On February 8, 2024 Applied DNA Sciences, Inc. (NASDAQ: APDN) ("Applied DNA" or the "Company"), a leader in PCR-based DNA technologies, reported consolidated financial results for its first fiscal quarter ended December 31, 2023. The Company’s Form 10-Q can be viewed at View Sourcesec-filings/" target="_blank" title="View Sourcesec-filings/" rel="nofollow">View Source (Press release, Applied DNA Sciences, FEB 8, 2024, View Source [SID1234639934]).

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"We made substantial progress in advancing the commercialization of our Linea IVT platform and the availability of GMP capacity for the manufacture of critical starting material for mRNA therapeutics during the past quarter," stated Dr. James A. Hayward, president and CEO of Applied DNA. "Our efforts centered on establishing and implementing new quality systems for GMP manufacturing to meet our customer requirements at a scale sufficient for use through clinical-stage mRNA therapy development. In addition, we initiated a scale-up manufacturing project for our Linea RNA polymerase (RNAP) with an enzyme manufacturer to optimize the enzyme’s production for commercial-scale use. We also secured our first CDMO partner to validate the commercial scale-up of Linea IVT within a cGMP workflow setting.

"In parallel, we expanded our sales pipeline and active projects with the addition of new research and development-stage customers for Linea IVT that can serve as the basis for potential long-term supply agreements as customers’ therapies enter toxicology, pharmacokinetics, and early-stage clinical development," continued Dr. Hayward. "We generated data readouts that further substantiate the capacity of Linea IVT to create equal or greater RNA yields with double-stranded RNA contamination at levels 10x-50x lower than those found using conventional mRNA production methods. Feedback to-date on our Linea IVT and Linea DNA platforms has been positive, having completed multiple successful customer evaluations within the quarter. Particularly noteworthy, we completed an evaluation with a clinical stage mRNA customer in which our IVT templates meet or exceeded all customer quality metrics with manufacturing speed that exceeded all other IVT template sources being evaluated by the customer.

1Based on company internal modeling utilizing current pricing projections and industry figures

2 Linea IVT revenue is comprised of Linea DNA IVT templates, Linea RNAP and technology license royalty

Concluded Dr. Hayward, "Supplying both DNA template and RNA polymerase positions us to capture a greater percentage of the economics of mRNA therapy production that we believe establishing our GMP production capacity will unlock. After the close of the quarter, we completed an equity offering that supports the initial phase of our GMP plan and timeline for critical starting materials in the production of mRNA. Slated to come online during first half of calendar 2024 and based on internal modeling, current pricing projections, and industry figures, we project our GMP facility, with an initial footprint of less than 1,000 square feet, to enable annual total Linea IVT revenues of up to $15 million. We believe our manufacturing workflow is highly reproducible, allowing us to scale our production facilities to meet incremental customer demand quickly. Looking ahead, we will continue to prioritize the commercialization of our Linea IVT and Linea DNA platforms and rationalize our cost structure in support of our biotherapeutic goals."

Summary First Quarter Fiscal 2024 Financial Results:

· Total revenues were approximately $891 thousand for the three-month period December 31, 2023, compared to $5.3 million for the same period in the prior fiscal year. The decrease in revenue of approximately $4.4 million was due to an expected decline in COVID-19 testing services revenue of $4.2 million driven primarily by cancelation of the testing contract with City University of New York (CUNY) in June 2023. The decrease was also due to a reduction in product revenue of $209 thousand primarily related to a decline year-over-year in cotton DNA tagging revenue in our DNA Tagging and Security Products and Services segment.

· Gross profit for the three-month period ended December 31, 2023, was $231 thousand, compared to $2.4 million for the three-month period ended December 31, 2022. The gross profit percentage was 26% and 45% for the three-month periods ended December 31, 2023, and 2022, respectively. The decline in gross profit percentage was primarily the result of a decline in gross profit percentage for our MDx (Molecular Diagnostics) testing services segment specifically related to decreased COVID-19 testing volumes year over year. To a lesser extent, the decline in gross profit percentage was due to lower product revenues during the three-month period ended December 31, 2023, as compared to the same period in the prior fiscal year. The lower volume of product revenues in the current period were not able to fully absorb the fixed costs that are included in cost of product revenues.

· Operating expenses increased to $4.0 million for the three-month period ended December 31, 2023, as compared to $3.6 million for the first quarter of fiscal 2023. The increase in operating expenses is the result of an increase in selling, general and administrative expenses of approximately $459 thousand. The increase in SG&A expenses relates to the prior three-month period having a credit in bad debt expense of approximately $290 thousand, from a customer balance that was fully reserved and was subsequently collected during the three-month period ended December 31, 2023. The remainder of the increase is attributable to an increase in stock-based compensation expense of $247 thousand. The increase in stock-based compensation expense primarily relates to the timing of the annual non-employee board of director grant that vests one-year from the date of grant during the second quarter of fiscal 2023. These increases were offset by a decrease in payroll of approximately $107 thousand.

· Loss from operations was $3.8 million for the three-month period ended December 31, 2023, compared to $1.2 million for the first quarter of 2023.

· Excluding non-cash expenses, Adjusted EBITDA was a negative $3.2 million for the three-month period ended December 31, 2023, compared to a negative $1.1 million for the same period in fiscal 2023.

· Cash and cash equivalents stood at $3.4 million on December 31, 2023, compared with $7.2 million as of September 30, 2023.

On February 2, 2024, the Company closed on a registered direct offering with institutional investors for gross proceeds of $3.44 million. In a concurrent private placement, the Company issued 11,288,122 unregistered warrants with an exercise price of $0.609 per warrant share. If these warrants were to be exercised assuming stockholder approval is obtained, it would result in additional gross proceeds of $6.87 million. The Company also agreed to reduce the exercise price of warrants previously issued to the investors as well as other certain other prior investors with exercise prices ranging from $1.29 to $4.00 per warrant to $0.609 per warrant. The Company further agreed to extend the expiration dates for such warrants to August 2028. The foregoing reductions of the exercise price and extension of expiration dates of such warrants is subject to stockholder approval and if such warrants were to be exercised, it would result in additional gross proceeds of $1.86 million.

First Quarter Fiscal 2024 Conference Call Information

The Company will hold a conference call and webcast to discuss its first quarter of fiscal year 2024 financial results on Thursday, February 8, 2024, at 4:30 PM ET. To participate in 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, not all questions may be answered.

To Participate, please ask to be joined to the ‘Applied DNA Sciences’ call:

· Domestic callers (toll free): 844-887-9402

· International callers: 412-317-6798

· Canadian callers (toll free): 866-605-3852

Live and replay of webcast: View Source

Telephonic replay (available 1 hour following the conclusion of the live call through February 15, 2024):

· Domestic callers (toll free): 1-877-344-7529

· Canadian callers (toll free): 1-855-669-9658

· Participant Passcode: 3086410

An accompanying slide presentation that will be embedded in the webcast can be accessed under ‘News & Events’ tab and ‘Company Events’ section of the Applied DNA investor relations website at View Source

About the Linea DNA and Linea IVT Platforms

The Linea DNA platform is a completely cell-free DNA production platform founded on the Company’s long-standing expertise in the large-scale enzymatic production of DNA. Capable of producing DNA in quantities ranging from milligrams to grams, the Linea DNA platform can produce high-fidelity DNA constructs ranging from 100bp to 20kb in size. The DNA produced via the Linea DNA platform is free of the adventitious DNA sequences found in other sources of DNA, is rapidly scalable, and provides for simple chemical modification of DNA constructs.

The Linea IVT platform combines DNA IVT templates manufacturing via the Linea DNA platform with a proprietary Linea RNAP to enable mRNA and saRNA manufacturers to produce better mRNA faster, with advantages over conventional mRNA production, including: 1) the elimination of plasmid DNA as a starting material; 2) the prevention or reduction of dsRNA contamination; and 3) simplified mRNA production workflows.