UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
To
FORM 10-QSB
Quarterly Report Pursuant to Section 13 Or 15(D) Of The Securities Act Of 1934
For the quarterly period ended December 31, 2004
Commission file number: 002-90519
APPLIED DNA SCIENCES, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 59-2262718
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
9229 West Sunset Boulevard, Suite 830, Los Angeles, CA 90069
(Address of principal executive offices)
(310) 860-1362
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $0.50 par value 47,280,993
(Class) (Outstanding as of February 8, 2005)
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)............................ 3
Item 2. Management's Discussion and Analysis or Plan of Operation...34
Item 3. Controls and Procedures.....................................40
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...........................................41
Item 2. Changes in Securities.......................................41
Item 3. Defaults Upon Senior Securities.............................41
Item 4. Submission of Matters to a Vote of Security Holders.........41
Item 5. Other Information...........................................41
Item 6. Exhibits....................................................42
Signatures...........................................................43
2
Item 1. Financial Statements (Unaudited)
APPLIED DNA SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS (Unaudited)
December 31, September 30,
2004 2004
----------- -----------
Current assets:
Cash and Equivalents ............................. $ 62,665 $ 1,832
----------- -----------
Total Current Assets ............................. 62,665 1,832
Property, Plant and Equipment:
Furniture and Equipment .......................... 29,507 29,507
Less: Accumulated Depreciation ................... (1,756) (1,405)
----------- -----------
27,751 28,102
Other Assets:
Deposits and Prepaid Expenses .................... 47,585 23,559
Patent Filing .................................... 34,257 29,910
Less: Accumulated Amortization ................... (6,126) (1,756)
----------- -----------
Net Patents ...................................... 28,131 28,154
Restricted Cash .................................. 1,065,318 --
----------- -----------
Total Other Assets ............................... 1,141,034 51,713
----------- ----------
Total Assets ..................................... $ 1,231,450 $ 81,647
=========== ===========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities ......... $ 2,973,686 $ 1,770,379
Accrued Liabilities Due Related Parties .......... 168,857 117,333
Convertible Notes Payable ........................ 1,675,000 1,625,000
Due to Related Parties ........................... 61,943 111,943
Note Payable ..................................... 1,125,000 1,163,500
----------- -----------
Total Current Liabilities ........................ 6,004,486 4,788,156
Long Term Liabilities:
Note Payable ..................................... -- --
----------- -----------
Deficiency in Stockholders' Equity:
Preferred Stock, par value $.0001 per share;
10,000,000 shares authorized;
60,000 issued at December 31, 2004 and
September 30, 2004 ............................... 6 6
Common Stock, par value $.50 per share;
100,000,000 shares authorized; 40,848,239
shares and 23,981,054 shares issued and
outstanding at December 31, 2004 and
September 30, 2004, respectively ................. 20,424,120 11,990,527
Common Stock Subscription ....................... (880,000) (1,000)
Additional Paid-In-Capital ...................... 10,863,008 6,118,993
Accumulated Deficit ............................. (35,180,170) (22,815,034)
----------- -----------
(4,773,036) (4,706,508)
----------- -----------
Total Liabilities and Deficiency in
Stockholders' Equity $ 1,231,450 $ 81,647
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements
3
APPLIED DNA SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
(Unaudited)
For the Period,
For The Three For The Three September 16, 2002,
Months Ended Months Ended (Date of Inception)
December 31, December 31, through
2004 2003 December 31, 2004
---- ---- ----------
Revenues:
Sales ............................. $ -- $ -- $ --
COGS .............................. $ -- $ -- $ --
Operating expenses:
Selling, general and administrative 10,792,921 7,407,750 31,852,994
Depreciation and amortization ..... 4,721 351 7,882
------------ ------------ ------------
Total operating expenses .......... 10,797,642 7,408,101 31,860,876
Operating loss .................... (10,797,642) (7,408,101) (31,860,876)
Other Income (expense) ............ 315 685 26,700
Interest (expense) ................ (1,567,809) (135,074) (3,345,995)
Income (taxes) benefit ............ -- -- --
------------ ------------ ------------
Net loss .......................... $(12,365,136) $ (7,542,490) $(35,180,171)
============ ============ ============
Loss per common share
(basic and assuming dilution) ..... $ (0.45) $ (0.41) $ (1.28)
============ ============ ============
Weighted average shares outstanding 27,402,160 18,503,162 27,402,160
See accompanying notes to unaudited condensed consolidated financial statements
4
APPLIED DNA SCIENCES, INC
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
DECEMBER 31, 2004
Deficit
Additional Accumulated
Preferred Paid in Common Stock During
Preferred Shares Common Common Stock Capital Stock Subscription Development
Shares Amount Shares Amount Amount Subscribed Receivable Stage Total
-------- -------- -------- --------- -------- ------------ ---------- ---------- -----------
Issuance of common stock
to Founders in exchange
for services on September
16, 2002 at $.01 per share - $ - 100,000 $ 10 $ 990 - $ - $ - $ 1,000
Net Loss - - - - - - - (11,612) (11,612)
-------- -------- -------- --------- -------- ------------ ---------- ---------- -----------
Balance at September 30,
2002 - - 100,000 10 990 - - (11,612) (10,612)
Issuance of common stock
in connection with merger
with Prohealth Medical
Technologies , Inc on
October 1, 2002 - - 10,178,352 1,018 - - - - 1,000
Cancellation of Common
stock in connection with
merger with Prohealth
Medical Technologies ,
Inc on October
21, 2002 - - (100,000) 10 (1,000) - - - (1,000)
Issuance of common stock
in exchange for services
in October 2002 at $ 0.65
per share - - 602,000 60 39,070 - - - 39,130
Issuance of common stock in
exchange for subscription
in November and December
2002 at $ 0.065 per share - - 876,000 88 56,852 - (56,940) - -
Cancellation of common
stock in January 2003
previously issued in
exchange for consulting
services - - (836,000) (84) (54,264) - 54,340 - -
Issuance of common stock
in exchange for licensing
services valued
at $ 0.065 per share in
January 2003 - - 1,500,000 150 97,350 - - - 97,500
Issuance of common stock
in exchange
for consulting services
valued at $ 0.13 per share
in January 2003 - - 586,250 58 76,155 - - - 76,213
Issuance of common stock
in exchange
for consulting services
at $ 0.065 per
share in February 2003 - - 9,000 1 584 - - - 585
Issuance of common stock
to Founders 1in exchange
for services valued at
$0.0001 per share in
March 2003 - - 10,140,000 1,014 - - - - 1,014
Issuance of common stock
in exchange for consulting
services valued at
$2.50 per share in March 2003 - - 91,060 9 230,625 - - - 230,634
See accompanying notes to unaudited condensed consolidated financial statements
5
APPLIED DNA SCIENCES, INC
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
DECEMBER 31, 2004
(Continued)
Deficit
Additional Accumulated
Preferred Paid in Common Stock During
Preferred Shares Common Common Stock Capital Stock Subscription Development
Shares Amount Shares Amount Amount Subscribed Receivable Stage Total
--------- ------- ---------- ------- -------- ---------- ---------- ------- --------
Issuance of common stock in
exchange for consulting
services valued at $
0.065 per share in March 2003 - - 6,000 1 389 - - - 390
Common stock subscribed in
exchange for cash at $1 per
share in March 2003 - - - - 18,000 - - - 18,000
Common stock issued in
exchange for consulting
services at $ 0.065 per
share on April 1, 2003 - - 860,000 86 55,814 - - - 55,900
Common stock issued in
exchange for
cash at $ 1.00 per share
on April 9, 2003 - - 18,000 2 - - - - 2
Common stock issued in
exchange for
consulting services at $
0.065 per
share on April 9, 2003 - - 9,000 1 584 - - - 585
Common stock issued in
exchange for
consulting services at
$ 2.50 per
share on April 23, 2003 - - 5,000 1 12,499 - - - 12,500
Common stock issued in
exchange for
consulting services at
$ 2.50 per
share, on June 12, 2003 - - 10,000 1 24,999 - - - 25,000
Common stock issued in
exchange for
cash at $ 1.00 per share
on June 17, 2003 - - 50,000 5 49,995 - - - 50,000
Common stock subscribed
in exchange
for cash at $ 2.50 per
share pursuant
to private placement
on June 27, 2003 - - - - - - 24,000 - 24,000
Common stock retired in
exchange for note payable
at $0.0118 per share,
on June 30, 2003 - - (7,500,000) (750) 750 - - - -
Common stock issued in
exchange for
consulting services at
$0.065 per
share, on June 30, 2003 - - 270,000 27 17,523 - - - 17,550
Common stock subscribed
in exchange for cash at
$ 1.00 per share pursuant
to private placement on
June 30, 2003 - - - - - 10,000 - - 10,000
Common stock subscribed
in exchange for cash at
$ 2.50 per share pursuant
to private placement on
June 30, 2003 - - - - - 24,000 - - 24,000
Common stock issued in
exchange for consulting
services at approximately
$2.01 per share, July 2003 - - 213,060 21 428,797 - - - 428,818
See accompanying notes to unaudited condensed consolidated financial statements
6
APPLIED DNA SCIENCES, INC
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
DECEMBER 31, 2004
(Continued)
Deficit
Additional Accumulated
Preferred Common Paid in Common Stock During
Preferred Shares Common Stock Capital Stock Subscription Development
Shares Amount Shares Amount Amount Subscribed Receivable Stage Total
--------- ------- ---------- ------- -------- ---------- ---------- ------- --------
Common stock canceled
in July 2003,
previously issued for
services rendered at
$2.50 per share - - (24,000) (2) (59,998) - - - (60,000)
Common stock issued
in exchange for
options exercised at
$1.00 in July 2003 - - 20,000 2 19,998 - - - 20,000
Common stock issued
in exchange for
exercised of options
previously
subscribed at $1.00 in
July 2003 - - 10,000 1 9,999 (10,000) - - -
Common stock issued in
exchange for
consulting services at
approximately
$2.38 per share,
August 2003 - - 172,500 17 410,913 - - - 410,931
Common stock issued in
exchange for
options exercised at
$1.00 in August 2003 - - 29,000 3 28,997 - - - 29,000
Common stock issued
in exchange for
consulting services
at approximately
$2.42 per share,
September 2003 - - 395,260 40 952,957 - - - 952,997
Common stock issued
in exchange for
cash at $2.50 per
share-subscription
payable-September 2003 - - 19,200 2 47,998 (48,000) - - -
Common stock issued in
exchange for
cash at $2.50 per
share pursuant to
private placement
September 2003 - - 6,400 1 15,999 - - - 16,000
Common stock issued in
exchange for
options exercised at
$1.00 in September 2003 - - 95,000 10 94,991 - - - 95,000
Common stock subscription
receivable reclassification
adjustment
Common Stock subscribed to
at $2.50 per share in
September 2003 - - - - 2,600 - 2,600
Net Loss for the year
ended September 30, 200 - - - 300,000 - - 300,000
Balance at September 30,
2003 - - - - - - - (3,445,164) (3,445,164)
-------- -------- ----------- -------- ----------- --------- --------- ------------- -----------
- $ - 17,811,082 $ 1,781 $2,577,568 $300,000 $ - $(3,456,776) $(577,427)
======== ======== =========== ======== =========== ========= ========= ============= ============
See accompanying notes to unaudited condensed consolidated financial statements
7
APPLIED DNA SCIENCES, INC
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
DECEMBER 31, 2004
(Continued)
Deficit
Additional Accumulated
Preferred Paid in Common Stock During
Preferred Shares Common Common Stock Capital Stock Subscription Development
Shares Amount Shares Amount Amount Subscribed Receivable Stage Total
--------- ------- ---------- ------- ------ ---------- ---------- ------- --------
Preferred shares issues
in exchange for services
at $25.00 per share,
October 2003 1500 15 15
Common stock issued in
exchange for consulting
services at
approximately $2.85 per
share, October 2003 287,439 29 820,389 - - - 820,418
Common stock issued in
exchange for cash at
$2.50 per
share-subscription
payable-October 2003 120,000 12 299,988 (300,000) - - -
Common stock canceled
in October 2003,
previously issued for
services rendered at
$2.50 per share (100,000) (10) (249,990) - - - (250,000)
Common stock issued in
exchange for consulting
services at approximately
$3 per share,
November 2003 100,000 10 299,990 - - - 300,000
Common stock subscribed
in exchange for cash at
$2.50 per share pursuant
to private placement,
November, 2003 100,000 10 249,990 - - - 250,000
Common stock subscribed
in exchange for cash at
$2.50 per share pursuant
to private placement,
December, 2003 6,400 1 15,999 - - - 16,000
Common stock issued in
exchange for consulting
services at approximately
$2.59 per share,
December 2003 2,125,500 213 5,504,737 - - - 5,504,950
Common Stock subscribed to
at $2.50 per share in
December 2003 - - - 104,000 - - 104,000
Beneficial conversion
feature relating
to notes payable - - 1,168,474 - - - 1,168,474
Beneficial conversion
feature relating
to warrants - - 206,526 - - - 206,526
Adjust common stock par
value from $0.0001 to
$0.50 per share, per
amendment of articles
dated Dec 2003 - 10,223,166 (10,223,166) - - - -
Common Stock issued
pursuant to subscription
at $2.50 share in Jan 2004 41,600 20,800 83,200 (104,000) - - -
Common stock issued in
exchange for consulting
services at $2.95 per
share, Jan 2004 13,040 6,520 31,948 - - - 38,468
Common stock issued in
exchange for consulting
services at $2.60 per
share, Jan 2004 123,000 61,500 258,300 - - - 319,800
Common stock issued in
exchange for consulting
services at $3.05 per
share, Jan 2004 1,000 500 2,550 - - - 3,050
See accompanying notes to unaudited condensed consolidated financial statements
8
APPLIED DNA SCIENCES, INC
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
DECEMBER 31, 2004
(Continued)
Deficit
Additional Accumulated
Preferred Paid in Common Stock During
Preferred Shares Common Common Stock Capital Stock Subscription Development
Shares Amount Shares Amount Amount Subscribed Receivable Stage Total
--------- ------- ---------- ------- ------ ---------- ---------- ------- --------
Common stock issued in
exchange for employee
services at $3.07 per
share, Feb 2004 6,283 3,142 16,147 - - - 19,288
Common stock issued in
exchange for consulting
services at $3.04 per
share, Mar 2004 44,740 22,370 113,640 - - - 136,010
Common Stock issued for
options exercised at
$1.00 per share in Mar
2004 55,000 27,500 27,500 - - - 55,000
Common stock issued in
exchange for employee
services at $3.00 per
share, Mar 2004 5,443 2,722 13,623 - - - 16,344
See accompanying notes to unaudited condensed consolidated financial statements
9
APPLIED DNA SCIENCES, INC
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
DECEMBER 31, 2004
(Continued)
Deficit
Additional Accumulated
Preferred Paid in Common Stock During
Preferred Shares Common Common Stock Capital Stock Subscription Development
Shares Amount Shares Amount Amount Subscribed Receivable Stage Total
--------- ------- ---------- ------- ------ ---------- ---------- ------- --------
Common stock issued in
exchange for employee
services at $3.15 per
share, Mar 2004 5,769 2,885 15,293 - - - 18,177
Preferred shared
converted to common
shares for consulting
services at $3.00per
share, Mar 2004 5000 5 125,000 62,500 312,500 - - - 374,995
Common stock issued in
exchange for employee
services at $3.03 per
share, Mar 2004 8,806 4,403 22,236 - - - 26,639
Common Stock issued
pursuant to
subscription at $2.50
per share in Mar. 2004 22,500 11,250 (9,000) - - - 2,250
Beneficial Conversion
Feature relating
to Notes Payable - - 122,362 - - - 122,362
Beneficial Conversion
Feature relating
to Warrants - - 177,638 - - - 177,638
Common stock issued in
exchange for consulting
services at $2.58 per
share, Apr 2004 9,860 4,930 20,511 - - - 25,441
Common stock issued in
exchange for consulting
services at $2.35 per
share, Apr 2004 11,712 5,856 21,667 - - - 27,523
Common stock issued in
exchange for consulting
services at $1.50 per
share, Apr 2004 367,500 183,750 367,500 - - - 551,250
Common stock returned
to treasury at
$0.065 per share,
Apr 2004 (50,000) (25,000) 21,750 - - - (3,250)
Preferred stock
converted to common
stock for consulting
services at $1.01
per share in May 2004 4000 4 100,000 50,000 51,250 - - - 101,246
Common stock issued per
subscription May 2004 10,000 5,000 (4,000) - (1,000) - -
Common stock issued in
exchange for consulting
services at $0.86 per
share in May 2004 137,000 68,500 50,913 - - - 119,413
Common stock issued in
exchange for consulting
services at $1.15 per
share in May 2004 26,380 13,190 17,147 - - - 30,337
Common stock returned to
treasury at $0.065 per
share, Jun 2004 (5,000) (2,500) 2,175 - - - (325)
See accompanying notes to unaudited condensed consolidated financial statements
10
APPLIED DNA SCIENCES, INC
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
DECEMBER 31, 2004
(Continued)
Deficit
Additional Accumulated
Preferred Paid in Common Stock During
Preferred Shares Common Common Stock Capital Stock Subscription Development
Shares Amount Shares Amount Amount Subscribed Receivable Stage Total
--------- ------- ---------- ------- ------ ---------- ---------- ------- --------
Common stock issued in
exchange for consulting
services at $0.67 per
share in June 2004 270,500 135,250 45,310 - - - 180,560
Common stock issued in
exchange for consulting
services at $0.89 per
share in June 2004 8,000 4,000 3,120 - - - 7,120
Common stock issued in
exchange for consulting
services at $0.65 per
share in June 2004 50,000 25,000 7,250 - - - 32,250
Common stock issued
pursuant to private
placement at $1.00
per share in June 2004 250,000 125,000 125,000 - - - 250,000
Common stock issued in
exchange for consulting
services at $0.54 per
share in July 2004 100,000 50,000 4,000 - - - 54,000
Common stock issued in
exchange for consulting
services at $0.72 per
share in July 2004 5,000 2,500 1,100 - - - 3,600
Common stock issued in
exchange for consulting
services at $0.47 per
share in July 2004 100,000 50,000 (2,749) - - - 47,251
Common stock issued in
exchange for consulting
services at $0.39 per
share in August 2004 100,000 50,000 (11,000) - - - 39,000
Preferred stock converted
to common stock for
consulting services at
$0.39 per share in
August 2004 (2000) (2) 50,000 25,000 (5,500) - - - 19,498
See accompanying notes to unaudited condensed consolidated financial statements
11
APPLIED DNA SCIENCES, INC
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
DECEMBER 31, 2004
(Continued)
Deficit
Additional Accumulated
Preferred Paid in Common Stock During
Preferred Shares Common Common Stock Capital Stock Subscription Development
Shares Amount Shares Amount Amount Subscribed Receivable Stage Total
--------- ------- ---------- ------- ------ ---------- ---------- ------- --------
Common stock issued in
exchange for consulting
services at $0.50 per
share in August 2004 100,000 50,000 250 50,250
Common stock issued in
exchange for consulting
services at $0.56 per
share in August 2004 200,000 100,000 12,500 - - - 112,500
Common stock issued in
exchange for consulting
services at $0.41 per
share in August 2004 92,500 46,250 (8,787) - - - 37,463
Common stock issued in
exchange for consulting
services at $0.52 per
share in September 2004 1,000,000 500,000 17,500 - - - 517,500
Common stock issued in
exchange for consulting
services at $0.46 per
share in September 2004 5,000 2,500 (212) - - - 2,288
Common stock issued
pursuant to subscription
at $0.50 per share in
September 2004 40,000 20,000 - - - - 20,000
Preferred shares
converted to common
stock for consulting
services at $0.41
per share in September
2004 (4000) (4) 100,000 50,000 4,000 - - - 53,996
Preferred shares issued
in exchange for service
at $25 per share in
September 2004 60,000 6 1,499,994 1,500,000
Warrants issued to
consultants in the
fourth quarter 2004 2,019,862 2,019,862
Net Loss - - - - - (19,358,259) (19,358,259)
Balance at
September 30, 2004 60,000 $6 23,981,054 11,990,527 6,118,993 - (1,000) (22,815,034) (4,706,508)
====== == ========== ========== ========= ======== ======= ============ ===========
See accompanying notes to unaudited condensed consolidated financial statements
12
APPLIED DNA SCIENCES, INC
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
DECEMBER 31, 2004
Deficit
Additional Accumulated
Preferred Paid in Common Stock During
Preferred Shares Common Common Stock Capital Stock Subscription Development
Shares Amount Shares Amount Amount Subscribed Receivable Stage Total
--------- ------- ---------- ------- ------ ---------- ---------- ------- --------
Common stock issued
in exchange for
consulting services
at $0.68 per share
in October 2004 - - 200,000 100,000 36,000 - - - 136,000
Common stock returned
to treasury at $0.60
per share, Oct 2004 - - (1,069,600) (534,800) (107,298) - - - (642,098)
Common stock issued
in exchange for
consulting services at
$0.60 per share in
October 2004 - - 82,500 41,250 8,250 - - - 49,500
Common Stock issued
pursuant to subscription
at $0.60 share in
October 2004 - - 500,000 250,000 50,000 (300,000) - - -
Common stock issued in
exchange for consulting
services by noteholders
at $0.50 per share
in October 2004 - - 532,500 266,250 - - - - 266,250
Common Stock issued
pursuant to subscription
at $0.50 share in
October 2004 - - 500,000 250,000 - - - - 250,000
Common Stock issued pursuant
to subscription at $0.45
share in October 2004 - - 1,000,000 500,000 (50,000) (450,000) - - -
Common stock issued in
exchange for consulting
services by noteholders
at $0.45 per share
in October 2004 - - 315,000 157,500 (15,750) - - - 141,750
Common Stock issued in
exchange for consulting
services at $0.47 share
in November 2004 - - 100,000 50,000 (3,000) - - - 47,000
Common Stock issued in
exchange for consulting
services at $0.80 share
in November 2004 - - 300,000 150,000 90,000 - - - 240,000
Common Stock issued in
exchange for consulting
services at $1.44 share
in November 2004 - - 115,000 57,500 108,100 - - - 165,600
Common Stock issued in
exchange for employee
services at $1.44 share
in November 2004 - - 5,000 2,500 4,700 - - - 7,200
See accompanying notes to unaudited condensed consolidated financial statements
13
APPLIED DNA SCIENCES, INC
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
DECEMBER 31, 2004
Common Stock issued in
exchange for employee
services at $0.60 share
in November 2004 - - 60,000 30,000 6,000 (4,000) - - 32,000
Beneficial Conversion
discount relating to
Notes Payable - - - - 936,541 - - - 936,541
Beneficial Conversion
Feature relating to
Warrants - - - - 528,459 - - - 528,459
Common stock issued at
$0.016 in exchange for
note payable in December
2004 5,500,000 2,750,000 (2,661,500) 88,500
Common Stock issued in
exchange for consulting
services at $1.44 share
in December 2004 - - 5,796,785 2,898,393 5,418,815 - - - 8,317,207
Common stock issued
pursuant to subscription
at $0.50 per share in
December 2004 - - 2,930,000 1,465,000 - (125,000) - - 1,340,000
Warrants issued to
consultants in
Dec. 2004 - - 394,698 394,698
Net Loss - - - - - - - (12,365,136)(12,365,136)
--------- ------- ---------- ---------- ---------- ----------- --------- ------------ -----------
60,000 6 40,848,239 20,424,120 10,863,008 (879,000) (1,000)(35,180,171) (4,773,035)
========= ======= =========== ========== ========== =========== ========= ============ ===========
See accompanying notes to unaudited condensed consolidated financial statements
14
APPLIED DNA SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the period
September 16,
2002 (date of
inception)
For The Three Months Ended through
December 31, December 31,
2004 2003 2004
---- ---- ----
Cash flows from operating activities:
Net loss from operating activities ........................................ $(12,365,136) $(7,542,490) $(35,180,170)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation .............................................................. 4,721 351 7,882
Organizational Expenses ................................................... 88,500
Preferred Shares issued in exchange for service ........................... -- -- 1,500,000
Warrants issued to consultants .......................... ................. 394,698 -- 2,414,560
Amortization of beneficial conversion feature-convertible notes............ 1,515,000 133,273 3,140,000
Common stock issued in exchange for consultant services rendered .......... 9,366,507 6,625,368 21,764,239
Common stock canceled-previously issued for services rendered ............. (642,605) (282,000) (928,180)
Changes in Assets and Liabilities:
Increase in-other assets .................................................. (1,065,318) -- (1,079,208)
Increase in due related parties ................................ 1,523 -- 154,219
Increase (decrease) in accounts payable and accrued liabilities ........... 1,203,816 (61,589) 2,959,525
------------ ------------ ------------
Net cash used in operating activities ..................................... (1,586,794) (1,127,087) (5,158,633)
------------
Cash flows from investing activities:
Payments for patent filing ................................................ (4,347) -- (25,698)
Payments for security deposits ............................................ (24,026) (23,559) (47,585)
Capital expenditures ...................................................... (0) (29,507) (29,507)
------------ ------------ ------------
Net cash used in investing activities ..................................... (28,373) (53,066) (102,790)
------------
Cash flows from financing activities:
Proceeds from sale of common stock, net of cost ........................... -- 266,000 432,000
Proceeds from subscription of common stock ................................ 250,000 104,000 375,000
Proceeds from sale of options ............................................. 36,000 32,000 277,000
Advances from shareholders ................................................ -- 34,004 100,088
Proceeds from notes payablele.............................................. 1,390,000 1,175,030 4,140,000
------------ ------------ ------------
Net cash provided by financing activities ................................. 1,676,000 1,611,034 5,324,088
------------
Net increase in cash and cash equivalents ................................. 60,833 430,881 62,665
Cash and cash equivalents at beginning of period .......................... 1,832 193,471 --
Cash and cash equivalents at end of period ................................ $ 62,665 $ 624,352 $ 62,665
============ ============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during period for interest ...................................... -- -- --
Cash paid during period for taxes ......................................... -- -- --
Non-cash transaction
Common stock issued for services .......................................... 9,366,507 6,625,368 21,765,239
Common stock canceled-previously issued for services rendered ............. (642,605) (282,000) (928,180)
Common stock retired ...................................................... -- -- --
Deferred financing costs ................................................. 200,000.00 --
Beneficial conversion feature related to notes payable .................... 936,541 1,168,474.00 2,321,812
Beneficial conversion feature related to warrants ......................... 528,459 206,526.00 818,188
Preferred Shares in exchange for services.................................. 1,500,000
Warrants issued to consultants ............................................ 394,698 -- 2,414,560
Acquisition:
Common stock retained ..................................................... 1,015
Assets acquired ........................................................... (135)
------------
Total consideration paid .................................................. 880
------------
Organization expenses - note issued in excahnge of shares retired ......... 88,500
Common stock issued in exchange for note payable .......................... 88,500 -- 88,500
See accompanying notes to unaudited condensed consolidated financial statements
15
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB, and therefore, do
not include all the information necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended December 31, 2004 is not
necessarily indicative of the results that may be expected for the year ended
September 30, 2005. The unaudited condensed consolidated financial statements
should be read in conjunction with September 30, 2004 financial statements.
Business and Basis of Presentation
On September 16, 2002, Applied DNA Sciences, Inc. (the "Company") was
incorporated under the laws of the State of Nevada. The Company is in the
development stage , as defined by Statement of Financial Accounting Standards
No. 7 ("SFAS No. 7") and its efforts have been principally devoted to developing
DNA embedded biotechnology security solutions in the United States. To date, the
Company has generated nominal sales revenues, has incurred expenses and has
sustained losses. Consequently, its operations are subject to all the risks
inherent in the establishment of a new business enterprise. For the period from
inception through December 31, 2004, the Company has accumulated losses of
$35,180,171
The consolidated financial statements include the accounts of the Company, and
its wholly-owned subsidiary ProHealth Medical Technologies, Inc. Significant
inter-company transactions have been eliminated in Consolidation.
Reclassification
Certain prior period amounts have been reclassified for comparative purposes.
Property and Equipment
Property and equipment are stated at cost and depreciated over their estimated
useful lives of 3 to 5 years using the straight line method. At December 31,
2004 property and equipment consist of:
December 31, 2004
-----------------
Furniture $ 29,507
Accumulated depreciation 1,756
=================
Net $ 27,751
Advertising
The Company will follow a policy of charging the costs of advertising to
expenses incurred. The Company incurred advertising costs of $4,490 and $0,
respectively during the three months ended December 31, 2004.
Intangible Assets
Intangible assets are amortized using the straight-line method over their
estimated period of benefit, ranging from one to ten years. We periodically
evaluate the recoverability of intangible assets and take into account events or
circumstances that warrant revised estimates of useful lives or that indicate
that an impairment exists. All of our intangible assets are subject to
amortization.
16
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES (continue)
Intangible Assets (continue)
At December 31, 2004, intangible assets consist of:
December 31,
2004
Intangible assets $ 34,257
Accumulated amortization (6,126)
-----------
Net Intangible Assets $ 28,131
===========
Restricted Cash
Per terms of the December Promissory Note Payable agreement dated December 20,
2004, all proceeds received from note holders remain in escrow subject to (1)
the filing of a Definitive Information Statement that increases the authorized
Common Stock and reduces par value, and (2) the closing of a Private Placement
for $1 million or more and in the event of such occurrence the Note will
automatically without notice to the note holder, in to Common Stock of the
Company, at any time at $0.50 per share plus 100% warrant coverage with said
warrant being exerciseable at $0.75 per share for a period of three years and
callable at $1.25 after the underlying stock is registered if said stock trades
at above $1.25 per share for 10 days - See Note F.
Stock Based Compensation
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in APB
Opinion No. 25 and related interpretations. Accordingly, compensation expense
for stock options is measured as the excess, if any, of the fair market value of
the Company's stock at the date of the grant over the exercise price of the
related option. The Company has adopted the annual disclosure provisions of SFAS
No. 148 in its financial reports for the year ended September 30, 2003 and for
the subsequent periods.
Had compensation costs for the Company's stock options been determined based on
the fair value at the grant dates for the awards, the Company's net loss and
losses per share would have been as follows (transactions involving stock
options issued to employees and Black-Scholes model assumptions are presented in
Note E):
17
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES (Continued)
Stock Based Compensation (Continued)
For the Period
September 16,
2002 (Date of
For The Three For The Three Inception)
Months ended Months ended through
December 31, December 31, December 31,
2004 2003 2004
Net loss - as reported $ (12,365,136) $(7,542,490) $(35,180,171)
Add: Total stock based employee compensation expense
as
reported under intrinsic value method (APB. No. 25) - - -
Deduct: Total stock based employee compensation expense as
reported under fair value based method (SFAS No. 123) - - -
- - -
Net loss - Pro Forma $ (12,365,136)
$(7,542,490) $ (35,180,171)
Net loss attributable to common stockholders - Pro forma
$ (12,365,136) $(7,542,490) $ (35,180,171)
============== ============ ==============
Basic (and assuming dilution) loss per share - as reported $ (0.45) $ (0.40) $ (1.28)
============== ============ ==============
Basic (and assuming dilution) loss per share - Pro forma $ (0.45) $ (0.40) $ (1.28)
============== ============ ==============
NOTE B - MERGER
Acquisition
On October 21, 2002, the Company completed a Plan and Agreement of
Reorganization ("Merger") with ProHealth Medical Technologies, Inc.
("ProHealth") an inactive publicly registered shell corporation with no
significant assets or operations. For accounting purposes, the Company shall be
the surviving entity. The transaction is accounted for using the purchase method
of accounting. The total purchase price and carrying value of net assets
acquired of was $ 880. From November 1988 until the date of the merger,
ProHealth was an inactive entity with no significant assets and liabilities
18
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
Effective with the Merger, all previously outstanding common stock, preferred
stock, options and warrants owned by the Company's shareholders were exchanged
for an aggregate of 10,178,352 shares of ProHealth common stock. The value of
the stock that was issued was the historical cost of the ProHealth's net
tangible assets, which did not differ materially from their fair value. In
accordance with SFAS No. 141, the Company is the acquiring entity.
Effective with the Merger, ProHealth changed its name to Applied DNA Sciences,
Inc.
The total purchase price and carrying value of net assets acquired of ProHealth
was $1. The net assets acquired were as follows:
Common stock retained by ProHealth shareholders $1,015
Assets acquired (135)
Total consideration paid $880
In accordance with SOP 98-5, the Company expensed $880 as organization costs.
NOTE C - RELATED PARTY TRANSACTIONS
At December 31, 2004, notes payable are as follows:
December
31, 2004
----------
Note payable , related party, together with interest at 8% per annum, unsecured.
Upon default, the Company issued noteholder 7.5 million shares of the Company's
common stock. The noteholder retained 2 million shares and set aside 3.5 million
in escrow as third party deferred compensation for a future transaction $ -
Note payable, unsecured, related party, payable from August 1, 2005, right to
convert to restricted stock in lieu of cash, rate of interest 4%, 160,000 shares
prior to October 31, 2005 or 180,000 shares after that date. 425,000
Due to ex-president, in September 2004, note holder entered into a private
transaction, selling a total of 2,500,000 shares to him, after which he loaned
all proceeds of $600,000 to us. 600,000
Note payable, ex-officer of the Company, due $100,000 upon first funding, 20%
rate of interest, or 100,000 shares at par value of $0.001 100,000
----------
1,125,000
Less: current portion 1,125,000
----------
Note payable - long-term $ -
----------
Included in current liabilities is $61,943 at December 31, 2004, which
represents advances from the stockholders of the Company. No formal agreements
or repayment terms exist.
Also, the Company owed $168,857 at December 31, 2004 to the stockholders and
other related parties towards accrued expenses.
The Company leases office space under a sub lease agreement with an entity
controlled by a significant former shareholder of the Company.
19
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
The Company has entered into long term employment and consulting agreements with
Company's President and Chief Executive Officer and an entity controlled by a
former significant Company shareholder, respectively.
NOTE D - CAPITAL STOCK
The Company is authorized to issue 10,000,000 shares of preferred stock with a
$.001 par value per share. The Company is authorized to issue 100,000,000 shares
of common stock, with a $0.50 par value per share. In January 2004, the Company
passed a resolution authorizing change in the par value per common shares from
$0.0001 per share to $0.50 per share. As of December 31, 2004, the Company has
issued and outstanding 40,848,239 common share with par value of $0.50 per share
and 60,000 convertible preferred shares with par value of $0.0001.
During the period September 16, 2002 through September 30, 2003, the Company
issued 100,000 shares of common stock in exchange for reimbursement of services
provided by the founders of the Company. The Company valued the shares issued at
approximately $1,000, which represents the fair value of the services received
which did not differ materially from the value of the stock issued.
In October, 2002, the Company issued 10,178,352 shares of common stock in
exchange for the previously issued 100,000 shares to the Company's founders in
connection with the merger with Prohealth Medical Technologies, Inc (see Note
B).
In October, 2002 the Company canceled 100,000 shares of common stock issued to
the Company's founders.
In October 2002 the Company issued 602,000 shares of common stock in exchange
for services valued at $ 0.065 per share. In accordance with EITF 96-18 the
measurement date to determine fair value was in October 2002. This was the date
at which a commitment for performance by the counter party to earn the equity
instrument was reached. The Company valued the shares issued at approximately
$0.065 per share, which presents the fair value of the services received which
did not differ materially from the value of the stock issued.
In November and December 2002, the Company issued 876,000 shares of common stock
in exchange for subscription at $ 0.065 per share. In accordance with EITF 96-18
the measurement date to determine fair value was in October 2002. This was the
date at which a commitment for performance by the counter party to earn the
equity instrument was reached. The Company valued the shares issued at
approximately $0.065 per share, which presents the fair value of the services
received which did not differ materially from the value of the stock issued.
In January 2003, the Company canceled 836,000 shares of common stock previously
issued in exchange for consulting services.
In January 2003, the Company issued 1,500,000 shares of common stock in exchange
for a licensing agreement (see Note H). The Company valued the shares issued at
approximately $ .065 per share, which represents the fair value of the license
received which did not differ materially from the value of the stock issued. The
Company charged the cost of the license to operations.
In January 2003, the Company issued 586,250 shares of common stock in exchange
for consulting services. In accordance with EITF 96-18 the measurement date to
determine fair value was in October 2002. This was the date at which a
commitment for performance by the counter party to earn the equity instrument
was reached. The Company valued the shares issued at approximately $0.13 per
share, which presents the fair value of the services received which did not
differ materially from the value of the stock issued.
In February 2003, the Company issued 9,000 shares of common stock in exchange
for consulting services. In accordance with EITF 96-18 the measurement date to
determine fair value was in October 2002. This was the date at which a
commitment for performance by the counter party to earn the equity instrument
was reached. The Company valued the shares issued at approximately $0.065 per
share, which presents the fair value of the services received which did not
differ materially from the value of the stock issued.
20
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE D - CAPITAL STOCK (continued)
In March 2003, the Company issued 10,140,000 shares of common stock to Company's
founders in exchange for services. In accordance with EITF 96-18 the measurement
date to determine fair value was in September 2002. This was the date at which a
commitment for performance by the counter party to earn the equity instrument
was reached. The Company valued the shares issued at approximately $0.0001 per
share, which presents the fair value of the services received which did not
differ materially from the value of the stock issued.
In March 2003, the Company issued 91,060 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $2.53
per share, which represents the fair value of the services received which did
not differ materially from the value of the stock issued.
In March 2003, the Company issued 6,000 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $
0.065 per share, which represents the fair value of the services received which
did not differ materially from the value of the stock issued.
In March 2003, the Company received subscription for 18,000 shares of common
stock in exchange for cash at $1 per share.
On April 1, 2003, the Company issued 860,000 shares of common stock in exchange
for consulting services provided to the Company. In accordance with EITF 96-18
the measurement date to determine fair value was in October 2002. This was the
date at which a commitment for performance by the counter party to earn the
equity instrument was reached. The Company valued the shares issued at
approximately $0.065 per share, which presents the fair value of the services
received which did not differ materially from the value of the stock issued.
On April 9, 2003, the Company issued 18,000 shares of common stock in exchange
for previously issued options to purchase the Company's common stock at $1.00
per share.
On April 9, 2003, the Company issued 9,000 shares of common stock in exchange
for consulting services provided to the Company. In accordance with EITF 96-18
the measurement date to determine fair value was in October 2002. This was the
date at which a commitment for performance by the counter party to earn the
equity instrument was reached. The Company valued the shares issued at
approximately $0.065 per share, which presents the fair value of the services
received which did not differ materially from the value of the stock issued.
On April 23, 2003, the Company issued 5,000 shares of common stock in exchange
for consulting services provided to the Company. The Company valued the shares
issued at approximately $2.50 per share, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
On June 12, 2003, the Company issued 10,000 shares common stock in exchange for
consulting services provided to the Company. The Company valued the shares
issued at approximately $ 2.50 per share, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
On June 17 2003, the Company issued 50,000 shares of common stock in exchange
for cash at $1.00 per share
On June 30, 2003, the Company issued 270,000 shares of common stock in exchange
for consulting services provided to the Company. In accordance with EITF 96-18
the measurement date to determine fair value was in October 2002. This was the
date at which a commitment for performance by the counter party to earn the
equity instrument was reached. The Company valued the shares issued at
approximately $0.065 per share, which presents the fair value of the services
received which did not differ materially from the value of the stock issued.
21
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE D - CAPITAL STOCK (continued)
On June 30, 2003, the Company received $10,000 as subscription for options to
purchase the Company's common stock at $1.00 per share.
In June, 2003, the Company received $48,000 in connection with a subscription to
purchase the Company's common stock pursuant to a private placement.
In connection with the Company's acquisition of ProHealth, the controlling owner
of ProHealth granted the Company an option to acquire up to 8,500,000 shares of
the Company's common stock in exchange for $100,000 (see Note B). The option
expires on December 10, 2004. On June 30, 2003, the Company exercised its option
and acquired 7,500,000 common shares under this agreement in exchange for an
$88,500 convertible promissory note payable to the former controlling owner. The
Company has an option through December 10, 2004 to acquire the remaining
1,000,000 shares from the former controlling owner in exchange for $11,500. On
June 30, 2003, the Company retired the 7,500,000 shares common acquired pursuant
to the option agreement.
In July 2003 the Company issued 213,060 shares of common stock for consulting
services provided to the Company. The Company valued the shares issued at
approximately $ 2.01 per share, which represents the fair value of the services
received which did not differ materially from the value of the stock issued.
In July 2003, the Company canceled 24,000 shares of common stock, previously
issued for services valued at $2.50 per share.
In July 2003, the Company received $20,000 in exchange for previously issued
options to purchase the Company's common stock at $1.00 per share.
In July 2003, the Company issued 10,000 shares of common stock for cash
previously subscribed at $1.00 per share.
In August 2003, the Company issued 172,500 shares of common stock in exchange
for consulting services provided to the Company. The Company valued the shares
issued at approximately $ 2.38 per share, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued
In August 2003, the Company received $29,000 in exchange for previously issued
options to purchase the Company's common stock at $1.00 per share.
In September 2003, the Company issued 395,260 shares of common stock in exchange
for consulting services provided to the Company. The Company valued the shares
issued at approximately $ 2.42 per share, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
In September 2003, the Company issued 19,200 shares of common stock for cash
previously subscribed at $2.50 per share.
In September 2003, the Company issued 6,400 shares of common stock issued in
exchange for cash at $2.50 per share pursuant to private placement.
In September 2003, the Company received $95,000 in exchange for previously
issued options to purchase the Company's common stock at $1.00 per share.
In September 2003, the Company received $300,000 in connection with a
7subscription to purchase the Company's common stock pursuant to a private
placement.
22
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE D - CAPITAL STOCK (continued)
The Company valued the shares issued for consulting services at the rate which
represents the fair value of the services received which did not differ
materially from the value of the stock issued.
In October 2003, the Company issued 15,000 shares of convertible preferred stock
in exchange for services. The Company valued the shares issued at the $15 par
value and recorded the value for services when the shares were converted into
common shares as identified below.
In October 2003, the Company issued 287,439 shares of common stock in exchange
for consulting services. The Company valued the shares issued at approximately
$2.85 per share for a total of $820,418, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
In October 2003, the Company issued 120,000 shares of common stock for shares
previously subscribed at $2.50 per share in September 2003.
In October 2003, the Company canceled 100,000 shares of common stock previously
issued in exchange for services at $2.50 per share.
In November 2003, the Company issued 100,000 shares of common stock in exchange
for consulting services. The Company valued the shares issued at approximately
$3.00 per share, which represents the fair value of the services received which
did not differ materially from the value of the stock issued.
In November 2003, the Company sold 100,000 shares of common stock subscribed for
cash at $2.50 per share pursuant to private placement.
In December 2003, the Company sold 6,400 shares of common stock subscribed for
cash at $2.50 per share pursuant to private placement.
In December 2003, the Company issued 2,125,500 shares of common stock in
exchange for consulting services. . The Company valued the shares issued at
approximately $2.59 per share, which represents the fair value of the services
received which did not differ materially from the value of the stock issued.
In December 2003, the Company received $104,000 in exchange for a common stock
subscription at $2.50 per share pursuant to private placement.
In January 2004, the Company issued 41,600 shares of common stock at $2.50 share
pursuant to a subscription made on December 2003.
In January 2004, the Company issued 13,040 shares of common stock at $2.95 per
share in exchange for consulting services valued at $38,468.
In January 2004, the Company issued 123,000 shares of common stock at $2.60 per
share in exchange for consulting services valued at $319,800.
In January 2004, the Company issued 1,000 shares of common stock at $3.05 per
share in exchange for consulting services valued at $3,050.
In February 2004, the Company issued 6,283 shares of common stock at $3.07 per
share in exchange for employee services valued at $19,288.
In March 2004, the Company issued 44,740 shares of common stock at $3.04 per
share in exchange for consulting services valued at $136,010.
23
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE D - CAPITAL STOCK (continued)
In March 2004, the Company issued 55,000 of common stock for options exercised
at $1.00 per share.
In March 2004, the Company issued 5,443 shares of common stock at $3.00 per
share in exchange for employee services valued at $16,344.
In March 2004, the Company issued 5,769 shares of common stock at $3.15 per
share in exchange for employee services valued at $18,177.
In March 2004, the Company converted 5,000 preferred shares into 125,000 shares
of common stock at $3.00 per share in exchange for employee services valued at
$375,000.
In March 2004, the Company issued 8,806 shares of common stock at $3.03 per
share in exchange for employee services valued at $26,639.
In April 2004, the Company issued 22,500 shares of common stock at $0.10 for
subscription of warrants to be exercised.
In April 2004, the Company issued 9,860 shares of common stock at $2.58 per
share in exchange for employee services valued at $25,441.
In April 2004, the Company issued 11,712 shares of common stock at $2.35 per
share in exchange for consulting services valued at $27,523.
In April 2004, the Company issued 367,500 shares of common stock at $1.50 per
share in exchange for consulting services valued at $551,250.
In April 2004, the Company retired 50,000 shares of common stock previously
issued for consulting services at $0.065 per share or $3,250.
In May 2004, the Company converted 4,000 preferred shares into 100,000 shares of
common stock at $1.01 per share in exchange for consulting services valued at
$101,250.
In May 2004, the Company issued 10,000 shares of common stock at $0.10 per share
in a stock subscription for $1,000.
In May 2004, the Company issued 137,000 shares of common stock at $0.86 per
share in exchange for consulting services valued at $119,233.
In May 2004, the Company issued 26,380 shares of common stock at $1.15 per share
in exchange for consulting services valued at $30,337.
In June 2004, the Company retired 5,000 shares of common stock previously issued
for consulting services at $0.065 per share or $325.
In June 2004, the Company issued 270,500 shares of common stock at $0.67 per
share in exchange for consulting services valued at $180,560.
In June 2004, the Company issued 8,000 shares of common stock at $0.89 per share
in exchange for consulting services valued at $7,120.
In June 2004, the Company issued 50,000 shares of common stock at $0.645 per
share in exchange for consulting services valued at $32,250.
In June 2004, the Company sold 250,000 shares of common stock at $1.00 per share
for total proceeds of $250,000 pursuant to private placement.
24
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE D - CAPITAL STOCK (continued)
In July 2004, the Company issued 100,000 shares of common stock at $0.54 per
share in exchange for consulting services valued at $54,000.
In July 2004, the Company issued 5,000 shares of common stock at $0.72 per share
in exchange for consulting services valued at $3,600.
In July 2004, the Company issued 100,000 shares of common stock at $0.47 per
share in exchange for consulting services valued at $47,250.
In August 2004, the Company converted 2,000 preferred shares into 50,000 shares
of common stock at $0.39 in exchange for consulting services valued at $19,500.
In August 2004, the Company issued 100,000 shares of common stock at $0.39 in
exchange for consulting services valued at $39,000.
In August 2004, the Company issued 100,000 shares of common stock at $0.50 in
exchange for consulting services valued at $50,250.
In August 2004, the Company issued 200,000 shares of common stock at $0.56 in
exchange for consulting services valued at $112,500.
In September 2004, the Company issued 1,000,000 shares of common stock at $0.52
in exchange for consulting services valued at $517,500.
In September 2004, the Company issued 45,000 shares of common stock at $0.50 in
exchange for consulting services valued at $22,288.
In September 2004, the Company converted 4,000 preferred shares into 100,000
shares of common stock at $0.41 in exchange for consulting services valued at
$54,000.
In September 2004, the Company issued 60,000 convertible preferred shares at
$25.00, in exchange for consulting services valued at $1,500,000.
In October 2004, the Company issued 200,000 shares of common stock in exchange
for consulting services. The Company valued the shares issued at approximately
$0.68 per share for a total of $136,000, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
In October 2004, shareholders returned 1,069,600 shares to treasury issued
earlier in exchange for services valued at $642,098.
In October 2004, the Company issued 82,500 shares of common stock in exchange
for consulting services. The Company valued the shares issued at approximately
$0.60 per share for a total of $49,500, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
In October 2004, the Company sold 500,000 shares of common stock subscribed for
cash at $0.60 per share pursuant to private placement.
In October 2004, the Company issued 532,500 shares of common stock to existing
noteholders. The Company valued the shares issued at approximately $0.50 per
share for a total of $266,250.
25
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE D - CAPITAL STOCK (continued)
In October 2004, the Company sold 500,000 shares of common stock subscribed for
cash at $0.50 per share pursuant to private placement.
In October 2004, the Company sold 1,000,000 shares of common stock subscribed
for cash at $0.45 per share pursuant to private placement.
In October 2004, the Company issued 315,000 shares of common stock in exchange
for consulting services. The Company valued the shares issued at approximately
$0.45 per share for a total of $141,750, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
In November 2004, the Company issued 100,000 shares of common stock in exchange
for consulting services. The Company valued the shares issued at approximately
$0.47 per share for a total of $47,000, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
In November 2004, the Company issued 300,000 shares of common stock in exchange
for consulting services. The Company valued the shares issued at approximately
$0.80 per share for a total of $240,000, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
In November 2004, the Company issued 115,000 shares of common stock in exchange
for consulting services. The Company valued the shares issued at approximately
$1.44 per share for a total of $165,600, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
In November 2004, the Company issued 5,000 shares of common stock in exchange
for employee services. The Company valued the shares issued at approximately
$1.44 per share for a total of $7,200, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
In November 2004, the Company issued 60,000 shares of common stock in exchange
for employee services. The Company valued the shares issued at approximately
$0.60 per share for a total of $36,000, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
In December 2004, the Company issued net 5,500,000 shares of common stock for
default as per terms of notes payable for $88,500. Out of total, 3,500,000
shares were retained in escrow on behalf of another party for future deferred
compensation.
In December 2004, the Company issued 5,796,785 shares of common stock in
exchange for consulting services. The Company valued the shares issued at
approximately $1.44 per share for a total of $8,317,207, which represents the
fair value of the services received which did not differ materially from the
value of the stock issued.
In December 2004, the Company issued 2,930,000 shares of common stock subscribed
for cash at $0.50 per share pursuant to the exercise terms of a promissory note
payable.
26
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE D - CAPITAL STOCK (Continued)
In accordance with EITF 96-18 the measurement date to determine fair value was
the date at which a commitment for performance by the counter party to earn the
equity instrument was reached. The Company valued the shares issued for
consulting services at the rate which represents the fair value of the services
received which did not differ materially from the value of the stock issued.
NOTE E - STOCK OPTIONS AND WARRANTS
Warrants
The following table summarizes the changes in warrants outstanding and the
related prices for the shares of the Company's common stock issued to
non-employees of the Company. These warrants were granted in lieu of cash
compensation for services performed or financing expenses in connection with the
sale of the Company's common stock.
Warrants Outstanding Exercisable
Remaining Weighted Weighted Weighted
Number Contractual Average Average Average
Exercise Prices Outstanding Life (Years) Exercise Price Exercisable Exercise Price
--------------- ----------- -------------- ----------- --------------
$0.10 335,000 4.54 $0.10 335,000 $0.10
$0.50 50,000 4.77 $0.50 50,000 $0.50
$0.60 6,322,750 4.30 $0.60 6,322,750 $0.60
$0.70 750,000 2.58 $0.70 750,000 $0.70
$0.75 2,830,000 2.98 $0.75 2,830,000 $0.75
$1.00 386,000 0.79 $1.00 386,000 $1.00
$3.00 62,503 1.00 $3.00 62,503 $3.00
---------- ----------
10,736,253 10,736,253
========== ==========
Transactions involving warrants are summarized as follows:
Number of Shares Weighted Average
Price Per Share
Outstanding at September 30, 2004 4,870,253 $ 0.63
Granted 5,866,000 0.68
Exercised - -
Canceled or expired - -
-------------------- -
Outstanding at December 31, 2004 10,736,253 $ 0.66
==================== ========
The estimated value of the compensatory warrants granted to non-employees in
exchange for services and financing expenses was determined using the
Black-Scholes pricing model and the following assumptions: contractual term of 2
to 5 years, a risk free interest rate of 4.25%, a dividend yield of 0% and
volatility of 22.9%. The amount of the expense charged to operations for
compensatory warrants granted in exchange for services was $ 394,698 for the
three months ended December 31, 2004.
27
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE F - CONVERTIBLE PROMISSORY NOTES PAYABLE
A summary of convertible promissory notes payable at December 31, 2004
(Unaudited) is as follows:
December 31, 2004
(Unaudited)
A) Convertible notes payable ("Bridge Unit Offering"), in
quarterly installments of interest only at 10% per annum, secured
by all assets of the Company and due on the earlier of the
9-month anniversary date of the initial closing of the Offering,
or the completion of any equity financing of $3M or more; The
Company, in its sole discretion, may prepay principal at any time
without penalty. The Notes are convertible into shares of common
stock of the Company at a price of $2.50 per share. 1,675,000
Debt Discount - beneficial conversion feature, net of accumulated
amortization of $1,290,837 as of December 31, 2004 -
Debt Discount - value attributable to warrants attached to notes,
net of accumulated amortization of $384,163 as of December 31,
2004 -
B) Convertible notes payable totaling $1,465,000 ("December
Promissory Notes"), at the earlier of Definitive Information
Statement that increases the authorized Common Stock and reduces
par value or the completion of any equity financing of $1M or
more bearing interest at 6% per annum. The Notes are convertible
into shares of common stock of the Company at a price of $0.50
per share.At December 31, 2004, convertible notes are converted
into common shares of the Company as per the terms -
Debt Discount - beneficial conversion feature, net of accumulated
amortization of $936,541 as of December 31, 2004. -
Debt Discount - value attributable to warrants attached to notes,
net of accumulated amortization of $528,459 as of December 31, -
2004. -----------
$ 1,675,000
===========
Convertible Debentures
During 2004, the Company sold 33.5 units (the "Units") to accredited investors
at a price of $50,000 per Unit (the "Bridge Offering") for a total of
$1,675,000. Each Unit consists of (i) a $50,000 Principal Amount 10% Secured
Convertible Promissory Note ("Note" or "Notes"), (ii) warrants to purchase
50,000 shares of our common stock, exercisable for a period of five years at a
price of $0.60 per share ("$0.60 Warrant") and (iii) warrants to purchase 10,000
shares of our common stock, exercisable for a period of five years at a price of
$0.10 per share ("$0.10 Warrant" and together with the $0.60 Warrant, the
"Warrants"). The Notes are convertible into shares of our common stock at a
price of $0.33 per share.
28
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE F - CONVERTIBLE PROMISSORY NOTES PAYABLE (continued)
In accordance with EMERGING ISSUES TASK FORCE ISSUE 98-5, ACCOUNTING FOR
CONVERTIBLE SECURITIES WITH A BENEFICIAL CONVERSION FEATURES OR CONTINGENTLY
ADJUSTABLE CONVERSION RATIOS ("EITF 98-5"), the Company recognized an imbedded
beneficial conversion feature present in the Bridge Offering note. The Company
allocated a portion of the proceeds equal to the intrinsic value of that feature
to additional paid in capital. The Company recognized and measured an aggregate
of $1,290,837 of the proceeds, which is equal to the intrinsic value of the
imbedded beneficial conversion feature, to additional paid in capital and a
discount against the Bridge Offering. The debt discount attributed to the
beneficial conversion feature is amortized over the Bridge Offering's earliest
maturity period of 9 months from the date of issue as interest expense.
In connection with the placement of the Bridge Offering notes, the Company
offered 100% warrant coverage for each dollar of promissory note, exercisable
for a period of three years at a price of $0.75 per share ("$0.75 Warrant"). In
accordance with EMERGING ISSUES TASK FORCE ISSUE 00-27, APPLICATION OF ISSUE NO.
98-5 TO CERTAIN CONVERTIBLE INSTRUMENTS ("EITF - 0027"), the Company recognized
the value attributable to the warrants in the amount of $384,163 to additional
paid in capital and a discount against the Bridge Offering. The Company valued
the warrants in accordance with EITF 00-27 using the Black-Scholes pricing model
and the following assumptions: contractual terms of 5 years, an average risk
free interest rate of 4.25%, a dividend yield of 0.00%, and volatility of 42%.
The debt discount attributed to the value of the warrants issued is amortized
over the Bridge Offering's earliest maturity period of 9 months from the date of
issue as interest expense.
In December 2004, the Company sold convertible promissory notes to accredited
investors in the aggregate of $1,465,000. Each $1.00 is convertible into common
stock at $0.50 and includes 100% warrant coverage to purchase our common stock,
exercisable for a period of three years at a price of $0.75 per share ("$0.75
Warrant") and callable at $1.25 after the underlying stock is registered if said
stock trades at above $1.25 per share for 10 days - See Note A, Restricted Cash.
In accordance with EMERGING ISSUES TASK FORCE ISSUE 98-5, ACCOUNTING FOR
CONVERTIBLE SECURITIES WITH A BENEFICIAL CONVERSION FEATURES OR CONTINGENTLY
ADJUSTABLE CONVERSION RATIOS ("EITF 98-5"), the Company recognized an imbedded
beneficial conversion feature present in the Bridge Offering note. The Company
allocated a portion of the proceeds equal to the intrinsic value of that feature
to additional paid in capital. The Company recognized and measured an aggregate
of $936,541 of the proceeds, which is equal to the intrinsic value of the
imbedded beneficial conversion feature, to additional paid in capital and a
discount against the Bridge Offering. The debt discount attributed to the
beneficial conversion feature was fully amortized over the fiscal first quarter
period as interest expense.
In connection with the placement of the Bridge Offering notes, the Company
offered 100% warrant coverage for each dollar of promissory note, exercisable
for a period of three years at a price of $0.75 per share ("$0.75 Warrant"). In
accordance with EMERGING ISSUES TASK FORCE ISSUE 00-27, APPLICATION OF ISSUE NO.
98-5 TO CERTAIN CONVERTIBLE INSTRUMENTS ("EITF - 0027"), the Company recognized
the value attributable to the warrants in the amount of $528,459 to additional
paid in capital and a discount against the Bridge Offering. The Company valued
the warrants in accordance with EITF 00-27 using the Black-Scholes pricing model
and the following assumptions: contractual terms of 3 years, an average risk
free interest rate of 4.25%, a dividend yield of 0.00%, and volatility of
26.72%. The debt discount attributed to the value of the warrants issued was
fully amortized over the fiscal first quarter period as interest expense.
29
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE G- INCOME TAXES
The Company has adopted Financial Accounting Standard No. 109 which requires the
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statement or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between financial statements and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Temporary differences between taxable
income reported for financial reporting purposes and income tax purposes are
insignificant.
At December 31, 2004, the Company has available for federal income tax purposes
a net operating loss carryforward of approximately $35,000,000, expiring in the
year 2023, that may be used to offset future taxable income. The Company has
provided a valuation reserve against the full amount of the net operating loss
benefit, since in the opinion of management based upon the earnings history of
the Company, it is more likely than not that the benefits will not be realized.
Due to significant changes in the Company's ownership, the future use of its
existing net operating losses may be limited.
Components of deferred tax assets as of December 31, 2004 are as follows:
Non current:
Net operating loss carryforward
$12,000,000
Valuation allowance (12,000,000)
-----------
Net deferred tax asse $ -
===========
NOTE H-LOSSES PER SHARE
The following table presents the computation of basic and diluted losses per
share:
30
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE H-LOSSES PER SHARE
The following table presents the computation of basic and diluted losses per
share:
For the Three Months Ended For the Three Months Ended
December 31, 2004 December 31, 2003
----------------- -----------------
Loss available for common shareholders $ (12,365,136) $ (7,542,590)
================= =================
Basic and fully diluted loss per share $ (0.45) $ (0.41)
================= =================
Weighted average common shares outstanding 27,402,160 18,503,162
Net loss per share is based upon the weighted average of shares of common stock
outstanding
NOTE I- COMMITMENTS AND CONTINGENCIES
Licensing Agreement
In October 2002, the Company entered into an exclusive Licensing Agreement
("License") with Biowell Technology, Inc., a company formed under the laws of
Taiwan, Republic of Taiwan. The initial term of the License expires in 2007 with
renewal options under certain terms and conditions. The License grants the
Company the exclusive use of certain patented DNA technology, along with the
rights to future technology, in exchange for an initial payment of 1,500,000
shares of the Company's restricted common stock (see Note D). The Company is
obligated to order minimum purchase orders or make future certain minimum annual
royalty payments as follows:
Year ending Minimum purchase orders Alternative Minimum
October 8, Royalty Payable
2005 360,000 -
2006 432,000 -
2007 518,400 -
Consulting Agreement
GP has been engaged, on a non-exclusive basis, to provide advice and assistance
to the Company regarding issues associated with Applied DNA's proprietary DNA
embedded security solutions. GP will assist the Company with strategic
positioning and enhancement of the Company's business, and will assist the
Company in the development of domestic and international marketing strategies
for the Company's DNA products and services. The term of the engagement is one
year from the effective date, with automatic one year renewals unless either
party expresses, in writing, an intention not to renew within 60 days prior to
the expiration of the term.
31
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE I- COMMITMENTS AND CONTINGENCIES
Consulting Agreements (continued)
As compensation for GP's performance, the Company will pay GP an aggregate
advisory fee of Two Million Dollars ($2,000,000) payable in increments over the
term and renewal term. Two payments of $500,000 each were made by the Company in
September 2004 and January 2005. Thereafter, eight payments of $125,000 are due
monthly over the period February through September 2005. Additionally, the
Company will issue a net-exercisable warrant to purchase shares of Common Stock
of the Company at a later date. Fees were placed in escrow during GP's
completion of its due diligence review.
All promotional materials of the Company, on a going forward basis, will be
submitted to GP for its review, including all advertising, written sales
promotion, press releases, news clippings and other publicity matters relating
to GP's engagement and the strategic relationship created.
Franchising and Distribution Agreements
The Company has entered into a Distribution and Franchising Agreement
("Franchise Agreement") in July 2003. Under the terms of the Franchise
Agreement, the franchisee is obligated to pay the Company $3,000,000 payable
$25,000 upon execution of the Franchise Agreement and the balance of $2,975,000
payable over five (5) years with interest accruing at 8% per annum. Payments
under the Franchise Agreement are subject to franchisee's net profits, as
defined, under the Franchise Agreement.
Note Payable Settlement
In October 2004, the Company defaulted on a note held by a former company
officer and director in the amount of $88,500 (See Note C), and in accordance
with the default, the noteholder had the right to demand that his outstanding
note be converted back into 7,500,000 shares. The Company subsequently settled
the matter for 5,500,000 shares with the noteholder. Included within the
5,500,000 shares are 3,500,000 shares retained in escrow for negotiated on
behalf of another party for future deferred compensation.
Litigation
Ex-officer was named as a defendant in a lawsuit brought by an outside party in
the United States District Court for the Central District of California, and in
that action, Applied DNA was named as a "nominal defendant." The plaintiff is
alleging that the ex-officer violated the short swing rule. The Company believes
it has meritorious defenses and will prevail in this matter.
32
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2004
(UNAUDITED)
NOTE I- COMMITMENTS AND CONTINGENCIES (continued)
Operating Lease Commitments
The Company leases office space under operating lease in Los Angeles, California
for its corporate use from an entity controlled by significant former
shareholder, expiring in November 2006. Total lease rental expenses for the
three months ended on December 31, 2004 was $47,194.
Commitments for minimum rentals under non-cancelable lease at September 30, 2004
were as follows:
Year ended September 30,
2005 $ 139,308
2006 143,977
2007 12,031
-----------
$ 295,316
Employment and Consulting Agreements
The Company has employment agreements with the Company's officers and certain
employees. These employment agreements provide for salaries and benefits,
including stock options and extend up to seven years. In addition to salary and
benefit provisions, the agreements include defined commitments should the
employer terminate the employee with or without cause.
The Company has a consulting agreement with an entity controlled by a former
significant shareholder of the Company. The consulting agreement provides for
compensation and certain benefits, including stock options and extends up to
seven years. In addition to compensation and benefit provisions, the agreements
include defined commitments should the employer terminate the consultant with or
without cause.
The Company has consulting agreements with outside contractors to provide
marketing and financial advisory services. The Agreements are generally for a
term of 12 months from inception and renewable automatically from year to year
unless either the Company or consultant terminates such engagement by written
notice.
NOTE J- SUBSEQUENT EVENTS
In January 2005, the Company arranged a $5.970 million private placement of
11.940 million shares at $0.50 per share along with 11.940 million attached
warrants with an exercise price of $0.75 that expires in 5 years.
In January 2005, holders of 1,675,000 of convertible notes payable elected to
convert their notes to common stock at $0.33 per share (See Note F).
On January 2005, the Company entered into a stock purchase agreement with
Biowell Technology Inc.,a Taiwan corporation ("Biowell"), whereby a to-be-formed
wholly- owned subsidiary of the Company would acquire a company to be formed
which would own all of the intellectual property of Biowell in exchange for
36,000,000 shares of the Company's common stock to be issued to the shareholders
of Biowell. The Acquisition Shares represent 50% of the total shares issued and
outstanding on a fully diluted basis on the date of execution of the Agreement.
In February 2005, the Company in a private placement, sold an aggregate of
$1,391,000 in secured convertible promissory notes and 2,782,000 warrants. The
notes bear interest at 10% per annum, mature one year from the date of issuance,
and are convertible: into shares of common stock of the Company at a price of
$0.50 per share (i) at the holder's option; or (ii) automatically upon the
Company's filing of a registration statement registering the shares underlying
the notes and Warrants.
33
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS FOR THE THREE
MONTHS ENDED DECEMBER 31, 2004
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere within
this report. The quarterly report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, including statements using
terminology such as "can", "may", "believe", "designated to", "will", "expect",
"plan", "anticipate", "estimate", "potential" or "continue", or the negative
thereof or other comparable terminology regarding beliefs, plans, expectations
or intentions regarding the future. Forward looking statements involve risks and
uncertainties and actual results could differ materially from those discussed in
forward-looking statements. All forward looking statements and risk factors
included in this document are made as of the date hereof, based on information
available to the Company as of the date thereof, and the Company assumes no
obligations to update any forward-looking statement or risk factor, unless the
Company is required to do so by law.
Plan of Operation
Liquidity and Capital Resources
As of December 31, 2004, we had a deficiency in working capital of
$5,942,000. For the three months ended December 31, 2004, we generated a net
cash flow deficit from operating activities of ($1,587,000), consisting
primarily of year to date losses of ($12,365,000), $8,724,000 in net stock
issued for consulting services, $1,515,000 for beneficial conversion of
convertible notes payable and warrants, $395,000 for warrants issued to
consultants as well as a net increase in current liabilities and other of
$144,000.
Cash used in investing activities totaled $28,000, which was utilized for
patent filings and, facility lease deposits. Cash provided by financing
activities totaled $1,676,000 consisting of $1,390,000 in proceeds from loans,
and $250,000 and $36,000 in common stock and exercised options proceeds,
respectively.
We expect capital expenditures to be nominal for fiscal 2005. These
anticipated expenditures are for continued investments in property and equipment
used in our business.
By adjusting our operations and development to the level of capitalization,
we believe we have sufficient capital resources to meet projected cash flow
deficits. However, if during that period or thereafter, we are not successful in
generating sufficient liquidity from operations or in raising sufficient capital
resources, on terms acceptable to us, this could have a material adverse effect
on our business, results of operations liquidity and financial condition.
The Company presently does not have any available credit, bank financing or
other external sources of liquidity. Due to its brief history and historical
operating losses, the Company's operations have not been a source of liquidity.
The Company will need to obtain additional capital in order to expand operations
and become profitable. The Company intends to pursue the building of a re-seller
network outside the United States, and if successful, the re-seller agreements
would constitute an additional source of liquidity and capital over time. In
order to obtain capital, the Company may need to sell additional shares of its
common stock or borrow funds from private lenders. There can be no assurance
that the Company will be successful in obtaining additional funding and
execution of re-seller agreements outside the Unites States.
During the three months ended December 31, 2004 and 2003 and from September 16,
2002 (inception) through December 31 2003, the Company's priorities were to
recruit and build its team, organize its new infrastructure and to develop a
successful strategy how best to exploit its exclusive Biowell license agreement.
No revenues were generated. Although the management of the Company is of the
opinion that continuing to develop and finance the Company's present business of
providing DNA anti-counterfeit technology may ultimately be successful,
management nevertheless expects that the Company will need substantial
additional capital before the Company's operations can be fully implemented.
From our inception through December 31, 2004, we have incurred losses of
$35,180,171. These expenses were associated principally with equity-based
compensation to employees and consultants, product development costs and
professional services.
While we have raised capital to meet our working capital and financing needs in
the past, additional financing is required in order to meet our current and
projected cash flow deficits from operations and development. We are seeking
financing in the form of equity through a Private Placement Memorandum in order
to provide the necessary working capital. We currently have no commitments for
financing. There is no guarantee that we will be successful in raising the funds
required.
34
The effect of inflation on the Company's operating results was not significant.
The Company's operations are located in North America and there are no seasonal
aspects that would have a material effect on the Company's financial condition
or results of operations.
The Company's independent certified public accountant has stated in their report
included in the Company's September 30, 2004 Form 10-KSB, that the Company has
incurred operating losses from its inception , and that the Company is dependent
upon management's ability to develop profitable operations. These factors among
others may raise substantial doubt about the Company's ability to continue as a
going concern.
Bridge Unit Offering
From November through December 2003, we sold 33.5 units (the "Units") to
accredited investors at a price of $50,000 per Unit (the "Offering") for a total
of $1,675,000. Each Unit consists of (i) a $50,000 Principal Amount 10% Secured
Convertible Promissory Note ("Note" or "Notes"), (ii) warrants to purchase
50,000 shares of our common stock, exercisable for a period of five years at a
price of $3.20 per share ("$3.20 Warrant") and (iii) warrants to purchase 10,000
shares of our common stock, exercisable for a period of five years at a price of
$0.10 per share ("$0.10 Warrant" and together with the $3.20 Warrant, the
"Warrants"). The Notes are convertible into shares of our common stock at a
price of $2.50 per share.
December Promissory Notes Payable
In December 2004, the Company received $1,065,318 in proceeds subject to the
terms of the December Promissory Notes Payable agreement. The Company held the
proceeds in escrow and classified the amount as Restricted Cash - See Note A,
Restricted Cash.
The aggregate principal amount of Notes sold was $1,375,000. The Notes are
secured and bear interest at 10% per annum, computed on the basis of a 365-day
year, accruing from the date an investor's subscription was closed upon by the
Company. Principal and all accrued interest will be payable in full on the
earlier of (i) the 9-month anniversary date of the initial closing of the
Offering, or (ii) the completion of any equity financing of $3,000,000 or more.
The Company, in its sole discretion, may prepay principal at any time without
penalty. The Notes are convertible into shares of common stock of the Company at
a price of $2.50 per share.
The Notes are secured by a security agreement giving the Holder a security
interest in all the patents, licenses, equipment, fixtures, inventory and
accounts receivable of the Company, and/or any of its subsidiaries.
The following events constitute events of default under the Notes:
(i) Default in the payment of the principal or accrued interest on any Note or
upon any other indebtedness of the Company that is greater than $100,000, as and
when the same shall become due, whether by default or otherwise, which Default
shall have continued for a period of five (5) business days; or
(ii) Any representation or warranty made by the Company or any officer of the
Company in the Notes, or in any agreement, report, certificate or other document
delivered to the Holder pursuant to the Notes shall have been incorrect in any
material respect when made which shall not have been remedied ten (10) days
after written notice thereof shall have been given by the Holder; or
(iii) The Company shall fail to perform or observe any affirmative covenant
contained in Section 4 of the Notes and such Default, if capable of being
remedied, shall not have been remedied ten (10) days after written notice
thereof shall have been given by the Holder; or
(iv) The Company or any subsidiary (A) shall institute any proceeding or
voluntary case seeking to adjudicate it bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of any order for relief or the appointment of a receiver, trustee,
custodian or other similar official for such Company or any subsidiary or for
any substantial part of its property, or shall consent to the commencement
against it of such a proceeding or case, or shall file an answer in any such
case or proceeding commenced against it consenting to or acquiescing in the
commencement of such case or proceeding, or shall consent to or acquiesce in the
appointment of such a receiver, trustee, custodian or similar official; (B)
shall be unable to pay its debts as such debts become due, or shall admit in
writing its inability to apply its debts generally; (C) shall make a general
assignment for the benefit of creditors; or (D) shall take any action to
authorize or effect any of the actions set forth above ; or
35
(v) Any proceeding shall be instituted against the Company seeking to adjudicate
it bankrupt or insolvent, or seeking dissolution, liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for the Company or for any
substantial part of its property, and either such proceeding shall not have been
dismissed or shall not have been stayed for a period of sixty (60) days or any
of the actions sought in such proceeding (including, without limitation, the
entry of any order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property) shall occur; or
(vi) One or more final judgments, arbitration awards or orders for the payment
of money in excess of $100,000 in the aggregate shall be rendered against the
Company, which judgment remains unsatisfied for thirty (30) days after the date
of such entry; or
(vii)Delisting of the Common Stock from the principal market or exchange on
which the Common Stock is listed for trading; Company's failure to comply with
the conditions for listing; or notification that the Company is not in
compliance with the conditions for such continued listing; or
(viii)The issuance of an SEC stop trade order or an order suspending trading of
the Common Stock from the principal market or exchange on which the Common Stock
is listed for trading for longer than five (5) trading days; or
(ix) The failure by the Company to issue shares of Common Stock to the Holder
upon exercise by the Holder of the conversion rights of the Holder in accordance
with the terms of the Notes, or the failure to transfer or cause its transfer
agent to transfer (electronically or in certificated form) any certificate for
shares of Common Stock issued to the Holder upon conversion of or otherwise
pursuant to the Notes as and when required by the Notes, or the failure to
remove any restrictive legend (or to withdraw any stop transfer instructions in
respect thereof) on any certificate for any shares of Common Stock issued to the
Holder upon conversion of or otherwise pursuant to the Notes as and when
required by the Notes, and any such failure shall continue uncured for ten (10)
days after the Company shall have been notified thereof in writing by the
Holder; or
(x) The failure by the Company to file the Registration Statement within
forty-five (45) days following the Closing Date (as defined in the Subscription
Agreement) or obtain effectiveness with the Securities and Exchange Commission
of the Registration Statement within one hundred thirty five (135) days
following the Closing Date (as defined in the Subscription Agreement) or such
Registration Statement lapses in effect (or sales cannot otherwise be made
thereunder effective, whether by reason of the Company's failure to amend or
supplement the prospectus included therein) for more than twenty (20)
consecutive days or forty (40) days in any twelve month period after the
Registration Statement becomes effective; or
(xi) The Company shall encumber or hypothecate the collateral subject to the
Security Agreement to any party; or
(xii) A default by the Company of a material term, covenant, warranty or
undertaking of any other agreement to which the Company and Holder are parties,
or the occurrence of an event of default under any such other agreement.
Holders shall, at any time prior to the Maturity Date, have the right to convert
the Note into Shares of the Company at $2.50 per such Share, which right shall
be exercised in the Holder's sole and absolute discretion. Holders shall, with
respect to any Shares acquired thereby, be granted the same demand and
piggy-back registration rights as if such Shares were purchased as part of the
Units.
In the event of and immediately upon the occurrence of an "Event of Default,"
the Notes shall become immediately due and payable without any action by the
Holder and the Notes shall bear interest until paid at the rate of 12% per annum
or such amount as shall be allowed by law.
In the event that the sum due under the Note is not repaid on the Maturity Date,
the Holder will have the option to either have the Note accrue interest at 12%
or such amount as legally allowed until paid, or to convert the entirety of the
debt then outstanding under the Note into the number of shares derived by
dividing the sum of such debt by the dollar value equal to 80% of the closing
ask price of the shares on the last trading day immediately preceding the
Maturity Date as reported on the market upon which the shares shall then be
trading, provided, however, that the conversion price shall never be less than
$1.00 per share. Any shares acquired thereby shall carry with them the demand
and piggy back registration rights granted to the Holder under the terms of the
Note.
36
Bridge Offering Warrants
Each Unit, or $50,000 principal amount of the Note, entitles the holder to
50,000 warrants exercisable on a one for one basis into shares of Common Stock
at an exercise price of $3.20 during a five-year period commencing on the
initial closing of the Offering (which was December 15, 2003, 2003). per share.
In addition, each Unit also entitles the holder to 10,000 warrants exercisable
on a one for one basis into shares of Common Stock at an exercise price of $0.10
per share during a five-year period commencing on the initial closing of the
Offering (which was December 15, 2003) In the event a holder of Warrants fails
to exercise the Warrants prior to their expiration, the Warrants will expire,
and the holder thereof will have no further rights with respect to the Warrants.
The Warrants expire at 5:00 p.m., New York time, on the fifth anniversary after
the initial closing of the Offering. In the event a holder of Warrants fails to
exercise the Warrants prior to their expiration, the Warrants will expire and
the holder thereof will have no further rights with respect to the Warrants.
Product Research and Development
Without substantial financial resources we do not anticipate incurring material
research and development costs during the next twelve months.
Acquisition of Plant and Equipment and Other Assets
We do not anticipate the sale of any material property , plant or equipment
during the next 12 months. Without substantial financial resources we do not
anticipate the acquisition of any material property, plant or equipment during
the next 12 months.
Number of Employees
From our inception through the period ended December 31, 2004 , we have relied
on the services of outside consultants for services and have no employees. In
order for us to attract and retain quality personnel, we anticipate we will have
to offer competitive salaries to future employees. We anticipate that it may
become desirable to add additional full and or part time employees to discharge
certain critical functions during the next 12 months. This projected increase in
personnel is dependent upon our ability to generate revenues and obtain sources
of financing. There is no guarantee that we will be successful in raising the
funds required or generating revenues sufficient to fund the projected increase
in the number of employees. As we continue to expand, we will incur additional
cost for personnel.
37
Trends, Risks and Uncertainties
We have sought to identify what we believe to be the most significant risks to
our business, but we cannot predict whether, or to what extent, any of such
risks may be realized nor can we guarantee that we have identified all possible
risks that might arise. Investors should carefully consider all of such risk
factors before making an investment decision with respect to the Company's
Common Stock.
Risks
Applied DNA Sciences, Inc. is a small company entering a technical and
specialized scientific industry. The Company's growth will depend upon the
working capital and financial support, which we are in the process of seeking.
The Company will need substantial additional capital to expand and to exploit
its potential. While the management team has strong contacts in the geographic
and product territories, the Company is small with limited assets and a limited
operating history and may, as a result, have difficulties securing large enough
and increasing financial commitments from potential investors. Thus the Company
may be subject to the high risks associated with start-up companies and small
business.
The Company relies on a small number of key individuals to implement plans and
operations. Although the Company may obtain key person life insurance coverage
on the Company's key individuals once substantial financial resources are
obtained, the Company has not done so at this time. Should for some reason their
services become unavailable, the Company will be required to retain other
qualified personnel.
Reductions or delays in research and development budgets and in government
funding may negatively impact the Company's sales. Future clients may include
researchers at pharmaceutical and biotechnology companies as well as other
industrial sectors, academic institutions and government and private
laboratories. Fluctuations in the research and development budgets of these
researchers and their organizations could have a significant effect on demand
for the Company's products. Research and development budgets fluctuate due to
numerous factors that are outside the Company's control and are difficult to
predict, including changes in available resources, spending priorities and
institutional budgetary policies. The Company's business could be seriously
damaged by any decrease in life science research and development expenditures by
pharmaceutical, biotechnological and other industrial sector companies, academic
institutions or government and private laboratories. Although the level of
research funding has increased during the past several years, we cannot assure
that this trend will continue. Government funding of research and development is
subject to the political process, which is inherently fluid and unpredictable.
Also government proposals to reduce or eliminate budgetary deficits have
sometimes included reduced allocations to government agencies that fund research
and development activities. Also, our potential customers receive funds from
approved grants at particular times of the year, as determined by the federal
government. Grants have, in the past, been frozen for extended periods or have
otherwise become unavailable to various institutions without advance notice. The
timing of receipt of grant funds affects the timing of purchase decisions by our
customers and, as a result, can cause fluctuations in our sales and operating
results.
The Company regards trademarks, trade secrets and other intellectual property as
a component of its success, The Company relies on trademark law and trade secret
protection and confidentiality and /or license agreements with consultants,
customers, partners and others to protect our intellectual property. Effective
trademark and trade secret protection may not be available in every country in
which the Company's products are available. The Company cannot be certain that
the Company has taken adequate steps to protect its intellectual property,
especially in countries where the laws may not protect the Company's rights as
fully as in the United States. In addition, the Company's third party
non-disclosure and confidentiality agreements can be breached and, if they are,
there may not be adequate remedy available to the Company. If the Company's
trade secrets become known, the Company may lose its competitive edge.
The Company may be unable to protect its trademarks, trade secrets and other
intellectual property rights that are important to its business. The Company
regards its trademarks, trade secrets and other intellectual property as a
component of its success. The Company relies on trademark law and trade secret
protection and confidentiality and/or license agreements with consultants,
employees, customers, partners and others to protect our intellectual property.
38
Litigation as regards the Company intellectual property or other subject matters
could harm the Company's business. Litigation regarding patents and other
intellectual property rights is extensive in the biotechnology industry. The
Company is aware that patents have been applied for, and in some cases issued to
others, claiming technologies that are closely related to Applied DNA Sciences,
Inc. As a result, and in part due to the ambiguities and evolving nature of
intellectual property law, the Company periodically receives notices of
potential infringements of patents held by others. Although to date the Company
has successfully resolved these types of claims, the Company may not be able to
do so in the future. In the event of an intellectual property dispute, the
Company may be forced to litigate. This litigation could involve proceedings
declared by the U.S. Patent and Trademark Office or the International Trade
Commission, as well as proceedings brought directly by affected third parties.
Intellectual property litigation can be extremely expensive, and these expenses,
as well as the consequences should the Company not prevail, could seriously harm
the Company's business, If a third party claimed an intellectual property right
to technology the Company uses, the Company might need to discontinue an
important product or product line, alter its products and processes, pay license
fees or cease its affected business activities, Although the Company might under
these circumstances attempt to obtain a license to this intellectual property,
it may not be able to do so on favorable terms, or at all.
In addition to intellectual property rights litigation, other substantial,
complex or extended litigation could result in large expenditures for the
Company and distraction of its management. For example, law suits by employees,
shareholders, collaborators, distributors or re-sellers could be very costly and
substantially disrupt the Company's business. Disputes from time to time with
companies or individuals are not uncommon in the industry and the Company cannot
assure that it will always be able to resolve them out of court.
The Company's growth depends upon the ability to undertake sales in current
markets and to expand sales nationally to additional market segments and to
Europe, South America, Australia and parts of the Middle East. There can be no
certainty that the Company's efforts to increase and expand sales can be
accomplished on a profitable basis. The expansion to other delivery methods and
to other venues will depend on a number of factors, most notably the timely and
successful promotion and sale of the Company's products and related services
directly or via re-sellers agreements.. The Company's inability to expand sales,
in a timely manner, would have a material adverse effect on its business,
operating results and its financial condition.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
39
Item 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures: As of December 31, 2004, the
Company's management carried out an evaluation, under the supervision of the
Company's Chief Executive Officer and the Chief Financial Officer of the
effectiveness of the design and operation of the Company's system of disclosure
controls and procedures pursuant to the Securities and Exchange Act, Rule
13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective, as of the date of their
evaluation, for the purposes of recording, processing, summarizing and timely
reporting material information required to be disclosed in reports filed by the
Company under the Securities Exchange Act of 1934.
Changes in internal controls: There were no changes in internal controls over
financial reporting, known to the Chief Executive Officer or Chief Financial
Officer that occurred during the period covered by this report that has
materially affected, or is likely to materially effect, the Company's internal
control over financial reporting.
40
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On October 1, 2004, we issued a total of 199,999 shares to parties related to an
investment banker with which we have a non-exclusive engagement.
On October 13, 2004, we issued a total of 257,500 shares to two consultants for
financial advisory and marketing services.
On October 18, 2004, we issued a total of 347,500 shares to previous investors
as consideration for our agreement to extend our registration commitment.
On October 19, 2004, we issued 1,000,000 shares to a single investor for total
proceeds of $500,000.
On October 26, 2004, we issued a total of 500,000 shares to parties related to
our investment banker in settlement for various breaches made in our Placement
Agent Agreement.
On November 4, 2004, we issued 100,000 to an employee as compensation for
services previously rendered.
On November 15, 2004 through December 17, 2004, we issued a total of 415,000
shares to a consultant for financial advisory services.
On December 17, 2004, we issued 5,000 shares to an employee for services
previously rendered.
To obtain funding for our ongoing operations, we sold $1,465,000 in convertible
promissory notes to 13 investors in December 2004. Each promissory note was
automatically convertible into shares of our common stock, at a price of $0.50
per share, upon the closing of a private placement for $1 million or more. In
connection with the sale of the convertible promissory notes, we issued
2,930,000 warrants to purchase shares of common stock. The warrants are
exercisable until three years from the date of issuance at a purchase price of
$0.75 per share. This issuance is considered exempt under Regulation D of the
Securities Act of 1933 and Rule 506 promulgated thereunder.
Subsequent Sale of Equity Securities
On January 4, 2005, we issued 12,500 shares as a result of an investor's
exercise of his $0.10 warrants. This issuance is considered exempt under
Regulation D of the Securities Act of 1933 and Rule 506 promulgated thereunder.
Also on January 10, 2005, we issued additional shares to our investors in
accordance with an adjustment provision in our private placement and placement
agent agreement. We issued a total of 3,249,750 shares of Common Stock to 24
investors. This issuance is considered exempt under Regulation D of the
Securities Act of 1933 and Rule 506 promulgated thereunder.
On January 13, 2005, we issued additional shares to two consultants in
accordance with an adjustment provision in their consulting agreements. A total
of 662,000 shares were issued. This issuance is considered exempt under
Regulation D of the Securities Act of 1933 and Rule 506 promulgated thereunder.
To obtain funding for our ongoing operations, we conducted a private placement
offering in January and February 2005, in which we sold $7,311,000 of 10%
Secured Convertible Promissory Notes to 61 investors. The 10% Secured
Convertible Promissory Notes automatically convert into shares of our common
stock, at a price of $0.50 per share, upon the filing of this registration
statement. In connection with the private placement offering, we have issued
15,222,000 warrants. The warrants are exercisable until five years from the date
of issuance at a purchase price of $0.75 per share. This issuance is considered
exempt under Regulation D of the Securities Act of 1933 and Rule 506 promulgated
thereunder.
On January 28, 2005, we closed upon a private placement transaction in excess of
$1 million, and on February 2, 2005, the promissory notes issued in December
2004 were converted into an aggregate of 2,930,000 shares of common stock. This
issuance is considered exempt under Regulation D of the Securities Act of 1933
and Rule 506 promulgated thereunder.
(c) The following table provides information about purchases by us and our
affiliated purchasers during the quarter ended December 31, 2004 of equity
securities that are registered by us pursuant to Section 12 of the Securities
Exchange Act of 1934:
ISSUER PURCHASES OF EQUITY SECURITIES
Period (a) (b) (c) (d)
Total Number of Average Price Total Number of Shares (or Units) Maximum Number (or Approximate Dollar Value)
Shares (or Units) Paid per Share Purchased as Part of Publicly of Shares (or Units) that May Yet Be
Purchased) (or Unit) Announced Plans or Programs (1) Purchased Under the Plans or Programs (1)
10/01/04-
10/31/04 0 $0 0 0
11/01/04-
11/30/04 0 $0 0 0
12/01/04-
12/31/04 0 $0 0 0
(1) We have not entered into any plans or programs under which we may repurchase
its common stock.
Securities Act of 1933.
On December 17, 2003, we issued a total of 1,850,000 shares to ten consultants
in connection with our agreement with the company's investment bankers, Vertical
Capital Partners, Inc.. These issuances are considered exempt from registration
by reason of the Section 4(2) of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
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ITEM 6. EXHIBITS
(a) Exhibits
31.1 Principal Executive Officer certification pursuant to Rule 13a-14 and
15d-14 under the Securities Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herein.
31.2 Principal Financial Officer certification pursuant to Rule 13a-14 and
15d-14 under the Securities Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herein.
32.1 Chief Executive Officer certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. Filed herein.
32.2 Chief Financial Officer certification pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Filed herein.
42
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: February 15, 2004 Applied DNA Sciences, Inc.
/s/ Rob Hutchison
----------------
Rob Hutchison
Chief Executive Officer
/s/Rob Hutchison
---------------
Rob Hutchison
Interim Chief Financial Officer
43