0001571049-16-011637.txt : 20160210 0001571049-16-011637.hdr.sgml : 20160210 20160210163105 ACCESSION NUMBER: 0001571049-16-011637 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 47 CONFORMED PERIOD OF REPORT: 20151231 FILED AS OF DATE: 20160210 DATE AS OF CHANGE: 20160210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPLIED DNA SCIENCES INC CENTRAL INDEX KEY: 0000744452 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS BUSINESS SERVICES [7380] IRS NUMBER: 592262718 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36745 FILM NUMBER: 161406139 BUSINESS ADDRESS: STREET 1: 50 HEALTH SCIENCES DRIVE CITY: STONY BROOK STATE: NY ZIP: 11790 BUSINESS PHONE: 631-240-8800 MAIL ADDRESS: STREET 1: 50 HEALTH SCIENCES DRIVE CITY: STONY BROOK STATE: NY ZIP: 11790 FORMER COMPANY: FORMER CONFORMED NAME: PROHEALTH MEDICAL TECHNOLOGIES INC DATE OF NAME CHANGE: 20010504 FORMER COMPANY: FORMER CONFORMED NAME: DCC ACQUISITION CORP DATE OF NAME CHANGE: 19990211 FORMER COMPANY: FORMER CONFORMED NAME: DATALINK CAPITAL CORP/TX/ DATE OF NAME CHANGE: 19980306 10-Q 1 t1600034_10q.htm FORM 10-Q
 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended December 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. 

o   Yes    x   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). 

x   Yes    o   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 o Accelerated filer o
Non-accelerated filer o Smaller reporting company x
(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). 

o   Yes    x   No

 

At February 5, 2016, the registrant had 24,072,092 shares of common stock outstanding.

 

 
   

 

 

Applied DNA Sciences, Inc.

 

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

 

Table of Contents

     
    Page
PART I - FINANCIAL INFORMATION    
     
Item 1 - Condensed Consolidated Financial Statements (unaudited)   1
     
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations   12
     
Item 3 - Quantitative and Qualitative Disclosures About Market Risk   16
     
Item 4 - Controls and Procedures   17
     
PART II - OTHER INFORMATION    
     
Item 1 – Legal Proceedings   18
     
Item 1A – Risk Factors   18
     
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds   18
     
Item 3 – Defaults Under Senior Securities   18
     
Item 4 – Mine Safety Disclosures   18
     
Item 5 – Other Information   18
     
Item 6 - Exhibits   19

 

   

 

 

Part I - Financial Information

 

Item 1 - Financial Statements.

 

APPLIED DNA SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

 

   December 31,
2015
   September 30,
2015
 
   (unaudited)     
         
ASSETS          
Current assets:          
Cash and cash equivalents  $12,382,907   $7,312,184 
Accounts receivable, net of allowance of $7,140 at December 31, 2015 and September 30, 2015   3,923,997    3,929,517 
Prepaid expenses and other current assets   187,355    293,351 
Total current assets   16,494,259    11,535,052 
           
Property, plant and equipment, net of accumulated depreciation of $955,765 at December 31, 2015 and $852,867 at September 30, 2015   561,912    572,107 
           
Other assets:          
Long term accounts receivables   1,500,000    1,500,000 
Deposits   58,488    62,988 
Goodwill   285,386    285,386 
Intangible assets, net of accumulated amortization of $284,816 and $238,368 at December 31, 2015 and September 30, 2015, respectively   1,584,473    1,598,779 
           
Total Assets  $20,484,518   $15,554,312 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
Current liabilities:          
Accounts payable and accrued liabilities  $2,110,995   $2,385,006 
Deferred revenue   57,526    282,050 
Total current liabilities   2,168,521    2,667,056 
           
           
Long term accounts payable   320,400    320,400 
           
Total liabilities   2,488,921    2,987,456 
           
Commitments and contingencies          
           
Stockholders’ Equity          
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; -0- shares issued and outstanding as of December 31, 2015 and September 30, 2015        
Series A Preferred stock, par value $0.001 per share, 10,000,000 shares authorized; -0- issued and outstanding as of December 31, 2015 and September 30, 2015        
Series B Preferred stock, par value $0.001 per share, 10,000,000 shares authorized; -0- issued and outstanding as of December 31, 2015 and September 30, 2015        
Common stock, par value $0.001 per share; 500,000,000 shares authorized at December 31, 2015 and September 30, 2015; 24,072,092 and 21,504,578 shares issued and outstanding as of December 31, 2015 and September 30, 2015, respectively   24,073    21,505 
Additional paid in capital   232,539,203    224,186,760 
Accumulated deficit   (214,567,679)   (211,641,409)
Total stockholders’ equity   17,995,597    12,566,856 
           
Total Liabilities and Stockholders’ Equity  $20,484,518   $15,554,312 

 

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 December 31, 
   2015   2014 
         
Revenues  $1,324,114   $1,241,802 
           
Operating expenses:          
Selling, general and administrative   3,554,362    4,671,490 
Research and development   471,934    278,288 
Depreciation and amortization   218,346    109,726 
           
Total operating expenses   4,244,642    5,059,504 
           
LOSS FROM OPERATIONS   (2,920,528)   (3,817,702)
           
Other income (expense):          
Interest income (expense), net   2,845    (31,875)
Other (expense) income, net   (8,587)   (3,685)
Loss on conversion of promissory notes       (980,842)
Loss on change in fair value of warrant liability       (2,994,540)
           
Net loss before provision for income taxes   (2,926,270)   (7,828,644)
           
Provision for income taxes        
           
NET LOSS  $(2,926,270)  $(7,828,644)
           
Net loss per share-basic and diluted  $(0.13)  $(0.51)
           
Weighted average shares outstanding-          
Basic and diluted   22,542,176    15,456,566 

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

 2 

 

 

APPLIED DNA SCIENCES, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) 

 

   Three Months Ended
December 31,
 
   2015   2014 
         
Cash flows from operating activities:          
Net loss  $(2,926,270)  $(7,828,644)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   218,346    109,726 
Stock based compensation expense   396,991    1,998,524 
Change in fair value of warrant liability       2,994,540 
Loss on conversion of promissory notes       980,842 
Common stock issued for consulting services   58,120     
Bad debt expense   10,000    2,779 
Change in operating assets and liabilities:          
Accounts receivable   (4,480)   (282,502)
Prepaid expenses and other current assets and deposits   71,896    (18,102)
Accounts payable and accrued liabilities   (320,825)   (253,997)
Deferred revenue   (224,524)   (59,001)
Net cash used in operating activities   (2,720,746)   (2,355,835)
           
Cash flows used in investing activities:          
Purchase of property plant and equipment   (51,795)   (30,825)
Purchase of intangible assets   (14,301)    
Net cash used in investing activities   (66,096)   (30,825)
           
Cash flows from financing activities:          
           
Net proceeds from sale of common stock and warrants   7,853,155    7,956,050 
Proceeds from the exercise of warrants   4,410     
Purchase and cancelation of previously issued warrants       (4,090,952)
           
Net cash provided by financing activities   7,857,565    3,865,098 
           
Net increase in cash and cash equivalents   5,070,723    1,478,438
Cash and cash equivalents at beginning of period   7,312,184    1,393,132 
Cash and cash equivalents at end of period  $12,382,907   $2,871,570 
           
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  $49   $ 
Property, plant and equipment acquired, and included in accounts payable  $40,908   $181,104 
Intangible assets acquired, and included in accounts payable  $17,841   $ 
Issuance of options to settle accrued liability  $42,335   $ 

 

See the accompanying notes to the unaudited condensed consolidated financial statements

 

 3 

 

 

APPLIED DNA SCIENCES, INC. 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(unaudited)

 

NOTE A — SUMMARY OF ACCOUNTING POLICIES

 

General

 

The accompanying condensed consolidated financial statements as of December 31, 2015 and for the three month periods ended December 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 month period ended December 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2016. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the fiscal year ended September 30, 2015 and footnotes thereto included in the Annual Report on Form 10-K, of Applied DNA Sciences, Inc. (the “Company”) filed with the SEC.

 

The condensed consolidated balance sheet as of September 30, 2015 contained herein has been derived from the audited consolidated financial statements as of September 30, 2015, but does not include all disclosures required by GAAP.

 

Business and Basis of Presentation

 

The Company is a Delaware corporation, which was initially organized in 1983 under the laws of the State of Florida as Datalink Systems, Inc. In 1998, the Company reincorporated in the State of Nevada, and in 2002, the Company changed its name to its current name, Applied DNA Sciences, Inc. In December 2008, the Company reincorporated from 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 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.

 

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 December 31, 2015 and September 30, 2015, the Company recorded deferred revenue of $57,526 and $282,050, respectively.

 

 4 

 

 

APPLIED DNA SCIENCES, INC. 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 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 $504,349 from these contract awards during the three month period ended December 31, 2015 and $449,647 for the three month period ended December 31, 2014.

 

The Company recognizes the revenue under its cotton customer contracts when the product has been shipped, as there is no right of return under these arrangements. The Company has evaluated the other indicators of gross and net revenue recognition, including whether or not the Company is the primary obligor and if it has general inventory risk. The Company does not have any general inventory risk and is not the primary obligor as it relates to the marketing portion of the tagging fee. With respect to the Company’s mutual license agreement with Himatsingka America Inc. (formerly known as Divatex Home Fashion, Inc.) (“Himatsingka”), the Company has carefully evaluated all of the key gross and net revenue recognition indicators and has concluded that the circumstances as they relate to Himatsingka’s portion of the tagging fee are more consistent with those key indicators that support net revenue reporting. In addition, the nature of some of the Company’s cotton contracts includes extended payment terms that will result in a longer collection period and slower cash inflows. As a result, $1,500,000 of revenue recognized during the fiscal year ended September 30, 2015 under the Company’s memorandum of understanding with Louis Dreyfus Commodities is included in long-term accounts receivable as of December 31, 2015 and September 30, 2015. The cotton ginning season in the United States takes place between September and December each year, therefore, revenues from these contracts may be seasonal.

 

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.

 

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 month periods ended December 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 
December 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 including those securities would have been anti-dilutive for the three month periods ended December 31, 2015 and 2014 are as follows: 

 

   2015   2014 
Warrants   7,324,727    4,470,502 
Employee options   3,890,420    3,777,888 
    11,215,147    8,248,390 

 

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 month period ended December 31, 2015 included an aggregate of 73%, from three customers. These three customers accounted for approximately 92% of the Company’s total accounts receivable, of which $1,500,000 is classified as long term accounts receivable at December 31, 2015.

 

The Company’s revenues earned from sale of products and services for the three month period ended December 31, 2014 included an aggregate of 53% from two customers. These two customers accounted for approximately 74% of the Company’s total accounts receivable at December 31, 2014.

 

 6 

 

 

APPLIED DNA SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2015 
(unaudited)

 

NOTE A — SUMMARY OF ACCOUNTING POLICIES (continued)

 

Recent Accounting Pronouncements

 

In November 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17").   This update requires an entity to classify deferred tax liabilities and assets as noncurrent within a classified statement of financial position.  ASU 2015-17 is effective for annual and interim reporting periods beginning after December 15, 2016.  This update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.  Early application is permitted as of the beginning of the interim or annual reporting period.  The Company is currently evaluating the impact of the adoption of this pronouncement on its balance sheet, although it does not expect the pronouncement to have a significant impact.

 

In September 2015, the FASB issued Accounting Standards Update 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). The FASB issued ASU 2015-16 to simplify US GAAP to require that the acquirer record, in the same period’s financial statements, the effect of changes to provisional, measurement period amounts calculated as if the accounting had been completed at the acquisition date and disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The Company does not believe that this updated standard will have a material impact on its condensed consolidated financial statements.

 

In August 2014, 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
December 31, 2015
(unaudited)

 

NOTE B – LIQUIDITY AND MANAGEMENT’S PLAN

 

The Company has recurring net losses, which have resulted in an accumulated deficit of $214,567,679 as of December 31, 2015. The Company incurred a net loss of $2,926,270 and generated negative operating cash flow of $2,720,746 for the three month period ended December 31, 2015. However, the Company also has working capital of $14,325,738 as of December 31, 2015. At December 31, 2015 the Company had cash and cash equivalents of $12,382,907. The Company’s current capital resources include cash and cash equivalents, accounts receivable and prepaid expenses and other current assets. Historically, the Company has financed its operations principally from the sale of equity securities. On November 23, 2015, the Company closed a registered direct public offering of common stock and a concurrent private placement of warrants to purchase common stock, for aggregate gross proceeds of approximately $8,750,000, before deducting placement agent fees and offering expenses (See Note D).

 

The Company expects to finance operations and capital expenditures primarily through cash received from the November 2015 public offering and concurrent private placement as well as 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.

 

The Company may require additional funds to complete the continued development of its products, product manufacturing, and to fund expected additional losses from operations, until revenues are sufficient to cover the Company’s operating expenses. 

 

As a result of the Company's inability to file with the SEC certain audited historical financial statements relating to the assets of Vandalia Research, Inc. acquired in September 2015 by the date on which they were required to be filed, the Company is currently ineligible to use Form S-3, a streamlined registration form, to register securities for at least twelve calendar months and it would not regain the use of Form S-3 unless the Company was able to subsequently file these audited historical financial statements. Moreover, until the Company has filed the audited historical financial statements, it would be unable to use Form S-1 or other SEC forms to register securities as required for a public offering and would be unable to conduct offerings in private placements under Rule 505 or 506 of Regulation D to any purchasers who are not accredited investors. Therefore, until such time as the Company is able to conduct a public offering, if it determines it to be necessary or advisable to raise additional capital, the Company would need to issue securities in private placements to the extent permissible by law or seek other forms of financing. These alternatives generally entail greater total costs to the Company than a public offering of securities.

 

NOTE C – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

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

 

   December 31,
2015
(unaudited)
   September 30,
2015
 
Accounts payable  $1,598,934   $1,237,973 
Accrued salaries payable   471,114    1,002,743 
Other accrued expenses   40,947    144,290 
Total  $2,110,995   $2,385,006 

 

 8 

 

 

APPLIED DNA SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(unaudited)

 

NOTE D - CAPITAL STOCK

 

On November 23, 2015, the Company entered into a securities purchase agreement with certain institutional investors providing for the purchase and sale of 2,500,000 shares of common stock at a price of $3.49 per share in a registered direct public offering. In a concurrent private placement, the Company sold warrants to purchase 1,250,000 shares of its common stock at a price of $0.01 per warrant, with an exercise price of $4.30 per share. The warrants will be exercisable beginning six months following the closing date of the private placement and will expire five years from the date on which they become exercisable. The warrants provide each warrant holder the right, at the warrant holder's election, to exercise by means of a cashless exercise feature. The gross proceeds to the Company from this registered direct offering and concurrent private placement were $8.75 million and net proceeds after deducting the placement agent fees and offering expenses were approximately $7.9 million.

 

In connection with the closing of the registered direct public offering and the concurrent private placement, as partial compensation, on November 25, 2015, the Company granted warrants to purchase 50,000 shares of common stock to its placement agent. These warrants have an exercise price of $4.01 (115% of the public offering price), subject to adjustment as set forth therein, will be exercisable beginning six months following the closing date of the private placement and expire at 5:00 PM (Eastern Standard Time) on November 25, 2020. These warrants provide the placement agent the right, at the placement agent’s election, to exercise by means of a cashless exercise feature.

 

NOTE E - 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 Note D) are summarized as follows:

 

   Number of
Shares
   Weighted
Average
Exercise
Price Per
Share
 
Balance at October 1, 2015   6,027,654   $3.54 
Granted   1,300,000    4.29 
Exercised   (1,260)   (3.50)
Cancelled or expired   (1,667)   (10.74)
Balance at December 31, 2015  $7,324,727   $3.67 

 

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APPLIED DNA SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(unaudited)

 

NOTE F - 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 (the “Incentive Plan”). In 2007, 2008, 2012 and 2015, 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 8,833,333 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. The Incentive Plan’s expiration date is January 25, 2025.

 

The Incentive Plan is designed to retain directors, executives, and selected employees and consultants by rewarding them for making contributions to the Company's success with an award of options to purchase shares of common stock and an award of shares of common stock. As of December 31, 2015 a total of 269,752 shares have been issued and options to purchase 4,666,469 shares have been granted under the Incentive 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, 2015   3,458,905   $4.74      
Granted   531,523    3.04      
Exercised   (75,000)   (2.86)     
Cancelled or expired   (25,008)   (4.20)     
Outstanding at December 31, 2015   3,890,420   $4.26      
Vested at December 31, 2015   2,819,006   $4.23   $0.97 
Non-vested at December 31, 2015   1,071,415        $0.87 

 

 

During the three month period ended December 31, 2015, the Company issued an aggregate of 531,523 options to employees and non-employee board of director members. Included in these grants were 160,000 options granted to executives.

 

The fair value of options granted during the three month periods ended December 31, 2015 and 2014 was determined using the Black Scholes Option Pricing Model with the following weighted average assumptions:

 

   Three
Months
Ended
December 31,
2015
   Three
Months
Ended
December 31,
2014
 
Stock price  $3.04   $2.84 
Exercise price  $3.04   $2.84 
Expected term, years   6.10    4.86 
Dividend yield   %   %
Volatility   130%   132%
Risk free rate   1.8%   1.58%

 

The Company recorded $396,991 and $1,998,524 as stock compensation expense for the three month periods ended December 31, 2015 and 2014, respectively. As of December 31, 2015, unrecorded compensation cost related to non-vested awards was $3,402,145 which is expected to be recognized over a weighted average period of approximately 2.35 years. The weighted average grant date fair value per share for options granted during the three month period ended December 31, 2015 was $2.71.

 

 10 

 

 

APPLIED DNA SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(unaudited)

 

NOTE G - 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. Total rent expense for the three month periods ended December 31, 2015 and 2014 was $144,716 and $124,838, 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 deferred by $50,000. This salary deferral 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. Effective January 1, 2016, the CEO's salary was increased to $400,000 pursuant to approval by the Compensation Committee of the Board of Directors.

 

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.

 

NOTE H - ASSET PURCHASE AGREEMENT

 

As disclosed in the Company's audited consolidated financial statements as of and for the fiscal year ended September 30, 2015 and footnotes thereto included in the Annual Report on Form 10-K, filed with the SEC, on September 11, 2015, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), with Vandalia Research, Inc. a West Virginia corporation ("Vandalia"), and Derek A. Gregg, Vandalia’s Chief Executive Officer and a director of Vandalia, providing for the purchase of substantially all the assets (“Assets”) of Vandalia. The Company completed the acquisition of such Assets on the same date. The purchase price for the Assets was $1,500,000, which amount was determined through arms-length negotiation. Of this amount, $500,000 was placed in an escrow account for a period of nine months following the closing to satisfy Vandalia’s indemnification obligations, of which $350,000 was released after sixty days.

 

The audits of the historical financial statements of Vandalia are currently still in process. The following unaudited supplemental pro forma information presents the Company's financial results as if the acquisition of Vandalia had occurred October 1, 2013:
 

   Three month period 
   ended 
   December 31, 2014 
Revenue  $1,257,844 
      
Net loss   (8,030,404)
      
Basic and diluted loss per share  $(0.52)

 

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

 

Forward-Looking Statements

 

This Quarterly Report (including but not limited to this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are subject to the “safe harbor” created by those sections. Forward-looking statements can generally be identified by the fact that they do not relate strictly to historical or current facts and include, but are not limited to, statements using terminology such as “can”, “may”, “could”, “should”, “assume”, “forecasts”, “believe”, “designated to”, “will”, “expect”, “plan”, “anticipate”, “estimate”, “potential”, “position”, “predicts”, “strategy”, “guidance”, “intend”, “budget”, “seek”, “project” or “continue”, or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. 

 

We believe it is important to communicate our expectations. However, forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry and are subject to known and unknown risks, uncertainties and other factors. Accordingly, our actual results and the timing of certain events may differ materially from those expressed or implied in such forward-looking statements due to a variety of factors and risks, including, but not limited to, those set forth in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and notes thereto included in this Quarterly Report and those set forth from time to time in our other filings with the SEC, including our Annual Report on Form 10-K for the year ended September 30, 2015, and the following factors and risks:

 

  · our short operating history, relatively new business model and lack of significant previous revenues;

 

  · our history of net losses, which may continue, and our potential inability to achieve profitability;

 

  · the possibility that we may require additional financing, which may involve the issuance of additional shares of common stock or securities exercisable for common stock and dilute the percentage of ownership held by our current stockholders;

 

  · difficulty in obtaining, or inability to obtain, additional financing if such financing becomes necessary, including due to constraints on our ability to raise and/or increased cost of raising capital, as a result of our inability to timely file the audited historical financial statements of Vandalia Research, Inc.;

 

  · volatility in the price and/or trading volume of our common stock;

 

  · future short selling and/or manipulation of the price of our common stock;

 

  · our inability to implement our short and long-term strategies;

 

  · loss of strategic relationships;

 

  · dependence on a limited number of key customers;

 

  · lack of acceptance of our products and services by potential customers;

 

  · potential failure to introduce new products and services;

 

  · difficulty or failure in expanding our sales, marketing and support organizations and our distribution arrangements necessary to enable us to reach our goals with respect to increasing market acceptance of our products and services;

 

  · inability to continue to retain the services of Dr. Hayward, our Chief Executive Officer, or Dr. Liang, our Chief Scientific Officer;

 

  · inability to compete effectively in the industries in which we operate;

 

  · lack of success in our research and development efforts for new products;

 

  · failure to manage our growth in operations and acquisitions of new technologies and businesses;

 

  · inability to protect our intellectual property rights;

 

  · intellectual property litigation against us or other legal actions or proceedings in which we may become involved;

 

  · unauthorized disclosure of sensitive or confidential data (including customer data) and cybersecurity breaches; and

 

  · adverse changes in worldwide or domestic economic, political or business conditions.

 

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All forward-looking statements and risk factors included in this Quarterly Report are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligations to update any forward-looking statement or risk factor, unless we are required to do so by law. Assumptions relating to the forward-looking statements included in this Quarterly Report involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, and the time and money required to successfully complete development and commercialization of our technologies, all of which are difficult or impossible to predict accurately and many of which are beyond our control.

 

Any of the assumptions underlying the forward-looking statements contained in this Quarterly Report could prove inaccurate and, therefore, we cannot assure you that the results contemplated in any of such forward-looking statements will be realized and we caution you against relying on any of the forward-looking statements contained herein.

 

Note

 

Our trademarks in the United States include SigNature® DNA, fiberTyping®, DNAnet®, digitalDNA® and Sentry. All trademarks, service marks and trade names included or incorporated by reference in this Quarterly Report are the property of their respective owners, including, without limitation, SmokeCloak®, a mark owned by MSS Professional A/S and/or its affiliates, and PimaCott™, a mark owned by Divatex Home Fashion, Inc. and/or its affiliates. 

 

Introduction

 

Using biotechnology as a forensic foundation, we provide plant-based-DNA 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 for 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 plant-based DNA technologies are designed to deliver what we believe to be the greatest levels of security, deterrence and legal recourse strength. Through our recent acquisition of substantially all of the assets of Vandalia Research, Inc. (“Vandalia”), we are also engaged in the large-scale production of specific DNA sequences using the polymerase chain reaction (“PCR”).

 

SigNature DNA, SigNature T DNA, fiberTyping, DNAnet®, Sentry, digitalDNA, and SmokeCloak DNA, our principal anti-counterfeiting and product authentication solutions 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, home asset marking, automotive, printing and packaging, homeland security, law enforcement, industrial materials, agrochemicals, pharmaceuticals, consumer products, and food and beverage. The large-scale production of specific DNA sequences is used in the diagnostics and reagent industries and also helps to ensure our capacity to manufacture enough DNA markers for all our current and future customers.

 

SigNature DNA. SigNature DNA is our platform ingredient, at the core of all our security solutions. The vehicle which carries SigNature DNA is custom designed to suit the particular application for which it is being used. Exhaustive development efforts have yielded a flexible and durable marker with all the accuracy provided by nature. SigNature DNA 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 markers now exist in the public domain on items ranging from consumer product packaging to microcircuits to guitars. We believe that no markers have ever been copied.

 

SigNature T DNA and fiberTyping. There is one common thread that runs through the global textile industry: success breeds counterfeiting and diversion. SigNature T DNA markers are used for brand protection efforts and raw material source compliance programs. For example, cotton fibers can be tagged at source, verified as “American grown” and then traced through every step of the supply chain. Our patented genotyping platform, known as “fiberTyping’, is complementary to tagging with SigNature T botanical DNA. fiberTyping cannot be used to track a specific cotton batch through the supply chain, a function which can only be accomplished by our SigNature T DNA system. fiberTyping indicates the cotton species while SigNature T DNA is used as an identifier for traceability. Its information is stored in our database, operating much like a bar code. For example, entities in the cotton industry use fiberTyping to differentiate purity or blends of higher-end Pima Extra Long Staple cotton and lower-end upland cotton, in conjunction with SigNature T DNA marking applied at the gin, for traceability to the source.

 

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 DNA marker that can be used to definitively link evidence and offenders to specific crime scenes and help return stolen or lost property to its rightful owner. As the crime is investigated, the fluorescing DNA marker can assist police in linking the offender and stolen items to a specific crime scene, creating a greater ability to identify and convict.

 

Sentry. Sentry intruder tagging systems help to expand and strengthen any security effort by providing a means of directly linking criminals to crimes. Each unit is designed to be unique to each store, warehouse, or sting operation, allowing the police and prosecutors to link criminals to the crimes. In the event of a crime, the fleeing offender is sprayed with an indelible, fluorescing DNA taggant. As the crime is investigated, the fluorescing DNA marker can assist police in linking the offender and stolen items to a specific crime scene, creating a greater ability to identify and convict. Whether deployed as 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. While any commercial/retail establishment could benefit from the addition of a Sentry system, ideal areas of use include: banks, ATMs, pharmacies, jewelry stores, convenience stores, pawn brokers and gun shops.

 

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. We believe the fog and DNA markers have no negative side effects while serving as a strong crime fighting and loss prevention tool.

 

 13 

 

 

digitalDNA. digitalDNA is a software platform that enables customers to manage the security of company-marked goods from point of marking to point of authentication or validation to end of life. The base platform is configurable to customer requirements which differ by vertical market, company, business process and IT environment. Basic functions offered include DNA inventory management, program training and communications, database of marked items information, associated documents and images, chain of custody and location tracking, sample authentication processing and Certificate of DNA Analysis downloads, and other administrative functions. Architected for either cloud or local operation, the system supports mobile data capture using bar codes or other technologies. Of special note is the power of embedding our proprietary DNA into tag ink or substrate as the forensic backstop for tags which can be easily copied. The system is architected as the controller and repository for other validation and authentication devices such as our multi-mode reader (prototype), and other third party devices such as DNA readers and is designed to share data with third party applications through standard interfaces.

 

Large-scale production of specific DNA sequences using PCR. Our Triathlon™ PCR systems allow for the large-scale production of specific DNA sequences. The systems are self-contained and modular, can work together in mass production or can be used individually throughout the world, offering the advantage of delivering DNA locally and securely. These DNA sequences are being used by customers as a diagnostic and reagent. Our 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 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.

 

Plan of Operations

 

General

 

To date, the substantial portion of our revenues have been generated from sales of our SigNature DNA and SigNature T DNA, our principal anti-counterfeiting and product authentication solutions. We expect to continue to grow revenues from sales of our SigNature DNA platform ingredient, including our Signature T DNA, DNAnet, Sentry, digitalDNA, and SmokeCloak DNA offerings as well as from large scale production of specific DNA sequences using PCR.  Our developments in the textile and apparel authentication, electronics authentication, cash-in-transit, and asset protection markets have contributed to the increase in our revenues. We intend to pursue both domestic and international sales opportunities in each of these vertical markets, and select other vertical markets.

 

Critical Accounting Policies

 

See Note A to the accompanying condensed consolidated financial statements for our critical accounting policies.

 

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

 

Revenues

 

For the three month periods ended December 31, 2015 and 2014, we generated $1,324,114 and $1,241,802, respectively, in revenues. The increase in revenues in the three month period ended December 31, 2015 of $82,312 or 7% was primarily from an increase in revenue related to DNA manufacturing for the diagnostic market of $242,000, an increase of approximately $55,000 from two government contract awards and an increase in consumer asset marking sales of $60,000. These increases were partially offset by a decrease in revenue from suppliers of the Defense Logistics Agency ("DLA") due to the consolidation of our contracts with several individual suppliers of the DLA to one contract directly with the DLA as well as other decreases in revenue from military customers of approximately $200,000 and a decrease in revenue related to industrial materials of approximately $81,000.

 

Costs and Expenses

 

Selling, General and Administrative

 

Selling, general and administrative expenses for the three month period ended December 31, 2015 decreased by $1,117,128 or 24% from $4,671,490 for the three month period ended December 31, 2014 to $3,554,362 for the three month period ended December 31, 2015. The decrease is attributable to a decrease in stock based compensation expense of approximately $1.6 million, primarily associated with grants to employees during the three month period ended December 31, 2015 having a four year vesting period whereas the grants to employees during the three month period ended December 31, 2014 vested immediately. The decrease in stock based compensation was primarily offset by increases in accounting and legal fees of approximately $113,000 and $129,000, respectively, as well as an increase in payroll expenses of $120,000 primarily for accrued employee bonuses.

 

Research and Development

 

Research and development expenses increased to $471,934 for the three month period ended December 31, 2015 from $278,288 for the three month period ended December 31, 2014, an increase of $193,646 or 70%. This increase is primarily due to development costs incurred in relation to two government contracts as well as an increase in other laboratory supplies and materials.

 

Depreciation and Amortization

 

In the three month period ended December 31, 2015, depreciation and amortization increased by $108,620 from $109,726 for the three month period ended December 31, 2014 to $218,346 for the three month period ended December 31, 2015. This increase is attributable to $69,000 of amortized customer purchase orders acquired from Vandalia Research, Inc. (“Vandalia”) and fulfilled by the Company during the three month period ended December 31, 2015, as well as $23,000 relating to amortization expense for customer relationships and technology purchased from Vandalia during September 2015.

 

Loss on Change in Fair Value of Warrant Liability

 

Loss from change in fair value of warrant liability during the three month period ended December 31, 2014 was $2,994,540. 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.

 

Liquidity and Capital Resources

 

Our liquidity needs consist of our working capital requirements and research and development expenditure funding. As of December 31, 2015, we had working capital of $14,325,738. For the three month period ended December 31, 2015, we generated a net cash flow deficit from operating activities of $2,720,746 consisting primarily of our loss of $2,926,270 net with non-cash adjustments of $218,346 in depreciation and amortization charges, $396,991 for stock-based compensation, $58,120 in common stock issued for consulting services, and $10,000 in bad debt expense. Additionally, we had a net decrease in operating assets of $67,416 and a net decrease in operating liabilities of $545,349. Cash used in investing activities was $66,096 for the purchase of property, plant and equipment and intangible assets. Cash provided by financing activities was $7,857,565 consisting primarily of net proceeds from the sale of common stock in the public offering and the concurrent private placement of warrants, which permit warrant holders to exercise by means of a cashless exercise feature.

 

 15 

 

 

At December 31, 2015, there was $1,500,000 included in long-term accounts receivable relating to a customer from the cotton industry that purchased SigNature T DNA to help secure the cotton supply chain. The nature of this contract includes extended payment terms that will result in a longer collection period and slower cash inflows, which will affect our liquidity and capital resources.

 

We have recurring net losses, which have resulted in an accumulated deficit of $214,567,679 as of December 31, 2015. We have incurred a net loss of $2,926,270 for the three month period ended December 31, 2015. At December 31, 2015 we had cash and cash equivalents of $12,382,907 and working capital of $14,325,738. Our current capital resources include cash and cash equivalents, accounts receivable and prepaid expenses and other current assets. Historically, we have financed our operations principally from the sale of equity securities. As discussed in Note D to the accompanying condensed consolidated financial statements, on November 23, 2015, we closed a registered direct public offering of common stock and a private placement of warrants to purchase common stock, for aggregate gross proceeds of approximately $8,750,000, before deducting placement agent discounts and offering expenses (excluding proceeds from any future exercises of such warrants).

 

We expect to finance operations and capital expenditures primarily through the cash received from the November 2015 public offering and concurrent private placement as well as cash flows provided by operating activities provided that we achieve a sufficient level of future revenues. We estimate that our cash and cash equivalents are sufficient to fund operations and capital expenditures for the next twelve months.

 

We may require additional funds to complete the continued development of our products, product manufacturing, and to fund expected additional losses from operations, until revenues are sufficient to cover our operating expenses. If revenues are not sufficient to cover our operating expenses, and if we are not successful in obtaining the necessary additional financing, we will most likely be forced to reduce operations.

 

As a result of our inability to file with the SEC certain audited historical financial statements relating to the assets of Vandalia Research, Inc. acquired in September 2015 by the date on which they were required to be filed, we are currently ineligible to use Form S-3, a streamlined registration form, to register securities for at least twelve calendar months and we would not regain the use of Form S-3 unless we are able to subsequently file these audited historical financial statements. Moreover, until we have filed the audited historical financial statements, we would be unable to use Form S-1 or other SEC forms to register securities as required for a public offering and would be unable to conduct offerings in private placements under Rule 505 or 506 of Regulation D to any purchasers who are not accredited investors. Therefore, until such time as we are able to conduct a public offering, if we determine it to be necessary or advisable to raise additional capital, we would need to issue securities in private placements to the extent permissible by law or seek other forms of financing. These alternatives generally entail greater total costs to us than a public offering of securities and may result in increased dilution to stockholders.

 

We expect capital expenditures to be less than $2,000,000 in fiscal 2016. Our primary investments are expected to 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

 

None.

 

Product Research and Development

 

We anticipate spending approximately $2,000,000 for product research and development activities during the next twelve months.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Inflation

 

The effect of inflation on our revenue and operating results was not significant.

 

Item 3. - Quantitative and Qualitative Disclosures About Market Risk.

 

Information requested by this Item is not applicable as we are electing scaled disclosure requirements available to smaller reporting companies with respect to this Item.

 

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Item 4. - Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this Quarterly Report, 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 December 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 December 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.

 

 17 

 

 

Part II - Other Information

 

Item 1. - Legal Proceedings.

 

None.

 

Item 1A. – Risk Factors.

 

You should carefully consider the risks and uncertainties described under the caption “Forward-Looking Statements” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Quarterly Report and in our other filings with the SEC, including our Annual Report on Form 10-K for the year ended September 30, 2015, and our subsequent filings. The risks and uncertainties described in this Quarterly Report and in our other filings with the SEC are not the only ones facing us. Additional risks and uncertainties not currently 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 materially adversely impacted. In that event, the market price of our common stock could decline and you may lose all or part of your investment. As further described under the caption “Forward-Looking Statements” in Part I, Item 2, this Quarterly Report also contains forward-looking statements that involve additional risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements due to the factors and risks described above or other factors.

 

During the fiscal quarter ended December 31, 2015, there have been no material changes in our risk factors previously disclosed under Part 1, Item 1A in our Annual Report on Form 10-K for the fiscal year ended September 30, 2015.

 

Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds.

 

On each of October 30, 2015, November 30, 2015 and December 31, 2015 we issued 5,000 shares of our common stock, aggregating 15,000 shares, to a consultant for services provided pursuant to our Incentive Plan. In addition, on December 31, 2015, we issued 3,000 shares of our common stock to a consultant for services provided pursuant to our Incentive Plan.

 

The foregoing issuances of common stock were exempt from registration under the Securities Act, pursuant to the exemptions from registration provided by Section 4(a)(2) of the Securities Act and/or by Rule 506 of Regulation D promulgated under the Securities Act as transactions not involving a public offering.

 

Item 3. – Defaults Upon Senior Securities.

 

None.

 

Item 4. – Mine Safety Disclosures.

 

None.

 

Item 5. – Other Information.

 

None. 

 

 18 

 

 

Item 6. – Exhibits.

 

10.1 Placement Agency Agreement by and between Applied DNA Sciences, Inc. and Maxim Group LLC, dated November 23, 2015 (incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Company’s Current Report on Form  8-K/A, filed November 23, 2015)
   
10.2 Form of Securities Purchase Agreement, dated as of November 23, 2015 (incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Company’s Current Report on Form  8-K/A, filed November 23, 2015)
   
4.1    Form of Purchase Warrant, dated as of November 25, 2015 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form  8-K, filed November 23, 2015)
   
4.2   Form of Placement Agent Warrant issued to Maxim Group LLC (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form  8-K, filed November 23, 2015)

   
31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities 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 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.

 

Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act or the Exchange Act, except as otherwise stated in any such filing.

 

 19 

 

 

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: February 10, 2016 /s/ JAMES A. HAYWARD
  James A. Hayward, Ph. D.
  Chief Executive Officer
  (Duly authorized officer and principal executive officer)
   
  /s/ BETH JANTZEN
Dated: February 10, 2016 Beth Jantzen, CPA
  Chief Financial Officer
  (Duly authorized officer and
  principal financial and accounting officer)

 

 20 

 

EX-31.1 2 t1600034_ex31-1.htm EXHIBIT 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: February 10, 2016    
     
  By: /s/ JAMES A. HAYWARD
    James A. Hayward
    Chief Executive Officer
    Applied DNA Sciences, Inc.

 

   

 

EX-31.2 3 t1600034_ex31-2.htm EXHIBIT 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: February 10, 2016    
     
  By: /s/ BETH JANTZEN
    Beth Jantzen, CPA
    Chief Financial Officer
    Applied DNA Sciences, Inc.

 

   

 

EX-32.1 4 t1600034_ex32-1.htm EXHIBIT 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 December 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) of the Securities Exchange Act of 1934, and

 

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

This certification is being provided pursuant to 18 U.S.C. 1350 and is not to be deemed a part of the Report, nor is it to be deemed to be “filed” for any purpose whatsoever.

     
  By: /s/ JAMES A. HAYWARD
    James A. Hayward
    Chief Executive Officer
    Applied DNA Sciences, Inc.
    Dated: February 10, 2016

 

   

 

 

EX-32.2 5 t1600034_ex32-2.htm EXHIBIT 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 December 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) of the Securities Exchange Act of 1934, and

 

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

This certification is being provided pursuant to 18 U.S.C. 1350 and is not to be deemed a part of the Report, nor is it to be deemed to be “filed” for any purpose whatsoever.

     
  By: /s/ BETH JANTZEN
    Beth Jantzen, CPA
    Chief Financial Officer
    Applied DNA Sciences, Inc.
    Dated: February 10, 2016

 

   

 

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The Company has evaluated the other indicators of gross and net revenue recognition, including whether or not the Company is the primary obligor and if it has general inventory risk. The Company does not have any general inventory risk and is not the primary obligor as it relates to the marketing portion of the tagging fee. With respect to the Company&#8217;s mutual license agreement with Himatsingka America Inc. (formerly known as Divatex Home Fashion, Inc.) (&#8220;Himatsingka&#8221;), the Company has carefully evaluated all of the key gross and net revenue recognition indicators and has concluded that the circumstances as they relate to Himatsingka&#8217;s portion of the tagging fee are more consistent with those key indicators that support net revenue reporting. In addition, the nature of some of&#160;the Company&#8217;s&#160;cotton contracts includes extended payment terms that will result in a longer collection period and slower cash inflows. 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The FASB issued&#160;ASU 2015-16 to simplify US GAAP to require that the acquirer record, in the same period&#8217;s financial statements, the effect of changes to provisional, measurement period amounts calculated as if the accounting had been completed at the acquisition date and disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. 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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. 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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&#8217;s condensed consolidated financial position or results of operations.</p> <div> <p style="text-align: justify; widows: 1; text-transform: none; text-indent: 0px; margin: 0px; font: 10pt 'times new roman', times, serif; white-space: normal; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal;"><b>NOTE B &#8211; LIQUIDITY AND MANAGEMENT&#8217;S PLAN</b></p> <p style="text-align: justify; widows: 1; text-transform: none; text-indent: 0px; margin: 0px; font: 10pt 'times new roman', times, serif; white-space: normal; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal;">&#160;</p> <p style="text-align: justify; widows: 1; text-transform: none; text-indent: 0px; margin: 0px; font: 10pt 'times new roman', times, serif; white-space: normal; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal;">The Company has recurring net losses, which have resulted in an accumulated deficit of $214,567,679 as of December 31, 2015. 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vertical-align: bottom;"> <td style="text-align: left;">Basic and diluted loss per share</td> <td>&#160;</td> <td style="text-align: left;">$</td> <td style="text-align: right;">(0.52</td> <td style="text-align: left;">)</td> </tr> </table> </div> 3.49 1500000 500000 350000 400000 50000 50000 1257844 -8030404 -0.52 00007444522015-11-012015-11-23 8750000 <p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><b><u>Use of Estimates</u></b></p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;">&#160;</p> <p style="font: 10pt/normal 'times new roman', times, serif; 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Document and Entity Information - shares
3 Months Ended
Dec. 31, 2015
Feb. 05, 2016
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 Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   24,072,092
Document Type 10-Q  
Document Period End Date Dec. 31, 2015  
Amendment Flag false  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q1  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.3.1.900
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
Dec. 31, 2015
Sep. 30, 2015
Current assets:    
Cash and cash equivalents $ 12,382,907 $ 7,312,184
Accounts receivable, net of allowance of $7,140 at December 31, 2015 and September 30, 2015 3,923,997 3,929,517
Prepaid expenses and other current assets 187,355 293,351
Total current assets 16,494,259 11,535,052
Property, plant and equipment, net of accumulated depreciation of $955,765 at December 31, 2015 and $852,867 at September 30, 2015 561,912 572,107
Other assets:    
Long term accounts receivables 1,500,000 1,500,000
Deposits 58,488 62,988
Goodwill 285,386 285,386
Intangible assets, net of accumulated amortization of $284,816 and $238,368 at December 31, 2015 and September 30, 2015, respectively 1,584,473 1,598,779
Total Assets 20,484,518 15,554,312
Current liabilities:    
Accounts payable and accrued liabilities 2,110,995 2,385,006
Deferred revenue 57,526 282,050
Total current liabilities 2,168,521 2,667,056
Long term accounts payable 320,400 320,400
Total liabilities $ 2,488,921 $ 2,987,456
Commitments and contingencies
Stockholders' Equity    
Preferred stock value
Common stock, par value $0.001 per share; 500,000,000 shares authorized at December 31, 2015 and September 30, 2015; 24,072,092 and 21,504,578 shares issued and outstanding as of December 31, 2015 and September 30, 2015, respectively $ 24,073 $ 21,505
Additional paid in capital 232,539,203 224,186,760
Accumulated deficit (214,567,679) (211,641,409)
Total stockholders' equity 17,995,597 12,566,856
Total Liabilities and Stockholders' Equity $ 20,484,518 $ 15,554,312
Series A Preferred stock    
Stockholders' Equity    
Preferred stock value
Series B Preferred stock    
Stockholders' Equity    
Preferred stock value
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.3.1.900
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)
Dec. 31, 2015
Sep. 30, 2015
Allowance on accounts receivable (in dollars) $ 7,140 $ 7,140
Accumulated depreciation on property, plant and equipment (in dollars) 955,765 852,867
Accumulated amortization on intangible assets (in dollars) $ 284,816 $ 238,368
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 500,000,000 500,000,000
Common stock, shares issued 24,072,092 21,504,578
Common stock, shares outstanding 24,072,092 21,504,578
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
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.3.1.900
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
3 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Income Statement [Abstract]    
Revenues $ 1,324,114 $ 1,241,802
Operating expenses:    
Selling, general and administrative 3,554,362 4,671,490
Research and development 471,934 278,288
Depreciation and amortization 218,346 109,726
Total operating expenses 4,244,642 5,059,504
LOSS FROM OPERATIONS (2,920,528) (3,817,702)
Other income (expense):    
Interest income (expense), net 2,845 (31,875)
Other (expense) income, net (8,587) (3,685)
Loss on conversion of promissory notes   (980,842)
Loss on change in fair value of warrant liability   (2,994,540)
Net loss before provision for income taxes $ (2,926,270) $ (7,828,644)
Provision for income taxes
NET LOSS $ (2,926,270) $ (7,828,644)
Net loss per share-basic and diluted $ (0.13) $ (0.51)
Weighted average shares outstanding-    
Basic and diluted 22,542,176 15,456,566
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
3 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Cash flows from operating activities:    
Net loss $ (2,926,270) $ (7,828,644)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 218,346 109,726
Stock based compensation expense 396,991 1,998,524
Change in fair value of warrant liability   2,994,540
Loss on conversion of promissory notes   980,842
Common stock issued for consulting services 58,120  
Bad debt expense 10,000 2,779
Change in operating assets and liabilities:    
Accounts receivable (4,480) (282,502)
Prepaid expenses and other current assets and deposits 71,896 (18,102)
Accounts payable and accrued liabilities (320,825) (253,997)
Deferred revenue (224,524) (59,001)
Net cash used in operating activities (2,720,746) (2,355,835)
Cash flows used in investing activities:    
Purchase of property plant and equipment (51,795) (30,825)
Purchase of intangible assets (14,301)  
Net cash used in investing activities (66,096) (30,825)
Cash flows from financing activities:    
Net proceeds from sale of common stock and warrants 7,853,155 7,956,050
Proceeds from the exercise of warrants 4,410  
Purchase and cancelation of previously issued warrants   (4,090,952)
Net cash provided by financing activities 7,857,565 3,865,098
Net increase in cash and cash equivalents 5,070,723 1,478,438
Cash and cash equivalents at beginning of period 7,312,184 1,393,132
Cash and cash equivalents at end of period $ 12,382,907 $ 2,871,570
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 $ 49
Property, plant and equipment acquired, and included in accounts payable 40,908 $ 181,104
Intangible assets acquired, and included in accounts payable 17,841
Issuance of options to settle accrued liability $ 42,335
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.3.1.900
SUMMARY OF ACCOUNTING POLICIES
3 Months Ended
Dec. 31, 2015
Accounting Policies [Abstract]  
SUMMARY OF ACCOUNTING POLICIES

NOTE A — SUMMARY OF ACCOUNTING POLICIES

 

General

 

The accompanying condensed consolidated financial statements as of December 31, 2015 and for the three month periods ended December 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 month period ended December 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2016. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the fiscal year ended September 30, 2015 and footnotes thereto included in the Annual Report on Form 10-K, of Applied DNA Sciences, Inc. (the “Company”) filed with the SEC.

 

The condensed consolidated balance sheet as of September 30, 2015 contained herein has been derived from the audited consolidated financial statements as of September 30, 2015, but does not include all disclosures required by GAAP.

 

Business and Basis of Presentation

 

The Company is a Delaware corporation, which was initially organized in 1983 under the laws of the State of Florida as Datalink Systems, Inc. In 1998, the Company reincorporated in the State of Nevada, and in 2002, the Company changed its name to its current name, Applied DNA Sciences, Inc. In December 2008, the Company reincorporated from 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 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.

 

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 December 31, 2015 and September 30, 2015, the Company recorded deferred revenue of $57,526 and $282,050, 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 $504,349 from these contract awards during the three month period ended December 31, 2015 and $449,647 for the three month period ended December 31, 2014.

 

The Company recognizes the revenue under its cotton customer contracts when the product has been shipped, as there is no right of return under these arrangements. The Company has evaluated the other indicators of gross and net revenue recognition, including whether or not the Company is the primary obligor and if it has general inventory risk. The Company does not have any general inventory risk and is not the primary obligor as it relates to the marketing portion of the tagging fee. With respect to the Company’s mutual license agreement with Himatsingka America Inc. (formerly known as Divatex Home Fashion, Inc.) (“Himatsingka”), the Company has carefully evaluated all of the key gross and net revenue recognition indicators and has concluded that the circumstances as they relate to Himatsingka’s portion of the tagging fee are more consistent with those key indicators that support net revenue reporting. In addition, the nature of some of the Company’s cotton contracts includes extended payment terms that will result in a longer collection period and slower cash inflows. As a result, $1,500,000 of revenue recognized during the fiscal year ended September 30, 2015 under the Company’s memorandum of understanding with Louis Dreyfus Commodities is included in long-term accounts receivable as of December 31, 2015 and September 30, 2015. The cotton ginning season in the United States takes place between September and December each year, therefore, revenues from these contracts may be seasonal.

 

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.

 

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 month periods ended December 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 including those securities would have been anti-dilutive for the three month periods ended December 31, 2015 and 2014 are as follows: 

 

    2015     2014  
Warrants     7,324,727       4,470,502  
Employee options     3,890,420       3,777,888  
      11,215,147       8,248,390  

 

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 month period ended December 31, 2015 included an aggregate of 73%, from three customers. These three customers accounted for approximately 92% of the Company’s total accounts receivable, of which $1,500,000 is classified as long term accounts receivable at December 31, 2015.

 

The Company’s revenues earned from sale of products and services for the three month period ended December 31, 2014 included an aggregate of 53% from two customers. These two customers accounted for approximately 74% of the Company’s total accounts receivable at December 31, 2014.

 

In November 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17").   This update requires an entity to classify deferred tax liabilities and assets as noncurrent within a classified statement of financial position.  ASU 2015-17 is effective for annual and interim reporting periods beginning after December 15, 2016.  This update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.  Early application is permitted as of the beginning of the interim or annual reporting period.  The Company is currently evaluating the impact of the adoption of this pronouncement on its balance sheet, although it does not expect the pronouncement to have a significant impact.

 

In September 2015, the FASB issued Accounting Standards Update 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). The FASB issued ASU 2015-16 to simplify US GAAP to require that the acquirer record, in the same period’s financial statements, the effect of changes to provisional, measurement period amounts calculated as if the accounting had been completed at the acquisition date and disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The Company does not believe that this updated standard will have a material impact on its condensed consolidated financial statements.

 

In August 2014, 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.

XML 18 R7.htm IDEA: XBRL DOCUMENT v3.3.1.900
LIQUIDITY AND MANAGEMENT'S PLAN
3 Months Ended
Dec. 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 $214,567,679 as of December 31, 2015. The Company incurred a net loss of $2,926,270 and generated negative operating cash flow of $2,720,746 for the three month period ended December 31, 2015. However, the Company also has working capital of $14,325,738 as of December 31, 2015. At December 31, 2015 the Company had cash and cash equivalents of $12,382,907. The Company’s current capital resources include cash and cash equivalents, accounts receivable and prepaid expenses and other current assets. Historically, the Company has financed its operations principally from the sale of equity securities. On November 23, 2015, the Company closed a registered direct public offering of common stock and a concurrent private placement of warrants to purchase common stock, for aggregate gross proceeds of approximately $8,750,000, before deducting placement agent fees and offering expenses (See Note D).

 

The Company expects to finance operations and capital expenditures primarily through cash received from the November 2015 public offering and concurrent private placement as well as 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.

 

The Company may require additional funds to complete the continued development of its products, product manufacturing, and to fund expected additional losses from operations, until revenues are sufficient to cover the Company’s operating expenses. 

 

As a result of the Company's inability to file with the SEC certain audited historical financial statements relating to the assets of Vandalia Research, Inc. acquired in September 2015 by the date on which they were required to be filed, the Company is currently ineligible to use Form S-3, a streamlined registration form, to register securities for at least twelve calendar months and it would not regain the use of Form S-3 unless the Company was able to subsequently file these audited historical financial statements. Moreover, until the Company has filed the audited historical financial statements, it would be unable to use Form S-1 or other SEC forms to register securities as required for a public offering and would be unable to conduct offerings in private placements under Rule 505 or 506 of Regulation D to any purchasers who are not accredited investors. Therefore, until such time as the Company is able to conduct a public offering, if it determines it to be necessary or advisable to raise additional capital, the Company would need to issue securities in private placements to the extent permissible by law or seek other forms of financing. These alternatives generally entail greater total costs to the Company than a public offering of securities.
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.3.1.900
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
3 Months Ended
Dec. 31, 2015
Payables and Accruals [Abstract]  
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

NOTE C – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

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

 

    December 31,
2015
(unaudited)
    September 30,
2015
 
Accounts payable   $ 1,598,934     $ 1,237,973  
Accrued salaries payable     471,114       1,002,743  
Other accrued expenses     40,947       144,290  
Total   $ 2,110,995     $ 2,385,006  
XML 20 R9.htm IDEA: XBRL DOCUMENT v3.3.1.900
CAPITAL STOCK
3 Months Ended
Dec. 31, 2015
Stockholders' Equity Note [Abstract]  
CAPITAL STOCK

NOTE D - CAPITAL STOCK

 

On November 23, 2015, the Company entered into a securities purchase agreement with certain institutional investors providing for the purchase and sale of 2,500,000 shares of common stock at a price of $3.49 per share in a registered direct public offering. In a concurrent private placement, the Company sold warrants to purchase 1,250,000 shares of its common stock at a price of $0.01 per warrant, with an exercise price of $4.30 per share. The warrants will be exercisable beginning six months following the closing date of the private placement and will expire five years from the date on which they become exercisable. The warrants provide each warrant holder the right, at the warrant holder's election, to exercise by means of a cashless exercise feature. The gross proceeds to the Company from this registered direct offering and concurrent private placement were $8.75 million and net proceeds after deducting the placement agent fees and offering expenses were approximately $7.9 million.

 

In connection with the closing of the registered direct public offering and the concurrent private placement, as partial compensation, on November 25, 2015, the Company granted warrants to purchase 50,000 shares of common stock to its placement agent. These warrants have an exercise price of $4.01 (115% of the public offering price), subject to adjustment as set forth therein, will be exercisable beginning six months following the closing date of the private placement and expire at 5:00 PM (Eastern Standard Time) on November 25, 2020. These warrants provide the placement agent the right, at the placement agent’s election, to exercise by means of a cashless exercise feature.
XML 21 R10.htm IDEA: XBRL DOCUMENT v3.3.1.900
STOCK OPTIONS AND WARRANTS
3 Months Ended
Dec. 31, 2015
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]  
STOCK OPTIONS AND WARRANTS

NOTE E - 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 Note D) are summarized as follows:

 

    Number of
Shares
    Weighted
Average 
Exercise
Price Per 
Share
 
Balance at October 1, 2015     6,027,654     $ 3.54  
Granted     1,300,000       4.29  
Exercised     (1,260 )     (3.50 )
Cancelled or expired     (1,667 )     (10.74 )
Balance at December 31, 2015   $ 7,324,727     $ 3.67  
  

 

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 (the “Incentive Plan”). In 2007, 2008, 2012 and 2015, 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 8,833,333 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. The Incentive Plan’s expiration date is January 25, 2025.

 

The Incentive Plan is designed to retain directors, executives, and selected employees and consultants by rewarding them for making contributions to the Company's success with an award of options to purchase shares of common stock and an award of shares of common stock. As of December 31, 2015 a total of 269,752 shares have been issued and options to purchase 4,666,469 shares have been granted under the Incentive 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, 2015     3,458,905     $ 4.74          
Granted     531,523       3.04          
Exercised     (75,000 )     (2.86 )        
Cancelled or expired     (25,008 )     (4.20 )        
Outstanding at December 31, 2015     3,890,420     $ 4.26          
Vested at December 31, 2015     2,819,006     $ 4.23     $ 0.97  
Non-vested at December 31, 2015     1,071,415             $ 0.87  

 

 

During the three month period ended December 31, 2015, the Company issued an aggregate of 531,523 options to employees and non-employee board of director members. Included in these grants were 160,000 options granted to executives.

 

The fair value of options granted during the three month periods ended December 31, 2015 and 2014 was determined using the Black Scholes Option Pricing Model with the following weighted average assumptions:

 

    Three
Months
Ended
December 31, 
2015
    Three
Months
Ended
December 31, 
2014
 
Stock price   $ 3.04     $ 2.84  
Exercise price   $ 3.04     $ 2.84  
Expected term, years     6.10       4.86  
Dividend yield     %     %
Volatility     130 %     132 %
Risk free rate     1.8 %     1.58 %

 

The Company recorded $396,991 and $1,998,524 as stock compensation expense for the three month periods ended December 31, 2015 and 2014, respectively. As of December 31, 2015, unrecorded compensation cost related to non-vested awards was $3,402,145 which is expected to be recognized over a weighted average period of approximately 2.35 years. The weighted average grant date fair value per share for options granted during the three month period ended December 31, 2015 was $2.71. 
XML 22 R11.htm IDEA: XBRL DOCUMENT v3.3.1.900
COMMITMENTS AND CONTINGENCIES
3 Months Ended
Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE G - 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. Total rent expense for the three month periods ended December 31, 2015 and 2014 was $144,716 and $124,838, 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 deferred by $50,000. This salary deferral 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. Effective January 1, 2016, the CEO's salary was increased to $400,000 pursuant to approval by the Compensation Committee of the Board of Directors.

 

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.
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.3.1.900
ASSET PURCHASE AGREEMENT
3 Months Ended
Dec. 31, 2015
Asset Purchase Agreement [Abstract]  
ASSET PURCHASE AGREEMENT

NOTE H - ASSET PURCHASE AGREEMENT

 

As disclosed in the Company's audited consolidated financial statements as of and for the fiscal year ended September 30, 2015 and footnotes thereto included in the Annual Report on Form 10-K, filed with the SEC, on September 11, 2015, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), with Vandalia Research, Inc. a West Virginia corporation ("Vandalia"), and Derek A. Gregg, Vandalia’s Chief Executive Officer and a director of Vandalia, providing for the purchase of substantially all the assets (“Assets”) of Vandalia. The Company completed the acquisition of such Assets on the same date. The purchase price for the Assets was $1,500,000, which amount was determined through arms-length negotiation. Of this amount, $500,000 was placed in an escrow account for a period of nine months following the closing to satisfy Vandalia’s indemnification obligations, of which $350,000 was released after sixty days.

 

The audits of the historical financial statements of Vandalia are currently still in process. The following unaudited supplemental pro forma information presents the Company's financial results as if the acquisition of Vandalia had occurred October 1, 2013:
 

    Three month period  
    ended  
    December 31, 2014  
Revenue   $ 1,257,844  
         
Net loss     (8,030,404 )
         
Basic and diluted loss per share   $ (0.52 )
XML 24 R13.htm IDEA: XBRL DOCUMENT v3.3.1.900
SUMMARY OF ACCOUNTING POLICIES (Policies)
3 Months Ended
Dec. 31, 2015
Accounting Policies [Abstract]  
Business and Basis of Presentation

Business and Basis of Presentation

 

The Company is a Delaware corporation, which was initially organized in 1983 under the laws of the State of Florida as Datalink Systems, Inc. In 1998, the Company reincorporated in the State of Nevada, and in 2002, the Company changed its name to its current name, Applied DNA Sciences, Inc. In December 2008, the Company reincorporated from 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 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.

 

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 December 31, 2015 and September 30, 2015, the Company recorded deferred revenue of $57,526 and $282,050, 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 $504,349 from these contract awards during the three month period ended December 31, 2015 and $449,647 for the three month period ended December 31, 2014.

 

The Company recognizes the revenue under its cotton customer contracts when the product has been shipped, as there is no right of return under these arrangements. The Company has evaluated the other indicators of gross and net revenue recognition, including whether or not the Company is the primary obligor and if it has general inventory risk. The Company does not have any general inventory risk and is not the primary obligor as it relates to the marketing portion of the tagging fee. With respect to the Company’s mutual license agreement with Himatsingka America Inc. (formerly known as Divatex Home Fashion, Inc.) (“Himatsingka”), the Company has carefully evaluated all of the key gross and net revenue recognition indicators and has concluded that the circumstances as they relate to Himatsingka’s portion of the tagging fee are more consistent with those key indicators that support net revenue reporting. In addition, the nature of some of the Company’s cotton contracts includes extended payment terms that will result in a longer collection period and slower cash inflows. As a result, $1,500,000 of revenue recognized during the fiscal year ended September 30, 2015 under the Company’s memorandum of understanding with Louis Dreyfus Commodities is included in long-term accounts receivable as of December 31, 2015 and September 30, 2015. The cotton ginning season in the United States takes place between September and December each year, therefore, revenues from these contracts may be seasonal.

Use of Estimates

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.

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 month periods ended December 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 including those securities would have been anti-dilutive for the three month periods ended December 31, 2015 and 2014 are as follows: 

 

    2015     2014  
Warrants     7,324,727       4,470,502  
Employee options     3,890,420       3,777,888  
      11,215,147       8,248,390  
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 month period ended December 31, 2015 included an aggregate of 73%, from three customers. These three customers accounted for approximately 92% of the Company’s total accounts receivable, of which $1,500,000 is classified as long term accounts receivable at December 31, 2015.

 

The Company’s revenues earned from sale of products and services for the three month period ended December 31, 2014 included an aggregate of 53% from two customers. These two customers accounted for approximately 74% of the Company’s total accounts receivable at December 31, 2014.
Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In November 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17").   This update requires an entity to classify deferred tax liabilities and assets as noncurrent within a classified statement of financial position.  ASU 2015-17 is effective for annual and interim reporting periods beginning after December 15, 2016.  This update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.  Early application is permitted as of the beginning of the interim or annual reporting period.  The Company is currently evaluating the impact of the adoption of this pronouncement on its balance sheet, although it does not expect the pronouncement to have a significant impact.

 

In September 2015, the FASB issued Accounting Standards Update 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). The FASB issued ASU 2015-16 to simplify US GAAP to require that the acquirer record, in the same period’s financial statements, the effect of changes to provisional, measurement period amounts calculated as if the accounting had been completed at the acquisition date and disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The Company does not believe that this updated standard will have a material impact on its condensed consolidated financial statements.

 

In August 2014, 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.
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.3.1.900
SUMMARY OF ACCOUNTING POLICIES (Tables)
3 Months Ended
Dec. 31, 2015
Accounting Policies [Abstract]  
Schedule of anti-dilutive securities excluded from computation of earning per share
    2015     2014  
Warrants     7,324,727       4,470,502  
Employee options     3,890,420       3,777,888  
      11,215,147       8,248,390  
XML 26 R15.htm IDEA: XBRL DOCUMENT v3.3.1.900
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)
3 Months Ended
Dec. 31, 2015
Payables and Accruals [Abstract]  
Schedule of accounts payable and accrued liabilities
    December 31,
2015
(unaudited)
    September 30,
2015
 
Accounts payable   $ 1,598,934     $ 1,237,973  
Accrued salaries payable     471,114       1,002,743  
Other accrued expenses     40,947       144,290  
Total   $ 2,110,995     $ 2,385,006  
XML 27 R16.htm IDEA: XBRL DOCUMENT v3.3.1.900
STOCK OPTIONS AND WARRANTS (Tables)
3 Months Ended
Dec. 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, 2015     6,027,654     $ 3.54  
Granted     1,300,000       4.29  
Exercised     (1,260 )     (3.50 )
Cancelled or expired     (1,667 )     (10.74 )
Balance at December 31, 2015   $ 7,324,727     $ 3.67  
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, 2015     3,458,905     $ 4.74          
Granted     531,523       3.04          
Exercised     (75,000 )     (2.86 )        
Cancelled or expired     (25,008 )     (4.20 )        
Outstanding at December 31, 2015     3,890,420     $ 4.26          
Vested at December 31, 2015     2,819,006     $ 4.23     $ 0.97  
Non-vested at December 31, 2015     1,071,415             $ 0.87  
Schedule of fair value of options granted
    Three
Months
Ended
December 31, 
2015
    Three
Months
Ended
December 31, 
2014
 
Stock price   $ 3.04     $ 2.84  
Exercise price   $ 3.04     $ 2.84  
Expected term, years     6.10       4.86  
Dividend yield     %     %
Volatility     130 %     132 %
Risk free rate     1.8 %     1.58 %
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.3.1.900
ASSET PURCHASE AGREEMENT (Tables)
3 Months Ended
Dec. 31, 2015
Asset Purchase Agreement [Abstract]  
Per forma information of company's financial results as if acquisition occurred
    Three month period  
    ended  
    December 31, 2014  
Revenue   $ 1,257,844  
         
Net loss     (8,030,404 )
         
Basic and diluted loss per share   $ (0.52 )
XML 29 R18.htm IDEA: XBRL DOCUMENT v3.3.1.900
SUMMARY OF ACCOUNTING POLICIES - Summary of potential stock issuances under various options, and warrants (Details) - shares
3 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from diluted net loss per share 11,215,147 8,248,390
Warrants    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from diluted net loss per share 7,324,727 4,470,502
Employee options    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from diluted net loss per share 3,890,420 3,777,888
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.3.1.900
SUMMARY OF ACCOUNTING POLICIES (Detail Textuals) - USD ($)
3 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Sep. 30, 2015
Accounting Policies [Abstract]      
Deferred revenue $ 57,526   $ 282,050
Revenue for government contract awards 504,349 $ 449,647  
Long-term accounts receivable revenue recognized $ 1,500,000   $ 1,500,000
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.3.1.900
SUMMARY OF ACCOUNTING POLICIES (Detail Textuals 1)
3 Months Ended
Dec. 31, 2015
USD ($)
Customer
Dec. 31, 2014
Customer
Sep. 30, 2015
USD ($)
Concentration Risk [Line Items]      
Long term accounts receivables | $ $ 1,500,000   $ 1,500,000
Customer Concentration Risk | Total Revenue | Three customers      
Concentration Risk [Line Items]      
Percentage of total revenue and accounts receivable 73.00%    
Number of customers 3    
Customer Concentration Risk | Total Revenue | Two customers      
Concentration Risk [Line Items]      
Percentage of total revenue and accounts receivable   53.00%  
Number of customers   2  
Customer Concentration Risk | Accounts Receivable | Three customers      
Concentration Risk [Line Items]      
Percentage of total revenue and accounts receivable 92.00%    
Number of customers 3    
Long term accounts receivables | $ $ 1,500,000    
Customer Concentration Risk | Accounts Receivable | Two customers      
Concentration Risk [Line Items]      
Percentage of total revenue and accounts receivable   74.00%  
Number of customers   2  
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.3.1.900
LIQUIDITY AND MANAGEMENT'S PLAN (Detail Textuals) - USD ($)
1 Months Ended 3 Months Ended
Nov. 23, 2015
Dec. 31, 2015
Dec. 31, 2014
Sep. 30, 2015
Sep. 30, 2014
Liquidity And Management Plan [Abstract]          
Accumulated deficit   $ (214,567,679)   $ (211,641,409)  
Net loss   (2,926,270) $ (7,828,644)    
Operating cash flow   (2,720,746) (2,355,835)    
Working capital   14,325,738      
Cash and cash equivalents   $ 12,382,907 $ 2,871,570 $ 7,312,184 $ 1,393,132
Gross proceeds from offering $ 8,750,000        
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.3.1.900
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES - Summary of accounts payable and accrued liabilities (Details) - USD ($)
Dec. 31, 2015
Sep. 30, 2015
Payables and Accruals [Abstract]    
Accounts payable $ 1,598,934 $ 1,237,973
Accrued salaries payable 471,114 1,002,743
Other accrued expenses 40,947 144,290
Total $ 2,110,995 $ 2,385,006
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.3.1.900
CAPITAL STOCK (Detail Textuals) - USD ($)
1 Months Ended
Nov. 25, 2015
Nov. 23, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Gross proceeds from offering   $ 8,750,000
Private placement    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Number of common stock called by warrants 50,000  
Exercise price of warrants $ 4.01  
Exercise price percentage of public offering price 115.00%  
Securities Purchase Agreement    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Number of shares issued   2,500,000
Share issued (Price per share)   $ 3.49
Gross proceeds from offering   $ 8,750,000
Net proceeds after deducting placement agent fees and offering expenses   $ 7,900,000
Securities Purchase Agreement | Private placement    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Number of common stock called by warrants   1,250,000
Share price   $ 0.01
Exercise price of warrants   $ 4.30
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.3.1.900
STOCK OPTIONS AND WARRANTS - Transactions involving warrants (Details)
3 Months Ended
Dec. 31, 2015
$ / shares
shares
Number of Shares  
Balance at October 1, 2015 | shares 6,027,654
Granted | shares 1,300,000
Exercised | shares (1,260)
Cancelled or expired | shares (1,667)
Balance, December 31, 2015 | shares 7,324,727
Weighted Average Exercise Price Per Share  
Balance at October 1, 2015 | $ / shares $ 3.54
Granted | $ / shares 4.29
Exercised | $ / shares (3.50)
Cancelled or expired | $ / shares (10.74)
Balance, December 31, 2015 | $ / shares $ 3.67
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.3.1.900
STOCK OPTIONS AND WARRANTS - Transactions involving stock options issued to employees (Details 1) - Employee Stock Options - Incentive Stock Plan 2005
3 Months Ended
Dec. 31, 2015
$ / shares
shares
Number of Shares  
Outstanding at October 1, 2015 | shares 3,458,905
Granted | shares 531,523
Exercised | shares (75,000)
Cancelled or expired | shares (25,008)
Outstanding at December 31, 2015 | shares 3,890,420
Vested at December 31, 2015 | shares 2,819,006
Non-vested at December 31, 2015 | shares 1,071,415
Weighted Average Exercise Price Per Share  
Outstanding at October 1, 2015 $ 4.74
Granted 3.04
Exercised (2.86)
Cancelled or expired (4.20)
Outstanding at December 31, 2015 4.26
Vested at December 31, 2015 4.23
Aggregate Intrinsic Value, Vested at December 31, 2015 0.97
Aggregate Intrinsic Value, Non-vested at December 31, 2015 $ 0.87
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.3.1.900
STOCK OPTIONS AND WARRANTS - Fair value of options granted using Black Scholes Option Pricing Model with weighted average assumptions (Details 2) - $ / shares
3 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]    
Stock price $ 3.04 $ 2.84
Exercise price $ 3.04 $ 2.84
Expected term, years 6 years 1 month 6 days 4 years 10 months 10 days
Dividend yield
Volatility 130.00% 132.00%
Risk free rate 1.80% 1.58%
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.3.1.900
STOCK OPTIONS AND WARRANTS - Employee Stock Options (Detail Textuals) - Employee Stock Options - Incentive Stock Plan 2005
3 Months Ended
Dec. 31, 2015
shares
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 8,833,333
Number of common stock shares that can be covered by awards made to any participant per period 833,334
Number of shares issued 269,752
Options to purchase shares under the 2005 Incentive Stock Plan 4,666,469
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.3.1.900
STOCK OPTIONS AND WARRANTS - Employee Stock Options (Detail Textuals 1) - USD ($)
3 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock-based compensation expense $ 396,991 $ 1,998,524
Unrecorded compensation cost related to non-vested awards $ 3,402,145  
Weighted average period of non-vested awards options 2 years 4 months 6 days  
Weighted average grant date fair value for options granted $ 2.71  
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 options granted 531,523  
Employee Stock Options | Executives    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Number of options granted 160,000  
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.3.1.900
COMMITMENTS AND CONTINGENCIES (Detail Textuals)
1 Months Ended 3 Months Ended
Jun. 15, 2013
USD ($)
ft²
Dec. 31, 2015
USD ($)
Dec. 31, 2014
USD ($)
Jan. 01, 2016
USD ($)
Jan. 01, 2015
USD ($)
Jun. 21, 2014
USD ($)
Commitments And Contingencies [Line Items]            
Area of property under operating lease | ft² 30,000          
Extended operating lease for two additional period 3 years          
Base rent during initial lease term per annum $ 449,142          
Total lease rental expenses   $ 144,716 $ 124,838      
Chief Executive Officer | Employment Agreement            
Commitments And Contingencies [Line Items]            
Deferred amount of salary         $ 50,000 $ 50,000
Threshold amount of sales for two consecutive quarters           $ 3,000,000
Chief Executive Officer | Employment Agreement | Subsequent Event            
Commitments And Contingencies [Line Items]            
Increased amount of salary       $ 400,000    
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.3.1.900
ASSET PURCHASE AGREEMENT (Details)
3 Months Ended
Dec. 31, 2014
USD ($)
$ / shares
Business Acquisition [Line Items]  
Revenue $ 1,257,844
Net loss $ (8,030,404)
Basic and diluted loss per share | $ / shares $ (0.52)
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.3.1.900
ASSET PURCHASE AGREEMENT (Detail Textuals) - Asset Purchase Agreement - Vandalia
Sep. 11, 2015
USD ($)
Business Acquisition [Line Items]  
Purchase price for assets $ 1,500,000
Amount held in escrow 500,000
Amount of indemnification claims paid $ 350,000
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