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Applied DNA Sciences Reports Fiscal Second Quarter 2013 Results

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STONY BROOK, NY--(Marketwired - May 16, 2013) - Applied DNA Sciences, Inc. ( OTCBB : APDN ), (Twitter: @APDN), a provider of DNA-based anti-counterfeiting technology and product authentication solutions, announced its financial results for the second fiscal quarter ending March 31, 2013. 

Financial Results:
For the three months ended March 31, 2013, APDN generated $344,605 in revenues from operations principally from the sales of authentication services. For the three months ended March 31, 2012, the company generated $518,402 in revenues from operations. The decrease in sales for the three months ended March 31, 2013 compared to the three months ended March 31, 2012 was primarily caused by the completion of our prior R&D contract with the Logistics Management Institute ("LMI"), and a slower than anticipated replacement of that revenue by DNA-marking contracts with commercial electronics manufacturers. In late January 2013, the United States Defense Logistics Agency ("DLA") announced that it would subsidize SigNature® DNA marking costs for its trusted suppliers, and in March 2013, after this and other mechanisms were in place, the company was able to fully roll-out SigNature DNA shipments for this market segment.

Selling, general and administrative (SG&A) expenses increased from $1,824,646 for the three months ended March 31, 2012 to $2,754,407 for the three months ended March 31, 2013. The increase of $929,761, or 51%, is primarily attributable to higher professional, salary and service fees incurred. These increments were carefully planned, and are essential to ensure a flawless execution against an expected growing demand for our products.

In an announcement made May 7th, the company announced that 10 companies were contracted to DNA mark the parts they will be selling to DLA, while 9 more companies were negotiating contract closings for DNA. In the week since that announcement, 2 more companies have signed contracts; we are negotiating with OCMs, OEMs and Authorized Distributors. We have quoted our first customer whose desire is to supply DNA-marked components to the commercial industry at large, as a value-adding "best practice" outside of the DLA requirement. Two companies have been signed on as "3rd party" markers, enabling new customers to ramp up faster. Our SG&A investment also enhanced our selling ability, reducing our sales cycle in this sector significantly. Finally, our contracted customers must meet our demanding security provisions before we will allow them to accept our DNA markers in their facilities. Our newly hired trainers then train and certify these customers with extensive training and QC compliance testing. By working closely with new customers and absorbing their feedback, we have reduced their accreditation time by nearly 70%. Improvements are being made weekly.

"Although marking components for trusted suppliers of DLA is only one aspect of our business, in the past quarter, we focused significant resources into getting this part of our business fully up and running to ensure we would be ready for the anticipated influx of additional orders. We feel that this program is still in its early stages and that although we are not close to the potential for this program, we are fully prepared to meet the anticipated demand," said Dr. James A. Hayward, President and CEO of Applied DNA Sciences.

To best control our cashflow, our investment strategy must precede, but only marginally, our technology roadmap (pictured for military electronics) to service the entire supply chain. We are developing seamlessly deployed technologies to service all the verticals that supply DLA and beyond, into the commercial sectors. This work is funded in part by our recently announced Phase 1 SBIR contract with the Missile Defense Agency.

In prior announcements, we described our efforts at protecting copper theft, a global scourge that can damage a country's critical infrastructure. In the last 6 months we have had a substantial order to protect a European electrical utility. Swedish railways have marked miles of copper with our DNA. Recently, American rail systems have shown similar interests. Given the size and scope of the copper market and the scale of copper crime combined with its threat to critical infrastructure, we expect the DNA marking of copper to become an important market for APDN.

Research and development expenses increased from $96,097 for the three months ended March 31, 2012 to $176,485 for the three months ended March 31, 2013. The increase of $80,388 is attributable to additional research and development activity needed in support of current operations.

Our increase in research expenditure has in part yielded a greatly enhanced portfolio of Intellectual Property, an essential asset for our shareholders, and the basis of competitive edge. We were issued 4 critical patents in the month of April alone, bringing our patent count to 22 granted patents. We have filed 6 additional patents since February, for a total of 24 patents pending. Yesterday, we announced the purchase of assets from RedWeb, including additional key patent applications. We regard our patent strategy as a fundamental component of our value creation.

Total operating expenses increased to $2,952,722 for the three months ended March 31, 2013 from $2,019,451 for the three months ended March 31, 2012, or an increase of $933,271 primarily attributable to an increase in professional fees paid and in R&D expenditures, which was offset by a decrease in depreciation and amortization expense.

Net loss for the three months ended March 31, 2013 increased to $3,127,631 from a net loss of $1,543,882 for the three months ended March 31, 2012 which is primarily attributable to factors described above.

APDN currently has 38 full-time employees and two part-time employees, including two in management, 27 in operations, 9 in sales and marketing, one in human resources, and one in investor relations. This is an increase of 11 employees from three months ago. Four additional employees have been offered employment and will start by June 15, 2013. This will give us 42 full-time employees, 2 part-time employees, including four in management, 29 in operations, 9 in sales and marketing, one in human resources, and one in investor relations.

Dr. Hayward commented further: "Our cash-in-transit business is holding steady with positive signs of potential growth, our textile business is completing global pilots and with the recent announcements of the RedWeb Asset acquisition and SmokeCloak collaboration, our security business throughout the world is poised for expansion -- both in breadth and depth."

Subsequent events include:

  • RedWeb -- On May 10, 2013, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with RedWeb Technologies Limited ("RedWeb"), a corporation incorporated and registered under the laws of England & Wales, to purchase certain assets of RedWeb ("Purchased Assets") relating to its forensic tagging security system for a purchase price of £400,000 ($624,080). The Purchased Assets include RedWeb's Sentry 500 Intruder Spray System, RedWeb's Advanced Molecular Taggent Technology and all products relating thereto, certain intellectual property and inventory relating to the foregoing.
  • SmokeCloak -- APDN has entered into a 2-way exclusive agreement with SmokeCloak, A/S (MSS) of Denmark, to market a technology combining APDN's SigNature DNA in a rapid-deployment security smoke called DNA Fog. MSS will buy DNA only from APDN, while APDN will supply DNA to no other fog manufacturer than SmokeCloak. As part of the relationship, MSS has extended their distribution network for use by APDN, accessing security sales throughout the world and enhancing APDN's internal sales force.
  • Markem LOI -- On April 4, 2013, APDN announced the signing of a Letter of Intent (LOI) with Markem-Imaje Corporation, establishing Applied DNA Sciences as an authorized reseller of Markem-Imaje Fluid inks. The LOI is specifically related to the application of SigNature DNA botanical markers added into Markem-Imaje inks. This supports suppliers in meeting the Defense Logistics Agency (DLA) requirement for SigNature DNA marking on a class of electronics provided to the Agency. Markem-Imaje is a top supplier of inks to the electronics industry, both military and commercial, and is said to be the world's largest provider of product identification solutions.
  • SBIR Grant -- On April 23, 2013, APDN announced that it had been awarded a Phase I research grant by the United States Missile Defense Agency (MDA) for approximately $150,000, for advanced development of APDN's anti-counterfeiting platform for military electronics. The award, granted by the MDA Small Business Innovative Research program (SBIR), aims to develop advanced and innovative methods of placing markings or coatings onto original parts at the time of manufacture, to enable customers at later stages in the supply chain to confirm that the component is authentic.

The quarterly report on Form 10-Q, which includes Applied DNA Sciences consolidated financial statements, is available for viewing and downloading, free of charge, through the Investor Relations section of APDN's Web site at www.adnas.com, or through the SEC's electronic data system at www.sec.gov.

About Applied DNA Sciences

APDN is a provider of botanical-DNA based security and authentication solutions that can help protect products, brands and intellectual property of companies, governments and consumers from theft, counterfeiting, fraud and diversion. SigNature® DNA and smartDNA, our principal anti-counterfeiting and product authentication solutions that essentially cannot be copied, provide a forensic chain of evidence and can be used to prosecute perpetrators. 

The statements made by APDN may be forward-looking in nature. Forward-looking statements describe APDN's future plans, projections, strategies and expectations, and are based on assumptions and involve a number of risks and uncertainties, many of which are beyond the control of APDN. Actual results could differ materially from those projected due to our short operating history, limited financial resources, limited market acceptance, market competition and various other factors detailed from time to time in APDN's SEC reports and filings, including our Annual Report on Form 10-K, filed on December 20, 2012 and our subsequent quarterly reports on Form 10-Q. APDN undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date hereof to reflect the occurrence of unanticipated events.