developed a PCR-based molecular diagnostic test for COVID-19, which was granted Emergency Use Authorization (EUA) by the U.S.  Food and Drug Administration (“FDA”) in May 2020.  The Company currently manufactures and sells its EUA authorized COVID-19 molecular diagnostic test kit under the Linea^TM COVID-19 Assay Kit trademark (“COVID-19 Diagnostic Testing”).  In addition, and in further response to the COVID-19 pandemic, the Company developed and is currently offering COVID-19 pooled surveillance testing to detect instances of COVID-19 in defined populations. Unlike diagnostic testing, which looks for the occurrence of COVID-19 at the individual level, surveillance testing looks for infections within a defined population or community and can be used for making health management decisions at the population level.  The Company’s COVID-19 pooled surveillance testing services are currently offered under the safeCircle^TM trademark (“COVID-19 Surveillance Testing”). As of May 10, 2021, the Company also offers COVID-19 diagnostic testing services under its wholly owned subsidiary that holds a New York clinical laboratory permit and a Clinical Laboratory Improvement Amendments of 1988, 42 U.S.C. §263a (“CLIA”) certification for COVID-19 testing using EUA authorized methods and devices (“Clinical Testing Laboratory”). 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, including genetic sequencing.

Biotherapeutic Contract Research and Manufacturing

The Company’s patented continuous flow PCR systems and other proprietary PCR-based production technology and post-processing systems that comprise the LinearDNA^TM platform allows for the large-scale production of specific DNA sequences. The LinearDNA^TM platform is currently being used for customers to manufacture DNA 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.

The Company provides preclinical contract research and manufacturing services for the nucleic acid-based therapeutic markets. It works 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 the Company’s LinearDNA^TM platform. In addition, it provides 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, the Company also uses its LinearDNA^TM platform to produce very large gram-scale quantities of DNA for the in vitro diagnostic market where the Company’s DNA is used for both commercially available diagnostics and diagnostics under development.

The Company is currently directly engaged in preclinical drug candidate development activities focusing on therapeutically relevant DNA constructs manufactured via its LinearDNA^TM platform in the fields of DNA-based anti-viral and anti-cancer vaccines, CAR-T cell immunotherapy and the manufacture of rAAV vectors for gene therapy.

NOTE A — NATURE OF THE BUSINESS, continued

Biotherapeutic Contract Research and Manufacturing, continued

The Company is also engaged in preclinical and animal drug candidate development activities focusing on therapeutically relevant DNA constructs manufactured via its PCR-based production platform. The Company seeks to develop, acquire and commercialize, alone or with partners, a diverse pipeline of nucleic acid-based therapeutics based on PCR-produced linear DNA. To this end, the Company is currently working with its development partners Takis S.R.L. and Evvivax S.R.L. (“Takis/Evvivax”) to develop an amplicon-based linear DNA vaccine for COVID-19 that would be manufactured on the Company’s LinearDNA^TM platform. Together with its development partners, the Company’s amplicon-based linear COVID-19 vaccine candidate has shown efficacy in preclinical cell and small animal studies. In September 2020, the Company entered into an Animal Clinical Trial Agreement with Takis/Evvivax and with Veterinary Oncology Services, PLLC, an affiliate of Guardian Veterinary Specialists (“GVS”), a multi-specialty veterinary hospital. In November 2020, the Company, together with Takis/Evvivax and GVS, announced receipt of approvals from the New York State Department of Agriculture and Markets and the U.S. Department of Agriculture (“USDA”) on an advanced clinical strategy to conduct a veterinary trial of an amplicon-based linear DNA vaccine COVID-19 candidate. The Company’s jointly developed amplicon-based DNA vaccine for COVID-19 is currently in a veterinary clinical trial in domestic feline cats, with the end goal of applying for a USDA Animal and Plant Health Inspection Service conditional license to enable commercial veterinary sales for veterinary applications. In April 2021, the Company announced preliminary data from its veterinary clinical trial in felines conducted with Takis/Evvivax and GVS. The preliminary data showed that all felines in the trial produced SARS-CoV-2 neutralizing antibodies after a single prime dose of the vaccine candidate. Subsequently in May 2021, the Company announced additional preliminary data from its feline clinical trial that showed a booster injection of the amplicon-based linear DNA vaccine candidate delivered 30 days after the prime vaccination elected a 5-fold increase in neutralizing antibody titers, with every member of the trial cohort producing  neutralizing antibody titers. In June 2021, the Company further announced preliminary data from an in vitro neutralization study of sera from the feline trial cohort against the B.1.1.7 (U.K.), P1 (Brazil), and B.1.526 (New York) SARS-CoV-2 variants. The preliminary data showed that the amplicon-based linear DNA vaccine candidate induced neutralizing antibodies against the 1.1.7 (U.K.), P1 (Brazil), and B.1.526 (New York) SARS-CoV-2 variants in 100% of the trial cohort.

NOTE A — NATURE OF THE BUSINESS, continued

COVID-19 Diagnostic Testing

On May 13, 2020 the Company received an EUA from the Food and Drug Administration (FDA) for the clinical use of the Linea^TM COVID-19 Assay Kit for the qualitative detection of nucleic acid from SARS-CoV-2 in respiratory specimens including anterior nasal swabs, self-collected at a healthcare location or collected by a healthcare worker, and nasopharyngeal and oropharyngeal swabs, mid-turbinate nasal swabs, nasopharyngeal washes/aspirates or nasal aspirates, and bronchoalveolar lavage specimens collected by a healthcare worker from individuals who are suspected of COVID-19 by their healthcare provider. Under the EUA, testing is limited to laboratories certified under the CLIA, that meet requirements to perform high complexity tests. Subsequently, during July and November 2020, the Company was granted EUA amendments that expand the installed base of PCR equipment platforms on which the Company’s Linea™ COVID-19 Assay Kit can be processed and significantly increased the daily testing capacity of the Linea™ COVID-19 Assay Kit through the use of automation. On May 11, 2021, the Company received a re-issued EUA that expanded the intended use of the Linea^TM COVID-19 Assay Kit to include use with anterior nasal swab specimens that are self-collected in the presence of a healthcare provider from individuals without symptoms or other reasons to suspect COVID-19 when tested at least weekly and with no more than 168 hours between serially collected specimens. The expanded intended use allows certified laboratory users of the Linea^TM COVID-19 Assay Kit and the Company, through its ADCL subsidiary, to provide serial screening testing to individuals with the return of individual testing results. The May 11, 2021 re-issued EUA also updated the Linea^TM COVID-19 Assay Kit’s Instructions for Use to include the KingFisher™ Flex Purification System, a high-throughput robotic nucleic acid extraction system. The scope of the EUA, as amended, is expressly limited to use consistent with the Instructions for Use by authorized laboratories, certified under CLIA to perform high complexity tests. The EUA will be effective until the declaration that circumstances exist justifying the authorization of the emergency use of in vitro diagnostics for detection and/or diagnosis of COVID-19 is terminated or until the EUA’s prior termination or revocation. The Company’s Linea™ COVID-19 Assay Kit has not been FDA cleared or approved, and the EUA’s limited authorization is only for the detection of nucleic acid from SARS-CoV-2, not for any other viruses or pathogens. The Company currently manufactures the Linea^TM COVID-19 Assay Kit at its facilities in Stony Brook, New York.

COVID-19 Surveillance Testing

Starting in July 2020, the Company under its wholly owned subsidiary, Applied DNA Clinical Labs LLC (“ADCL”), began offering COVID-19 pooled surveillance testing to customers as a Testing-as-a-Service (TaaS) offering branded under the safeCircle^TM trademark. Unlike diagnostic testing, which looks for the occurrence of COVID-19 at the individual level, safeCircle^TM surveillance testing looks for infections within a defined population or community and can be used for making health management decisions at the population level. safeCircle^TM surveillance testing uses high-sensitivity pooled COVID-19 testing utilizing the Linea™ COVID-19 Assay Kit. Under the safeCircle^TM surveillance testing service, pooled test results are returned to the sponsoring organization in the aggregate only, not directly to the participating individuals, and may be performed without CLIA certification. Once potentially infected portions of a defined population are identified by the safeCircle^TM surveillance testing service, the individuals comprising the potentially infected portions of the defined population are referred to follow on diagnostic testing at a clinical lab to obtain individual results, which may include ADCL. ADCL is offering its safeCircle^TM surveillance testing in compliance with current CDC, FDA, CMS and New York State Department of Health recommendations. The use of pooled sampling procedures for the safeCircle^TM surveillance testing service has been internally validated by ADCL in compliance with current CDC guidance. The use of pooled sampling procedures is not included in the Linea^TM COVID-19 Assay Kit EUA.

The Company currently provides safeCircle^TM surveillance testing to primary/secondary/higher education institutions, private clients, local governments, and businesses and college athletic programs.

NOTE A — NATURE OF THE BUSINESS, continued

In addition, starting in February 2021, the Company began the development of its Linea^TM COVID-19 Selective Genomic Surveillance^TM mutation panel for the qPCR-based detection of SARS-CoV-2 genetic mutations (the “SGS Panel”). In May 2021, the Company announced that it had completed technical validation of the SGS Panel . Use of the SGS Panel is currently limited to Research Use Only (RUO).

Clinical Testing Laboratory

Under the Company’s ADCL subsidiary, on May 10, 2021 the Company received its New York clinical laboratory permit and its CLIA certification from the New York State Department of Health, Clinical Laboratory Evaluation Program (“CLEP”) for COVID-19 testing using EUA authorized methods and devices. Now that certification has been obtained, the Company is able to operate a clinical diagnostic laboratory for COVID-19 testing and provide individual patient testing results.

iCTC Technology

The Company’s 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. The Company’s 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. The Company seeks to further develop and commercialize this technology and to potentially integrate aspects of the iCTC Technology with its PCR know-how and with the LinearDNA^TM platform for cancer research and nucleic acid-based drug development.

Non-Biological Tagging and Related Services

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