Differences between the 10K & 10KA
I ran the two reports thru a text comparison program.
A * means a change.
A !> means a new line.
A !< means a deleted line.
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1 * 10-K 1 t77969_10k.htm FORM 10-K
* 10-K/A 1 t79133_10ka.htm FORM 10-K (AMENDMENT NO. 1)
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10 * FORM 10-K
* *FORM 10-K**/A *
!> *(Amendment No. 1) *
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98 * Accelerated filer o
* Accelerated filer x
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102 * Smaller reporting company x
* Smaller reporting company £
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!>
!> *Explanatory Note *
!>
!> Applied DNA Sciences, Inc. (the “Company”) is filing this Amendment No.
!> 1 (the “Amendment”) to its Annual Report on Form 10-K for the fiscal
!> year ended September 30, 2013, previously filed with the Securities and
!> Exchange Commission (the “SEC”) on December 20, 2013 (the “Original
!> 10-K”). The Company has determined that as a result of the Company’s
!> transition from a “smaller reporting company” to an “accelerated filer”
!> at the end of fiscal 2013, the Company was required to include in the
!> Original 10-K the auditor attestation report on internal control over
!> financial reporting required by Section 404(b) of the Sarbanes-Oxley Act
!> of 2002 (the “Auditor Attestation Report”). This Amendment includes,
!> among other changes and additions to the Original 10-K described below,
!> the Auditor Attestation Report and revisions to Management’s Report on
!> Internal Control over Financial Reporting.
!>
!> The Company was a smaller reporting company for fiscal year 2013 subject
!> to scaled disclosure requirements afforded to smaller reporting
!> companies. When a company is required to exit smaller reporting company
!> status, as the Company did at the end of fiscal 2013, it may continue to
!> provide scaled disclosure as a smaller reporting company through the
!> filing of the annual report on Form 10-K for that year, but, as an
!> accelerated filer, it is required to include an Auditor Attestation
!> Report. At the time the Company filed the Original 10-K in December
!> 2013, it believed that the contents of the Original 10-K were governed
!> by the disclosure requirements applicable to a smaller reporting company
!> and omitted the Auditor Attestation Report required for an accelerated
!> filer.
!>
!> In addition to the above, this Amendment includes the following changes
!> and additions to the Original 10-K:
!>
!> · Item 1 “Business- Target Markets” has been updated to clarify and
!> enhance the narrative section based on SEC comments the Company received
!> on February 20, 2014 and March 12, 2014. Certain other conforming
!> changes have been made.
!>
!> · We have included new risk factors relating to possible claims for
!> damages in connection with certain sales of shares of our stock in the
!> open market and the material weakness in internal control over financial
!> reporting identified in Management's Report on Internal Control over
!> Financial Reporting.
!>
!> · Our independent registered public accounting firm has revised their
!> audit report on our consolidated financial statements and added a
!> paragraph regarding their separate audit report on internal control over
!> financial reporting.
!>
!> · We have updated our Notes to our consolidated financial statement on
!> Note M – Subsequent Events.
!>
!> · New certifications by our principal executive officer and principal
!> financial officer under Sections 302 and 906 of Sarbanes-Oxley Act of
!> 2002 are filed as exhibits to this Amendment.
!>
!>
!>
!> Except as described above, no other amendments have been made to the
!> Original Filing. This Amendment does not modify or update the
!> disclosures or financial information contained in the Original Filing in
!> any way other than as required to reflect the revisions discussed above.
!>
!>
!>
!>
!>
!>
!>
!>
!>
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214 * 29
* 30
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223 * 30
* 31
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228 * 37
* 38
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234 * 41
* 42
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239 * 44
* 45
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244 * 45
* 46
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253 * 46
* 47
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684 * fiberTyping
* *fiberTyping*
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859 * target markets include microcircuits and other electronics, homeland
* target markets include microcircuits and other electronics,
860 * security, cash-in-transit, textile and apparel authentication and law
* cash-in-transit and , textile and apparel authentication and our future
861 * enforcement, and our future target markets include identification cards
* target markets include homeland security, law enforcement,
862 * and secure documents, pharmaceuticals, consumer products, fine wine and
* identification cards and secure documents, pharmaceuticals, consumer
863 * art and collectibles. If and when we have significantly penetrated
* products, fine wine and art and collectibles. If and when we have
864 * these markets, we intend to expand into additional related high volume
* significantly penetrated these markets, we intend to expand into
865 * markets.
* additional related high volume markets.
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880 * efforts on microcircuits and other electronics, homeland security,
* efforts on microcircuits and other electronics, cash-in-transit, and
881 * cash-in-transit, textile and apparel businesses and law enforcement. In
* textile and apparel businesses. In the future, the Company plans to
882 * the future, the Company plans to expand its focus to include
* expand its focus to include homeland security, law enforcement,
883 * identification cards and other secure documents, pharmaceuticals, wine
* identification cards and other secure documents, pharmaceuticals,
884 * and luxury consumer goods.
* consumer products, fine wine and arts and collectibles .
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934 * Homeland Security
* The Defense Logistics Agency (“DLA”), a component of the U.S. Department
!> of Defense, requires that defense contractors provide items that have
!> been marked with botanically-generated DNA produced by us or our
!> authorized licensees. DNA marking is required on items falling within
!> Federal Supply Class (FSC) 5962, Electronic Microcircuits, which have
!> been determined to be at high risk for counterfeiting. A clause at
!> Defense Logistics Acquisition Directive (DLAD) 52.211-9074,
!> Deoxyribonucleic Acid (DNA) Marking on High Risk Items, is included in
!> new solicitations and contracts for FSC 5962 items when the item
!> description states that the item requires DNA marking. As of December
!> 12, 2013, we are providing unique DNA marks to 27 companies that sell
!> microcircuits and other electronics to the military and other markets.
!>
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936 * The U.S. military is facing the challenge of the increasing intrusion of
*
937 * counterfeit electronics and other parts into its supply lines. This
* Our SigNature DNA solution provides secure, forensic, and cost-effective
938 * problem is not limited to electronics. Foreign suppliers using
* anti-counterfeiting, anti-piracy and identification solutions to the
939 * substandard materials could be producing rivets, bolts and screws that
* military organizations and other companies supplying microelectronics
940 * hold together everything from missile casings to ship ladders. The
* and similar products globally in need of securing their supply chains.
941 * explosion of counterfeit parts is being driven by an expanding global
*
942 <! economy and an emphasis on low-price contracting — both of which come as
943 <! the U.S. Department of Defense is relying more heavily on older
944 <! platforms, with parts that are becoming obsolete. The global
945 <! semiconductor market has been estimated to be as large as $300 billion
946 <! per year, all subject to the risks of counterfeiting. The US Department
947 <! of Defense is estimated to spend $4 billion per year in the
948 <! semiconductor market.
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956 <!
957 <! On September 9, 2010, Homeland Security Newswire published an article
958 <! “Fake chips from China threaten U.S. military systems”in which a U.S.
959 <! Chamber of Commerce estimate finds that the global market for
960 <! counterfeit electronics may be as large as $10 billion. While these
961 <! references include daunting statistics, the underlying problem has not
962 <! changed because there was no satisfactory technological
963 <! solution. Senate hearings in November 2011 revealed the discovery of
964 <! over 1,800 incidents, totaling over 1 million parts, of counterfeit
965 <! electronic parts in the defense supply chain. According to the
966 <! semiconductor industry, counterfeiting results in a $7.5 billion loss in
967 <! revenue annually as well as a loss of 11,000 U.S. jobs.
968 <!
969 <! DNA-marking protects the consumer, the government and our service men
970 <! and women. The manufacturers can ensure that only properly screened,
971 <! original product goes to users. The same DNA marking can then protect
972 <! the manufacturers themselves in the form of returned product which they
973 <! must replace or repair. Broadly applicable, DNA marking could be
974 <! disseminated as industry best practices and military standards.
975 <!
976 <! The Defense Logistics Agency (“DLA”), a component of the U.S. Department
977 <! of Defense, has launched a new requirement that defense contractors
978 <! provide items that have been marked with botanically-generated DNA
979 <! produced by us or our authorized licensees. DNA marking must begin on
980 <! items falling within Federal Supply Class (FSC) 5962, Electronic
981 <! Microcircuits, which have been determined to be at high risk for
982 <! counterfeiting. A new clause at Defense Logistics Acquisition Directive
983 <! (DLAD) 52.211-9074, Deoxyribonucleic Acid (DNA) Marking on High Risk
984 <! Items, will be included in new solicitations and contracts for FSC 5962
985 <! items when the item description states that the item requires DNA marking.
986 <!
987 <! Our SigNature DNA solution can provide secure, forensic, and
988 <! cost-effective anti-counterfeiting, anti-piracy and identification
989 <! solutions to military organizations and other companies supplying
990 <! microelectronics and similar products globally in need of securing their
991 <! supply chains.
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1010 *
*
1011 * We are able to incorporate our SigNature DNA Markers in cash degradation
* We incorporate our SigNature DNA Markers in cash degradation inks that
1012 * inks that are used in the cash-in-transit industry. This solvent-based
* are used in the cash-in-transit industry. This solvent-based ink marks
1013 * ink marks bank notes if the cash box is compromised and has the ability
* bank notes if the cash box is compromised and has the ability to
1014 * to penetrate the bank notes rapidly and permanently. We believe our
* penetrate the bank notes rapidly and permanently. We believe our
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1016 * competing technologies.
* competing technologies.
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!> Our SigNature T DNA anti-counter feiting system for DNA marking and
!> authentication of wool and cotton fibers is currently in use by our
!> customers. We are now marking product in the United States and abroad to
!> assure integrity of the textile supply chain.
!>
!>
!> */Future Markets: /*
!>
!>
!>
!> */Homeland Security /*
!>
!>
!>
!> The U.S. military is facing the challenge of the increasing intrusion of
!> counterfeit electronics and other parts into its supply lines. This
!> problem is not limited to electronics. Foreign suppliers using
!> substandard materials could be producing rivets, bolts and screws that
!> hold together everything from missile casings to ship ladders. The
!> explosion of counterfeit parts is being driven by an expanding global
!> economy and an emphasis on low-price contracting — both of which come as
!> the U.S. Department of Defense is relying more heavily on older
!> platforms, with parts that are becoming obsolete. The global
!> semiconductor market has been estimated to be as large as $300 billion
!> per year, all subject to the risks of counterfeiting. The US Department
!> of Defense is estimated to spend $4 billion per year in the
!> semiconductor market.
!>
!>
!>
!> On September 9, 2010, Homeland Security Newswire published an article
!> “Fake chips from China threaten U.S. military systems” in which a U.S.
!> Chamber of Commerce estimate finds that the global market for
!> counterfeit electronics may be as large as $10 billion. While these
!> references include daunting statistics, the underlying problem has not
!> changed because there was no satisfactory technological
!> solution. Senate hearings in November 2011 revealed the discovery of
!> over 1,800 incidents, totaling over 1 million parts, of counterfeit
!> electronic parts in the defense supply chain. According to the
!> semiconductor industry, counterfeiting results in a $7.5 billion loss in
!> revenue annually as well as a loss of 11,000 U.S. jobs.
!>
!>
!>
!> DNA-marking using our SigNature DNA marks, protects the consumer, the
!> government and our service men and women. The manufacturers can ensure
!> that only properly screened, original product goes to users. The same
!> DNA marking can then protect the manufacturers themselves in the form of
!> returned product which they must replace or repair. Broadly applicable,
!> DNA marking could be disseminated as industry best practices and
!> military standards.
!>
!>
!>
!> The Defense Logistics Agency (“DLA”), a component of the U.S. Department
!> of Defense, has launched a new requirement that defense contractors
!> provide items that have been marked with botanically-generated DNA
!> produced by us or our authorized licensees. DNA marking must begin on
!> items falling within Federal Supply Class (FSC) 5962, Electronic
!> Microcircuits, which have been determined to be at high risk for
!> counterfeiting. A new clause at Defense Logistics Acquisition Directive
!> (DLAD) 52.211-9074, Deoxyribonucleic Acid (DNA) Marking on High Risk
!> Items, will be included in new solicitations and contracts for FSC 5962
!> items when the item description states that the item requires DNA marking.
!>
!>
!>
!> Our SigNature DNA solution can provide secure, forensic, and
!> cost-effective anti-counterfeiting, anti-piracy and identification
!> solutions to military organizations and other companies supplying
!> microelectronics and similar products globally in need of securing their
!> supply chains.
!>
!>
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1066 * by providing forensic quality evidence. Applied DNA Sciences, Inc. is
* by providing forensic quality evidence. We are working with the UK
1067 * working with the UK Metropolitan Police Service (MPS) by providing its
* Metropolitan Police Service (MPS) by providing its
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1071 <! Future Markets:
1072 <!
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1199 * identification number.”In some cases, drug makers are spending as much
* identification number.” In some cases, drug makers are spending as much
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1202 * to company executives. Applied DNA Sciences’ unique DNA identifier
* to company executives. Our unique DNA identifier mark-embedded in the
1203 * mark-embedded in the ink of a unique serialized bar code can provide a
* ink of a unique serialized bar code can provide a layered security
1204 * layered security foundation for a customer solution in this market.
* foundation for a customer solution in this market.
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!>
!> /We have identified a material weakness in our internal control over
!> financial reporting that could adversely affect our stock price and
!> ability to prepare complete and accurate financial statements in a
!> timely manner. /
!>
!>
!>
!> We concluded that our disclosure controls and procedures were not
!> effective as of September 30, 2013 and this deficiency constituted a
!> material weakness in our internal control over financial reporting as of
!> September 30, 2013. The material weakness, which arose primarily due to
!> the need for more enhanced and formalized documentation and procedures
!> regarding the financial statement closing and review process, is further
!> described in Item 9A of this Annual Report on Form 10-K. We are taking
!> steps to remediate this material weakness and to improve our disclosure
!> controls and procedures. We may, however, identify additional or future
!> material weaknesses or deficiencies. If we fail to remediate the
!> identified or any future material weakness or deficiency, or to maintain
!> our disclosure controls and procedures at the reasonable assurance
!> level, our financial statements and related disclosure could contain
!> material misstatements, the preparation and filing of our financial
!> statements and related filings could be delayed, and substantial costs
!> and resources may be required to remediate any weaknesses or
!> deficiencies or to improve our disclosure controls and procedures. If we
!> cannot produce reliable and timely financial statements, investors could
!> lose confidence in our reported financial information, the market price
!> of our stock could decline significantly, we may be unable to obtain
!> additional financing on acceptable terms, and our business and financial
!> condition could be harmed.
!>
!>
=======
=======
!>
!> We may be subject to claims for damages in connection with certain sales
!> of shares of our common stock in the open market.
!>
!> There may have been inadvertent violations of federal and state
!> securities laws in connection with certain sales of shares of our common
!> stock in the open market pursuant to a registration statement on Form
!> S-3 that we had filed to cover the resale of shares issued or to be
!> issued that was declared effective by the Securities and Exchange
!> Commission on July 31, 2013. On December 20, 2013, we filed our annual
!> report on Form 10-K for the fiscal year ended September 30, 2013 (the
!> "Original 2013 Form 10-K") which did not include the auditor attestation
!> report on internal control over financial reporting required by Section
!> 404(b) of Sarbanes-Oxley (the "Auditor Attestation Report"). We have
!> filed this amendment to the Original 2013 Form 10-K in order to include
!> the Auditor Attestation Report. There were approximately three months
!> when sales of shares may have occurred in open market transactions
!> pursuant to our registration statement when the use thereof should have
!> been suspended. Any such sales may have violated Section 5 or Section
!> 12(a)(1) of the Securities Act of 1933, as amended, and, as a result,
!> the Company may be liable for claims for damages. In addition, the
!> Securities and Exchange Commission and relevant state regulators could
!> impose monetary fines or other sanctions on us as provided under
!> relevant federal and state securities laws. The amount of such damages
!> and penalties, if any, cannot be determined at this time. If the payment
!> of damages or fines is significant, it could have a material, adverse
!> effect on our cash flow, financial condition or prospects.
!>
!>
=======
=======
!>
!> *Remediation of Weakness in Internal Controls *
!>
!>
!>
!> We concluded that our disclosure controls and procedures were not
!> effective as of September 30, 2013 and this deficiency constituted a
!> material weakness in our internal control over financial reporting as of
!> September 30, 2013. The material weakness, which arose primarily due to
!> the need for more enhanced and formalized documentation and procedures
!> regarding the financial statement closing and review process, is further
!> described in Item 9A of this Annual Report on Form 10-K. We are taking
!> the following steps to remediate this material weakness and to improve
!> our disclosure controls and procedures:
!>
!> · Our CEO has appointed a Sarbanes-Oxley project leadership team,
!> consisting of our CFO and our Controller, that will oversee the project;
!>
!> · Together with a consultant that we have engaged, we have enhanced
!> our review procedures and the documentation thereof; and
!>
!> · We are prepared to implement these enhanced procedures as we are
!> preparing our Form 10-Q for the period ended March 31, 2014.
!>
!>
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=======
!>
!> On December 20, 2013, 2,500,000 shares of the Company’s Common Stock
!> were issued in connection with a settlement resulting from the
!> termination of a consulting agreement. The fair value of the Common
!> Stock was determined using the Company’s stock price on December 20,
!> 2013. The total fair value of $337,500 was charged to operations.
!>
!>
!>
!> On February 11, 2014, 746,835 shares of the Company’s common stock were
!> issued in connection with the cashless exercise of 1,000,000 warrants to
!> acquire the Company’s common stock.
!>
!>
!>
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=======
!>
!> On February 6, 2014, the Company granted 2,500,000 options to purchase
!> the Company’s common stock at an exercise price of $0.16 per share for
!> five years to a consultant, with immediate vesting. This resulted in an
!> expense of $271,417 for the three month period ended March 31, 2014
!>
!>
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=======
!> *Management Report on Internal Control over Financial Reporting *
!>
!> Our management is responsible for establishing and maintaining adequate
!> internal control over financial reporting, as such term is defined in
!> Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over
!> financial reporting was designed to provide reasonable assurance to the
!> Company’s management and board of directors regarding the preparation
!> and fair presentation of published consolidated financial statements.
!> Internal control over financial reporting is promulgated under the
!> Exchange Act as a process designed by, or under the supervision of, the
!> Company’s principal executive and principal financial officers and
!> effected by the Company’s board of directors, management and other
!> personnel, 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. Internal control over financial reporting, no matter how
!> well designed, has inherent limitations and may not prevent or detect
!> misstatements. Therefore, even effective internal control over financial
!> reporting can only provide reasonable assurance with respect to the
!> financial statement preparation and presentation.
!>
!>
!>
!> Our management has conducted, with the participation of our CEO and CFO,
!> an assessment, including testing of the effectiveness, of our internal
!> control over financial reporting as of September 30, 2013. Management’s
!> assessment of internal control over financial reporting was based on
!> assessment criteria established in the /1992 Internal Control—Integrated
!> Framework/ issued by the Committee of Sponsoring Organizations of the
!> Treadway Commission (“COSO”). Based on such evaluation, management
!> concluded that our internal control over financial reporting was not
!> effective as of September 30, 2013 due to a deficiency in our disclosure
!> controls that was determined to be a material weakness, as described below.
!>
!>
!>
!> A material weakness is a deficiency, or a combination of deficiencies,
!> in internal control over financial reporting, such that there is a
!> reasonable possibility that a material misstatement of the company’s
!> annual or interim financial statements will not be prevented or detected
!> on a timely basis.
!>
!>
!>
!> The specific material weakness identified by the Company’s management as
!> of September 30, 2013 is described as follows:
!>
!>
!>
!> Our management determined that, as of September 30, 2013, the Company’s
!> disclosure controls and internal control over financial reporting were
!> not effective, due to the need for more enhanced and formalized
!> documentation and procedures regarding the financial statement closing
!> and review process to ensure that the application of the Company’s
!> accounting policies and the presentation of disclosures in the Company’s
!> financial statements is adequate. Further, in the filing of our original
!> Form 10-K for the year ended September 30, 2013, we did not effectively
!> evaluate the impact of our unaffiliated aggregate market value being in
!> excess of $75 million (reported level of $113 million) at March 31,
!> 2013. Subsequent to the filing of our Form 10-K, our management
!> determined that we should have included a 404(b) attestation report from
!> our auditors in our Form 10-K.
!>
!>
!>
!> Despite the material weakness reported above, the Company’s management
!> believes that its consolidated financial statements included in this
!> report fairly present in all material respects the Company’s financial
!> condition, results of operations, and cash flows for the periods presented.
!>
!>
!>
!> /Remediation of Material Weakness /
!>
!>
!>
!> Our management has developed a remediation action plan and we are
!> actively engaged in the implementation of the plan to fully remediate
!> our material weakness. The principal elements of our remediation plan
!> include the following:
!>
!>
!>
!> a. Our CEO has appointed a Sarbanes-Oxley project leadership team,
!> consisting of our CFO and our Controller, that will oversee the project,
!>
!> b. Together with a consultant that we have engaged, we have enhanced
!> our review procedures and the documentation thereof, and,
!>
!> c. We are prepared to implement these enhanced procedures as we are
!> preparing our Form 10-Q for the period ended March 31, 2014.
!>
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=======
3549 * Evaluation of Disclosure Controls and Procedures
*
!> Further, we have amended our Form 10-K for the year ended September 30,
!> 2013 to include a 404(b) attestation opinion from our auditors.
!>
!> *Attestation Report of the Independent Registered Public Accounting Firm *
!>
!> The effectiveness of our internal control over financial reporting as of
!> September 30, 2013 has been audited by RBSM LLP, our independent
!> registered public accounting firm, who also audited our consolidated
!> financial statements included in this Annual Report on Form 10-K/A, as
!> stated in their reports which appear with our accompanying consolidated
!> financial statements.
!>
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=======
3551 * Under the supervision and with the participation of our management,
*
3552 * including Dr. James A. Hayward, our Chief Executive Officer, who was
* *Changes in Internal Control over Financial Reporting *
3553 * also our principal executive officer as well as our Acting Chief
*
3554 <! Financial Officer, on September 30, 2013, we conducted an evaluation of
3555 <! the effectiveness of the design and operation of our disclosure controls
3556 <! and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
3557 <! Exchange Act, as of September 30, 2013. Disclosure controls and
3558 <! procedures are those controls and procedures designed to provide
3559 <! reasonable assurance that the information required to be disclosed in
3560 <! our Exchange Act filings is (1) recorded, processed, summarized and
3561 <! reported within the time periods specified in the SEC’s rules and forms,
3562 <! and (2) accumulated and communicated to management, including our Chief
3563 <! Executive Officer and Chief Financial Officer, as appropriate, to allow
3564 <! timely decisions regarding required disclosure.
3565 <!
3566 <! Based on that evaluation, our Chief Executive Officer and Acting Chief
3567 <! Financial Officer concluded that, as of September 30, 2013, our
3568 <! disclosure controls and procedures were effective.
3569 <!
3570 <! Management’s Annual Report on Internal Control over Financial Reporting
3571 <!
3572 <! Our management, including our Chief Executive Officer and Acting Chief
3573 <! Financial Officer, is responsible for establishing and maintaining
3574 <! adequate internal control over financial reporting, as such term is
3575 <! defined in Rule 13a-15(f) under the Exchange Act. Management conducted
3576 <! an assessment as of September 30, 2013 of the effectiveness of our
3577 <! internal control over financial reporting based on the framework
3578 <! inInternal Control – Integrated Framework issued by the Committee of
3579 <! Sponsoring Organizations of the Treadway Commission (“COSO”). Based on
3580 <! that evaluation, management concluded that our internal control over
3581 <! financial reporting was effective as of September 30, 2013, based on
3582 <! criteria inInternal Control – Integrated Framework issued by the COSO.
=======
=======
!>
!> There were no additional changes, other than those detailed above under
!> Remediation of Material Weakness in our internal control over financial
!> reporting during the most recent fiscal quarter that has materially
!> affected, or is reasonably likely to materially affect, our internal
!> control over financial reporting.
!>
!> 29
!>
!>
!>
!> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
!>
!>
!>
!> To the Board of Directors and Stockholders of
!> Applied DNA Sciences, Inc.:
!>
!>
!>
!> We have audited Applied DNA Sciences, Inc.’s (the “Company”) internal
!> control over financial reporting as of September 30, 2013, based on
!> criteria established in /Internal Control - Integrated Framework (1992)/
!> issued by the Committee of Sponsoring Organizations of the Treadway
!> Commission (COSO). The Company’s management is responsible for
!> maintaining effective internal control over financial reporting and for
!> its assessment of the effectiveness of internal control over financial
!> reporting, included in the accompanying Management’s Report on Internal
!> Control over Financial Reporting. Our responsibility is to express an
!> opinion on the Company’s internal control over financial reporting based
!> on our audit.
!>
!>
!>
!> We conducted our audit in accordance with the standards of the Public
!> Company Accounting Oversight Board (United States). Those standards
!> require that we plan and perform the audit to obtain reasonable
!> assurance about whether effective internal control over financial
!> reporting was maintained in all material respects. Our audit of internal
!> control over financial reporting included obtaining an understanding of
!> internal control over financial reporting, assessing the risk that a
!> material weakness exists, and testing and evaluating the design and
!> operating effectiveness of internal control based on the assessed risk.
!> Our audit also included performing such other procedures as we
!> considered necessary in the circumstances. We believe that our audit
!> provides a reasonable basis for our opinion.
!>
!>
!>
!> A company’s internal control over financial reporting is a process
!> designed 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. A company’s internal control over financial reporting
!> includes those policies and procedures that (1) pertain to the
!> maintenance of records that, in reasonable detail, accurately and fairly
!> reflect the transactions and dispositions of the assets of the company;
!> (2) provide reasonable assurance that transactions are recorded as
!> necessary to permit preparation of financial statements in accordance
!> with generally accepted accounting principles, and that receipts and
!> expenditures of the company are being made only in accordance with
!> authorizations of management and directors of the company; and (3)
!> provide reasonable assurance regarding prevention or timely detection of
!> unauthorized acquisition, use, or disposition of the company’s assets
!> that could have a material effect on the financial statements.
!>
!>
!>
=======
=======
3585 * reporting may not prevent or detect misstatements should they occur.
* reporting may not prevent or detect misstatements. Also, projections of
3586 * Also, projections of any evaluation of effectiveness to future periods
* any evaluation of effectiveness to future periods are subject to the
3587 * are subject to the risk that controls may become inadequate because of
* risk that controls may become inadequate because of changes in
3588 * changes in conditions or that the degree of compliance with the control
* conditions, or that the degree of compliance with the policies or
3589 * procedure may deteriorate.
* procedures may deteriorate.
3590 *
*
3591 * This Annual Report does not include an attestation report of our
*
3592 * registered public accounting firm regarding internal control over
*
3593 * financial reporting. Management’s report is not subject to attestation
* A material weakness is a control deficiency, or combination of
3594 * by our registered public accounting firm pursuant to rules of the SEC
* deficiencies, in internal control over financial reporting, such that
3595 * that permit us to provide only management’s report in this Annual Report
* there is a reasonable possibility that a material misstatement of the
3596 * on Form 10-K.
* Company’s annual or interim financial statements will not be prevented
3597 *
* or detected on a timely basis. The following material weakness has been
3598 * Changes in Internal Control over Financial Reporting
* identified and included in management’s assessment. The material
3599 *
* weakness, which arose primarily due to the need for more enhanced and
3600 * There was no change in our internal control over financial reporting
* formalized documentation and procedures regarding the financial
3601 * during the most recent fiscal quarter that has materially affected, or
* statement closing and review process to ensure that the application of
3602 * is reasonably likely to materially affect, our internal control over
* the Company’s accounting policies and the presentation of disclosures in
3603 * financial reporting.
* the Company’s financial statements is adequate. Further, in the filing
!> of the Company’s original Form 10-K for the year ended September 30,
!> 2013, the Company’s management did not effectively evaluate the impact
!> of the Company’s unaffiliated aggregate market value being in excess of
!> $75 million (reported level of $113 million) at March 31, 2013, its most
!> recent second quarter end. Subsequent to the filing of its Form 10-K,
!> the Company’s management determined that the Companyshould have included
!> a 404(b) attestation report from us in its Form 10-K. This material
!> weakness was considered in determining the nature, timing, and extent of
!> audit tests applied in our audit of the September 30, 2013’s
!> consolidated financial statements, and this report does not affect our
!> report dated May 1, 2014 on those financial statements.
!>
!>
!>
!> In our opinion, because of the effect of the material weakness described
!> above on the achievement of the objectives of the control criteria,
!> Applied DNA Sciences, Inc. has not maintained effective internal control
!> over financial reporting as of September 30, 2013, based on criteria
!> established in /Internal Control - Integrated Framework (1992)/ issued
!> by the Committee of Sponsoring Organizations of the Treadway Commission
!> (COSO).
!>
!>
!>
!> We have also audited, in accordance with the standards of the Public
!> Company Accounting Oversight Board (United States), the consolidated
!> balance sheets of Applied DNA Sciences, Inc. as of September 30, 2013
!> and 2012, and the related consolidated statements of operations,
!> stockholders’ equity, and cash flows for each of the two years in the
!> period ended September 30, 2013 of Applied DNA Sciences, Inc., and our
!> report dated May 1, 2014 expressed an unqualified opinion.
!>
!>
!>
!> /s/ RBSM LLP
!>
!>
!>
!> New York, New York
!>
!> May 1, 2014
!>
=======
=======
3610 * 29
* 30
=======
=======
3724 * 30
* 31
=======
=======
3757 * 31
* 32
=======
=======
3863 * 32
* 33
=======
=======
3890 * 33
* 34
=======
=======
3969 * 34
* 35
=======
=======
4120 * 35
* 36
=======
=======
4227 * 36
* 37
=======
=======
4369 * 37
* 38
=======
=======
4563 * 38
* 39
=======
=======
4657 * 39
* 40
=======
=======
4817 * 40
* 41
=======
=======
4972 * 41
* 42
=======
=======
5102 * 42
* 43
=======
=======
5163 * 43
* 44
=======
=======
5216 * 44
* 45
=======
=======
5342 * 45
* 46
=======
=======
5374 * 46
* 47
=======
=======
5390 * Date: December 19, 2013
* Date: May 1, 2014
=======
=======
5413 * December 19, 2013
* May 1, 2014
=======
=======
5420 * Chief Financial Officer (Principal Financial Officer)
* Chief Financial Officer (/Principal Financial Officer/ and Principal
!> Accounting Officer )
=======
=======
5423 * December 19, 2013
* May 1, 2014
=======
=======
5425 *
*
=======
=======
5431 * December 19, 2013
* May 1, 2014
=======
=======
5439 * December 19, 2013
* May 1, 2014
=======
=======
5447 * December 19, 2013
* May 1, 2014
=======
=======
5455 * December 19, 2013
* May 1, 2014
=======
=======
5460 * 47
* 48
=======
=======
5573 * 48
* 49
=======
=======
5677 * Sciences, Inc. and Karol Gray.*†
* Sciences, Inc. and Karol Gray filed as an exhibit to the annual report
!> on Form 10-K filed with the Commission on December 20, 2013 and
!> incorporated herein by reference .*†
=======
=======
5715 * 49
* 50
=======
=======
5768 * 50
* 51
=======
=======
!> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
!>
=======
=======
5816 * REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
*
5817 *
* To the Board of Directors and Stockholders of
5818 * To the Board of Directors
*
5819 * Applied DNA Sciences, Inc.
* Applied DNA Sciences, Inc.:
5820 * Stony Brook, New York
*
5821 *
* * *
!>
=======
=======
5825 * and cash flows for each of the two years period ended September 30,
* and cash flows for each of the two years in the period ended September
5826 * 2013. These consolidated financial statements are the responsibility of
* 30, 2013. These consolidated financial statements are the
5827 * the Company’s management. Our responsibility is to express an opinion
* responsibility of the Company’s management. Our responsibility is to
5828 * on these consolidated financial statements based on our audits.
* express an opinion on these consolidated financial statements based on
!> our audits.
!>
=======
=======
!>
=======
=======
5831 * Company Accounting Oversight Board (United States of America). Those
* Company Accounting Oversight Board (United States). Those standards
5832 * standards require that we plan and perform the audit to obtain
* require that we plan and perform the audit to obtain reasonable
5833 * reasonable assurance about whether the financial statements are free of
* assurance about whether the financial statements are free of material
5834 * material misstatements. The Company is not required to have, nor were
* misstatements. An audit includes examining, on a test basis, evidence
5835 * we engaged to perform, an audit of its internal control over financial
* supporting the amounts and disclosures in the financial statements. An
5836 * reporting. Our audit included consideration of internal control over
* audit also includes assessing the accounting principles used and
5837 * financial reporting as a basis for designing audit procedures that are
* significant estimates made by management, as well as evaluating the
5838 * appropriate in the circumstances, but not for the purpose of expressing
* overall financial statement presentation. We believe our audits provide
5839 * an opinion on the effectiveness of the Company’s internal control over
* a reasonable basis for our opinion.
5840 * financial reporting. Accordingly we express no such opinion. An audit
*
5841 <! includes examining, on a test basis, evidence supporting the amounts and
5842 <! disclosures in the financial statements. An audit also includes
5843 <! assessing the accounting principles used and significant estimates made
5844 <! by management, as well as evaluating the overall financial statement
5845 <! presentation. We believe our audits provide a reasonable basis for our
5846 <! opinion.
=======
=======
!>
=======
=======
5852 * for each of the two years period ended September 30, 2013, in conformity
* for each of the two years in the period ended September 30, 2013, in
5853 * with accounting principles generally accepted in the United States of
* conformity with accounting principles generally accepted in the United
5854 * America.
* States of America.
5855 <!
5856 <!
5857 <! /s/ RBSM LLP
5858 <!
=======
=======
5861 * New York, New York
*
5862 * December 19, 2013
* We have also audited, in accordance with the standards of the Public
!> Company Accounting Oversight Board (United States), the Company’s
!> internal control over financial reporting as of September 30, 2013,
!> based on the criteria established in Internal Control – Integrated
!> Framework 1992 issued by the Committee of Sponsoring Organizations of
!> the Treadway Commission (COSO) , and our report dated May 1, 2014
!> expressed an adverse opinion on the Company’s internal control over
!> financial reporting.
!>
=======
=======
!>
!> /s/ RBSM LLP
!>
!>
!>
!> New York, New York
!>
!> May 1, 2014
!>
=======
=======
!>
!> On December 20, 2013, 2,500,000 shares of the Company’s Common Stock was
!> issued in connection with a settlement resulting from the termination of
!> a consulting agreement. The fair value of the Common Stock was
!> determined using the Company’s stock price on December 20, 2013. The
!> total fair value of $337,500 was changes to operations.
!>
!> On February 11, 2014, 746,835 shares of the Company’s Common Stock were
!> issued in connection with the cashless exercise of 1,000,000 warrants to
!> acquire the Company’s Common Stock.
=======
=======
!>
!> On February 6, 2014, the Company granted 2,500,000 options to purchase
!> the Company’s common stock at an exercise price of $0.16 per share for
!> five years to a consultant, with immediate vesting. This resulted in an
!> expense of $271,417 for the three month period ended March 31, 2014.
!>
=======
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