Revenues and Cost of Sales
During the three and nine months ended September 30, 2005 and 2004, revenues were $316,983 and $906,470 for 2005, respectively and $165,647 and $648,925 for 2004, respectively. A $151,336 increase in revenues for the third quarter from the prior period is a 91% increase while a $257,545 increase in revenues for the nine month period ending September 30, 2005 compared to the prior period is a 40% increase. In addition to the revenues recognized in the accompanying statement of operations, we also have recorded deferred revenues of $113,792 as of September 30, 2005. Deferred revenue resulted from some ANCESTRYbyDNA(TM) and EURO-DNA(TM) client testing that was not complete as of September 30, 2005. These amounts will be recognized as revenue in the fourth quarter of 2005.
The approximately $151,000 increase in revenues for the three months ended September 30, 2005 compared to the same period in the prior year is mainly the result of our ANCESTRYbyDNA(TM) revenues increasing by approximately $126,000, our paternity services increasing by approximately $10,000 and EURO-DNA(TM) revenues increasing approximately $31,000 compared to the same period in the prior year. These increases are due to our increased promotion and marketing of these services. We recorded approximately $16,000 of revenues from our mtDNA(TM) product, $11,000 of revenues from our DNAWitness-Mito(TM) and $10,000 of revenues from our Y-chromosome products which were added to our product line when we acquired Trace Genetics. This was offset by a decrease of approximately $60,000 from our genotyping services and $8,000 from our DNAWitness(TM) sales. In addition, we had approximately $15,000 of other revenues.
The approximately $258,000 increase in revenues for the nine months ended September 30, 2005 compared to the same period in the prior year is a result of our ANCESTRYbyDNA(TM) revenues increasing by approximately $136,000, our paternity services increasing by approximately $89,000 and our EURO-DNA(TM) revenues increasing approximately $74,000 compared to the same period in the prior year. These increases are due to our increased promotion and marketing of these services. We recorded approximately $16,000 of revenues from our mtDNA(TM) product, $11,000 of revenues from our DNAWitness-Mito(TM) and $10,000 of revenues from our Y-chromosome products which were added to our product line when we acquired Trace Genetics. This was offset by a decrease of approximately $78,000 from our genotyping services and $15,000 from our DNAWitness(TM) sales. In addition, we had approximately $15,000 of other revenues.
Paternity sales are generated primarily through our various distributors and from our website www.ancestrybydna.com. The majority of the increase in sales during 2005 compared to 2004 was from a distributor that was added during the second quarter of 2004. Paternity testing is an add-on service, and we expect revenues to continue to fluctuate in this market. While we have not yet implemented a formal marketing and sales plan for this service, we continue to perform market research and gather information in order to define and implement a formal marketing strategy. One distributor accounted for approximately $105,000 of our paternity sales during the first nine months of 2005. We do not expect these revenues to continue for the balance of the year and are working hard to replace the potential short-fall. During the third quarter and into the last quarter we will be accelerating our direct marketing and mail campaign for our ANCESTRYbyDNA(TM) and DNAWitness(TM) products and services as well as the Trace Genetics products and services.
Genotyping sales were generated primarily through work with universities with one university being our major client of this service. The decrease of genotyping services of approximately $60,000 during the third quarter of 2005 compared to the same period in 2004 and approximately $78,000 during the nine months ended September 30, 2005 compared to the same period in 2004 was the result of decreased service provided to one university. To date, our genotyping service customers have come to us either through client referrals or our general website. In the future, we plan to concentrate our genotyping services on specific diseases, including cancer, neurological disorders, and heart disease. By concentrating on specific diseases, we hope to develop an expertise that will attract customers in those areas requiring external assistance and additional research capacity. One university accounted for approximately $150,000 of our genotyping sales during the first nine months of 2005.
As part of our on-going genotyping contract services work for one of our new customers, we have offered to perform ANCESTRYbyDNA testing services on 284 children suffering from a disease known as ALL or Acute Lymphocyte Leukemia and anticipate under a joint publication agreement to submit a manuscript for publication during 2006. Following this early pre-screening, the ALL program will test nearly 3,000 children afflicted with this disease in hopes that we will be better able to help the research hospital determine the genetic markers that are inherited and that may play a role in disease formation, advancement or remission. Treatment protocols or treatment regimes include multiple drug therapies and include, Taxol and Taxol like derivatives as well as other chemotherapy treatments and protocols. It is too early to determine the potential benefits to us, but we believe that our donation of our technology and services is crucial to the development of better and improved treatments for ALL. Currently, nearly 10-20% of the children afflicted with this disorder do not survive beyond 18-24 months after diagnosis. We believe that our technology combined with the research hospital's other work and including the contracted genotyping work performed by us for them, may help in reducing this dreadful statistic.
We continue to market our DNAWitness(TM) product through marketing to various agencies, our attendance at trade shows and through our relationships with Lynn Peavey catalog, Orchid Biosciences, and ReliaGene Technologies. We continue to seek to develop other distributors of our services and products. During 2004, our products, DNAWitness(TM) 2.0, RETINOME, and EURO-Witness 1.0 were featured in the Lynn Peavey Company catalog and the Lynn Peavey Web site. We trained Lynn Peavey Company personnel to establish and conduct seminars and training programs for detectives, crime laboratory personnel and crime scene personnel on DNAWitness(TM). Similarly, we have trained nearly 2,000 forensic personnel that include detectives, prosecutors and forensic scientists about our technology and its use. We anticipate continuing to train personnel on the use of our technology and products throughout 2005. Because these are new products and there are no similar products being marketed, we believe that forensic revenues will continue to fluctuate as we continue to research the markets and refine our sales and marketing strategy for our products. We have identified and applied for several grants and submitted our technology for federal review for applications that include human identification and terrorist tracking. We have not experienced and do not anticipate any funding of our research and development or deployment of our technology into any of these applications in 2005. We believe that the restraint of our sales in the forensics market does not originate from a lack of desire to use the technology by the detective or the prosecutor but rather a lack of funding for the increased staff that will be required to review cold case files, open new investigations or identify missing persons from stored human remains. We believe that the bulk of our investigative support will come through local and regional police, fire and detective agencies that do not require any federal funding to use our services and technology. We will however, continue to pursue much larger applications for our technologies on a global basis and will participate in several forensic and biometric venues in the remainder of 2005 that offer us a broad platform exposure to the world market. We are also seeking distributors of our products and services on a global basis applying our technology wherever the need could arise.
During the third quarter of 2005 compared to the same period in 2004, our sales of ANCESTRYbyDNA(TM) increased approximately $126,000. This is due to increased awareness and interest in genealogy and increased advertising during the third quarter by us in several markets. During the nine months ended 2005 compared to the same period in 2004, our sales of ANCESTRYbyDNA(TM) increased by $136,000. When we introduced our ANCESTRYbyDNA(TM) 2.5 during 2004, we increased the pricing which has resulted in a lower volume of product sold, but at a higher margin. Also, the product is relatively new to the market, and we believe sales will continue to fluctuate from period to period until we can better determine through continued market research and time how and where to best market and sell . . .
WE ARE CREATING VALUE --- GEO
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