
Forward-looking Information This section outlines forward-looking statements in the Annual Report on Form 10-K, emphasizing inherent risks and uncertainties that may cause actual results to differ materially - Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from projections81013 - Key areas of forward-looking statements include future revenues, expenditures, capital requirements, ability to continue as a going concern, need for additional financing, business strategy, demand for services (Therapeutic DNA, MDx Testing, DNA Tagging), regulatory approvals, and profitability1112 - The company assumes no obligation to update any forward-looking statement or risk factor unless required by law14 ITEM 1. BUSINESS Applied DNA Sciences is a biotechnology company focused on DNA and RNA production and detection across three markets, prioritizing Therapeutic DNA Production and MDx Testing Services Overview Applied DNA Sciences develops and commercializes DNA and RNA production and detection technologies, focusing on Therapeutic DNA Production and MDx Testing Services - The company operates in three primary business markets: Therapeutic DNA Production Services, MDx Testing Services, and DNA Tagging and Security Products and Services18 - Current growth strategy focuses on developing and commercializing Therapeutic DNA Production Services and expanding MDx Testing Services through genetic testing19 Corporate History The company was formed in 1983, reincorporated in Delaware in 2008, and is headquartered in Stony Brook, New York - The company was initially formed in 1983, reincorporated in Delaware in 2008, and is headquartered in Stony Brook, New York2021 Industry Background and Markets This section details the company's three main business segments, highlighting their technologies, market opportunities, and strategic focus Therapeutic DNA Production Services The company develops Linea DNA and Linea IVT platforms for enzymatic DNA and mRNA production, offering advantages over traditional methods for nucleic acid-based therapeutics - The Linea DNA platform enables rapid, efficient, and large-scale cell-free manufacture of high-fidelity DNA sequences, offering advantages over plasmid-based methods in speed, scalability, purity, simplicity, and flexibility242627 - The Linea IVT platform, combining Linea DNA IVT templates and Linea RNAP (from Spindle acquisition), aims to improve mRNA production by preventing dsRNA contamination, offering faster delivery (14-30 days), and reducing manufacturing complexities31 - The acquisition of Spindle in July 2023 is expected to increase the company's mRNA-related Total Addressable Market (TAM) by approximately 3x32 Linea DNA Quality Grades and Availability | Quality Grade | Permitted Use | Company Status | | :------------------------- | :------------------------------------------------------------------- | :------------------------------------------- | | GLP | Research and pre-clinical discovery | Currently available | | GMP for Starting Materials | DNA critical starting materials for the production of mRNA therapies | Planned availability first half of CY2024 (1) | | GMP | DNA biologic, drug substance and/or drug product | Planned availability first half of CY 2025 (1) | (1) Dependent on the availability of future financing - The company plans to develop Linea DNA-based therapeutic or prophylactic vaccines for high-value veterinary health indications, leveraging LNP encapsulation for intramuscular administration363738 MDx Testing Services ADCL provides MDx testing services, including PGx testing pending NYSDOH approval, with historical revenue largely from safeCircle™ COVID-19 testing - ADCL offers MDx testing services, including pharmacogenomics (PGx) testing, which is currently pending NYSDOH approval394041 - The majority of historical MDx revenue came from safeCircle™ COVID-19 testing, but demand has significantly decreased, resulting in reduced revenues42 - Upon NYSDOH approval, the company plans to leverage PGx Testing Services for large entities and self-insured employers, citing potential healthcare cost reductions and improved patient wellbeing41 DNA Tagging and Security Products and Services The CertainT® platform uses non-biologic DNA tags for supply chain security and product authentication, primarily for cotton, with increased interest due to UFLPA - The CertainT® platform uses non-biologic DNA tags for supply chain security and product authentication, with a primary focus on cotton4344 - The Uyghur Forced Labor Prevention Act (UFLPA) has increased interest in DNA tagging, fiberTyping, and isotopic analysis services as evidence for product origin45 Sales and Marketing The company has a small sales and marketing team consisting of five employees, with three directly involved in sales - The sales and marketing team comprises five employees, with three directly engaged in sales46 Research and Development R&D efforts focus on optimizing LineaDNA and Linea IVT platforms, developing veterinary vaccines, validating PGx testing, and incorporating DNA tags - R&D efforts are focused on optimizing LineaDNA and Linea IVT platforms, developing LineaDNA-based veterinary vaccines, validating PGx testing services, and incorporating/authenticating DNA tags in various products484950 Research and Development Expenses | Fiscal Year Ended September 30 | R&D Expenses (Millions) | | :----------------------------- | :---------------------- | | 2023 | $3.7 | | 2022 | $3.9 | Raw Materials and Suppliers The company relies on DNA polymerase and synthesized DNA templates, but Linea RNAP is from a single third-party CDMO, posing supply risks - Key raw materials include DNA polymerase (DNAP) and synthesized DNA templates, generally available from multiple sources51 - Linea RNAP for Therapeutic DNA Production Services is currently manufactured by a single third-party CDMO, creating a risk of production delays if this supplier's production ceases51 Manufacturing The company manufactures GLP grade Linea DNA at Stony Brook, with plans for GMP grades, while Linea RNAP is produced by a third-party CDMO - Linea DNA is manufactured at the Stony Brook facility, currently at GLP grade, with plans for GMP non-drug substance grade in CY2024 and GMP drug substance grade in CY202552 - Linea RNAP is produced by a third-party CDMO in the United States52 - In-house authentication capabilities for DNA Tagging and Security are available in Stony Brook and India52 Distribution of our Products/Services and Commercial Agreements The company distributes its products and services directly to customers, through channel partners, and via licensed distributors - Products and services are distributed directly to customers, through channel partners, and via licensed distributors52 Collaboration and Licensing Agreements The company partners with CLEARED4 for COVID-19 testing and Cornell University for veterinary health LNP formulations and LineaDNA expression vectors - Partnership with CLEARED4 for COVID-19 testing solutions, integrating safeCircle™ with their digital health platform53 - Collaboration with Cornell University College of Veterinary Medicine to develop LNP formulations and LineaDNA expression vectors for veterinary health, specifically equine infectious diseases54 Customers The company experienced significant customer concentration, with two MDx Testing Services customers accounting for 65% and 14% of FY2023 revenue Revenue Concentration from MDx Testing Services Customers | Fiscal Year | Customer 1 Revenue Share | Customer 2 Revenue Share | | :---------- | :----------------------- | :----------------------- | | 2023 | 65% | 14% | - The COVID-19 testing contract with CUNY, which accounted for 65% of FY2023 and 58% of FY2022 revenues, terminated in June 2023, resulting in a significant revenue reduction55 - Three customers accounted for 60% of accounts receivable at September 30, 2023, and two customers accounted for 89% at **September 30,