Applied DNA Reports 2019 Year End and Fiscal Fourth Quarter Financial Results

Applied DNA Sciences, Inc. (NASDAQ: APDN) (“Applied DNA” or the “Company”), a leader in Polymerase Chain Reaction (PCR)-based DNA manufacturing for product authenticity, traceability solutions and nucleic acid-based biotherapeutic development announced consolidated financial results for the full fiscal year and quarter ended September 30, 2019.

“In fiscal 2019 total revenues increased 38 %, and total operating expenses decreased by 5 % as we sharpened our focus on our ability to produce linear DNA at scale for our tagging, diagnostics and preclinical biotherapeutic businesses,” said Dr James A. Hayward, chairman, president and CEO of Applied DNA.

Added Dr Hayward, “Over the past year we focused on elevating the Company’s profile for preclinical biotherapeutics and diagnostic applications. With the Company’s unique ability – approximately 130 patents and patents pending – to produce large quantities of ultra-pure linear DNA, the Company’s linear DNA manufacturing platform is a potential industry disrupter that offers therapeutic developers a replacement to plasmid DNA that we believe is cheaper, faster and easily scalable. Over the past 15 months, we developed a robust pipeline of more than 15 contract research opportunities with top cancer, gene therapy, vaccine and RNA partners, which is already generating initial revenue.”

“The recent acquisition of the assets and IP of Vitatex, Inc. gives us a second compelling branch to the linear DNA story that we believe lends itself to the diagnostics, prognostics and therapeutics of invasive circulating tumor cells (iCTC). Within just three months of acquisition, we signed an agreement with Tyme Technologies, Inc. for the supply of our Vita-AssayTM iCTC capture assay and associated services for iCTC detection in their pivotal stage pancreatic cancer clinical trial. In addition, our protocols for obtaining and studying iCTCs in colorectal cancer have recently been approved by an Institutional Review Board.”

Continued Dr Hayward, “Within our product authenticity and traceability solutions segment, our textile business, led by an experienced sales team, broadened awareness and adoption of our CertainT platform. Expanding beyond our relationship with Himatsingka for cotton home textiles, we established a technology partnership that gives us entrée into the cotton apparel market. We continued the global implementation of our tagging platform by completing commercial scale pilots at approximately 20 textile manufacturing sites using varied materials throughout China, Southeast Asia and India. In synthetic textiles, brands and retailers are increasingly relying on materials that offer high performance, sustainability and transparency and the promise of circular manufacturing. Our efforts have yielded strategic alliances that position us alongside key participants along multiple points in the global textile value chain to more broadly drive adoption of our authentication technology platform. We have begun to integrate our CertainT platform to provide end-to-end material traceability to multiple related categories, including leather, wool, down and feather, specialty coatings and additives, recycled PET, viscose, and other synthetics. We believe we are well positioned for uptake by brands and retailers.”

Concluded Dr Hayward, “Looking ahead, we have set our sights on generating top-line growth from our linear DNA manufacturing platform, that should be driven by textiles and cannabis, as well as biotherapeutic and diagnostics, as we begin to convert our business-building activities in fiscal 2019 into pre-commercial and commercial revenues in fiscal 2020. Having recently completed an equity raise, re-established our compliance with the Nasdaq listing requirements, and eliminated our Going Concern opinion, we have our strongest balance sheet in years and the financial resources to support a sustainable growth trajectory.”

2019 Full Fiscal Year Financial Highlights:

•             Revenues for fiscal 2019 totalled USD 5.4 million, an increase of 38% from USD 3.9 million from the prior fiscal year. The increase in revenues was due to an increase in service revenues of USD 1.2 million, or 57 %, and an increase in product revenues of USD 308 thousand, or 17 %. The increase in revenue was primarily attributable to an increase of USD 1 million from our now terminated cannabis licensing agreement, as well as an USD 889 thousand increase in textiles relating to shipments of DNA concentrate to protect the cotton supply chain. These increases in revenue were offset by a decrease in consumer asset marking sales.

•             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 USD 915 thousand during fiscal 2019. This amount was primarily comprised of the recognition of USD 766 thousand during the twelve-month period ended September 30, 2019, under a USD 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 USD 493 thousand. See Cumulative Effect Adjustment and the Impact on Current Period Financial Statements of Adopting Topic 606 attached.

•             Operating expenses for the fiscal year ended September 30, 2019 decreased by USD 707 thousand or 5 % as compared to the prior fiscal year. The decrease is primarily attributable to approximately an USD 890 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 fees.

•             Net loss for the twelve months ended September 30, 2019 was USD 8.6 million or USD 9.69 per share, compared with a net loss of USD 11.7 million or USD 15.86 per share for the twelve months ended September 30, 2018, an improvement of 26 %.

•             Excluding non-cash expenses and interest, Adjusted EBITDA for the fiscal year ended September 30, 2019 was a negative USD 7.6 million as compared to a negative USD 9.8 million for the prior fiscal year, an improvement of 22 %. See below for information regarding non-GAAP measures.

Fiscal Fourth Quarter 2019 Financial Results:

•             Revenues increased 40% for the fourth quarter of fiscal 2019 to USD 1.7 million, compared with USD 1.2 million reported in the same period of the prior fiscal year and decreased 19 % from USD 2.1 million for the third quarter of fiscal 2019. The increase in revenues year over year was due primarily to an increase in product revenues from shipments of DNA concentrate to protect the cotton supply chain. The decrease in revenue quarter over quarter was due to the recognition of USD 1 million in revenue from a licensing agreement in the cannabis industry during the third fiscal quarter of fiscal 2019.

•             Total operating expenses decreased to USD 3.2 million for the fourth fiscal quarter of 2019, compared with USD 4.4 million in the prior fiscal year’s fourth quarter. This decrease is primarily attributable to an approximate USD 231 thousand decrease in payroll, due to a realignment of the sales force and reductions in overall headcount as well as a decrease of USD 954 thousand in stock-based compensation expense.

•             Net loss for the quarter ended September 30, 2019 was USD 1.2 million, or USD 1.44 per share, compared with a net loss of USD 3.5 million, or USD 4.62 per share, for the quarter ended September 30, 2018, an improvement of 69 %, and a net loss of USD 1.5 million, or USD 1.60 per share, for the quarter ended June 30, 2019.

•             Excluding non-cash expenses, Adjusted EBITDA was negative USD 1.6 million and a negative USD 2.2 million for the quarters ended September 30, 2019 and 2018, respectively. See below for information regarding non-GAAP measures.

Select Recent Operational Highlights:

•             On November 26, Applied DNA’s majority-owned subsidiary focused on next-generation biotherapeutics and diagnostics, LineaRx, signed a definitive agreement with Tyme Technologies, Inc. to supply the Company’s Vita-AssayTM invasive Circulating Tumor Cell (iCTC) capture assay and associated services for use in the pivotal stage of the TYME-88-PANC clinical trial for patients with third-line pancreatic cancer. The potential value of the Agreement is the largest contract to-date for LineaRx, and we believe the largest in the development history of the iCTC assay;

•             On November 12, the Company announced the successful DNA tagging of leather at one of the world’s largest tanneries based in Asia. The work follows a successful research project undertaken within the UK that demonstrated SigNature® DNA could be successfully used to trace the hide of an animal from a farm to the product in a store;

•             On October 16, Applied DNA announced that it had entered into a partnership with Molecular Isotope Technologies, LLC (“MIT LLC”), a pioneer and leader in the application of natural-abundance stable-isotopic analysis provided under the trademarks Nature’s Fingerprint® and IsoPedigree™. MIT LLC’s technology utilizes stable isotopic “fingerprints” as a method for verification of product origin and supply chain processing to support product claims. MIT LLC’s technology will be offered by Applied DNA as an additional component of its CertainT® platform to tag, test and track raw materials and finished goods. MIT LLC will support and promote the CertainT platform as a service complementary to its own;

•             On October 1, LineaRx announced that its invasive Circulating Tumor Cells (iCTCs) platform demonstrated superior correlation over Prostate Specific Antigen (PSA) in an ongoing Phase II trial in recurrent prostate cancer. The Company believes that the study shows that iCTCs may be used to accurately follow therapy success in prostate cancer while also providing new tools for cell and gene therapy design and production;

•             On September 24, the Company announced that it received a USD 1 million order to supply SigNature® T taggant for cotton in the upcoming 2019 – 2020 ginning season that began in October. The Company’s SigNature T technology, paired with its genotyping and digital systems, will be used to tag, test and track the Pima cotton variety grown in the San Joaquin Valley, California that is sold under the PimaCott® brand nationwide and online by the largest home goods retailer in the U.S. Since 2014, and including the cotton tagged with this order, over 250 million pounds of cotton will have been tagged as the key to a total end-to-end traceability solution that is substantiated by forensic test data;

•             On September 19, LineaRx announced that its collaborators Takis/Evvivax have completed pre-clinical animal studies of two vaccine candidates produced with linear DNA. Tests of both vaccines in mouse models demonstrated their ability to eliminate tumors in vivo, and to potentially prevent initial occurrence. Clinical data accumulated from linear DNA vaccines for companion animals can be used to accelerate translation to human therapies by Evvivax and Takis;

•             On September 5, Applied DNA announced a sales and marketing partnership with Navarpluma that extends the Company’s Textiles business to include the global down and feather supply chain. Navarpluma S.L., one of the world’s premier suppliers of down and feathers to the textile industry, will be the first to offer this new system to its customer base that counts some of the world’s most prestigious brands as clients.

Applied DNA is a provider of molecular technologies that enable supply chain security, anti-counterfeiting and anti-theft technology, product genotyping, and pre-clinical nucleic acid-based therapeutic drug candidates.

Applied DNA makes 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.