
PART I - FINANCIAL INFORMATION Item 1 – Condensed Consolidated Financial Statements The company's financial position strengthened with increased assets and revenue driven by COVID-19 products, despite a net loss Condensed Consolidated Balance Sheets (Unaudited) | Account | March 31, 2021 | September 30, 2020 | | :--- | :--- | :--- | | Total Current Assets | $17,419,184 | $9,077,725 | | Total Assets | $20,781,584 | $11,341,179 | | Total Current Liabilities | $2,130,129 | $4,265,878 | | Total Liabilities | $2,161,596 | $5,631,673 | | Total Equity | $18,619,988 | $5,709,506 | Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Total Revenues | $2,671,542 | $552,473 | | Loss from Operations | ($2,315,991) | ($2,682,208) | | Gain on extinguishment of notes payable | $839,945 | - | | Net Loss | ($1,517,078) | ($2,950,905) | | Net Loss Per Share (basic and diluted) | ($0.21) | ($0.79) | Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Six Months Ended March 31, 2021 | Six Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($7,426,015) | ($5,151,404) | | Net cash used in investing activities | ($1,139,586) | ($44,752) | | Net cash provided by financing activities | $14,704,855 | $13,300,059 | | Net increase in cash and cash equivalents | $6,139,254 | $8,103,903 | | Cash and cash equivalents at end of period | $13,925,997 | $8,662,891 | Notes to Condensed Consolidated Financial Statements The notes detail business expansion due to COVID-19, improved liquidity from financing, and significant debt extinguishment events - The company's business is centered on its LinearDNA PCR-based manufacturing platform, with applications in Biotherapeutics, COVID-19 Diagnostics, COVID-19 Surveillance, cancer technology, and Non-Biologic Tagging202832 - The company secured approximately $13.8 million in net proceeds from a registered direct public offering and an additional $2.6 million from warrant exercises, providing sufficient cash for the next twelve months4088 - The company's Paycheck Protection Program (PPP) loan of approximately $847,000 was fully forgiven, resulting in a gain on extinguishment of debt of $839,9457879 - The company repaid $1.67 million to settle secured convertible notes, resulting in a loss on extinguishment of debt of $1,774,662 for the six-month period8087 Disaggregation of Revenue (Three Months Ended) | Revenue Source | March 31, 2021 | March 31, 2020 | | :--- | :--- | :--- | | Clinical laboratory testing services | $1,554,880 | $0 | | Diagnostic kits | $724,588 | $0 | | Research and development services | $124,760 | $286,598 | | Other Product/Service Revenue | $267,314 | $265,875 | | Total | $2,671,542 | $552,473 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses significant revenue growth from COVID-19 products, increased operating expenses, and a strengthened liquidity position from recent financing Recent Developments The company's COVID-19 test kit received FDA recognition for variant detection and an expanded Emergency Use Authorization (EUA) - The FDA noted the Linea™ COVID-19 Assay Kit's "S-gene target dropout" pattern may aid in early identification of variants like B.1.1.7140142 - The company received a re-issued EUA from the FDA, expanding the kit's use to include serial screening for asymptomatic individuals143 Results of Operations Revenue grew 384% year-over-year driven by new COVID-19 testing services and kits, while operating expenses rose with business expansion Revenue Comparison (Three Months Ended March 31) | Revenue Type | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product Revenues | $965,110 | $197,801 | +$767,309 | +388% | | Service Revenues | $1,706,432 | $354,672 | +$1,351,760 | +381% | | Total Revenues | $2,671,542 | $552,473 | +$2,119,069 | +384% | - The increase in Q2 FY21 product revenue was primarily driven by approximately $785,000 in sales of the Linea COVID-19 Assay Kit148 - The increase in Q2 FY21 service revenue was attributable to $1,554,880 from COVID-19 Surveillance Testing services149 - Selling, general and administrative expenses for Q2 FY21 increased by 56% to $3.6 million, primarily due to higher stock-based compensation, payroll, and lab supplies151 Liquidity and Capital Resources The company's liquidity improved significantly with $13.9 million in cash, supported by recent financing activities ensuring operational funding - The company had $13.9 million in cash and cash equivalents and $15.3 million in working capital as of March 31, 2021173174 - Financing activities provided $14.7 million in cash for the six months ended March 31, 2021, primarily from a registered direct offering ($13.8M net) and warrant exercises ($2.6M net)173175 - The company estimates it has sufficient cash to fund operations for the next twelve months from the filing date of this report175 - The COVID-19 pandemic led to a reduction of textile-related revenues but an increase in the Biotherapeutic Contract Research and Manufacturing business176177 Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company is a smaller reporting company using scaled disclosure requirements - The company is a smaller reporting company and has elected scaled disclosure requirements, making this item not applicable180 Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Management concluded that as of March 31, 2021, the company's disclosure controls and procedures were effective182 - No changes in internal control over financial reporting occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls183 PART II - OTHER INFORMATION Legal Proceedings The company reports no legal proceedings - There are no legal proceedings to report185 Risk Factors New risks were identified related to the company's COVID-19 test kit, including potential false negatives and increased competition - A new risk factor highlights that the Linea™ COVID-19 Assay Kit may produce false negatives, which could lead to potential termination of the EUA by the FDA186 - The company acknowledges a risk that competitors may develop and receive authorization for diagnostics that can also detect the 69-70del mutation, potentially impacting sales187 Other Information The company received a re-issued EUA from the FDA, expanding the use of its COVID-19 kit for asymptomatic screening - On May 11, 2021, the FDA provided a re-issued EUA for the Linea COVID-19 Assay Kit, expanding its use to include serial screening of asymptomatic individuals and updating it to include the KingFisher™ Flex Purification System189