NATURE OF THE BUSINESS

12 Months Ended

Sep. 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 Test Kit”). In addition, and in further response to the COVID-19 pandemic, the Company developed and is currently offering, COVID-19 testing services under its wholly owned subsidiary, Applied DNA Clinical Labs, LLC (“ADCL”). ADCL currently holds a New York clinical laboratory permit and a Clinical Laboratory Improvement Amendments of 1988, 42 U.S.C. §263a (“CLIA”) certification for virology (“Clinical Testing Laboratory”). Using the Company’s COVID-19 Diagnostic Test Kit, ADCL's currently offers to clients a high throughput pooled COVID-19 testing program, known as safeCircle^TM, which utilizes high-sensitivity pooled testing to help prevent virus spread by identifying infections within a community, school, or workplace. safeCircle provides to its clients rapid testing results using real-time PCR (RT-PCR) testing. (“COVID-19 Testing Services”). 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 enzymatic 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 conventional nucleic-acid 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 LinearDNA 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, mouse and feline 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 LinearDNA 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. In October 2020, Applied DNA and The Cornell University School of Veterinary Medicine began a SARS-CoV-2 challenge trial in ferrets to assess the protective efficacy of the LinearDNA vaccine against live SARS-CoV-2 virus.

COVID-19 Diagnostic Test Kit

On May 13, 2020 the Company received an EUA from the 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 CLIA, that meet requirements to perform high complexity tests. Subsequently, during July and November 2020, we were granted EUA amendments that expanded the installed base of PCR equipment platforms on which the Company’s Linea^TM COVID-19 Assay Kit can be processed and significantly increased the daily testing capacity of the Linea (TM) 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 ADCL and other certified laboratory users of the Linea^TM COVID-19 Assay Kit, 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(TM) 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. Our Linea (TM) 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.

NOTE A – NATURE OF THE BUSINESS, continued

The Company currently manufactures the Linea^TM COVID-19 Assay Kit at its facilities in Stony Brook, New York. The Company’s COVID-19 Assay Kit is predominantly utilized by ADCL to provide safeCircle high-throughput pooled COVID-19 testing services.

COVID-19 Testing Services

The Company under its wholly owned subsidiary, ADCL, offers a high throughput COVID-19 testing program to customers as a Testing-as-a-Service (TaaS) offering branded under the safeCircle^TM trademark. safeCircle is a turnkey testing solution that provides for all aspects of large population COVID-19 testing – from sample collection to results reporting – for institutes of higher education, K-12 schools, businesses, and healthcare facilities, among other institutions with large populations. safeCircle utilizes serial, high-sensitivity pooled RT-PCR testing to help prevent virus spread by quickly identifying infections within a community, school, or workplace. Testing is conducted utilizing the Company’s Linea™ COVID-19 Assay Kit that provides rapid results using real-time PCR (RT-PCR testing) with results returned typically within 24 to 48 hours at the Company’s Clinical Laboratory Evaluation Program (“CLEP”) permitted, CLIA-certified laboratory.  For the majority of safeCircle clients, test scheduling and testing result reporting is provided though the CLEARED4 digital health platform owned and operated by Chelsea Health Solutions, LLC.

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

In addition, starting in February 2021, the Company began the development of its Linea SARS-CoV-2 Mutation Panel (formally the Selective Genomic Surveillance Mutation Panel) for the qPCR-based detection of certain SARS-CoV-2 genetic mutations (the “Mutation Panel”). In May 2021, the Company announced that it had completed technical validation of the Mutation Panel. In October 2021, the Company announced that an EUA request for the Mutation Panel had been filed with FDA. Use of the Mutation 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, CLEP, which is currently permitted for virology. As part of the Company’s COVID-19 Testing Services its laboratory provides individual COVID-19 testing utilizing the Company’s EUA-authorized Linea COVID-19 Assay Kit, pooled screening testing under its July 13, 2021 LDT submission to NYSDOH and pooled surveillance testing that is not regulated by FDA, CDC or CMS.

On November 15, 2021 FDA revised its guidance document titled “Policy for Coronavirus Disease-2019 Tests During the Public Health Emergency (Revised)” (“FDA COVID-19 Testing Guidance”) to require all COVID-19 diagnostic assays conducted as Laboratory-Developed Tests (“LDTs”) to apply for EUA authorization within a 60-day period from the revised guidance’s issuance date. The FDA Guidance provides an exception for certain notified states, who can authorize in-state laboratories to develop and perform COVID-19 tests under the authority of their own State law in instances where the laboratory did not otherwise submit an EUA request to FDA.

On July 13, 2021, ADCL submitted data supporting the validation of a high-throughput robotic 5-sample pooling workflow utilizing the Linea COVID-19 Assay Kit to the New York State Department of Health (“NYSDOH”), which is currently pending. New York State falls within the exemption contemplated by FDA’s revised COVID-19 Testing Guidance, meaning ADCL can obtain NYSDOH authorization for conducting the test in lieu of an EUA from FDA. Pursuant to current NYSDOH guidance, ADCL is currently performing the validated workflow in its COVID-19 testing during the pendency of the NYSDOH review.

NOTE A – NATURE OF THE BUSINESS, continued

In the event that NYSDOH declines to authorize ADCL’s performance of the Linea COVID-19 assay on pooled samples, ADCL will be required to submit an EUA to FDA in order to continue performing the validated pooling workflow in its COVID-19 testing. Pursuant to the revised FDA COVID-19 Testing Guidance, laboratories can continue performing validated assays during the pendency of the EUA review by FDA. It is important to note that FDA retains the authority to review, or decline to review, as well as authorize, or decline to authorize, any EUA request for any product. ADCL cannot, therefore, guarantee that it will ultimately obtain authorization to perform its Linea COVID-19 assay on pooled samples if it is required to submit an EUA.

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.