Market Overview

Applied DNA Reports Fiscal Third Quarter 2018 Financial Results

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Company to Hold Conference Call and Webcast Today,

Monday, August 13, 2018 at 4:30 PM EST-

Applied DNA Sciences, Inc. (NASDAQ:APDN) ("Applied DNA" or the
"Company"), announced financial results for the fiscal 2018 third
quarter ended June 30, 2018.

Commenting on Applied DNA's results for the fiscal third quarter, Dr.
James A. Hayward, president and CEO, stated, "Results for the quarter
did not fulfill our expectations for recognized revenue due to the
shipping of an initial cotton DNA order under extended payment terms.
Nonetheless, our performance stands out for the progress we have made in
driving commercial adoption of our DNA taggant platform through large
commercial-scale feasibility activities:

  • in pharmaceuticals, together with Colorcon we performed a larger scale
    production run for solid oral dosage form tagging;
  • in leather, we are nearing the completion of a commercial-scale
    tagging and testing trial following the completion of the feasibility
    program supported by several global brands and supply chain
    stakeholders,
  • and in cannabis, we designed, built and publicly unveiled our cannabis
    tracking system (CTS), a major milestone under our TheraCann agreement
    which will power seed-to-sale legal cannabis tracking.

In addition to these activities under existing development contracts, we
signed new agreements with large marquee companies, UL and Everledger,
that we expect will broaden our access to new markets and increase our
value proposition to customers. Concurrently, business in our biopharma
research and manufacturing offerings has been gaining promising
momentum."

Continued, Dr. Hayward, "As global supply chains move to address growing
business imperatives centered on supply chain traceability, transparency
and trust, we are expanding our opportunities for revenue by seeding
markets with partners that recognize the value proposition of our
taggant technology. With momentum growing globally for the legalization
of cannabis and supply chain participants seeking regulatory compliance,
our launch of the industry's first seed-to-sale cannabis tagging system
with TheraCann is timely. Our partner Everledger, endorses our view that
the linkage of digital blockchain-enabled transactions with a forensic
physical goods identifier increases the value of the platform to global
ecosystems. That identifier is our DNA taggant.

"We also reached new milestones in biotherapeutic contract research and
contract manufacturing of linear DNA, with multiple firms throughout
Europe and the US. We believe that our ability to deliver large-scale
PCR-based DNA production for DNA/RNA vaccines, gene therapies, adoptive
cell therapies and diagnostics, may eliminate the risks associated with
current plasmid- and virus-based genetic methods. With these milestones,
we demonstrate the potential to replace plasmid production methods and
viral vectors, potentially opening large, high-value markets that will
bring the benefits of our technology to patients.

Concluded Hayward, "Applied DNA sits at the nexus between global supply
chains and market forces dictating the need for increased transparency
and responsible procurement. With our taggant technology platform proven
at scale, a foundation of recurring revenues, new commercial agreements
that open previously untapped markets, we are well positioned to
leverage tailwinds in the marketplace to deliver sustainable growth to
our shareholders."

Fiscal Third Quarter Financial Results:

  • Revenues decreased 43% for the third quarter of fiscal 2018 to $1.0
    million, compared with $1.8 million reported in the third quarter of
    fiscal 2017, and remained flat as compared to revenues for the fiscal
    second quarter ended March 31, 2018. The year-over-year decrease in
    revenues is primarily attributable to shipments relating to the
    initial order of $1.2 million in our cotton vertical for the upcoming
    ginning season being recorded in deferred revenue at June 30, 2018 due
    to extended payment terms. This decrease was offset by an increase in
    revenues from feasibility pilots in pharmaceutical and cannabis
    industries.
  • Deferred revenue increased to $2.3 million as of June 30, 2018 as
    compared to $352 thousand at September 30, 2017. The reason for this
    increase is due to the initial cotton order of $1.2 million noted
    above as well as fees paid for a variety of contracts that include
    specific milestones and therefore were not able to be fully recognized
    as revenue during the quarter ended June 30, 2018.
  • Total operating expenses were $3.6 million, compared with $4.2 million
    in the prior year's quarter, a decrease of approximately 13%. The
    decrease in year-over-year total operating expenses is primarily
    attributable to a decrease in stock-based compensation expense of $328
    thousand and bad debt expense of $343 thousand.
  • Net loss for the quarter ended June 30, 2017 was $2.9 million, or
    $0.10 per share, compared with a net loss of $2.6 million, or $0.10
    per share for the same period in the prior fiscal year and a net loss
    of $2.1 million, or $0.07 per share for the first fiscal quarter ended
    March 31, 2018.
  • Excluding non-cash expenses, Adjusted EBITDA for the quarter ended
    June 30, 2018 was negative $2.5 million, compared to negative Adjusted
    EBITDA of $1.5 million for the same quarter last fiscal year and
    negative Adjusted EBITDA of $2.3 million in the prior fiscal quarter.
    See below for information regarding non-GAAP measures.

Nine-Month Financial Highlights:

  • Revenues for the first nine months of fiscal 2018 totaled $2.7
    million, a decrease of 25% from $3.6 million from the same period in
    the prior fiscal year. The decrease in revenues was due to the
    deferral of approximately $1.2 million for product shipped for the
    marking of cotton with extended payment terms during the quarter ended
    June 30, 2018.
  • Operating expenses for the nine months ended June 30, 2018 decreased
    by $2.8 million or 22% for the same period last fiscal year. The
    decrease is primarily attributable to a decrease in stock-based
    compensation, offset by an increase in R&D due to the government
    contract award.
  • Net loss for the nine months ended June 30, 2018 was $8.2 million or
    $0.28 per share, compared with a net loss of $10 million or $0.38 per
    share for the nine months ended June 30, 2017.
  • Excluding non-cash expenses and interest, Adjusted EBITDA for the nine
    months ended June 30, 2018 was a negative $7.6 million as compared to
    a negative $6.6 million for the same period in the prior fiscal year.
    See below for information regarding non-GAAP measures.

Recent Operational Highlights:

  • On August 2, Applied DNA announced that it has reached new milestones
    in therapeutic contract research and contract manufacturing of
    Polymerase Chain Reaction (PCR)-produced linear DNA. PCR is a
    well-proven technique of DNA amplification that holds the potential to
    replace plasmid production methods and viral vectors in nucleic acid
    based therapeutics.
  • On July 31, the Company announced the signing of a MOU with Everledger
    to build a CertainT Blockchain platform for high-end product markets.
    The molecular tag, test and track platform provides physical identity
    and traceability for Everledger's digital platform with the leather
    supply chain as the first target market.
  • On July 24, the Company announced that, in conjunction with TheraCann
    International, it will launch the cannabis industry's first DNA based
    cannabis tagging system (CTS) using Applied DNA's CertainT® platform
    of tag, test and track. The device is designed to rapidly molecularly
    tag cannabis plants in commercial harvests of any scale.
  • On July 17, Applied DNA announced the shipment of a $1.2 million order
    in its fiscal 2018 third quarter to tag cotton in the upcoming
    2018/2019 ginning season. The order for the Company's SigNature T® platform
    technology will be used to tag, test and track three US cotton
    varietals, Pima, Acala and Delta. Revenues were deferred until payment
    is due.
  • On July 10, the Company announced a strategic partnership with UL. The
    commercial agreement aims to expand product authentication and
    traceability solutions throughout the product supply chain.
  • On May 8, Applied DNA announced that Louis Dreyfus Company (LDC) has
    installed Applied DNA Sciences' SigNature® T cotton
    traceability system at its Moree gin in Australia to tag, test and
    track pure HomeGrown™ Australian cotton.

Fiscal Third Quarter 2018 Conference Call Information

The Company will hold a conference call and webcast to discuss its
fiscal third quarter-end 2018 results on Monday, August 13, 2018 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/apdn180809.html

Replay (available 1 hour following the conclusion of the live call
through August 14, 2018):

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 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, personalized
medicine and therapeutics.

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. The proprietary DNA-based "CertainT®" platform can be
used to identify, tag, test, and track products, to help assure
authenticity, origin, traceability, sustainability and quality of
products.

SigNature® DNA describes the core technology ingredient that is at the
heart of a family of uncopiable, security and authentication solutions,
targeted a wide range of industries, including but not limited to,
pharmaceuticals and nutraceuticals, textiles and defense materials and
DNAnet®, for anti-theft and loss prevention, and digitalDNA®, providing
powerful track-and-trace. Our products provide a forensic chain of
evidence in large commercial ecosystems

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

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 our lack of
significant revenues, limited financial resources, limited market
acceptance, history of net losses, market competition, risk of not
obtaining regulatory approval 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 28, 2017 and our subsequent
quarterly reports on Form 10-Q filed on February 8, 2018, May 3, 2018
and August 13, 2018, 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
 
 

June 30,
2018

   

September 30,
2017

(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,514,816 $ 2,959,781
Accounts receivable, net 1,414,948 2,587,969
 
Inventories 295,278 326,468
Prepaid expenses and other current assets   602,800     366,954  
Total current assets 4,827,842 6,241,172
 
Property and equipment, net 535,805 523,688
 
Other assets:
Deposits 62,380 61,626
 
Goodwill 285,386 285,386
Intangible assets, net   896,562     1,042,076  
 
Total Assets $ 6,607,975   $ 8,153,948  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable and accrued liabilities $ 818,642 $ 944,133
Deferred revenue   2,298,152     351,735  
Total current liabilities 3,116,794 1,295,868
 
Long-term accrued liabilities   433,051   -  
 
Total liabilities   3,549,845     1,295,868  
 
Commitments and contingencies
 
Stockholders' Equity
Preferred stock, par value $0.001 per share; 10,000,000 shares
authorized; -0- shares issued and outstanding as of June 30, 2018
and September 30, 2017
Series A Preferred stock, par value $0.001 per share, 10,000,000
shares authorized; -0- issued and outstanding as of June 30, 2018
and September 30, 2017
Series B Preferred stock, par value $0.001 per share, 10,000,000
shares authorized; -0- issued and outstanding as of June 30, 2018
and September 30, 2017
Common stock, par value $0.001 per share; 500,000,000 shares
authorized; 30,112,057 and 27,377,057 shares issued and outstanding
as of June 30, 2018 and September 30, 2017, respectively
30,112 27,377
Additional paid in capital 247,918,818 243,503,858
Accumulated deficit   (244,890,800 )   (236,673,155 )
Total stockholders' equity   3,058,130     6,858,080  
 
Total Liabilities and Stockholders' Equity $ 6,607,975   $ 8,153,948  
 
 
APPLIED DNA SCIENCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
  Three Months Ended June 30,     Nine Months Ended June 30,
2018     2017 2018    

2017

 
Revenues:
Product revenues $ 393,758 $ 1,493,449 $ 1,230,232 $ 2,887,054
Service revenues   622,597     303,933     1,477,746     718,709  
Total revenues   1,016,355     1,797,382     2,707,978     3,605,763  
 
Cost of revenues   252,562     232,348     956,155     804,552  
 
Operating expenses:
Selling, general and administrative 2,882,158 3,402,817 7,471,917 10,534,105
Research and development 625,006 603,095 2,034,886 1,757,616
Depreciation and amortization   122,999     161,441     425,927     486,786  
 
Total operating expenses   3,630,163     4,167,353     9,932,730     12,778,507  
 
LOSS FROM OPERATIONS (2,866,370 ) (2,602,319 ) (8,180,907 ) (9,977,296 )
 
Other income (expense):
Interest income, net - 228 - 2,763
Other (expense) income , net (21,353 )   (8,758 )   (36,738 )   (26,556 )
 
Loss before provision for income taxes (2,887,723 ) (2,610,849 ) (8,217,645 ) (10,001,089 )
 
Provision for income taxes                
 
NET LOSS $ (2,887,723 ) $ (2,610,849 ) $ (8,217,645 ) $ (10,001,089 )
 
Net loss per share-basic and diluted $ (0.10 ) $ (0.10 ) $ (0.28 ) $ (0.38 )
 
Weighted average shares outstanding-
Basic and diluted   30,112,057     26,374,023     29,290,555     26,049,866  
 
 
APPLIED DNA SCIENCES, INC.
CALCULATION AND RECONCILIATION OF ADJUSTED EBITDA
 
(Unaudited)
 
  Three Months Ended June 30,   Nine Months Ended June 30,
2018   2017 2018   2017
 
Net Loss $ (2,887,723 ) $ (2,610,849 ) $ (8,217,645 ) $ (10,001,089 )
Interest (income) expense, net - (228 ) - (2,763 )
Depreciation and amortization 122,999 161,441 425,927 486,786
Stock based compensation 238,738 566,377 184,806 2,562,300
Bad debt expense 3,434     346,921   20,551     368,168  
 
Total non-cash items 365,171     1,074,511   631,284     3,414,491  
 
Consolidated Adjusted EBITDA (loss) (2,522,552 )   (1,536,338 ) (7,586,361 )   (6,586,598 )

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