10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2015

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)

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.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

☒ Yes ☐ No

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

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
(Do not check if a smaller reporting company)

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

☐ Yes ☒ No

At May 8, 2015, the registrant had 21,472,202 shares of common stock outstanding.

Applied DNA Sciences, Inc.

Form 10-Q for the Quarter Ended March 31, 2015

Table of Contents

	Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (unaudited)	1
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3 - Quantitative and Qualitative Disclosures About Market Risk	23
Item 4 - Controls and Procedures	24
PART II - OTHER INFORMATION
Item 1 – Legal Proceedings	25
Item 1A – Risk Factors	25
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3 – Defaults Under Senior Securities	25
Item 4 – Mine Safety Disclosures	25
Item 5 – Other Information	25
Item 6 - Exhibits	26

Part I

Item 1 - Financial Statements.

APPLIED DNA SCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2015			September 30, 2014
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	984,050		$	1,393,132
Accounts receivable, net of allowance of $11,257 and $9,634 at March 31, 2015 and September 30, 2014, respectively		1,160,304			834,818
Prepaid expenses and other current assets		155,593			135,365
Total current assets		2,299,947			2,363,315
Property, plant and equipment, net of accumulated depreciation of $645,855 at March 31, 2015 and $759,087 at September 30, 2014		587,600			576,128
Other assets:
Deposits		61,988			57,638
Deferred offering costs		287,831			181,104
Intangible assets, net of accumulated amortization and impairment of $302,610 and $256,208 at March 31, 2015 and September 30, 2014, respectively		389,470			327,872
Total Assets	$	3,626,836		$	3,506,057
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities, including related party accrued interest of $6,597 at September 30, 2014	$	1,443,665		$	1,494,759
Promissory notes payable, including $1,000,000 with a related party		—			1,800,000
Deferred revenue		227,810			583,362
Total current liabilities		1,671,475			3,878,121
Warrant liability		—			1,096,412
Total liabilities		1,671,475			4,974,533
Commitments and contingencies (Note I)
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, 2015 and September 30, 2014		—			—
Series A Preferred stock, par value $0.001 per share, 10,000,000 shares authorized; -0- issued and outstanding as of March 31, 2015 and September 30, 2014		—			—
Series B Preferred stock, par value $0.001 per share, 10,000,000 shares authorized; -0- issued and outstanding as of March 31, 2015 and September 30, 2014		—			—
Common stock, par value $0.001 per share; 500,000,000 and 1,350,000,000 shares authorized; 17,369,202 and 13,935,954 shares issued and outstanding as of March 31, 2015 and September 30, 2014, respectively		17,370			13,937
Additional paid in capital		211,412,483			198,277,859
Accumulated deficit		(209,474,492	)		(199,760,272	)
Total stockholders’ equity (deficit)		1,955,361			(1,468,476	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	3,626,836		$	3,506,057

See the accompanying notes to the unaudited condensed consolidated financial statements

1

APPLIED DNA SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,						Six Months Ended March 31,
	2015			2014			2015			2014
Revenues	$	1,518,761		$	637,146		$	2,760,563		$	1,234,500
Operating expenses:
Selling, general and administrative		2,901,207			3,297,739			7,569,950			7,143,317
Research and development		373,380			359,782			651,652			819,086
Depreciation and amortization		123,079			106,810			232,805			212,025
Total operating expenses		3,397,666			3,764,331			8,454,407			8,174,428
LOSS FROM OPERATIONS		(1,878,905	)		(3,127,185	)		(5,693,844	)		(6,939,928	)
Other income (expense):
Interest income (expense), net		16			239			(31,859	)		673
Other (expense) income, net		(6,693	)		(79,389	)		(13,135	)		76,028
Loss on conversion of promissory notes		—			—			(980,842	)		—
Gain (loss) on change in fair value of warrant liability		—			455,899			(2,994,540	)		(2,178,859	)
Net loss before provision for income taxes		(1,885,582	)		(2,750,436	)		(9,714,220	)		(9,042,086	)
Provision for income taxes		—			—			—			—
NET LOSS	$	(1,885,582	)	$	(2,750,436	)	$	(9,714,220	)	$	(9,042,086	)
Net loss per share-basic and diluted	$	(0.11	)	$	(0.20	)	$	(0.59	)	$	(0.68	)
Weighted average shares outstanding-
Basic and diluted		17,362,573			13,470,806			16,404,299			13,316,179

See the accompanying notes to the unaudited condensed consolidated financial statements

2

APPLIED DNA SCIENCES, INC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended March 31,
	2015			2014
Cash flows from operating activities:
Net loss	$	(9,714,220	)	$	(9,042,086	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		232,805			212,025
Stock based compensation expense		2,515,843			1,313,331
Change in fair value of warrant liability		2,994,540			2,178,859
Loss on conversion of promissory notes		980,842			—
Common stock issued for consulting services		22,676			337,500
Bad debt expense		2,779			16,144
Change in operating assets and liabilities:
Accounts receivable		(328,265	)		50,499
Prepaid expenses and other current assets and deposits		(24,578	)		59,134
Accounts payable and accrued liabilities		(298,577	)		344,572
Deferred revenue		(355,552	)		267,486
Net cash used in operating activities		(3,971,707	)		(4,262,536	)
Cash flows used in investing activities:
Purchase of property plant and equipment		(197,875	)		(109,581	)
Purchase of intangible assets		(35,000	)		—
Net cash used in investing activities		(232,875	)		(109,581	)
Cash flows from financing activities:
Net proceeds from sale of common stock and warrants		7,956,050			—
Offering costs paid		(69,598	)		—
Purchase and cancelation of previously issued warrants		(4,090,952	)		—
Net cash provided by financing activities		3,795,500			—
Net decrease in cash and cash equivalents		(409,082)			(4,372,117	)
Cash and cash equivalents at beginning of period		1,393,132			6,360,301
Cash and cash equivalents at end of period	$	984,050		$	1,988,184
Supplemental Disclosures of Cash Flow Information:
Cash paid during period for interest	$	—		$	—
Cash paid during period for taxes	$	—		$	—
Non-cash investing and financing activities:
Common stock issued for cashless exercise of options and warrants	$	—		$	19,570
Reclassification of deferred offering costs to additional paid in capital	$	181,104		$	—
Offering costs incurred, and included in accounts payable and accrued liabilities	$	218,233		$	—
Property, plant and equipment acquired, and included in accounts payable	$	—		$	7,794
Intangible assets acquired, and included in accounts payable	$	73,000		$	—
Common stock issued upon conversion of promissory notes payable	$	1,843,750		$	—

See the accompanying notes to the unaudited condensed consolidated financial statements

3

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(unaudited)

NOTE A — SUMMARY OF ACCOUNTING POLICIES

General

The accompanying condensed consolidated financial statements as of March 31, 2015 and for the three and six month periods ended March 31, 2015 and 2014 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 Rule 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 generally accepted accounting principles 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, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2015. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended September 30, 2014 and footnotes thereto included in the Company’s Annual Report on Form 10-K, as amended, filed with the SEC.

The condensed consolidated balance sheet as of September 30, 2014 contained herein has been derived from the audited consolidated financial statements as of September 30, 2014, but does not include all disclosures required by GAAP.

All warrant, option, share, and per share information in the condensed consolidated financial statements gives retroactive effect to the one-for-60 reverse stock split that was effected on October 29, 2014. See Note G.

Business and Basis of Presentation

On September 16, 2002, Applied DNA Sciences, Inc. (the “Company”) was incorporated under the laws of the State of Nevada. Effective December 17, 2008, the Company reincorporated from the State of Nevada to the State of Delaware. The Company is principally devoted to developing DNA embedded biotechnology security solutions in the United States and Europe. To date, the Company has had a limited operating history, and as a result, its operations have produced limited recurring revenues from its services and products; it has incurred expenses and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a biotechnology company. For the period from inception through March 31, 2015, the Company has accumulated losses of $209,474,492.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, APDN (B.V.I.) Inc. and Applied DNA Sciences Europe Limited, which currently have no operations or activity. Significant inter-company transactions and balances have been eliminated in consolidation.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”). ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and/or service has been performed; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered or services provided and the collectability of those amounts. Provisions for allowances and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered, service has not been provided, or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered, the service has been provided, or no refund will be required. At March 31, 2015 and September 30, 2014, the Company recorded deferred revenue of $227,810 and $583,362, respectively.

4

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(unaudited)

NOTE A — SUMMARY OF ACCOUNTING POLICIES (continued)

Revenue Recognition , continued

Revenue arrangements with multiple components are divided into separate units of accounting if certain criteria are met, including whether the delivered component has stand-alone value to the customer. Consideration received is allocated among the separate units of accounting based on their respective selling prices. The selling price for each unit is based on vendor-specific objective evidence, or VSOE, if available, third party evidence if VSOE is not available, or estimated selling price if neither VSOE nor third party is available. The applicable revenue recognition criteria are then applied to each of the units.

Revenue for government contract awards, which supports the Company’s development efforts on specific projects, is recognized as milestones are achieved as per the contract. The Company recognized revenue of approximately $811,676 and $1,261,323 from these contract awards during the three and six month periods ended March 31, 2015 and $25,000 and $50,000 for the three and six month periods ended March 31, 2014, respectively.

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, 2015 and 2014, common stock equivalent shares are excluded from the computation of the diluted loss per share as their effect would be anti-dilutive.

5

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(unaudited)

NOTE A — SUMMARY OF ACCOUNTING POLICIES (continued)

Net Loss Per Share , continued

Securities that could potentially dilute basic net income per share in the future that were not included in the computation of diluted net loss per share because to do so would have been antidilutive for the three and six month periods ended March 31, 2015 and 2014 are as follows:

	2015		2014
Warrants		4,453,835		617,302
Employee options		3,808,894		3,208,083
		8,262,729		3,825,385

Stock Based Compensation

The Company accounts for stock-based compensation for employees and directors in accordance with ASC 718, Compensation (“ASC 718”). ASC 718 requires all share-based payments to employees, 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 employee’s 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 718, excess tax benefits realized from the exercise of stock-based awards are classified in cash flows from financing activities. The future realization of the reserved deferred tax assets related to these tax benefits associated with the exercise of stock options will result in a credit to additional paid in capital if the related tax deduction reduces taxes payable. The Company has elected the “with and without approach” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce taxes payable in the current year. Under this approach, the windfall tax benefit would be recognized in additional paid-in-capital only if an incremental tax benefit is realized after considering all other benefits presently available.

The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50.

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 temporary cash investments 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 and six month periods ended March 31, 2015 included an aggregate of 75% and 55%, respectively, from one customer of the Company’s total revenues. This one customer accounted for approximately 73% of the Company’s total accounts receivable at March 31, 2015.

The Company’s revenues earned from sale of products and services for the three month period ended March 31, 2014 included an aggregate of 16% from one customer of the Company’s total revenues. During the six month period ended March 31, 2014 no customers represented 10% or greater of the Company’s total revenues. This one customer accounted for approximately 29% of the Company’s total accounts receivable at March 31, 2014.

6

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(unaudited)

NOTE A — SUMMARY OF ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company will adopt the methodologies prescribed by ASU 2014-15 by the date required, and does not anticipate that the adoption of ASU 2014-15 will have a material effect on its condensed consolidated financial position or results of operations.

In June 2014, the FASB issued Accounting Standards Update 2014-12, “Accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period,” (“ASU 2014-12”) which requires performance-based awards with a performance target that affects vesting and that could be achieved after an employee completes the requisite service period to be accounted for as a performance condition. If performance targets are clearly defined and it is probable that the performance condition will be achieved, stock-based expense should be recognized over the remaining requisite service period. This guidance will be effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the provisions of the ASU and assessing the potential effect on the Company’s condensed consolidated financial position or results of operations.

In May 2014, the FASB issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”) which provides updated, comprehensive revenue recognition guidance for contracts with customers, including a new principles-based five step framework that eliminates much of the industry-specific guidance in current accounting literature. Under ASU 2014-09, revenue recognition is based on a core principle that companies recognize revenue in an amount consistent with the consideration it expects to be entitled to in exchange for the transfer of goods or services. The standards update also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of recognized revenue. This guidance will be effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2017. The Company is in the process of evaluating the provisions of the ASU and assessing the potential effect on the Company’s condensed consolidated financial position or results of operations.

7

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(unaudited)

NOTE B – LIQUIDITY AND MANAGEMENT’S PLAN

The Company has recurring net losses, which have resulted in an accumulated deficit of $209,474,492 as of March 31, 2015. The Company incurred a net loss of $9,714,220 and generated negative operating cash flow of $3,971,707 for the six month period ended March 31, 2015. However, the Company also has attained positive working capital of $628,472 as of March 31, 2015. At March 31, 2015 the Company had cash and cash equivalents of $984,050. The Company’s current capital resources include cash and cash equivalents, accounts receivable and prepaid expenses. Historically, the Company has financed its operations principally from the sale of equity securities. As discussed in Note G, on April 1, 2015, the Company closed its underwritten public offering of common stock and warrants for gross proceeds of approximately $12.0 million, before deducting underwriting discounts and offering expenses. Subsequently on April 30, 2015, the Company closed on the over-allotment option of the underwritten public offering for additional gross proceeds of $263,950. In addition, on November 20, 2014 the Company closed its underwritten public offering of common stock and warrants for gross proceeds of $9.3 million before deducting underwriting discounts and offering expenses. The Company utilized approximately $4,091,000 of the gross proceeds to repurchase the remaining Series B Warrants from Crede, as discussed in Note E. The Company raised $2,156,264 in a private placement of common stock and warrants and $1,800,000 in promissory notes during the fiscal year ended September 30, 2014, including $1,000,000 from a related party. See Notes D and G. As of April 30, 2015, the Company’s cash balance was approximately $11,615,406.

The Company expects to finance operations primarily through cash flows provided by operating activities provided that it will achieve a sufficient level of future revenues. The Company estimates that its cash and cash equivalents are sufficient to fund operations for the next twelve months. Management is implementing a cost savings plan that is designed to reduce the Company’s cash expenditures.

The Company will 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 the Company’s operating expenses.

NOTE C – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at March 31, 2015 and September 30, 2014 are as follows:

	March 31, 2015 (unaudited)		September 30,  2014
Accounts payable	$	997,676	$	1,059,623
Accrued consulting fees		102,500		102,500
Accrued salaries payable		265,484		245,761
Accrued interest payable		—		11,875
Other accrued expenses		78,005		75,000
Total	$	1,443,665	$	1,494,759

NOTE D – PROMISSORY NOTES PAYABLE

On September 11, 2014, the Company issued and sold promissory notes (the “Notes”) in the aggregate principal amount of $1,800,000 and bearing interest at a rate of 12.5% per annum to Dr. James A. Hayward, the Company’s President, Chairman and Chief Executive Officer, in the amount of $1,000,000, and to another individual, in the amount of $800,000, both of whom are “accredited investors” as defined in regulations promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

The Notes had a ten month maturity. Interest was payable in cash or in shares of common stock at the option of the holders of the Notes. Interest to be paid in shares was to be paid in shares of common stock equal to (i) the amount of interest payable, divided by (ii) the average of the closing prices for the five consecutive trading days immediately preceding the applicable interest date. The Notes may be prepaid in whole or in part, at any time, subject to certain prepayment penalties. Upon an event of default, the Notes and all accrued interest thereon shall automatically convert into common stock at the closing price of the common stock on the date of issuance of the Notes. In the event of a consolidation or merger with another corporation in which the Company does not survive, the Notes shall be paid in full. On November 11, 2014, Dr. Hayward and the other individual agreed to exchange for cancellation their respective notes (including principal and accrued interest thereon) for 315,171 shares of common stock and warrants to purchase 315,171 shares of common stock, in the case of Dr. Hayward, and 252,137 shares of common stock and warrants to purchase 252,137 shares of common stock, in the case of the other individual, at $3.25 ($3.24 for one share of common stock and $0.01 for one warrant) (“combined price”), the aggregate public offering per share price of common stock and warrants issued in the Company’s underwritten public offering, which closed on November 20, 2014. The conversion of the promissory notes resulted in a loss on conversion of approximately $981,000, which was recorded on the condensed consolidated statement of operations for the six month period ended March 31, 2015. The loss was calculated as the difference between the carrying amount of the promissory note and accrued interest on the conversion date compared to the fair value of the common stock and warrant issued as settlement of the Notes.

Interest expense for these promissory notes was $31,875 for the six month period ended March 31, 2015.
  

8

NOTE E – WARRANT LIABILITY

On December 16, 2013, Crede CG III, Ltd (“Crede”) effected the cashless exercise of 178,253 Series A Warrants and 116,667 Series B Warrants. At December 16, 2013 (date of exercise), the Company determined the fair value of the Warrants to be $2,455,042 using the Binomial Lattice model with the following assumptions: fair value of the Company’s common stock $10.80 per share; dividend yield 0%; expected term: 4.55 years; risk free interest rate: 1.55%; expected volatility of: 118.89%; and an exercise price of $14.59. The change in fair value of the warrant liability on the day of exercise amounted to a loss of $1,288,752 and was included in the other income (expense). Upon exercise, the fair value of the Series A Warrants and 116,667 of the Series B Warrants were reclassified to equity.

The Series A and Series B Warrants were classified as liabilities on the issuance date due to certain provisions contained in the warrant agreements, which may cause an adjustment to the conversion rate or the number of warrants outstanding.

The change in fair value of the warrant liability resulted in a gain of $455,899 and a loss of $2,178,859 for the three and six month periods ended March 31, 2014, respectively.

On October 28, 2014, the Company entered into a warrant repurchase option agreement with Crede, pursuant to which it had the option to purchase between 50% and 100% of Crede’s Series B Warrant (currently exercisable for 387,621 shares of common stock) at a purchase price of $10.55 per share underlying such Series B Warrant (up to an aggregate purchase price of $4,091,000 for all of the Series B Warrant). On November 21, 2014, the Company exercised its option and repurchased 100% of Crede’s Series B Warrant for an aggregate purchase price of approximately $4,091,000. The change in fair value of the warrant liability on the day of repurchase amounted to a loss of $2,994,540 and was included in other income (expense) for the six month period ended March 31, 2015.

NOTE F – RELATED PARTY TRANSACTIONS

As discussed in Note D, on September 11, 2014, the Company issued and sold a promissory note in the aggregate principal amount of $1,000,000 and bearing interest at a rate of 12.5% per annum to Dr. James A. Hayward, the Company’s President, Chairman and Chief Executive Officer. On November 11, 2014, Dr. Hayward agreed to exchange for cancellation of his note (including principal and accrued interest thereon) for 315,171 shares of common stock and warrants to purchase 315,171 shares of common stock, at a combined price of $3.25, the aggregate public offering price of common stock and warrants issued in the Company’s underwritten public offering which closed on November 20, 2014.

As discussed in Note G, the Company’s Chief Executive Officer and an affiliated company of a member of the Company’s board of directors participated in the Company’s November 20, 2014 underwritten public offering.

9

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(unaudited)

NOTE G - CAPITAL STOCK

On October 24, 2014, the Company filed a Third Certificate of Amendment of its Certificate of Incorporation with the Secretary of State of the State of Delaware that effected a one-for-60 (1:60) reverse stock split of its common stock, par value $.001 per share, and a decrease in its authorized common stock, from 1,350,000,000 to 500,000,000 shares, effective October 29, 2014. All warrant, option, share, and per share information in the condensed consolidated financial statements gives retroactive effect to the one-for-60 reverse stock split that was effected on October 29, 2014. In addition, the Company is authorized to issue 10,000,000 shares of preferred stock with a $0.001 par value per share. As of March 31, 2015 and September 30, 2014, there were 17,369,202 and 13,935,954 shares of common stock issued and outstanding, respectively.

On November 20, 2014, the Company closed its underwritten public offering of 2,800,000 shares of common stock and warrants to purchase up to an aggregate of 2,800,000 shares of common stock for gross proceeds of $9.1 million before deducting underwriting discounts and offering expenses. The Company utilized $4,091,000 of the gross proceeds to repurchase the remaining Series B Warrants from Crede, as discussed in Note E. The combined price for each share of common stock and warrant was $3.25. The warrants may be exercised for a period of five years and have an exercise price of $3.50 per share. In connection with the offering, the Company granted to the underwriters a 45-day option to purchase up to 420,000 additional shares of common stock at $3.24 per share and/or up to 420,000 additional warrants at $0.01 per share to cover over-allotments, if any. The Company’s Chief Executive Officer and an affiliate of a member of the Company’s board of directors participated in this underwritten public offering. The Company’s common stock and warrants are listed on the Nasdaq Capital Market under the symbols “APDN” and “APDNW”, respectively. On December 19, 2014, the Company closed on the underwriters’ exercise of its over-allotment option of 416,850 warrants for gross proceeds of $4,169 and on December 30, 2014, the Company closed on the underwriters’ additional exercise of its over-allotment option of 52,000 shares of common stock for gross proceeds of $168,400. The total number of common stock and warrants issued under this offering, including the exercise of the over-allotment option was 2,852,000 and 3,216,850, respectively. The gross proceeds to the Company was $9,272,649 and net proceeds after deducting underwriting discounts, offering expenses and the repurchase the remaining Series B Warrants from Crede was approximately $3.69 million.

In connection with the closing of this underwritten public offering, on November 20, 2014, the Company granted 128,800 warrants to purchase common stock to its underwriters as partial compensation. These warrants have an exercise price of $3.73 (115% of the public offering price) and expire on November 14, 2019.

On February 27, 2015 and March 31, 2015, the Company granted 2,500 and 5,000, shares of common stock, respectively to a consultant for a total expense of approximately $22,700 during the three month period ended March 31, 2015.

On April 1, 2015, the Company closed its underwritten public offering of 4,011,000 shares of common stock and warrants to purchase up to an aggregate of 1,604,400 shares of common stock, at $3.00 ($2.99 for one share of common stock and $0.01 for one warrant) (“combined offering price”), including 191,000 shares and 76,400 warrants sold pursuant to the partial exercise of the underwriters’ over-allotment option. The warrants have a per share exercise price of $3.50, are exercisable immediately, and expire on November 20, 2019. The gross proceeds to the Company from this offering, including the partial exercise of the over-allotment option but before deducting the underwriting discount and offering expenses, is $12.0 million. In connection with the offering, the Company granted to the underwriters a 45-day option to purchase up to 573,000 additional shares of common stock and up to 229,200 additional warrants to cover over-allotments, if any. On April 30, 2015, the Company closed on the underwriters’ exercise of its over-allotment option of 87,000 shares of common stock and 152,800 warrants for gross proceeds of $263,950.

In connection with the closing of this underwritten public offering, as partial compensation, on April 1, 2015, the Company granted up to 163,720 warrants to purchase common stock to its underwriters. These warrants have an exercise price of $3.44 (115% of the public offering price) and expire on March 27, 2020.

See Note D for the common stock and warrants issued in connection with the conversion of the promissory notes.

NOTE H - STOCK OPTIONS AND WARRANTS

Warrants

The following table summarizes the changes in warrants outstanding and the related prices for the shares of common stock issued to non-employees of the Company. These warrants were granted in lieu of cash for services performed or financing expenses in connection with the sale of common stock.

Transactions involving warrants (see Notes D, E and G) are summarized as follows:

	Number of Shares			Weighted Average Exercise Price Per Share
Balance at October 1, 2014		945,166		$	9.59
Granted		3,912,958			3.51
Exercised		(—	)		(—	)
Cancelled or expired		(404,289	)		(13.66	)
Balance at March 31, 2015		4,453,835		$	3.88

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APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(unaudited)

NOTE H - STOCK OPTIONS AND WARRANTS (continued)

Employee Stock Options

In 2005, the Board of Directors and the holders of a majority of the outstanding shares of common stock approved the 2005 Incentive Stock Plan. In 2007, 2008 and 2012, the Board of Directors and holders of a majority of the outstanding shares of common stock approved various increases in the number of shares of common stock that can be issued as stock awards and stock options thereunder to an aggregate of 5,833,334 shares and the number of shares of common stock that can be covered by awards made to any participant in any calendar year to 833,334 shares. On January 21, 2015, the Board of Directors approved an amendment to the 2005 Incentive Stock Plan, which is subject to shareholder approval. The amendment increases the number of shares of common stock that can be issued as stock awards and stock options thereunder to an aggregate of 8,333,333. The amendment also extends the Plan’s expiration date to January 25, 2025.

The 2005 Incentive Stock Plan is designed to retain directors, executives, and selected employees and consultants by rewarding them for making contributions to our success with an award of options to purchase shares of common stock. As of March 31, 2015 a total of 218,752 shares have been issued and options to purchase 4,250,628 shares have been granted under the 2005 Incentive Stock Plan.

Transactions involving stock options issued to employees are summarized as follows:

	Number of Shares		Weighted Average Exercise Price Per Share			Aggregate Intrinsic Value
Outstanding at October 1, 2014	2,909,046		$	4.74
Granted	900,509			2.86
Exercised	—			—
Cancelled or expired	(661	)		(9.77	)
Outstanding at March 31, 2015	3,808,894		$	4.30
Vested at March 31, 2015	2,852,150		$	3.99		$	0.44
Non-vested at March 31, 2015	956,744					$	0.19

For the three and six-month periods ended March 31, 2015, the Company issued 31,667 and 900,509, options to employees, consultants and non-employee board of director members, respectively. Included in these grants for the three and six month periods was 30,000 and 450,000 options granted to executives, respectively.

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APPLIED DNA SCIENCES, INC.

 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(unaudited)

NOTE H - STOCK OPTIONS AND WARRANTS (continued)

Employee Stock Options, continued

The fair value of options granted during the three and six month periods ended March 31, 2015 was determined using the Black Scholes Option Pricing Model with the following weighted average assumptions:

	Three Months Ended March 31, 2015				Six Months Ended March 31, 2015
Stock price	$	3.42		$	2.86
Exercise price	$	3.42		$	2.86
Expected term, years		6.12			4.91
Dividend yield		—	%		—	%
Volatility		139	%		132	%
Risk free rate		1.69	%		1.59	%

The Company recorded $517,320 and $547,784 as stock compensation expense for the three month periods ended March 31, 2015 and 2014, respectively, and $2,515,843 (including $132,063 for stock option modifications) and $1,313,331 for the six month periods ended March 31, 2015 and 2014, respectively for the vesting portion of all options. As of March 31, 2015, unrecorded compensation cost related to non-vested awards was $3,123,989 which is expected to be recognized over a weighted average period of approximately 2.58 years. The weighted average grant date fair value for options granted during the three and six month periods ended March 31, 2015 was $90,497 and $1,131,341, respectively.
 

12

APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(unaudited)

NOTE I - 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 expires on May 31, 2016, with the option to extend the lease for two additional three-year periods. The base rent during the initial lease term is $449,142 per annum. The Company also has operating leases for a laboratory in Huddersfield, England, which is currently inactive and Calverton, New York. The Huddersfield lease is currently month to month. The Calverton lease was from February 1, 2014 through October 31, 2014, with the option to renew for additional one year periods. The Calverton lease is currently on a month to month basis. The base rent during the initial lease term is $2,850 per year. Total rent expense for the three and six month periods ended March 31, 2015 was $124,429 and $249,268, respectively. Total rent expense for the three and six month periods ended March 31, 2014 were $126,300 and $254,983, respectively.

Employment Agreement

The Company has an employment agreement with the Chief Executive Officer. Effective June 21, 2014, the Chief Executive Officer’s annual salary was voluntarily reduced by $50,000. This salary reduction will be accrued and repaid when the Company reaches $3,000,000 in sales for two consecutive quarters or the Company has net income at the end of any fiscal year. Effective January 1, 2015, the Chief Executive Officer’s annual salary was voluntarily reduced by an additional $50,000.

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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APPLIED DNA SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(unaudited)

NOTE J - FAIR VALUE

The carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximate estimated fair values because of their short maturities.

The carrying value of the warrant liability is determined using the Binomial Lattice option pricing model as described in Note A. Certain assumptions used in the calculation of the warrant liability represent level-3 unobservable inputs. The Company did not have any assets or liabilities categorized as Level 1, 2 or 3 as of March 31, 2015.

The following table summarizes the activity of Level 3 inputs measured on a recurring basis:

Fair Value Measurements of Common Stock Warrants Using Significant Unobservable Inputs (Level 3)	Six Months Ended March 31,
	2015			2014
Balance at October 1, 2014 and 2013	$	1,096,412		$	2,643,449
Adjustment resulting from change in fair value (a)		2,994,540			2,178,859
Removal of warrant upon repurchase		(4,090,952	)		—
Reclassification to equity upon exercise		—			(2,455,042	)
Balance at March 31,	$	—		$	2,367,266

(a) Adjustment resulting from change in fair value is the amount of total gains or losses for the period attributable to the change in unrealized gains or losses relating to warrant liabilities held at the reporting date and realized gains or losses at the date of exercise. The gain or loss is recorded in change in fair value of warrant liability in the accompanying condensed consolidated statements of operations.
 

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

The following discussion should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and Notes thereto, included elsewhere within this report. The Quarterly Report contains forward-looking statements, including statements using terminology such as “can”, “may”, “believe”, “designed to”, “will”, “expect”, “plan”, “anticipate”, “estimate”, “potential” or “continue”, or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. 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 involve risks and uncertainties and our actual results and the timing of certain events could differ materially from those discussed in forward-looking statements as a result of certain factors, including those set forth under “Risk Factors,” “Business” and elsewhere in our Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, 2014. All forward-looking statements and risk factors included in this document are made as of the date hereof, based on information available to us as of the date thereof, and we assume no obligations to update any forward-looking statement or risk factor, unless we are required to do so by law.

Introduction

Using biotechnology as a forensic foundation, we provide botanical-DNA based security and authentication solutions and services that can help protect products, brands, entire supply chains, and intellectual property of companies, governments and consumers from theft, counterfeiting, fraud, and diversion. Whether working in supply chain security, brand protection or law enforcement applications, it is our goal to help establish secure flourishing environments that foster quality, integrity and success. With secure taggants, high-resolution DNA authentication, and comprehensive reporting, our botanical DNA-based technologies are designed to deliver what we believe to be the greatest levels of security, deterrence and legal recourse strength.

SigNature ® DNA. SigNature DNA is our platform ingredient, at the core of all our security solutions. From application to application, the vehicle which carries SigNature DNA is custom designed to suit the application. Exhaustive development efforts have yielded a flexible and durable marker with all the accuracy provided by nature. SigNature DNA is based on full, double stranded plant DNA, and provides forensic power and protection for a wide array of applications. Highly secure, robust, and durable, SigNature DNA markers are an ingredient that can be used to fortify brand protection efforts; mark, track and convict criminals; and strengthen supply chain security. Custom DNA sequences can be embedded into a wide range of host carriers including ink, varnish, thread, laminates and metal coatings. These items can then be tested for the presence of SigNature DNA Markers through optical screening or a forensic level authentication. Hundreds of millions of SigNature DNA marks now exist in the public domain on items ranging from consumer product packaging to microcircuits to guitars. We believe that no marks have ever been copied.

SigNature DNA, SigNature® T DNA, fiberTyping®, DNAnet® digitalDNA®, and SmokeCloak® DNA, our principal anti-counterfeiting and product authentication solutions and our Counterfeit Prevention Authentication Program can be used in numerous industries, including, but not limited to microcircuits and other electronics, cash-in-transit (transport and storage of banknotes), textiles and apparel, automotive, printing and packaging, homeland security, law enforcement and home asset marking, identity cards and other secure documents, industrial materials, agrochemicals, pharmaceuticals, consumer products, food and beverage, sports memorabilia, fine wine, and art and collectibles.

SigNature T DNA and fiberTyping. There is one common thread that runs through the global textile industry: success breeds counterfeiting and diversion. SigNature T botanical DNA markers are used for brand protection efforts and raw material source compliance programs. In situations where natural fibers like cotton or wool are utilized, we can isolate and type inherent DNA, making it possible to verify the presence of specified materials. This fiberTyping process provides DNA verification to help manufacturers, retailers and brand owners ensure quality, safety and compliance of their products.

DNAnet. Recognizing that DNA-based evidence is the cornerstone of the modern era of law enforcement, we have created what we believe to be an effective crime fighting tool: DNAnet, a botanical DNA marker that can be used to definitively link evidence and offenders to specific crime scenes. Whether deployed as a residential asset marker, an offender spray or fog in a retail location or a degradation dye in cash handling boxes, DNA markers facilitate conviction, and establish a heightened level of deterrence. DNAnet, which includes our SmartDNA product line, is a unique security system and effective crime protection system for stores, warehouses, banks, pharmacies, ATMs and the protection of valuables. Each unit is designed to be unique to each store, warehouse, residence or sting operation, allowing the police and prosecutors to link criminals to the crimes. The DNAnet family of products include Sentry 500 Intruder Spray Systems, Advanced Molecular Taggant Technology and our SmartDNA product line.

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digitalDNA. digitalDNA is a security solution that utilizes the flexibility of mobile communications, the instant accessibility of secure, cloud-based data, and the certainty of DNA to make item tracking and authentication fast, easy and definitive, while providing the opportunity to create a new customer interface. digitalDNA begins with a DNA-secured form of the QR (“quick read”) code or other two dimensional code. A unique identification code is created for each article, and represented in an easy-to-read QR style barcode. The product uses forensic authentication of a botanical DNA marker, embedded within a secure QR code, and physically included within the ink used to digitally print the code. Should there ever be a question about the validity of a digitalDNA code, a laboratory-based analysis can be conducted to determine authenticity. Scanning bar code item numbers on marked goods enables individuals to post or access information about a product such as its geo-location, original image or associated documentation. Consumers may take advantage of marketing information supplied by brand owners.

The secure cloud application also offers back-end features including DNA custody management, forensic sample submission, CODA (certificate of DNA authentication) issuance, customer account administration, order placement, status tracking and reporting, and online training. The cloud-based platform is designed to be customizable for the particular attributes of each customer’s business and conforms to strict security standards for ISO, PCI, and Federal Information Processing Standards. This digitalDNA platform is designed as the data management and reporting hub for our recently announced devices for DNA on-site authentication and optical mark in-field validation. Market-specific configurations have been demonstrated to businesses in textiles supply chain, printing/publishing, art and collectibles and law enforcement.

SmokeCloak DNA. When deployed in pharmacies, banks, commercial or retail locations, SmokeCloak DNA helps protect staff, customers and assets. A thick and disorienting fog wards off offenders and deposits a unique, location-specific DNA marker on skin, clothing and stolen items. The combination of fog and DNA technologies has no negative side effects and provides a strong crime fighting and loss prevention tool.

Counterfeit Prevention Authentication Program. Our turnkey program for electronics, military, commercial, and aerospace contractors called the Counterfeit Prevention Authentication Program (“CPA” Program) empowers end-users to verify the originality or provenance of parts which have been marked by their suppliers with our SigNature DNA Markers.

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Plan of Operations

General

To date, the substantial portion of our revenues have been generated from sales of SigNature DNA and fiberTyping, our principal anti-counterfeiting and product authentication solutions. We expect to continue to grow revenues from sales of our SigNature DNA platform ingredient, our Signature T DNA fibertyping, DNAnet, digitalDNA, and SmokeCloak DNA offerings and the Counterfeit Prevention Authentication Program. We have limited sources of liquidity. We have developed or are currently attempting to develop business in the following target markets: microcircuits and other electronics, cash-in-transit (transport and storage of banknotes), textiles and apparel, automotive, printing and packaging, homeland security, law enforcement and home asset marking, identity cards and other secure documents, industrial materials, agrochemical, pharmaceuticals, consumer products, food and beverage, sports memorabilia, fine wine, and art and collectibles. Our developments in the semiconductor authentication, cash-in-transit and textile and apparel authentication have contributed to the increase in our revenues. We intend to pursue both domestic and international sales opportunities in each of these vertical markets.

Critical Accounting Policies

Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.

We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our condensed consolidated results of operations, financial position or liquidity for the periods presented in this report.

The accounting policies identified as critical are as follows:

● Revenue recognition;

● Equity based compensation.

● Fair value of financial instruments

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”). ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and/or service has been performed; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered or services provided and the collectability of those amounts. Provisions for allowances and other adjustments are provided for in the same period the related sales are recorded. We defer any revenue for which the product has not been delivered, service has not been provided, or is subject to refund until such time that we and the customer jointly determine that the product has been delivered, the service has been provided, or no refund will be required. At March 31, 2015 and September 30, 2014, we recorded deferred revenue of $227,810 and $583,362, respectively.
 

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Revenue arrangements with multiple components are divided into separate units of accounting if certain criteria are met, including whether the delivered component has stand-alone value to the customer. Consideration received is allocated among the separate units of accounting based on their respective selling prices. The selling price for each unit is based on vendor-specific objective evidence, or VSOE, if available, third party evidence if VSOE is not available, or estimated selling price if neither VSOE nor third party is available. The applicable revenue recognition criteria are then applied to each of the units.

Revenue for government contract awards, which supports our development efforts on specific projects, is recognized as milestones are achieved as per the contract. We recognized revenue of approximately $811,676 and $1,261,323 from these contract awards during the three and six month periods ended March 31, 2015, respectively, and $25,000 and $50,000 for the three and six month periods ended March 31, 2014, respectively.
 

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Equity Based Compensation
 

We follow ASC subtopic 718, Compensation (“ASC 718”) which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values.
 

We account for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50.

Fair Value of Financial Instruments

The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related asset or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities.

The Company utilizes observable market inputs (quoted market prices) when measuring fair value whenever possible.

For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, who report to the Chief Financial Officer, determine its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Chief Financial Officer.

Use of Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could differ from those estimates.

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Comparison of Results of Operations for the Three Month Periods Ended March 31, 2015 and 2014
 

Revenues
 

For the three month periods ended March 31, 2015 and 2014, we generated $1,518,761 and $637,146, respectively, in revenues. The increase in revenues in the three month period ended March 31, 2015 of $881,615 or 138% was primarily from an increase in revenue from government contract awards of approximately $786,676. To a smaller extent, the increase was also related to increased sales to a cash-in-transit customer.

Costs and Expenses
 

Selling, General and Administrative
 

Selling, general and administrative expenses for the three month period ended March 31, 2015 decreased by $396,532 or 12% from $3,297,739 for the three month period ended March 31, 2014 to $2,901,207 for the three month period ended March 31, 2015. The decrease is primarily attributable to lower legal fees incurred as a result of the dismissal of the SmartWater litigation of $252,000, as well reduced travel expenses in the current period by approximately $60,000. The decrease was also due to a decrease of approximately $75,000 in filing fee expenses.

Research and Development
 

Research and development expenses increased to $373,380 for the three month period ended March 31, 2015 from $359,782 for the three month period ended March 31, 2014, an increase of $13,598 or 3.8%.

Depreciation and Amortization
 

In the three month period ended March 31, 2015, depreciation and amortization increased by $16,269 from $106,810 for the three month period ended March 31, 2014 to $123,079 for the three month period ended March 31, 2014.
 

Gain on Change in Fair Value of Warrant Liability

Gain from change in fair value of warrant liability during the three month period ended March 31, 2014 was $455,899. This change in fair value related to warrants containing certain reset provisions which required us to classify them as liabilities and mark the warrants to market and record the change in fair value at each reporting period, and upon exercise as a non cash adjustment to our current period operations. As discussed in Note E of the accompanying condensed consolidated financial statements, on November 21, 2014, we repurchased the remaining outstanding Series B Warrants.
 

Comparison of Results of Operations for the Six Month Periods Ended March 31, 2015 and 2014
 

Revenues
 

For the six month periods ended March 31, 2015 and 2014, we generated $2,760,563 and $1,234,500, respectively, in revenues. The increase in revenues of $1,526,063 or 124% was primarily due to an increase in sales from two government contract awards of approximately $1,211,323 as well as revenues related to textile sales of $172,500 for the set up, marking, and authentication of cotton for a customer. Additionally, the increase in revenue relates to an increase in sales of DNAnet kits in Europe of approximately $130,000.

Costs and Expenses
 

Selling, General and Administrative

Selling, general and administrative expenses for the six month period ended March 31, 2015 increased by $426,633 or 6% from $7,143,317 for the six month period ended March 31, 2014 to $7,569,950 for the six month period ended March 31, 2015. The increase is primarily attributable to an increase in stock based compensation expense of approximately $1,202,500, attributable to grants to employees that vested immediately and have a ten year term, as well as stock based compensation expense associated with stock option modifications. The increase is also due to an increase in investor relations expense year over year attributable to the Nasdaq listing fee of $75,000. These increases were primarily offset by decreases in legal and consulting expenses. Legal expenses decreased by $517,000 due to the dismissal of the SmartWater litigation. Consulting fees decreased by $242,000 primarily due to shares of common stock issued to a business strategy consultant in settlement of their fees during the six month period ended March 31, 2014. The remaining decrease related to a decrease in travel expenses and filing fees during the six month period ended March 31, 2015.

Research and Development

Research and development expenses decreased to $651,652 for the six month period ended March 31, 2015 from $819,086 for the six month period ended March 31, 2014. The decrease of $167,434 or 20% is attributable to purchases for laboratory equipment associated with the corporate headquarters in the prior year as well as components purchased relating to a pilot program for the marking of cotton during the prior period, which we did not incur during the six month period ended March 31, 2015. Also, during the six month period ended March 31, 2015, we started capitalizing the costs for the development of infield readers, which were being expensed during the same period in the prior year.

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Depreciation and Amortization
 

Depreciation and amortization increased by $20,780 from $212,025 for the six month period ended March 31, 2014 to $232,805 for the six month period ended March 31, 2015.

Loss from Change in Fair Value of Warrant Liability

Loss from change in fair value of warrant liability during the six month periods ended March 31, 2015 and 2014 was $2,994,540 and $2,178,859, respectively. These losses relate to warrants containing certain reset provisions which required us to classify them as liabilities and mark the warrants to market and record the change in fair value at each reporting period as a non-cash adjustment to our current period operations. As discussed in Note E of the accompanying condensed consolidated financial statements, on November 21, 2014, we repurchased the remaining outstanding Series B Warrants.

Liquidity and Capital Resources
 

Our liquidity needs consist of our working capital requirements and research and development expenditure funding. As of March 31, 2015, we had working capital of $628,472. For the six month period ended March 31, 2015, we generated a net cash flow deficit from operating activities of $3,971,707 consisting primarily of our loss of $9,714,220, net with non-cash adjustments of $232,805 in depreciation and amortization charges, $2,515,843 for stock-based compensation, $2,994,540 change in fair value of warrant liability, $980,842 in loss on the conversion of promissory notes, $22,676 in common stock issued for consulting services and $2,779 of bad debt expense. Additionally, we had a net increase in operating assets of $352,843 and a net decrease in operating liabilities of $654,129. Cash used in investing activities was $232,875 for the purchase of property, plant and equipment and intangible assets. Cash provided by financing activities was $3,795,500 in net proceeds from the sale of common stock related to the underwritten public offering offset by the repurchase and cancellation of the remaining Series B Warrants.

21

The Company has recurring net losses, which have resulted in an accumulated deficit of $209,474,492 as of March 31, 2015. The Company incurred a net loss of $9,714,220 and generated negative operating cash flow of $3,971,707 for the six month period ended March 31, 2015. However, the Company also has attained positive working capital of $628,472 as of March 31, 2015. At March 31, 2015 the Company had cash and cash equivalents of $984,050. The Company’s current capital resources include cash and cash equivalents, accounts receivable and prepaid expenses. Historically, the Company has financed its operations principally from the sale of equity securities. As discussed below, on April 1, 2015, the Company closed on an underwritten public offering of common stock and warrants for gross proceeds of $12.0 million, before deducting underwriting discounts and offering expenses. Subsequently on April 30, 2015, the Company closed on the over-allotment option of the underwritten public offering for additional gross proceeds of $263,950. In addition, on November 20, 2014 the Company closed its underwritten public offering of common stock and warrants for gross proceeds of $9.3 million before deducting underwriting discounts and offering expenses. The Company utilized approximately $4,091,000 of the gross proceeds to repurchase the remaining Series B Warrants from Crede, as discussed in Note E. The Company also raised $2,156,264 in a private placement of common stock and warrants and $1,800,000 in promissory notes during the fiscal year ended September 30, 2014, including $1,000,000 from a related party. As of April 30, 2015, the Company’s cash balance was approximately $11,615,406.

The Company expects to finance operations primarily through cash flows provided by operating activities provided that it will achieve a sufficient level of future revenues. The Company estimates that its cash and cash equivalents are sufficient to fund operations for the next twelve months. Management is implementing a cost savings plan that is designed to reduce the Company’s cash expenditures.
 

The Company will 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 the Company’s operating expenses.

We expect capital expenditures to be less than $980,000 in fiscal 2015. Our primary investments will be in laboratory equipment to support prototyping, manufacturing, our authentication services, and outside services for our detector and reader development.
 

All of the real property used in our business is leased under operating lease agreements.

Subsequent Events

On April 1, 2015, the Company closed its underwritten public offering of 4,011,000 shares of common stock and warrants to purchase up to an aggregate of 1,604,400 shares of common stock, at a combined offering price of $3.00, including 191,000 shares and 76,400 warrants sold pursuant to the partial exercise of the underwriters’ over-allotment option. The warrants have a per share exercise price of $3.50, are exercisable immediately, and expire on November 20, 2019. The gross proceeds to the Company from this offering, including the partial exercise of the over-allotment option but before deducting the underwriting discount and offering expenses, is $12.0 million. In connection with the offering, the Company granted to the underwriters a 45-day option to purchase up to 573,000 additional shares of common stock and up to 229,200 additional warrants to cover over-allotments, if any. On April 30, 2015, the Company closed on the underwriters’ exercise of its over-allotment option of 87,000 shares of common stock and 152,800 warrants for gross proceeds of $263,950.

In connection with the closing of this underwritten public offering, as partial compensation, on April 1, 2015, the company granted up to 163,720 warrants to purchase common stock to its underwriters. These warrants have an exercise price of $3.44 (115% of the public offering price) and expire on March 27, 2020.

Product Research and Development

We anticipate spending approximately $1,500,000 for product research and development activities during the next twelve months.

Acquisition of Plant and Equipment and Other Assets

We do not anticipate the sale of any material property, plant or equipment during the next twelve months.
 

22

Number of Employees
 

We currently have forty-six full-time employees and six part-time employees, including four in management, eight in research and development, one in Life Sciences, two in forensics, seven in quality assurance/compliance, four in finance and accounting, five in operations, thirteen in sales and marketing, one in human resources, two in shared services, three in information services and two in investor relations and communications. We expect to increase our staffing dedicated to sales, production and formulation. Marketing, salaries, and general overhead will be increased as necessary. However, cost containment measures have been put in place to monitor expenses. In order for us to attract and retain quality personnel, we anticipate we will continue to offer competitive salaries and benefits to future employees. We anticipate that it may become desirable to add additional full and or part time employees to discharge certain critical functions during the next twelve months. This projected increase in personnel is dependent upon our ability to generate revenues and obtain sources of financing. There is no guarantee that we will be successful in raising the funds required or generating revenues sufficient to fund the projected increase in the number of employees. As we continue to expand, we will incur additional costs for personnel. We continue to work with Insperity Inc. to help us manage many of our back-end administrative human resources and payroll responsibilities.

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.

There have been no material changes in our market risk as previously disclosed under Part I, Item 3 of our Annual Report on Form 10-K, for the fiscal year ended September 30, 2014. Please refer to the Company’s Annual Report on Form 10-K (filed with the SEC on December 15, 2014, as amended on March 6, 2015) for the fiscal year ended September 30, 2014.
  

23

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, 2015, 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.
 

Changes in Internal Control over Financial Reporting
 

During the fiscal quarter ended March 31, 2015, 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.
  

24

Part II - Other Information

Item 1. - Legal Proceedings.

None.

Item 1A. – Risk Factors.

Before deciding to invest in us or to maintain or increase your investment, you should carefully consider the risks and uncertainties described in the first two paragraphs under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report and our other filings with the SEC, for the period ended September 30, 2014 and thereafter. The risks and uncertainties described in this report are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect us. If any of these risks actually materialize, our business, financial position, results of operations and cash flows could be adversely impacted. In that event, the market price of our common stock could decline and you may lose all or part of your investment.

During the three month period ended March 31, 2015, there have been no material changes in our risk factors previously disclosed in our Annual Report on Form 10-K (as amended March 6, 2015) for the fiscal year ended September 30, 2014.

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.

25

Item 6. – Exhibits.

4.1	First Amendment to Warrant Agreement dated April 1, 2015 between Applied DNA Sciences, Inc. and American Stock Transfer & Trust Company, LLC as warrant agent filed as exhibit 4.1 to the current report on Form 8-K filed with the Commission on April 1, 2015 and incorporated herein by reference.
10.1*#	Mutual License Agreement dated March 25, 2015 between Applied DNA Sciences, Inc. and Divatex Home Fashion, Inc.
10.2	Form of Underwriter’s Warrant filed as exhibit 4.1 to the current report on Form 8-K filed with the Commission on March 27, 2015 and incorporated herein by reference.
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended
32.1**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)
32.2**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)
101 INS*	XBRL Instance Document
101 SCH*	XBRL Taxonomy Extension Schema Document
101 CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101 LAB*	XBRL Extension Label Linkbase Document
101 PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

** Furnished herewith.

# Portions of Exhibit 10.1 have been omitted and separately filed with the Securities and Exchange Commission with a request for confidential treatment.
 

26

 

Signatures
 

In accordance with 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 11, 2015	/s/ JAMES A. HAYWARD, Ph. D.
	James A. Hayward, Ph. D.
	Chief Executive Officer
	(Duly authorized officer and principal executive officer)
	/s/ BETH JANTZEN
	Beth Jantzen, CPA
	Chief Financial Officer
	(Duly authorized officer and
	principal financial and accounting officer)

27

EX-10.1

Exhibit 10.1

Confidential materials omitted and filed separately with the Securities and Exchange Commission. Asterisks (***) denote omissions.

MUTUAL LICENSE AGREEMENT

MUTUAL LICENSE AGREEMENT (“Agreement”), dated as of March 25, 2015 (the “Effective Date”), by and between Divatex Home Fashion, Inc., a New York corporation with a place of business at 261 Fifth Avenue, Suite 501, New York, NY 10016 (“DHF”), and Applied DNA Sciences, Inc., a Delaware corporation, having an address at 50 Health Sciences Drive, Stony Brook, NY 11790 (“ADNAS”; and together with DHF, the “Parties”).

WITNESSETH:

WHEREAS, ADNAS has developed patented technologies (the “Technologies”) for the tagging of raw cotton fiber at source called SigNature^® T; and

WHEREAS, DHF designs, manufactures, sources, and distributes home textile fabrics including bedding, bath and accessories. DHF has filed applications with the U.S. Patent and Trademark Office (“USPTO”) to register the following trademarks: “PimaCott”, “GizaCott” and “AmeriCott” (collectively, the “Trademarks”) for the branding and marketing of tagged cotton fiber; and

WHEREAS, the Parties contemplate entering into an agreement with commodity merchant(s) pursuant to which the merchant will be given a license to collect a tagging fee for each pound of SigNature^® T tagged cotton from the cotton gins and sell the tagged cotton fibers to customers.

NOW, THEREFORE, the Parties hereto agree as follows:

ARTICLE I

GENERAL PROVISIONS

1.1       Term of the Agreement. The initial term of this Agreement shall be two (2) years, which shall automatically renew for additional one (1) year periods, unless the Agreement is mutually terminated pursuant to Section 7.1 below. (The initial term and any renewal terms shall collectively be referred to as the “Term”). If the cumulative sales for tagged cotton do not result in total sales of 45 million pounds within two (2) years, the Agreement can be terminated at the option of ADNAS.

1.2       Limitations on Liability.

(a)          Neither of the Parties shall have any power to bind the other Party except as specifically provided in this Agreement.

Confidential Treatment Requested

(b)          Except as otherwise provided herein, neither Party shall be responsible or liable for any indebtedness, obligation or liability of the other Party, whether incurred before or after the Effective Date of this Agreement. In the event that either Party becomes liable for any indebtedness or obligation of the other Party in contravention of the provisions of this provision, such Party shall be indemnified by the other Party pursuant to Article VI hereof.

(c)          The terms and conditions of this Agreement are intended for the exclusive benefit of each Party and no third party shall be entitled to any benefit therefrom nor may any third party in any way rely upon either Party, its assets, or any of its officers, directors, employees or agents, none of whom shall have any apparent authority to bind the other Party except in the manner expressly provided herein.

ARTICLE II

RIGHTS AND DUTIES OF THE PARTIES

2.1       Contributions by the Parties.

(a)          ADNAS will grant the DHF an exclusive worldwide license to use the SigNature^® T technology for application in raw cotton fiber for the Term. Upon any expiration or termination of this Agreement, the grant shall expire immediately and DHF shall have no further right to use the SigNature^® T technology for application in raw cotton fiber.

(b)          DHF will grant ADNAS an exclusive, worldwide license to use the trademarks, “PimaCott”, “GizaCott” and “AmeriCott” for the Term. Upon any expiration or termination of this Agreement, the grant shall expire immediately and ADNAS shall have no further right to use the "PimaCott", "GizaCott" and "AmeriCott" trademarks.

2.2       Management.

DHF will be solely responsible for the following marketing and operational procedures. The Parties shall jointly determine protocols for chain of custody assurance. ADNAS agrees to provide DHF reasonable technical assistance relating to the use the SigNature® T technology for application in raw cotton fiber in DHF’s marketing efforts.

2.3       Business Plan. The Parties will agree on a business plan. DHF will use best efforts to achieve the goals set forth in such business plan which will include the sale of (a) of fifty (50) million pounds of raw cotton in the first year of the Agreement and (b) one hundred (100) million pounds of raw cotton in the second year of the Agreement.

ARTICLE III

FINANCIAL MATTERS

3.1       Expenses, Profits and Losses.

(a)          DHF will be solely responsible for the marketing of the tagged cotton using Signature^® T under the Trademarks to businesses that use cotton in the production and distribution of cotton goods. DHF will be responsible for its own travel expenses

2

Confidential Treatment Requested

(b)          ADNAS will be solely responsible for the application of the tagging technology, DNA-related marketing materials and labor, and a predetermined amount per year of QC testing and authentication through the supply chain. ADNAS will work directly with merchant(s) for delivery and installation of SigNature^® T technology transfer equipment at the designated gins. ADNAS will be responsible for its own travel expenses related specifically to training and installation of such equipment.

(c)          The parties will reach an agreement of the cost for marketing and application of the Technology set forth in subparagraphs (a) and (b) above. DHF will be responsible for costs of subparagraph (a) and ADNAS will be responsible for the costs set forth in subparagraph (b) (collectively the “Agreed Costs”). The Agreed Costs will be as set forth in the Revenue Sharing Model attached hereto as Schedule A. The Parties will reach an agreement on any other costs that may occur that are not included in subparagraphs (a) or (b) above.

(d)          ADNAS will collect the tagging fee from the merchant. Each party shall be entitled to be reimbursed therefrom for their respective Agreed Costs. The balance of the tagging fee shall be divided equally between the parties, except for the first hundred million pounds of cotton tagged, the fee will be distributed as set forth in Schedule A.

(e)          DHF shall report to ADNAS with respect the Agreed Costs it has incurred as such are incurred.

(f)          ADNAS will provide a quarterly statement to DHF, within ten (10) business days of the end of each calendar quarter, with respect to tagging fees collected for the previous quarter and shall pay to DHF with the report, its share of the tagging fee.

3.2       Books and Records; Audit Rights.

(a)          Books and Records. Each Party shall keep adequate books and records at its place of business, setting forth a true and accurate account of all business transactions arising out of and in connection with this Agreement.

(b)           Audit Rights. During the Term and for one (1) year thereafter, each Party shall have the right, at its own expense, upon five (5) business days' prior written notice through its representatives including its auditors, to examine and/or audit, and make copies and extracts from the other Party's books and records during regular business hours.

(c)          Discrepancy. In the event that such inspection reveals an underpayment by ADNAS, then DHF shall promptly provide ADNAS a copy thereof and ADNAS shall within thirty (30) days of receipt of such report, remit payment to DHF in the amount of the underpayment; provided, however, that ADNAS shall have thirty (30) days from receipt of any audit report to respond with documentation reasonably refuting any claim contained therein. ADNAS shall pay any undisputed claims as set forth above. If no such documentation is provided or documentation is provided but DHF disagrees that such documentation warrants a reduction in the amount claimed by DHF to be due, then DHF shall thereafter be free to pursue its remedies under the Agreement related to non-payment. In the event that such discrepancy is greater than ten percent (10%) of monies owed to DHF, then ADNAS shall bear all reasonable expenses related to such inspection, including reasonable attorney's fees if applicable.

3

Confidential Treatment Requested

3.3       Insurance  Each Party shall acquire and maintain at its sole cost and expense during the Term and for a period of six (6) years following the termination of this Agreement, comprehensive general liability Insurance, including product liability and contractual liability, underwritten by an insurance company with a Best’s rating of at least A-/XII.  This insurance coverage shall provide protection of not less than $2,000,000 combined single limit for personal injury and property damage (on a per occurrence basis) and a deductible not to exceed ten percent (10%) of the required policy limits.  All insurance policies shall name the other Party and its parents, subsidiaries and related companies and the respective owners, officers, directors, agents and employees of each of them as additional insureds.  Each Party shall furnish the other Party with endorsements from insurance carriers reflecting compliance with the foregoing obligations within thirty (30) days after execution of this Agreement.  Each Party’s insurance will be primary and not excess or contributory with respect to any insurance that the other Party may maintain.

4            Intellectual Property. DHF shall own all trademarks and domain names developed in the course of this Agreement. and agrees to grant and hereby grants ADNAS the worldwide, non-exclusive right and license to use such trademarks and domain names relating to the goods and services provided hereunder. In the event that DHF elects not to renew a trademark registration or domain name licensed pursuant to this Section, DHF shall notify ADNAS at least sixty (60) days prior to such renewal/expiration date and, upon ADNAS’ request, agrees to transfer such trademark registration or domain name registration to ADNAS.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES: COVENANTS

5.1       Each of the Parties represents and warrants to the other that:

(a)          It is a corporation, duly formed, validly existing and in good standing under the laws of the state of its formation. The execution, delivery and performance by it of this Agreement are within its corporate power and authority and have been duly authorized by all necessary corporate action.

(b)          This Agreement is its valid and binding obligation enforceable against each Party in accordance with its terms except that such enforcement may be subject to bankruptcy, insolvency, reorganization moratorium or similar laws now or hereafter in effect, or legal or equitable principles relating to or limiting creditors’ rights.

ARTICLE V

INDEMNIFICATION/CONTRIBUTION

6.1       Contribution/Indemnification.

(a)       Indemnification:

i.          DHF agrees to indemnify and hold ADNAS harmless with respect to any third party claims arising out of (a) the marketing and use of the Trademarks except for any ADNAS claims with respect to the efficacy of the Technology, or (b) or any claim asserting that the use of the Trademarks as contemplated herein infringes on or violates the rights of such third party.

4

Confidential Treatment Requested

ii.         ADNAS agrees to indemnify and hold DHF harmless with respect to any third party claims arising out of the any claim that the application of the SigNature^® T technology infringes on or violates the rights of such third party or that SigNature^® T technology does not meet ADNAS claims with respect to efficacy.

iii.        In the event that any claim for indemnification hereunder arises, the party seeking such indemnification shall promptly notify the other party in writing. Such other party shall thereupon be obligated, at the option of the party seeking indemnification, to retain and pay for counsel to defend such claim, the choice of such counsel being subject to the approval of the party entitled to indemnification, but which approval shall not be unreasonably be withheld. The parties shall further use good faith efforts to keep the costs of such indemnification, including defense cost, to a reasonable minimum as may be commercially reasonable under the circumstances. In the event that that the party entitled to indemnification does not seek defense, such party shall be entitled to have its own counsel participate in the defense of such claim at its costs and expense.

iv.        The indemnification provisions herein shall also extend to the officers, employees, agents, attorneys or other persons acting on behalf of the parties.

v.         No settlement of a claim shall be entered into without the consent of the party providing the indemnification, which consent shall not be unreasonably withheld.

vi.        Neither party shall be entitled to indemnification for any claim that is based on the conduct of that party.

ARTICLE VI

TERMINATION

7.1       Event of Termination. Either party may terminate this Agreement upon the happening of any of the following events:

(a)  An event of Bankruptcy or Insolvency of either of the Parties.

(b)  Mutual written agreement of the Parties with sixty (60) days prior written notice.

(c)  At ADNAS’s option if DHF does not complete the cumulative sale of 45 million pounds of DNA-marked cotton by the 2-year anniversary of this agreement as per Paragraph 1.1.

5

Confidential Treatment Requested

(d)  A material breach by one Party of its obligations hereunder which has not been cured within thirty (30) days after written notice thereof has been received by the other Party.

ARTICLE VII

MISCELLANEOUS PROVISIONS

8.1       Confidential Information. In the course of the performance of this Agreement, the one party (“Disclosing Party”) may furnish the other party (“Receiving Party”) with confidential and proprietary information and trade secrets including any business and technical information, know-how and trade secrets (whether written, graphic or oral) related to their and their subsidiaries’ current, future and proposed products, including, but not limited to, research and development programs, improvements, methods, procedures, discoveries, patents, patent applications, inventions, processes, chemical formulae, marker compounds, DNA sequences, technology, designs, models, drawings, product plans, products, services, customers, customer lists, strategies, studies, business plans, forecasts, market information, marketing plans, techniques, engineering, testing systems, hardware configuration information, computer software and programs (including source code and related documentation), test and/or experimental data and results, laboratory notebooks, marketing, finances or other business information (collectively, “Confidential Information”). Confidential Information also includes confidential information of third parties that is observed, identified or disclosed under or as a result of this Agreement. The Receiving Party will not disclose the Confidential Information, must immediately return it upon expiration or termination of this Agreement, and must keep it in strict confidence and not use it for any purpose other than the Parties’ respective performance under this Agreement. The Receiving Party may disclose Discloser’s Confidential Information to its Affiliates, employees, officers, directors, partners, representatives, third-party service providers or contractors or other persons designated by a party to act or perform on its behalf on a “need to know” basis only, provided that each is bound by obligations of confidentiality and restrictions against disclosure at least as restrictive as those contain herein. The Disclosing Party will use reasonable efforts to mark or cause to be marked all materials containing its Confidential Information to clearly indicate ownership of the materials and their confidential status; however, failure to mark does not by itself disqualify information from being Confidential Information if other factors or circumstances, or a Party’s course of performance, clearly indicate to the Receiving Party at the time of disclosure or the Receiving Party acknowledges that the information is confidential. The Receiving Party recognizes that the Confidential Information of the Disclosing Party (1) was designed and developed by the Disclosing Party at great expense and over lengthy periods of time; (2) is secret, confidential and unique; (3) constitutes the exclusive property and/or trade secrets of the Disclosing Party; and (4) that any use of the Confidential Information by the Receiving Party for any purpose other than in accordance with this Agreement and in furtherance of obligations hereunder would be wrongful and would cause irreparable injury to the Disclosing Party for which damages are not an adequate remedy. The restrictions and obligations in this Section concerning confidentiality will survive the expiration or termination of this Agreement for a period of three (3) years. The obligations of the Parties herein will not apply to information which: (i) was known to the Receiving Party prior to receipt thereof from the Disclosing Party, as evidenced by the written records of the Receiving Party; (ii) was disclosed to the Receiving Party in good faith by a third party who is in lawful possession of and who had the right to make such disclosures; (iii) became part of the public domain, by publication or otherwise, through no fault of the Receiving Party; or, (iv) was independently developed by the Receiving Party as evidenced by the Receiving Party's written records. Each Party understands and agrees that, in the event that it violates any of the Confidentiality provisions of this paragraph 8.1, the other Party will suffer immediate and irreparable harm that cannot be accurately calculated in monetary damages. Consequently, notwithstanding anything to the contrary in this Agreement, the violating Party acknowledges and agrees that the other Party shall be entitled to immediate injunctive relief, either by temporary or permanent injunction, to prevent such a violation. The violating Party acknowledges and agrees that this injunctive relief shall be in addition to any other legal or equitable relief to which the other Party would be entitled.

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Confidential Treatment Requested

8.2       Validity. In the event that any provision of this Agreement shall be held to be invalid, the same shall not affect in any respect whatsoever the validity of the remainder of this Agreement.

8.3       Integrated Agreement. This Agreement constitutes the entire understanding and agreement among the Parties with respect to the subject matter hereof and there are no agreements, understandings, restrictions or warranties among the parties.

8.4       Headings. The headings, titles and subtitles used in this Agreement are for ease of reference only and shall not control or affect the meaning or construction of any provision hereof.

8.5       Notices. Except as may be otherwise specifically provided in this Agreement, all notices required or permitted here under shall be in writing and shall be deemed to be delivered when deposited in the United States mail, postage prepaid, certified or registered mail, return receipt requested, addressed to the Parties at their respective addresses set forth in this Agreement, and addressed to the person signing this agreement on behalf of such Party. With respect to DHF, a copy of any notice shall be sent to its counsel, Paul H. Aloe, Esq., Kudman Trachten Aloe LLP, 350 Fifth Avenue, Suite 4400, New York, New York 10118 in the manner set forth above or by electronic mail to paloe@kudmanlaw.com. Either Party may change the address to which notices are to be sent, or the person to whose attention they are to be directed, by a written notice in accordance with this paragraph.

8.6       Arbitration of Disputes.Any controversy, dispute between the Parties or claim arising out of or relating to this contract, or the breach thereof, if it cannot be resolved by the Parties, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

8.7       Applicable Law and Venue. This Agreement shall be construed in accordance with the laws of the State of New York without regard to any provisions of conflicts of laws. Exception arbitration as set forth above, the New York State Supreme Court, County of New York, or the United States District Court for the Southern District of New York shall have exclusive jurisdiction to adjudicate any action arising in connection with this Agreement and each party hereby consents to such jurisdiction.

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Confidential Treatment Requested

8.8       Assignment. Neither Party hereto shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other Party hereto, and any such attempted assignment without the prior written consent of the other Party shall be void and of no force or effect; provided, however, that either Party may assign this Agreement or any of its rights and obligations hereunder to a related corporate entity (provided that it also assigns its rights in the Trademarks or SigNature® T to such entity). This Agreement will be binding upon the Parties’ respective assigns.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first above written.

Divatex Home Fashion, Inc.		Applied DNA Sciences, Inc.
By:	/s/ David Greenstein	By:	/s/ James A. Hayward
	David Greenstein		James A. Hayward
	Chief Executive Officer		Chief Executive Officer

8

Confidential Treatment Requested

SCHEDULE A

ADNAS-DIVATEX REVENUE SHARING MODEL

This revenue sharing model assumes:

1.     ADNAS DNA costs per lb of cotton marked

o Includes

§ Marking materials and labor

§ QC testing

§ Authentication through the supply chain

o Excludes

§ Design customization and installation of marking equipment

§ Travel expenses

2.     Divatex marketing costs per lb of cotton marked exclude travel expenses

3.     ADNAS-Divatex shared revenue (***) on remainder assuming a selling price of $*** per lb

Revenue-sharing per lb per year:

Lbs of cotton DNA-marked per year	ADNAS DIRECT (estimated) $ per lb (1)	DIVATEX DIRECT (estimated)$ per lb (2)	ADNAS-DIVATEX SHARED Revenue $ per lb Assume $*** per lb (3)	ADNAS TOTAL Revenue $ per lb	DIVATEX TOTAL Revenue $ per lb
*** to ***	$***	$***	$***	$***	$***
*** to ***	$***	$***	$***	$***	$***
*** to ***	$***	$***	$***	$***	$***
>***	$***	$***	$***	$***	$***

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 11, 2015

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 11, 2015

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, 2015 (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), as applicable, of the Securities Exchange Act of 1934, as amended, and

● the information 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 11, 2015

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, 2015 (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), as applicable, of the Securities Exchange Act of 1934, as amended, and

● the information 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 11, 2015

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FAIR VALUE - Fair Value Measurements of Common Stock Warrants Using Significant Unobservable Inputs (Level 3) (Details) (Common Stock Warrants, USD $)	6 Months Ended
	Mar. 31, 2015		Mar. 31, 2014
Common Stock Warrants
Fair Value Measurements of Common Stock Warrants Using Significant Unobservable Inputs (Level 3)
Balance at October 1, 2014 and 2013	$ 1,096,412		$ 2,643,449
Adjustment resulting from change in fair value	2,994,540	[1]	2,178,859	[1]
Removal of warrant upon repurchase	(4,090,952)
Reclassification to equity upon exercise			(2,455,042)
Balance at March 31,			$ 2,367,266

[1] Adjustment resulting from change in fair value is the amount of total gains or losses for the period attributable to the change in unrealized gains or losses relating to warrant liabilities held at the reporting date and realized gains or losses at the date of exercise. The gain or loss is recorded in change in fair value of warrant liability in the accompanying condensed consolidated statements of operations.

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STOCK OPTIONS AND WARRANTS - Transactions involving warrants (Details) (USD $)	6 Months Ended
	Mar. 31, 2015
Number of Shares
Balance at October 1, 2014	945,166
Granted	3,912,958
Exercised
Cancelled or expired	(404,289)
Balance, March 31, 2015	4,453,835
Weighted Average Exercise Price Per Share
Balance at October 1, 2014	$ 9.59
Granted	$ 3.51
Exercised
Cancelled or expired	$ (13.66)
Balance, March 31, 2015	$ 3.88

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ACCOUNTS PAYABLE AND ACCRUED LIABILITIES - Summary of accounts payable and accrued liabilities (Details) (USD $)	Mar. 31, 2015	Sep. 30, 2014
Payables and Accruals [Abstract]
Accounts payable	$ 997,676	$ 1,059,623
Accrued consulting fees	102,500	102,500
Accrued salaries payable	265,484	245,761
Accrued interest payable		11,875
Other accrued expenses	78,005	75,000
Total	$ 1,443,665	$ 1,494,759

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STOCK OPTIONS AND WARRANTS - Employee Stock Options (Detail Textuals 1) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended		1 Months Ended	0 Months Ended	1 Months Ended	0 Months Ended	1 Months Ended
	Nov. 20, 2014	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Jan. 21, 2015	Apr. 07, 2015	Apr. 30, 2015	Feb. 15, 2015	Dec. 22, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares issued	2,800,000
Stock-based compensation expense		$ 517,320	$ 547,784	$ 2,515,843	$ 1,313,331
Stock option modifications				132,063
Unrecorded compensation cost related to non-vested awards		3,123,989		3,123,989
Weighted average period of non-vested awards options				2 years 6 months 29 days
Weighted average grant date fair value for options granted		$ 90,497		$ 1,131,341
Employee Stock Options | Employees, consultants and non-employee board of director members
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares issued		31,667		900,509
Number of options granted		30,000		450,000
Employee Stock Options | Vesting on each anniversary for next four years | Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based payment award expiration period						5 years
Vesting period of options issued						4 years
Employee Stock Options | Vesting on each anniversary for next four years | Employee | Subsequent Event
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based payment award expiration period							5 years
Vesting period of options issued							4 years	4 years
Employee Stock Options | Vesting on each anniversary for next four years | Chief Financial Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based payment award expiration period									10 years
Vesting period of options issued									4 years
Employee Stock Options | Immediate vesting | Consultant
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based payment award expiration period	5 years
Employee Stock Options | Immediate vesting | Employees, including executive officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based payment award expiration period										10 years
Employee Stock Options | Vest in full one year from grant date | Non-employee board of director members
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based payment award expiration period										10 years

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PROMISSORY NOTES PAYABLE

6 Months Ended

Mar. 31, 2015

Convertible Notes Payable [Abstract]

PROMISSORY NOTES PAYABLE

NOTE D – PROMISSORY NOTES PAYABLE

On September 11, 2014, the Company issued and sold promissory notes (the “Notes”) in the aggregate principal amount of $1,800,000 and bearing interest at a rate of 12.5% per annum to Dr. James A. Hayward, the Company’s President, Chairman and Chief Executive Officer, in the amount of $1,000,000, and to another individual, in the amount of $800,000, both of whom are “accredited investors” as defined in regulations promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

The Notes had a ten month maturity. Interest was payable in cash or in shares of common stock at the option of the holders of the Notes. Interest to be paid in shares was to be paid in shares of common stock equal to (i) the amount of interest payable, divided by (ii) the average of the closing prices for the five consecutive trading days immediately preceding the applicable interest date. The Notes may be prepaid in whole or in part, at any time, subject to certain prepayment penalties. Upon an event of default, the Notes and all accrued interest thereon shall automatically convert into common stock at the closing price of the common stock on the date of issuance of the Notes. In the event of a consolidation or merger with another corporation in which the Company does not survive, the Notes shall be paid in full. On November 11, 2014, Dr. Hayward and the other individual agreed to exchange for cancellation their respective notes (including principal and accrued interest thereon) for 315,171 shares of common stock and warrants to purchase 315,171 shares of common stock, in the case of Dr. Hayward, and 252,137 shares of common stock and warrants to purchase 252,137 shares of common stock, in the case of the other individual, at $3.25 ($3.24 for one share of common stock and $0.01 for one warrant) (“combined price”), the aggregate public offering per share price of common stock and warrants issued in the Company’s underwritten public offering, which closed on November 20, 2014. The conversion of the promissory notes resulted in a loss on conversion of approximately $981,000, which was recorded on the condensed consolidated statement of operations for the six month period ended March 31, 2015. The loss was calculated as the difference between the carrying amount of the promissory note and accrued interest on the conversion date compared to the fair value of the common stock and warrant issued as settlement of the Notes.

Interest expense for these promissory notes was $31,875 for the six month period ended March 31, 2015.

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CAPITAL STOCK (Detail Textuals) (USD $)	1 Months Ended
	Oct. 24, 2014	Mar. 31, 2015	Sep. 30, 2014
Stockholders' Equity Note [Abstract]
Reverse stock split	one-for-60 (1:60)
Common stock, par value (in dollars per share)		$ 0.001	$ 0.001
Common stock, shares authorized		500,000,000	1,350,000,000
Preferred stock, shares authorized		10,000,000	10,000,000
Preferred stock, par value (in dollars per share)		$ 0.001	$ 0.001
Common stock, shares issued		17,369,202	13,935,954
Common stock, shares outstanding		17,369,202	13,935,954

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RELATED PARTY TRANSACTIONS (Detail Textuals) (USD $)	0 Months Ended
	Nov. 11, 2014	Nov. 20, 2014	Sep. 30, 2014	Sep. 11, 2014
Short-term Debt [Line Items]
Promissory note issued to related party (in dollars)			$ 1,000,000
Conversion price of convertible promissory note converted (in dollars per share)		$ 3.25
Promissory notes
Short-term Debt [Line Items]
Promissory note issued to related party (in dollars)				1,800,000
Interest rate on promissory note				12.50%
Promissory notes | James A. Hayward
Short-term Debt [Line Items]
Promissory note issued to related party (in dollars)				$ 1,000,000
Interest rate on promissory note				12.50%
Common stock issued in settlement of convertible debentures and interest	315,171
Number of shares issued in settlement of convertible notes and accrued interest	315,171
Conversion price of convertible promissory note converted (in dollars per share)	$ 3.25

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CAPITAL STOCK (Detail Textuals 1) (USD $)	1 Months Ended				3 Months Ended	6 Months Ended
	Feb. 27, 2015	Dec. 19, 2014	Dec. 30, 2014	Nov. 20, 2014	Mar. 31, 2015	Mar. 31, 2015
Stockholders' Equity Note [Abstract]
Underwritten public offering of common stock closed				2,800,000
Number of common stock called by warrants				2,800,000
Gross proceeds from underwritten public offering of common stock and warrants				$ 9,300,000
Gross proceeds to repurchase remaining Series B Warrants				4,091,000
Conversion price of convertible promissory note converted into common stock (in dollars per share)				$ 3.25
Period of warrant exercised				5 years
Exercise price of warrants				$ 3.50
Number of days option given to underwriters				45 days
Additional common stock purchase limit given to underwriters				420,000
Additional common stock per share purchase limit given to underwriters				$ 3.24
Additional warrants purchase limit given to underwriters				420,000
Additional per share warrants purchase limit given to underwriters				$ 0.01
Warrant closed on the underwriters exercise of over-allotment option		416,850
Gross proceeds from closed on underwriters exercise of over-allotment option		4,169
Common stock closed on underwriters additional exercise of over-allotment option			52,000
Gross proceeds from closed on underwriters additional exercise of over-allotment option			168,400
Number of common stock including the exercise of over allotment option				2,852,000
Number of warrant issued including the exercise of over allotment option				3,216,850
Gross proceeds from sale of common stock and warrants				9,272,649
Net proceeds from sale of common stock and warrants				3,690,000		7,956,050
Additional number of common stock called by warrants				128,800
Exercise price of warrants which company agreed to issue to the underwriters				$ 3.73
Exercise price percentage of public offering price				115.00%
Number of common stock shares granted to consultant	2,500				5,000
Total expenses to consultant					$ 22,700

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CAPITAL STOCK (Detail Textuals 2) (USD $)	0 Months Ended	1 Months Ended
	Apr. 01, 2015	Apr. 30, 2015	Nov. 20, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of common stock called by warrants			2,800,000
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 3.50
Underwritten public offering | Subsequent Event
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock offered	4,011,000
Number of common stock called by warrants	1,604,400
Combined offering price	$ 3.00
Offering price for common stock	$ 2.99
Offering price for warrant	$ 0.01
Number of common stock sold pursuant to over allotment option	191,000
Number of warrants stock sold pursuant to over allotment option	76,400
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 3.50
Gross proceeds	$ 12,000,000
Number of days for option to purchase additional shares	45 days
Number of additional shares of common stock	573,000
Number of additional warrants to cover over allotments	229,200
Number of common stock exercise in over allotment option		87,000
Number of warrants exercise in over allotment option		152,800
Gross proceeds from exercise of over allotment option		$ 263,950

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ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

6 Months Ended

Mar. 31, 2015

Payables and Accruals [Abstract]

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

NOTE C – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at March 31, 2015 and September 30, 2014 are as follows:

	March 31, 2015 (unaudited)		September 30,  2014
Accounts payable	$	997,676	$	1,059,623
Accrued consulting fees		102,500		102,500
Accrued salaries payable		265,484		245,761
Accrued interest payable		—		11,875
Other accrued expenses		78,005		75,000
Total	$	1,443,665	$	1,494,759

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CAPITAL STOCK (Detail Textuals 3) (USD $)	1 Months Ended	0 Months Ended
	Nov. 20, 2014	Apr. 01, 2015	Mar. 31, 2015	Sep. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price of warrants	$ 3.50
Exercise price percentage of public offering price	115.00%
Number of warrants granted			4,453,835	945,166
Underwritten public offering | Subsequent Event
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price of warrants		$ 3.50
Underwritten public offering | Underwriters | Subsequent Event
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of warrants granted as partial compensation		163,720
Exercise price of warrants		$ 3.44
Exercise price percentage of public offering price		115.00%

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2015	Sep. 30, 2014
Current assets:
Cash and cash equivalents	$ 984,050	$ 1,393,132
Accounts receivable, net of allowance of $11,257 and $9,634 at March 31, 2015 and September 30, 2014, respectively	1,160,304	834,818
Prepaid expenses and other current assets	155,593	135,365
Total current assets	2,299,947	2,363,315
Property, plant and equipment, net of accumulated depreciation of $645,855 at March 31, 2015 and $759,087 at September 30, 2014	587,600	576,128
Other assets:
Deposits	61,988	57,638
Deferred offering costs	287,831	181,104
Intangible assets, net of accumulated amortization and impairment of $302,610 and $256,208 at March 31, 2015 and September 30, 2014, respectively	389,470	327,872
Total Assets	3,626,836	3,506,057
Current liabilities:
Accounts payable and accrued liabilities, including related party accrued interest of $6,597 at September 30, 2014	1,443,665	1,494,759
Promissory notes payable, including $1,000,000 with a related party		1,800,000
Deferred revenue	227,810	583,362
Total current liabilities	1,671,475	3,878,121
Warrant liability		1,096,412
Total liabilities	1,671,475	4,974,533
Commitments and contingencies (Note I)
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, 2015 and September 30, 2014
Common stock, par value $0.001 per share; 500,000,000 and 1,350,000,000 shares authorized; 17,369,202 and 13,935,954 shares issued and outstanding as of March 31, 2015 and September 30, 2014, respectively	17,370	13,937
Additional paid in capital	211,412,483	198,277,859
Accumulated deficit	(209,474,492)	(199,760,272)
Total stockholders' equity (deficit)	1,955,361	(1,468,476)
Total Liabilities and Stockholders' Equity (Deficit)	3,626,836	3,506,057
Series A Preferred stock
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, 2015 and September 30, 2014
Series B Preferred stock
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, 2015 and September 30, 2014

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SUMMARY OF ACCOUNTING POLICIES

6 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

SUMMARY OF ACCOUNTING POLICIES

NOTE A — SUMMARY OF ACCOUNTING POLICIES

General

The accompanying condensed consolidated financial statements as of March 31, 2015 and for the three and six month periods ended March 31, 2015 and 2014 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 Rule 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 generally accepted accounting principles 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, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2015. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended September 30, 2014 and footnotes thereto included in the Company’s Annual Report on Form 10-K, as amended, filed with the SEC.

The condensed consolidated balance sheet as of September 30, 2014 contained herein has been derived from the audited consolidated financial statements as of September 30, 2014, but does not include all disclosures required by GAAP.

All warrant, option, share, and per share information in the condensed consolidated financial statements gives retroactive effect to the one-for-60 reverse stock split that was effected on October 29, 2014. See Note G.

Business and Basis of Presentation

On September 16, 2002, Applied DNA Sciences, Inc. (the “Company”) was incorporated under the laws of the State of Nevada. Effective December 17, 2008, the Company reincorporated from the State of Nevada to the State of Delaware. The Company is principally devoted to developing DNA embedded biotechnology security solutions in the United States and Europe. To date, the Company has had a limited operating history, and as a result, its operations have produced limited recurring revenues from its services and products; it has incurred expenses and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a biotechnology company. For the period from inception through March 31, 2015, the Company has accumulated losses of $209,474,492.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, APDN (B.V.I.) Inc. and Applied DNA Sciences Europe Limited, which currently have no operations or activity. Significant inter-company transactions and balances have been eliminated in consolidation.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”). ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and/or service has been performed; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered or services provided and the collectability of those amounts. Provisions for allowances and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered, service has not been provided, or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered, the service has been provided, or no refund will be required. At March 31, 2015 and September 30, 2014, the Company recorded deferred revenue of $227,810 and $583,362, respectively.

Revenue arrangements with multiple components are divided into separate units of accounting if certain criteria are met, including whether the delivered component has stand-alone value to the customer. Consideration received is allocated among the separate units of accounting based on their respective selling prices. The selling price for each unit is based on vendor-specific objective evidence, or VSOE, if available, third party evidence if VSOE is not available, or estimated selling price if neither VSOE nor third party is available. The applicable revenue recognition criteria are then applied to each of the units.

Revenue for government contract awards, which supports the Company’s development efforts on specific projects, is recognized as milestones are achieved as per the contract. The Company recognized revenue of approximately $811,676 and $1,261,323 from these contract awards during the three and six month periods ended March 31, 2015 and $25,000 and $50,000 for the three and six month periods ended March 31, 2014, respectively.

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, 2015 and 2014, 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 that were not included in the computation of diluted net loss per share because to do so would have been antidilutive for the three and six month periods ended March 31, 2015 and 2014 are as follows:

	2015		2014
Warrants		4,453,835		617,302
Employee options		3,808,894		3,208,083
		8,262,729		3,825,385

Stock Based Compensation

The Company accounts for stock-based compensation for employees and directors in accordance with ASC 718, Compensation (“ASC 718”). ASC 718 requires all share-based payments to employees, 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 employee’s 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 718, excess tax benefits realized from the exercise of stock-based awards are classified in cash flows from financing activities. The future realization of the reserved deferred tax assets related to these tax benefits associated with the exercise of stock options will result in a credit to additional paid in capital if the related tax deduction reduces taxes payable. The Company has elected the “with and without approach” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce taxes payable in the current year. Under this approach, the windfall tax benefit would be recognized in additional paid-in-capital only if an incremental tax benefit is realized after considering all other benefits presently available.

The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50.

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 temporary cash investments 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 and six month periods ended March 31, 2015 included an aggregate of 75% and 55%, respectively, from one customer of the Company’s total revenues. This one customer accounted for approximately 73% of the Company’s total accounts receivable at March 31, 2015.

The Company’s revenues earned from sale of products and services for the three month period ended March 31, 2014 included an aggregate of 16% from one customer of the Company’s total revenues. During the six month period ended March 31, 2014 no customers represented 10% or greater of the Company’s total revenues. This one customer accounted for approximately 29% of the Company’s total accounts receivable at March 31, 2014.

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company will adopt the methodologies prescribed by ASU 2014-15 by the date required, and does not anticipate that the adoption of ASU 2014-15 will have a material effect on its condensed consolidated financial position or results of operations.

In June 2014, the FASB issued Accounting Standards Update 2014-12, “Accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period,” (“ASU 2014-12”) which requires performance-based awards with a performance target that affects vesting and that could be achieved after an employee completes the requisite service period to be accounted for as a performance condition. If performance targets are clearly defined and it is probable that the performance condition will be achieved, stock-based expense should be recognized over the remaining requisite service period. This guidance will be effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the provisions of the ASU and assessing the potential effect on the Company’s condensed consolidated financial position or results of operations.

In May 2014, the FASB issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”) which provides updated, comprehensive revenue recognition guidance for contracts with customers, including a new principles-based five step framework that eliminates much of the industry-specific guidance in current accounting literature. Under ASU 2014-09, revenue recognition is based on a core principle that companies recognize revenue in an amount consistent with the consideration it expects to be entitled to in exchange for the transfer of goods or services. The standards update also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of recognized revenue. This guidance will be effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2017. The Company is in the process of evaluating the provisions of the ASU and assessing the potential effect on the Company’s condensed consolidated financial position or results of operations.

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STOCK OPTIONS AND WARRANTS - Summary of value of options granted using Black Scholes Option Pricing Model with weighted average assumptions (Details) (USD $)	3 Months Ended	6 Months Ended
	Mar. 31, 2015	Mar. 31, 2015
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]
Stock price	$ 3.42	$ 2.86
Exercise price	$ 3.42	$ 2.86
Expected term, years	6 years 1 month 13 days	4 years 10 months 28 days
Dividend yield
Volatility	139.00%	132.00%
Risk free rate	1.69%	1.59%

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SUMMARY OF ACCOUNTING POLICIES (Detail Textuals) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Oct. 24, 2014	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Sep. 30, 2014
Accounting Policies [Abstract]
Reverse stock split	one-for-60 (1:60)
Accumulated losses		$ (209,474,492)		$ (209,474,492)		$ (199,760,272)
Deferred revenue		227,810		227,810		583,362
Revenue for government contract awards		$ 811,676	$ 25,000	$ 1,261,323	$ 50,000

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STOCK OPTIONS AND WARRANTS - Employee Stock Options (Detail Textuals) (Employee Stock Options, Incentive Stock Plan 2005)	6 Months Ended
	Mar. 31, 2015	Jan. 21, 2015
Employee Stock Options | Incentive Stock Plan 2005
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate number of shares of common stock that can be issued as stock awards and stock option	5,833,334	8,333,333
Number of common stock shares that can be covered by awards made to any participant per period	833,334
Number of shares issued	218,752
Options to purchase shares under the 2005 Incentive Stock Plan	4,250,628

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LIQUIDITY AND MANAGEMENT'S PLAN (Detail Textuals) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended	0 Months Ended	1 Months Ended
	Nov. 20, 2014	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Sep. 30, 2014	Apr. 01, 2015	Apr. 30, 2015	Sep. 30, 2013
Liquidity And Management Plan [Line Items]
Accumulated deficit		$ (209,474,492)		$ (209,474,492)		$ (199,760,272)
Net loss		(1,885,582)	(2,750,436)	(9,714,220)	(9,042,086)
Operating cash flow				(3,971,707)	(4,262,536)
Working capital		628,472		628,472
Cash and cash equivalents		984,050	1,988,184	984,050	1,988,184	1,393,132			6,360,301
Gross proceeds from underwritten public offering of common stock and warrants	9,300,000
Gross proceeds to repurchase remaining Series B Warrants	4,091,000
Proceeds from issuance of private placement of common stock and warrants						2,156,264
Proceeds from promissory notes						1,800,000
Proceeds from promissory notes from related party						1,000,000
Subsequent Event
Liquidity And Management Plan [Line Items]
Cash and cash equivalents								11,615,406
Gross proceeds from underwritten public offering of common stock and warrants							$ 12,000,000	$ 263,950

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LIQUIDITY AND MANAGEMENT'S PLAN

6 Months Ended

Mar. 31, 2015

Liquidity And Management Plan [Abstract]

LIQUIDITY AND MANAGEMENT'S PLAN

NOTE B – LIQUIDITY AND MANAGEMENT’S PLAN

The Company has recurring net losses, which have resulted in an accumulated deficit of $209,474,492 as of March 31, 2015. The Company incurred a net loss of $9,714,220 and generated negative operating cash flow of $3,971,707 for the six month period ended March 31, 2015. However, the Company also has attained positive working capital of $628,472 as of March 31, 2015. At March 31, 2015 the Company had cash and cash equivalents of $984,050. The Company’s current capital resources include cash and cash equivalents, accounts receivable and prepaid expenses. Historically, the Company has financed its operations principally from the sale of equity securities. As discussed in Note G, on April 1, 2015, the Company closed its underwritten public offering of common stock and warrants for gross proceeds of approximately $12.0 million, before deducting underwriting discounts and offering expenses. Subsequently on April 30, 2015, the Company closed on the over-allotment option of the underwritten public offering for additional gross proceeds of $263,950. In addition, on November 20, 2014 the Company closed its underwritten public offering of common stock and warrants for gross proceeds of $9.3 million before deducting underwriting discounts and offering expenses. The Company utilized approximately $4,091,000 of the gross proceeds to repurchase the remaining Series B Warrants from Crede, as discussed in Note E. The Company raised $2,156,264 in a private placement of common stock and warrants and $1,800,000 in promissory notes during the fiscal year ended September 30, 2014, including $1,000,000 from a related party. See Notes D and G. As of April 30, 2015, the Company’s cash balance was approximately $11,615,406.

The Company expects to finance operations primarily through cash flows provided by operating activities provided that it will achieve a sufficient level of future revenues. The Company estimates that its cash and cash equivalents are sufficient to fund operations for the next twelve months. Management is implementing a cost savings plan that is designed to reduce the Company’s cash expenditures.

The Company will 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 the Company’s operating expenses.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $)	Mar. 31, 2015	Sep. 30, 2014
Allowance on accounts receivable (in dollars)	$ 11,257	$ 9,634
Accumulated depreciation on property, plant and equipment (in dollars)	645,855	759,087
Accumulated amortization and impairment on intangible assets (in dollars)	302,610	256,208
Related party accrued interest (in dollars)		6,597
Promissory note issued to related party (in dollars)		$ 1,000,000
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 (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	1,350,000,000
Common stock, shares issued	17,369,202	13,935,954
Common stock, shares outstanding	17,369,202	13,935,954
Series A Preferred stock
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
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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SUMMARY OF ACCOUNTING POLICIES (Tables)

6 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Schedule of stock issuances under options and warrants that could have a dilutive effect on the shares outstanding

	2015		2014
Warrants		4,453,835		617,302
Employee options		3,808,894		3,208,083
		8,262,729		3,825,385

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Document and Entity Information	6 Months Ended
	Mar. 31, 2015	May 08, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	APPLIED DNA SCIENCES INC
Entity Central Index Key	0000744452
Trading Symbol	apdn
Current Fiscal Year End Date	--09-30
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		21,472,202
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2

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ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)

6 Months Ended

Mar. 31, 2015

Payables and Accruals [Abstract]

Schedule of accounts payable and accrued liabilities

	March 31, 2015 (unaudited)		September 30,  2014
Accounts payable	$	997,676	$	1,059,623
Accrued consulting fees		102,500		102,500
Accrued salaries payable		265,484		245,761
Accrued interest payable		—		11,875
Other accrued expenses		78,005		75,000
Total	$	1,443,665	$	1,494,759

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Income Statement [Abstract]
Revenues	$ 1,518,761	$ 637,146	$ 2,760,563	$ 1,234,500
Operating expenses:
Selling, general and administrative	2,901,207	3,297,739	7,569,950	7,143,317
Research and development	373,380	359,782	651,652	819,086
Depreciation and amortization	123,079	106,810	232,805	212,025
Total operating expenses	3,397,666	3,764,331	8,454,407	8,174,428
LOSS FROM OPERATIONS	(1,878,905)	(3,127,185)	(5,693,844)	(6,939,928)
Other income (expense):
Interest income (expense), net	16	239	(31,859)	673
Other (expense) income, net	(6,693)	(79,389)	(13,135)	76,028
Loss on conversion of promissory notes			(980,842)
Gain (loss) on change in fair value of warrant liability		455,899	(2,994,540)	(2,178,859)
Net loss before provision for income taxes	(1,885,582)	(2,750,436)	(9,714,220)	(9,042,086)
Provision for income taxes
NET LOSS	$ (1,885,582)	$ (2,750,436)	$ (9,714,220)	$ (9,042,086)
Net loss per share-basic and diluted (in dollars per share)	$ (0.11)	$ (0.20)	$ (0.59)	$ (0.68)
Weighted average shares outstanding-
Basic and diluted (in shares)	17,362,573	13,470,806	16,404,299	13,316,179

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CAPITAL STOCK

6 Months Ended

Mar. 31, 2015

Stockholders' Equity Note [Abstract]

CAPITAL STOCK

NOTE G - CAPITAL STOCK

On October 24, 2014, the Company filed a Third Certificate of Amendment of its Certificate of Incorporation with the Secretary of State of the State of Delaware that effected a one-for-60 (1:60) reverse stock split of its common stock, par value $.001 per share, and a decrease in its authorized common stock, from 1,350,000,000 to 500,000,000 shares, effective October 29, 2014. All warrant, option, share, and per share information in the condensed consolidated financial statements gives retroactive effect to the one-for-60 reverse stock split that was effected on October 29, 2014. In addition, the Company is authorized to issue 10,000,000 shares of preferred stock with a $0.001 par value per share. As of March 31, 2015 and September 30, 2014, there were 17,369,202 and 13,935,954 shares of common stock issued and outstanding, respectively.

On November 20, 2014, the Company closed its underwritten public offering of 2,800,000 shares of common stock and warrants to purchase up to an aggregate of 2,800,000 shares of common stock for gross proceeds of $9.1 million before deducting underwriting discounts and offering expenses. The Company utilized $4,091,000 of the gross proceeds to repurchase the remaining Series B Warrants from Crede, as discussed in Note E. The combined price for each share of common stock and warrant was $3.25. The warrants may be exercised for a period of five years and have an exercise price of $3.50 per share. In connection with the offering, the Company granted to the underwriters a 45-day option to purchase up to 420,000 additional shares of common stock at $3.24 per share and/or up to 420,000 additional warrants at $0.01 per share to cover over-allotments, if any. The Company’s Chief Executive Officer and an affiliate of a member of the Company’s board of directors participated in this underwritten public offering. The Company’s common stock and warrants are listed on the Nasdaq Capital Market under the symbols “APDN” and “APDNW”, respectively. On December 19, 2014, the Company closed on the underwriters’ exercise of its over-allotment option of 416,850 warrants for gross proceeds of $4,169 and on December 30, 2014, the Company closed on the underwriters’ additional exercise of its over-allotment option of 52,000 shares of common stock for gross proceeds of $168,400. The total number of common stock and warrants issued under this offering, including the exercise of the over-allotment option was 2,852,000 and 3,216,850, respectively. The gross proceeds to the Company was $9,272,649 and net proceeds after deducting underwriting discounts, offering expenses and the repurchase the remaining Series B Warrants from Crede was approximately $3.69 million.

In connection with the closing of this underwritten public offering, on November 20, 2014, the Company granted 128,800 warrants to purchase common stock to its underwriters as partial compensation. These warrants have an exercise price of $3.73 (115% of the public offering price) and expire on November 14, 2019.

On February 27, 2015 and March 31, 2015, the Company granted 2,500 and 5,000, shares of common stock, respectively to a consultant for a total expense of approximately $22,700 during the three month period ended March 31, 2015.

On April 1, 2015, the Company closed its underwritten public offering of 4,011,000 shares of common stock and warrants to purchase up to an aggregate of 1,604,400 shares of common stock, at $3.00 ($2.99 for one share of common stock and $0.01 for one warrant) (“combined offering price”), including 191,000 shares and 76,400 warrants sold pursuant to the partial exercise of the underwriters’ over-allotment option. The warrants have a per share exercise price of $3.50, are exercisable immediately, and expire on November 20, 2019. The gross proceeds to the Company from this offering, including the partial exercise of the over-allotment option but before deducting the underwriting discount and offering expenses, is $12.0 million. In connection with the offering, the Company granted to the underwriters a 45-day option to purchase up to 573,000 additional shares of common stock and up to 229,200 additional warrants to cover over-allotments, if any. On April 30, 2015, the Company closed on the underwriters’ exercise of its over-allotment option of 87,000 shares of common stock and 152,800 warrants for gross proceeds of $263,950.

In connection with the closing of this underwritten public offering, as partial compensation, on April 1, 2015, the Company granted up to 163,720 warrants to purchase common stock to its underwriters. These warrants have an exercise price of $3.44 (115% of the public offering price) and expire on March 27, 2020.

See Note D for the common stock and warrants issued in connection with the conversion of the promissory notes.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Mar. 31, 2015

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE F – RELATED PARTY TRANSACTIONS

As discussed in Note D, on September 11, 2014, the Company issued and sold a promissory note in the aggregate principal amount of $1,000,000 and bearing interest at a rate of 12.5% per annum to Dr. James A. Hayward, the Company’s President, Chairman and Chief Executive Officer. On November 11, 2014, Dr. Hayward agreed to exchange for cancellation of his note (including principal and accrued interest thereon) for 315,171 shares of common stock and warrants to purchase 315,171 shares of common stock, at a combined price of $3.25, the aggregate public offering price of common stock and warrants issued in the Company’s underwritten public offering which closed on November 20, 2014.

As discussed in Note G, the Company’s Chief Executive Officer and an affiliated company of a member of the Company’s board of directors participated in the Company’s November 20, 2014 underwritten public offering.

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SUMMARY OF ACCOUNTING POLICIES (Detail Textuals 1) (Customer Concentration Risk)	3 Months Ended		6 Months Ended
	Mar. 31, 2015 Customer	Mar. 31, 2014 Customer	Mar. 31, 2015 Customer	Mar. 31, 2014
Total Revenue
Concentration Risk [Line Items]
Concentration risk benchmark description				no customers represented 10% or greater
Number of customers	1	1	1
Total Revenue | Customer One
Concentration Risk [Line Items]
Percentage of total revenue and accounts receivable	75.00%	16.00%	55.00%
Accounts Receivable
Concentration Risk [Line Items]
Number of customers			1	1
Accounts Receivable | Customer One
Concentration Risk [Line Items]
Percentage of total revenue and accounts receivable			73.00%	29.00%

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STOCK OPTIONS AND WARRANTS (Tables)

6 Months Ended

Mar. 31, 2015

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Schedule of transactions involving warrants

	Number of Shares			Weighted Average Exercise Price Per Share
Balance at October 1, 2014		945,166		$	9.59
Granted		3,912,958			3.51
Exercised		(—	)		(—	)
Cancelled or expired		(404,289	)		(13.66	)
Balance at March 31, 2015		4,453,835		$	3.88

Schedule of summary of transactions involving stock options issued to employees

	Number of Shares		Weighted Average Exercise Price Per Share			Aggregate Intrinsic Value
Outstanding at October 1, 2014	2,909,046		$	4.74
Granted	900,509			2.86
Exercised	—			—
Cancelled or expired	(661	)		(9.77	)
Outstanding at March 31, 2015	3,808,894		$	4.30
Vested at March 31, 2015	2,852,150		$	3.99		$	0.44
Non-vested at March 31, 2015	956,744					$	0.19

Schedule of fair value of options granted

	Three  Months  Ended  March 31,  2015				Six Months Ended March 31, 2015
Stock price	$	3.42		$	2.86
Exercise price	$	3.42		$	2.86
Expected term, years		6.12			4.91
Dividend yield		—	%		—	%
Volatility		139	%		132	%
Risk free rate		1.69	%		1.59	%

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FAIR VALUE

6 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

FAIR VALUE

NOTE J - FAIR VALUE

The carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximate estimated fair values because of their short maturities.

The carrying value of the warrant liability is determined using the Binomial Lattice option pricing model as described in Note A. Certain assumptions used in the calculation of the warrant liability represent level-3 unobservable inputs. The Company did not have any assets or liabilities categorized as Level 1, 2 or 3 as of March 31, 2015.

The following table summarizes the activity of Level 3 inputs measured on a recurring basis:

Fair Value Measurements of Common Stock Warrants Using Significant Unobservable Inputs (Level 3)	Six Months Ended March 31,
	2015			2014
Balance at October 1, 2014 and 2013	$	1,096,412		$	2,643,449
Adjustment resulting from change in fair value (a)		2,994,540			2,178,859
Removal of warrant upon repurchase		(4,090,952	)		—
Reclassification to equity upon exercise		—			(2,455,042	)
Balance at March 31,	$	—		$	2,367,266

(a) Adjustment resulting from change in fair value is the amount of total gains or losses for the period attributable to the change in unrealized gains or losses relating to warrant liabilities held at the reporting date and realized gains or losses at the date of exercise. The gain or loss is recorded in change in fair value of warrant liability in the accompanying condensed consolidated statements of operations.

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STOCK OPTIONS AND WARRANTS

6 Months Ended

Mar. 31, 2015

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

STOCK OPTIONS AND WARRANTS

NOTE H - STOCK OPTIONS AND WARRANTS

Warrants

The following table summarizes the changes in warrants outstanding and the related prices for the shares of common stock issued to non-employees of the Company. These warrants were granted in lieu of cash for services performed or financing expenses in connection with the sale of common stock.

Transactions involving warrants (see Notes D, E and G) are summarized as follows:

	Number of Shares			Weighted Average Exercise Price Per Share
Balance at October 1, 2014		945,166		$	9.59
Granted		3,912,958			3.51
Exercised		(—	)		(—	)
Cancelled or expired		(404,289	)		(13.66	)
Balance at March 31, 2015		4,453,835		$	3.88

Employee Stock Options

In 2005, the Board of Directors and the holders of a majority of the outstanding shares of common stock approved the 2005 Incentive Stock Plan. In 2007, 2008 and 2012, the Board of Directors and holders of a majority of the outstanding shares of common stock approved various increases in the number of shares of common stock that can be issued as stock awards and stock options thereunder to an aggregate of 5,833,334 shares and the number of shares of common stock that can be covered by awards made to any participant in any calendar year to 833,334 shares. On January 21, 2015, the Board of Directors approved an amendment to the 2005 Incentive Stock Plan, which is subject to shareholder approval. The amendment increases the number of shares of common stock that can be issued as stock awards and stock options thereunder to an aggregate of 8,333,333. The amendment also extends the Plan’s expiration date to January 25, 2025.

The 2005 Incentive Stock Plan is designed to retain directors, executives, and selected employees and consultants by rewarding them for making contributions to our success with an award of options to purchase shares of common stock. As of March 31, 2015 a total of 218,752 shares have been issued and options to purchase 4,250,628 shares have been granted under the 2005 Incentive Stock Plan.

Transactions involving stock options issued to employees are summarized as follows:

	Number of Shares		Weighted Average Exercise Price Per Share			Aggregate Intrinsic Value
Outstanding at October 1, 2014	2,909,046		$	4.74
Granted	900,509			2.86
Exercised	—			—
Cancelled or expired	(661	)		(9.77	)
Outstanding at March 31, 2015	3,808,894		$	4.30
Vested at March 31, 2015	2,852,150		$	3.99		$	0.44
Non-vested at March 31, 2015	956,744					$	0.19

For the three and six-month periods ended March 31, 2015, the Company issued 31,667 and 900,509, options to employees, consultants and non-employee board of director members, respectively. Included in these grants for the three and six month periods was 30,000 and 450,000 options granted to executives, respectively.

The fair value of options granted during the three and six month periods ended March 31, 2015 was determined using the Black Scholes Option Pricing Model with the following weighted average assumptions:

	Three Months Ended March 31, 2015				Six Months Ended March 31, 2015
Stock price	$	3.42		$	2.86
Exercise price	$	3.42		$	2.86
Expected term, years		6.12			4.91
Dividend yield		—	%		—	%
Volatility		139	%		132	%
Risk free rate		1.69	%		1.59	%

The Company recorded $517,320 and $547,784 as stock compensation expense for the three month periods ended March 31, 2015 and 2014, respectively, and $2,515,843 (including $132,063 for stock option modifications) and $1,313,331 for the six month periods ended March 31, 2015 and 2014, respectively for the vesting portion of all options. As of March 31, 2015, unrecorded compensation cost related to non-vested awards was $3,123,989 which is expected to be recognized over a weighted average period of approximately 2.58 years. The weighted average grant date fair value for options granted during the three and six month periods ended March 31, 2015 was $90,497 and $1,131,341, respectively.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE I - 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 expires on May 31, 2016, with the option to extend the lease for two additional three-year periods. The base rent during the initial lease term is $449,142 per annum. The Company also has operating leases for a laboratory in Huddersfield, England, which is currently inactive and Calverton, New York. The Huddersfield lease is currently month to month. The Calverton lease was from February 1, 2014 through October 31, 2014, with the option to renew for additional one year periods. The Calverton lease is currently on a month to month basis. The base rent during the initial lease term is $2,850 per year. Total rent expense for the three and six month periods ended March 31, 2015 was $124,429 and $249,268, respectively. Total rent expense for the three and six month periods ended March 31, 2014 were $126,300 and $254,983, respectively.

Employment Agreement

The Company has an employment agreement with the Chief Executive Officer. Effective June 21, 2014, the Chief Executive Officer’s annual salary was voluntarily reduced by $50,000. This salary reduction will be accrued and repaid when the Company reaches $3,000,000 in sales for two consecutive quarters or the Company has net income at the end of any fiscal year. Effective January 1, 2015, the Chief Executive Officer’s annual salary was voluntarily reduced by an additional $50,000.

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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SUMMARY OF ACCOUNTING POLICIES (Policies)

6 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Business and Basis of Presentation

Business and Basis of Presentation

On September 16, 2002, Applied DNA Sciences, Inc. (the “Company”) was incorporated under the laws of the State of Nevada. Effective December 17, 2008, the Company reincorporated from the State of Nevada to the State of Delaware. The Company is principally devoted to developing DNA embedded biotechnology security solutions in the United States and Europe. To date, the Company has had a limited operating history, and as a result, its operations have produced limited recurring revenues from its services and products; it has incurred expenses and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a biotechnology company. For the period from inception through March 31, 2015, the Company has accumulated losses of $209,474,492.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, APDN (B.V.I.) Inc. and Applied DNA Sciences Europe Limited, which currently have no operations or activity. Significant inter-company transactions and balances have been eliminated in consolidation.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”). ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and/or service has been performed; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered or services provided and the collectability of those amounts. Provisions for allowances and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered, service has not been provided, or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered, the service has been provided, or no refund will be required. At March 31, 2015 and September 30, 2014, the Company recorded deferred revenue of $227,810 and $583,362, respectively.

Revenue arrangements with multiple components are divided into separate units of accounting if certain criteria are met, including whether the delivered component has stand-alone value to the customer. Consideration received is allocated among the separate units of accounting based on their respective selling prices. The selling price for each unit is based on vendor-specific objective evidence, or VSOE, if available, third party evidence if VSOE is not available, or estimated selling price if neither VSOE nor third party is available. The applicable revenue recognition criteria are then applied to each of the units.

Revenue for government contract awards, which supports the Company’s development efforts on specific projects, is recognized as milestones are achieved as per the contract. The Company recognized revenue of approximately $811,676 and $1,261,323 from these contract awards during the three and six month periods ended March 31, 2015 and $25,000 and $50,000 for the three and six month periods ended March 31, 2014, respectively.

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, 2015 and 2014, 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 that were not included in the computation of diluted net loss per share because to do so would have been antidilutive for the three and six month periods ended March 31, 2015 and 2014 are as follows:

	2015		2014
Warrants		4,453,835		617,302
Employee options		3,808,894		3,208,083
		8,262,729		3,825,385

Stock Based Compensation

Stock Based Compensation

The Company accounts for stock-based compensation for employees and directors in accordance with ASC 718, Compensation (“ASC 718”). ASC 718 requires all share-based payments to employees, 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 employee’s 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 718, excess tax benefits realized from the exercise of stock-based awards are classified in cash flows from financing activities. The future realization of the reserved deferred tax assets related to these tax benefits associated with the exercise of stock options will result in a credit to additional paid in capital if the related tax deduction reduces taxes payable. The Company has elected the “with and without approach” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce taxes payable in the current year. Under this approach, the windfall tax benefit would be recognized in additional paid-in-capital only if an incremental tax benefit is realized after considering all other benefits presently available.

The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50.

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 temporary cash investments 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 and six month periods ended March 31, 2015 included an aggregate of 75% and 55%, respectively, from one customer of the Company’s total revenues. This one customer accounted for approximately 73% of the Company’s total accounts receivable at March 31, 2015.

The Company’s revenues earned from sale of products and services for the three month period ended March 31, 2014 included an aggregate of 16% from one customer of the Company’s total revenues. During the six month period ended March 31, 2014 no customers represented 10% or greater of the Company’s total revenues. This one customer accounted for approximately 29% of the Company’s total accounts receivable at March 31, 2014.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company will adopt the methodologies prescribed by ASU 2014-15 by the date required, and does not anticipate that the adoption of ASU 2014-15 will have a material effect on its condensed consolidated financial position or results of operations.

In June 2014, the FASB issued Accounting Standards Update 2014-12, “Accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period,” (“ASU 2014-12”) which requires performance-based awards with a performance target that affects vesting and that could be achieved after an employee completes the requisite service period to be accounted for as a performance condition. If performance targets are clearly defined and it is probable that the performance condition will be achieved, stock-based expense should be recognized over the remaining requisite service period. This guidance will be effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the provisions of the ASU and assessing the potential effect on the Company’s condensed consolidated financial position or results of operations.

In May 2014, the FASB issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”) which provides updated, comprehensive revenue recognition guidance for contracts with customers, including a new principles-based five step framework that eliminates much of the industry-specific guidance in current accounting literature. Under ASU 2014-09, revenue recognition is based on a core principle that companies recognize revenue in an amount consistent with the consideration it expects to be entitled to in exchange for the transfer of goods or services. The standards update also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of recognized revenue. This guidance will be effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2017. The Company is in the process of evaluating the provisions of the ASU and assessing the potential effect on the Company’s condensed consolidated financial position or results of operations.

The Company has recurring net losses, which have resulted in an accumulated deficit of $209,474,492 as of March 31, 2015. The Company incurred a net loss of $9,714,220 and generated negative operating cash flow of $3,971,707 for the six month period ended March 31, 2015. However, the Company also has attained positive working capital of $628,472 as of March 31, 2015. At March 31, 2015 the Company had cash and cash equivalents of $984,050. The Company’s current capital resources include cash and cash equivalents, accounts receivable and prepaid expenses. Historically, the Company has financed its operations principally from the sale of equity securities. As discussed in Note G, on April 1, 2015, the Company closed its underwritten public offering of common stock and warrants for gross proceeds of approximately $12.0 million, before deducting underwriting discounts and offering expenses. Subsequently on April 30, 2015and May 8, 2015 the Company closed on the over-allotment option of the underwritten public offering for additional gross proceeds of $263,950. In addition, on November 20, 2014 the Company closed its underwritten public offering of common stock and warrants for gross proceeds of $9.3 million before deducting underwriting discounts and offering expenses. The Company utilized approximately $4,091,000 of the gross proceeds to repurchase the remaining Series B Warrants from Crede, as discussed in Note E. The Company raised $2,156,264 in a private placement of common stock and warrants and $1,800,000 in promissory notes during the fiscal year ended September 30, 2014, including $1,000,000 from a related party. See Notes D and G. As of April 30, 2015, the Company’s cash balance was approximately $11,615,406.

The Company expects to finance operations primarily through cash flows provided by operating activities provided that it will achieve a sufficient level of future revenues. The Company estimates that its cash and cash equivalents are sufficient to fund operations for the next twelve months. Management is implementing a cost savings plan that is designed to reduce the Company’s cash expenditures.

The Company will 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 the Company’s operating expenses.

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STOCK OPTIONS AND WARRANTS - Transactions involving stock options issued to employees (Details 1) (Employee Stock Options, Incentive Stock Plan 2005, USD $)	6 Months Ended
	Mar. 31, 2015
Employee Stock Options | Incentive Stock Plan 2005
Number of Shares
Outstanding at October 1, 2014	2,909,046
Granted	900,509
Exercised
Cancelled or expired	(661)
Outstanding at March 31, 2015	3,808,894
Vested at March 31, 2015	2,852,150
Non-vested at March 31, 2015	956,744
Weighted Average Exercise Price Per Share
Outstanding at October 1, 2014	$ 4.74
Granted	$ 2.86
Exercised
Cancelled or expired	$ (9.77)
Outstanding at March 31, 2015	$ 4.30
Vested at March 31, 2015	$ 3.99
Aggregate Intrinsic Value, Vested at March 31, 2015	$ 0.44
Aggregate Intrinsic Value, Non-vested at March 31, 2015	$ 0.19

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SUMMARY OF ACCOUNTING POLICIES - Summary of potential stock issuances under various options, and warrants (Details)	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Accounting Policies [Abstract]
Warrants	4,453,835	617,302	4,453,835	617,302
Employee options	3,808,894	3,208,083	3,808,894	3,208,083
Total number of potential stock issuances under various options, and warrants	8,262,729	3,825,385	8,262,729	3,825,385

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PROMISSORY NOTES PAYABLE (Detail Textuals) (USD $)	6 Months Ended	0 Months Ended
	Mar. 31, 2015	Nov. 11, 2014	Nov. 20, 2014	Sep. 30, 2014	Sep. 11, 2014
Short-term Debt [Line Items]
Promissory note issued to related party (in dollars)				$ 1,000,000
Promissory notes maturity term	10 months
Debt instrument, convertible, threshold consecutive trading days	5 days
Conversion price of convertible promissory note converted (in dollars per share)			$ 3.25
Conversion price of convertible promissory note converted into common stock (in dollars per share)			$ 3.24
Conversion price of convertible promissory note converted into warrant (in dollars per share)			$ 0.01
Loss on conversion of promissory notes	980,842
Promissory notes
Short-term Debt [Line Items]
Promissory note issued to related party (in dollars)					1,800,000
Interest rate on promissory note					12.50%
Loss on conversion of promissory notes	981,000
Interest expense	31,875
Promissory notes | James A. Hayward
Short-term Debt [Line Items]
Promissory note issued to related party (in dollars)					1,000,000
Interest rate on promissory note					12.50%
Common stock issued in settlement of convertible debentures and interest		315,171
Number of shares issued in settlement of convertible notes and accrued interest		315,171
Conversion price of convertible promissory note converted (in dollars per share)		$ 3.25
Promissory notes | Another individual
Short-term Debt [Line Items]
Promissory note issued to related party (in dollars)					$ 800,000
Common stock issued in settlement of convertible debentures and interest		252,137
Number of shares issued in settlement of convertible notes and accrued interest		252,137
Conversion price of convertible promissory note converted (in dollars per share)		$ 3.25

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net loss	$ (9,714,220)	$ (9,042,086)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	232,805	212,025
Stock based compensation expense	2,515,843	1,313,331
Change in fair value of warrant liability	2,994,540	2,178,859
Loss on conversion of promissory notes	980,842
Common stock issued for consulting services	22,676	337,500
Bad debt expense	2,779	16,144
Change in operating assets and liabilities:
Accounts receivable	(328,265)	50,499
Prepaid expenses and other current assets and deposits	(24,578)	59,134
Accounts payable and accrued liabilities	(298,577)	344,572
Deferred revenue	(355,552)	267,486
Net cash used in operating activities	(3,971,707)	(4,262,536)
Cash flows used in investing activities:
Purchase of property plant and equipment	(197,875)	(109,581)
Purchase of intangible assets	(35,000)
Net cash used in investing activities	(232,875)	(109,581)
Cash flows from financing activities:
Net proceeds from sale of common stock and warrants	7,956,050
Offering costs paid	(69,598)
Purchase and cancelation of previously issued warrants	(4,090,952)
Net cash provided by financing activities	3,795,500
Net decrease in cash and cash equivalents	(409,082)	(4,372,117)
Cash and cash equivalents at beginning of period	1,393,132	6,360,301
Cash and cash equivalents at end of period	984,050	1,988,184
Supplemental Disclosures of Cash Flow Information:
Cash paid during period for interest
Cash paid during period for taxes
Non-cash investing and financing activities:
Common stock issued for cashless exercise of options and warrants		19,570
Reclassification of deferred offering costs to additional paid in capital	181,104
Offering costs incurred, and included in accounts payable and accrued liabilities	218,233
Property, plant and equipment acquired, and included in accounts payable		7,794
Intangible assets acquired, and included in accounts payable	73,000
Common stock issued upon conversion of promissory notes payable	$ 1,843,750

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WARRANT LIABILITY

6 Months Ended

Mar. 31, 2015

Warrant Liability [Abstract]

WARRANT LIABILITY

NOTE E – WARRANT LIABILITY

On December 16, 2013, Crede CG III, Ltd (“Crede”) effected the cashless exercise of 178,253 Series A Warrants and 116,667 Series B Warrants. At December 16, 2013 (date of exercise), the Company determined the fair value of the Warrants to be $2,455,042 using the Binomial Lattice model with the following assumptions: fair value of the Company’s common stock $10.80 per share; dividend yield 0%; expected term: 4.55 years; risk free interest rate: 1.55%; expected volatility of: 118.89%; and an exercise price of $14.59. The change in fair value of the warrant liability on the day of exercise amounted to a loss of $1,288,752 and was included in the other income (expense). Upon exercise, the fair value of the Series A Warrants and 116,667 of the Series B Warrants were reclassified to equity.

The Series A and Series B Warrants were classified as liabilities on the issuance date due to certain provisions contained in the warrant agreements, which may cause an adjustment to the conversion rate or the number of warrants outstanding.

The change in fair value of the warrant liability resulted in a gain of $455,899 and a loss of $2,178,859 for the three and six month periods ended March 31, 2014, respectively.

On October 28, 2014, the Company entered into a warrant repurchase option agreement with Crede, pursuant to which it had the option to purchase between 50% and 100% of Crede’s Series B Warrant (currently exercisable for 387,621 shares of common stock) at a purchase price of $10.55 per share underlying such Series B Warrant (up to an aggregate purchase price of $4,091,000 for all of the Series B Warrant). On November 21, 2014, the Company exercised its option and repurchased 100% of Crede’s Series B Warrant for an aggregate purchase price of approximately $4,091,000. The change in fair value of the warrant liability on the day of repurchase amounted to a loss of $2,994,540 and was included in other income (expense) for the six month period ended March 31, 2015.

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WARRANT LIABILITY (Detail Textuals) (USD $)	3 Months Ended	6 Months Ended		0 Months Ended	1 Months Ended	2 Months Ended
	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Dec. 16, 2013	Oct. 28, 2014	Nov. 21, 2014
Class of Warrant or Right [Line Items]
Cashless exercise of warrant
Gain (loss) on change in fair value of warrant liability	$ 455,899	$ (2,994,540)	$ (2,178,859)
Crede CG III, Ltd | Warrants
Class of Warrant or Right [Line Items]
Fair value of warrants				2,455,042
Method used for determining allocated fair value of the Warrants				Binomial Lattice model
Fair value of common stock				$ 10.80
Dividend yield				0.00%
Expected terms				4 years 6 months 18 days
Risk free interest rate				1.55%
Expected volatility				118.89%
Expected price at which holders exercise Warrants				$ 14.59
Gain (loss) on change in fair value of warrant liability				(1,288,752)
Crede CG III, Ltd | Series A Warrants
Class of Warrant or Right [Line Items]
Cashless exercise of warrant				178,253
Crede CG III, Ltd | Series B Warrants
Class of Warrant or Right [Line Items]
Cashless exercise of warrant				116,667
Crede CG III, Ltd | Series B Warrants | Warrant repurchase option agreement
Class of Warrant or Right [Line Items]
Cashless exercise of warrant					387,621
Expected price at which holders exercise Warrants					$ 10.55
Percentage of option to purchase warrant						100.00%
Aggregate purchase price of warrant exercise					$ 4,091,000	$ 4,091,000
Crede CG III, Ltd | Series B Warrants | Warrant repurchase option agreement | Minimum
Class of Warrant or Right [Line Items]
Percentage of option to purchase warrant					50.00%
Crede CG III, Ltd | Series B Warrants | Warrant repurchase option agreement | Maximum
Class of Warrant or Right [Line Items]
Percentage of option to purchase warrant					100.00%

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COMMITMENTS AND CONTINGENCIES (Detail Textuals) (USD $)	0 Months Ended	3 Months Ended		6 Months Ended		9 Months Ended
	Jun. 15, 2013 sqft	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Oct. 31, 2014	Jun. 21, 2014
Commitments And Contingencies [Line Items]
Area of property under operating lease	30,000
Extended operating lease for two additional period	3 years
Base rent during initial lease term per annum	$ 449,142					$ 2,850
Total lease rental expenses		124,429	126,300	249,268	254,983
Chief Executive Officer | Employment Agreement
Commitments And Contingencies [Line Items]
Reduced amount of salary		50,000		50,000			50,000
Threshold amount of sale for two consecutive quarters							$ 3,000,000

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FAIR VALUE (Tables)

6 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Schedule of fair value measurements of common stock warrants using significant unobservable inputs (Level 3)

Fair Value Measurements of Common Stock Warrants Using Significant Unobservable Inputs (Level 3)	Six Months Ended March 31,
	2015			2014
Balance at October 1, 2014 and 2013	$	1,096,412		$	2,643,449
Adjustment resulting from change in fair value (a)		2,994,540			2,178,859
Removal of warrant upon repurchase		(4,090,952	)		—
Reclassification to equity upon exercise		—			(2,455,042	)
Balance at March 31,	$	—		$	2,367,266

(a) Adjustment resulting from change in fair value is the amount of total gains or losses for the period attributable to the change in unrealized gains or losses relating to warrant liabilities held at the reporting date and realized gains or losses at the date of exercise. The gain or loss is recorded in change in fair value of warrant liability in the accompanying condensed consolidated statements of operations.