Applied DNA Sciences Inc (APDN)

[rockymarsi]

Press Release: Applied DNA Reports Fiscal Third Quarter 2019 Financial Results
4:05 pm ET August 13, 2019 (Dow Jones) Print
Press Release: Applied DNA Reports Fiscal Third Quarter 2019 Financial Results

Applied DNA Reports Fiscal Third Quarter 2019 Financial Results

Company to Hold Conference Call and Webcast Today, Tuesday, August 13, 2019 at 4:30 PM EST.

STONY BROOK, N.Y.--(BUSINESS WIRE)--August 13, 2019--

Applied DNA Sciences, Inc. (NASDAQ: APDN) ("Applied DNA" or the "Company"), announced consolidated financial results for the fiscal 2019 third quarter ended June 30, 2019. "Our fiscal third quarter performance reflects our continuing abilities to monetize our molecular taggant technology and our diagnostic and therapeutic platforms while also realigning our cost structure and reorienting our sales and business development efforts to support new opportunities," said Dr. James A. Hayward, chairman, president and CEO of Applied DNA. "Revenues increased over 100% this quarter over the same period last fiscal year and increased 164% quarter over quarter, supplemented by the receipt of a $1 million cash payment under the terms of our exclusive licensing agreement with TheraCann International Benchmark Corporation (TheraCann)."

"After the close of the quarter we received a written delisting notice from Nasdaq regarding our non-compliance with the requirements for a $1.00 bid price and $35 million market value of listed securities. We are diligently working to comply with all applicable requirements for continued listing on Nasdaq and we intend to submit a plan to that effect to the NASDAQ Hearings Panel as part of the hearing process," continued Dr. Hayward. "As part of our plan, we secured a non-binding term sheet from TheraCann for the outstanding $4 million balance under our licensing agreement in the form of $4 million in convertible preferred stock as well as an incremental $1 million convertible note. We also raised $1.5 million through a convertible note offering, which increases our current convertible notes outstanding to approximately $3.7 million. If any portion of these notes were to convert into common stock, it would increase our equity as a further step towards facilitating Nasdaq compliance. We are engaged in Nasdaq's appeal process, and I am pleased to report that we have secured a hearing for September 19, 2019 that allows us additional time to execute on the balance of our plan. However, we can not provide assurance that we will be successful in our NASDAQ appeal."

Concluded, Dr. Hayward, "As we projected last quarter, our growth is coming from cannabis, textiles and biotherapeutics. Looking ahead, we remain focused on growth supported by these business verticals. TheraCann's ETCH(TM) BioTrace solution powered by our tagging platform is attracting the attention of large cannabis players. We will soon launch our CertainT(R) brand into the cotton apparel market. Initial product from our recently completed tagging program for Egyptian cotton is being used to build demand among brands and manufacturers. Our LineaRx subsidiary is increasingly being viewed within the biotech industry as a cleaner, higher-performing alternative to plasmid DNA production that is converting to increased order-flow. We have a burgeoning pipeline and growing scientific and intellectual property assets following the recent acquisition by LineaRx of the assets and IP of Vitatex, Inc. that further broaden our platform's applicability in the potentially high-reward cancer diagnostic and therapeutic spaces. Just last week we submitted to the NIH our application for a 3-year, approximately $4 million SBIR Phase IIb grant to be matched with funding being sought from commercial 3rd parties, that, if granted, will fund the full commercialization of the Vitatex platform for early detection of non-hematologic cancers."

Fiscal Third Quarter 2019 Financial Results:

-- Revenues increased 102% for the third quarter of fiscal 2019 to $2.1

million, compared with $1.0 million reported in the second quarter of

fiscal 2018, and increased 164% from the $778 thousand reported in the

second fiscal quarter ended March 31, 2019. The increase in revenues was

due primarily to an increase in revenue from a licensing agreement in the

cannabis industry of $1 million.

-- Total operating expenses decreased to $3.2 million for the second fiscal

quarter of 2019, compared with $3.6 million in the prior fiscal year's

second quarter. This decrease is primarily attributable to approximately

a $409 thousand decrease in payroll, due to a realignment of the sales

force and reductions in overall headcount. This decrease in payroll was

offset by an increase in legal and professional fees.

-- Net loss for the quarter ended June 30, 2019 was $1.5 million, or $0.04

per share, compared with a net loss of $2.9 million, or $0.10 per share,

for the quarter ended June 30, 2018 and a net loss of $2.7 million, or

$0.08 per share, for the quarter ended March 31, 2018.

-- Excluding non-cash expenses, Adjusted EBITDA was negative $1.2 million

and a negative $2.5 million for the quarters ended June 30, 2019 and

2018, respectively. See below for information regarding non-GAAP

measures.

Nine-Month Financial Highlights:

-- Revenues for the first nine months of fiscal 2019 totaled $3.7 million,

an increase of 37% from $2.7 million from the same period in the prior

fiscal year. The increase in revenues was due to an increase in service

revenues of $1.4 million, or 92%, offset by a decrease in product

revenues of $344 thousand, or 28%. The increase in service revenue was

attributable to an increase in revenue of $1 million from the licensing

agreement in the cannabis industry, as well as increases of $140 thousand

for a pre-commercial feasibility project under the cooperation agreement

with TheraCann entered into during 2018, $51 thousand for the government

contract award and $143 thousand from pre-commercial pilots within the

textile industry.

-- Effective October 1, 2018, the Company was required to adopt Accounting

Standards Update (ASU; the "Update") No. 2014-09, Revenue from Contracts

with Customers (Topic 606), utilizing the modified retrospective method.

Had the Company not adopted the Update, the Company would have recognized

additional revenue of approximately $851 thousand during the first nine

months of fiscal 2019. This amount was primarily comprised of the

recognition of $766 thousand during the nine months periods ended June

30, 2019, under a $1.15 million cotton order shipped in June 2018, with

extended payment terms. The total cumulative impact of the Update that

was recorded to opening retained earnings in fiscal 2019 was

approximately $494 thousand. See Cumulative Effect Adjustment and the

Impact on Current Period Financial Statements of Adopting Topic 606

attached.

-- Operating expenses for the nine months ended June 30, 2019 increased by

$486 thousand or 5% for the same period last fiscal year. The increase is

primarily attributable to an increase in stock-based compensation and

legal and professional fees, offset by a decrease in payroll of $659

thousand.

-- Net loss for the nine months ended June 30, 2019 was $7.4 million or

$0.21 per share, compared with a net loss of $8.2 million or $0.28 per

share for the nine months ended June 30, 2018.

-- Excluding non-cash expenses and interest, Adjusted EBITDA for the nine

months ended June 30, 2019 was a negative $6.1 million as compared to a

negative $7.6 million for the same period in the prior fiscal year. See

below for information regarding non-GAAP measures.

Fiscal Third Quarter 2019 Conference Call Information

The Company will hold a conference call and webcast to discuss its fiscal third quarter-end 2019 results on Tuesday, August 13, 2019 at 4:30 PM ET. To participate on the conference call, please follow the instructions below. While every attempt will be made to answer investors' questions on the Q&A portion of the call, due to the large number of expected participants, not all questions may be answered.

To Participate:

-- Participant Toll Free:1-844-887-9402

-- Participant Toll: 1-412-317-6798

-- Please ask to be joined to the Applied DNA Sciences call

Live webcast: https://services.choruscall.com/links/apdn190808.html

Replay (available 1 hour following the conclusion of the live call through August 21, 2019):

-- Participant Toll Free: 1-877-344-7529

-- Participant Toll: 1-412-317-0088

-- Participant Passcode: 10133063

-- Webcast replay: https://services.choruscall.com/links/apdn190808.html

For those investors unable to attend the live call, a copy of management's PowerPoint presentation will be available for review under the 'Events and Presentations' section of the company's Investor Relations web site: https://adnas.com/molecular-based-security/investors/

Information about Non-GAAP Financial Measures

As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America. To supplement our condensed consolidated financial statements prepared and presented in accordance with GAAP, this earnings release includes Adjusted EBITDA, which is a non-GAAP financial measure as defined in Rule 101 of Regulation G promulgated by the Securities and Exchange Commission. Generally, a non-GAAP financial measure is a numerical measure of a company's historical or future performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information presented in accordance with GAAP. We use this non-GAAP financial measure for internal financial and operational decision making purposes and as a means to evaluate period-to-period

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Press Release: Applied DNA Reports Fiscal Third -2-

comparisons of the performance and results of operations of our core business. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the performance of our business by excluding non-cash expenses that may not be indicative of our recurring operating results. We believe this non-GAAP financial measure is useful to investors as they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

"EBITDA"- is defined as earnings (loss) before interest expense, income tax expense and depreciation and amortization expense.

"Adjusted EBITDA"- is defined as EBITDA adjusted to exclude (i) stock-based compensation and (ii) other non-cash expenses.

About Applied DNA Sciences

Applied DNA is a provider of molecular technologies that enable supply chain security, anti-counterfeiting and anti-theft technology, product genotyping and DNA mass production for diagnostics and therapeutics.

We make life real and safe by providing innovative, molecular-based technology 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.

Visit adnas.com for more information. Follow us on Twitter and LinkedIn. Join our mailing list.

Common stock listed on NASDAQ under the symbol APDN, and warrants are listed under the symbol APDNW.

Forward-Looking Statements

The statements made by Applied DNA in this press release may be "forward-looking" in nature within the meaning of the Private Securities Litigation Act of 1995. Forward-looking statements describe Applied DNA'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 Applied DNA. Actual results could differ materially from those projected due to its history of net losses, limited financial resources, limited market acceptance, the uncertainties inherent in research and development, future clinical data and analysis, including whether any of Applied DNA's product candidates will advance further in the preclinical research or clinical trial process, including receiving clearance from the U.S. Food and Drug Administration or equivalent foreign regulatory agencies to conduct clinical trials and whether and when, if at all, they will receive final approval from the U.S. FDA or equivalent foreign regulatory agencies, shifting enforcement priorities of US federal laws relating to cannabis, ability to maintain its NASDAQ listing in light of delisting notices received and various other factors detailed from time to time in Applied DNA's SEC reports and filings, including our Annual Report on Form 10-K filed on December 18, 2018, as amended, and our subsequent quarterly reports on Form 10-Q filed on February 7, 2019, May 9, 2019 and August 13, 2019, and other reports we file with the SEC, which are available at www.sec.gov. Applied DNA 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, unless otherwise required by law.

Financial Tables Follow

APPLIED DNA SCIENCES, INC.

CONSOLIDATED BALANCE SHEETS

September 30,

June 30, 2019 2018

-------------- --------------

ASSETS (unaudited)

Current assets:

Cash and cash equivalents $507,146 $1,659,564

Accounts receivable, net 243,557 1,485,938

Inventories 309,746 221,369

Prepaid expenses and other

current assets 544,509 635,174

------------ ------------

Total current assets 1,604,958 4,002,045

Property and equipment, net 265,295 419,774

Other assets:

Deposits 62,375 62,325

Goodwill 285,386 285,386

Intangible assets, net 767,129 864,203

Total Assets $2,985,143 $5,633,733

============ ============

LIABILITIES AND

STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued

liabilities $1,171,172 $965,167

Deferred revenue 802,585 1,856,693

------------ ------------

Total current liabilities 1,973,757 2,821,860

Long-term accrued

liabilities 584,246 470,739

Secured convertible notes

payable 2,215,668 1,586,631

------------ ------------

Total liabilities 4,773,671 4,879,230

Commitments and

contingencies

Stockholders' (Deficit)

Equity

Preferred stock, par value

$0.001 per share;

10,000,000 shares

authorized; -0- shares

issued and outstanding as

of June 30, 2019 and

September 30, 2018 - -

Series A Preferred stock,

par value $0.001 per share;

10,000,000 shares

authorized; -0- issued and

outstanding as of June 30,

2019 and September 30,

2018 - -

Series B Preferred stock,

par value $0.001 per share;

10,000,000 shares

authorized; -0- issued and

outstanding as of June 30,

2019 and September 30,

2018 - -

Common stock, par value

$0.001 per share;

500,000,000 shares

authorized; 38,327,057 and

30,112,057 shares issued

and outstanding as of June

30, 2019 and September 30,

2018, respectively 38,327 30,112

Additional paid in capital 253,444,993 249,090,474

Accumulated deficit (255,271,848) (248,366,083)

------------ ------------

Total stockholders'

(deficit) equity (1,788,528) 754,503

------------ ------------

Total Liabilities and

Stockholders' (Deficit)

Equity $2,985,143 $5,633,733

============ ============

APPLIED DNA SCIENCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

Three Months Ended June

30, Nine Months Ended June 30,

2019 2018 2019 2018

------------ ------------ ------------ ------------

Revenues:

Product revenues $392,599 $393,758 $885,736 $1,230,232

Service revenues 1,660,858 622,597 2,830,511 1,477,746

----------- ----------- ----------- -----------

Total revenues 2,053,457 1,016,355 3,716,247 2,707,978

----------- ----------- ----------- -----------

Cost of revenues 270,883 252,562 557,508 956,155

----------- ----------- ----------- -----------

Operating

expenses:

Selling, general

and

administrative 2,407,223 2,882,158 8,018,516 7,471,917

Research and

development 719,668 625,006 2,080,610 2,034,886

Depreciation and

amortization 87,315 122,999 320,039 425,927

----------- ----------- ----------- -----------

Total operating

expenses 3,214,206 3,630,163 10,419,165 9,932,730

----------- ----------- ----------- -----------

LOSS FROM

OPERATIONS (1,431,632) (2,866,370) (7,260,426) (8,180,907)

Other income

(expense):

Interest

(expense)

income, net (38,177) - (107,206) -

Other expense (8,102) (21,353) (31,356) (36,738)

----------- ----------- ----------- -----------

Loss before

provision for

income taxes

Provision for

income taxes -- -- -- --

----------- ----------- ----------- -----------

NET LOSS $(1,477,911) $(2,887,723) $(7,398,988) $(8,217,645)

----------- ----------- ----------- -----------

Net loss per

share-basic and

diluted $(0.04) $(0.10) $(0.21) $(0.28)

----------- ----------- ----------- -----------

Weighted

average shares

outstanding-

Basic and

diluted 38,113,391 30,112,057 34,970,862 29,290,555

----------- ----------- ----------- -----------

APPLIED DNA SCIENCES, INC.

CALCULATION AND RECONCILIATION OF ADJUSTED EBITDA

(unaudited)

Three Months Ended June

30, Nine Months Ended June 30,

-------------------------- ----------------------------

2019 2018 2019 2018

---------- ---------- ---------- ----------

Net Loss $(1,477,911) $(2,887,723) $(7,398,988) $(8,217,645)

Interest

expense

(income),

net 38,177 - 107,206 -

Depreciation

and

amortization 87,315 122,999 320,039 425,927

Stock based

compensation

expense

(income) 154,304 238,738 911,642 184,806

Bad debt

expense - 3,434 (8,633 ) 20,552

---------- ---------- ---------- ----------

Total non-cash

items 279,796 365,171 1,330,254 631,285

---------- ---------- ---------- ----------

Consolidated

Adjusted

EBITDA

(loss) $(1,198,115) $(2,522,552) $(6,068,734) $(7,586,360)

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Press Release: Applied DNA Reports Fiscal Third -3-

========== ========== ========== ==========

APPLIED DNA SCIENCES, INC. CUMULATIVE EFFECT ADJUSTMENT AND THE

IMPACT ON CURRENT PERIOD FINANCIAL STATEMENTS OF ADOPTING TOPIC

606 (unaudited)

Three months ended June 30, 2019 (unaudited)

------------------------------------------------

Topic 606

prior U.S. GAAP impact as reported

------------------ ---------- ----------------

Statement of

Operations

Revenues

Product $392,599 $- $392,599

Service 1,681,065 (20,207) 1,660,858

------------ --- -------- ------------

Total

revenues 2,073,664 (20,207) 2,053,457

------------ --- -------- ------------

Cost of revenues 270,883 - 270,883

Loss from

operations (1,411,425) (20,207) (1,431,632)

Nine months ended June 30, 2019 (unaudited)

------------------------------------------------

Topic 606

prior U.S. GAAP impact as reported

------------------ ---------- ----------------

Statement of

Operations

Revenues

Product $1,651,928 $(766,192) $885,736

Service 2,914,956 (84,445) 2,830,511

------------ --- -------- ------------

Total revenues 4,566,884 (850,637) 3,716,247

------------ --- -------- ------------

Cost of revenues 564,176 (6,668) 557,508

Loss from

operations (6,416,455) (843,971) (7,260,426)

Assets

Prepaids and

other current

assets $551,178 $(6,669 ) $544,509

Liabilities and

stockholder's

equity

Deferred Revenue $452,139 $350,446 $802,585

Accumulated

Deficit (254,921,402) (350,446) (255,271,848)

View source version on businesswire.com: https://www.businesswire.com/news/home/20190813005560/en/

CONTACT: Investor contact: Sanjay M. Hurry, 212-838-3777, LHA Investor Relations, [e-mail]

Media contact: Susan Forman, Dian Griesel Int'l., 212-825-3210, [e-mail]

Web: www.adnas.com

Twitter: @APDN

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