APPLIED DNA SCIENCES INC.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36745

Applied DNA Sciences, Inc.

(Exact name of registrant as specified in its charter)


Delaware	59-2262718
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

50 Health Sciences Drive
Stony Brook, New York	11790
(Address of principal executive offices)	(Zip Code)

631-240-8800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	APDN	The Nasdaq Stock Market LLC

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 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 ☐ No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

On May 12, 2025, the registrant had 6,497,790 shares of common stock outstanding.

Table of Contents

Applied DNA Sciences, Inc. and Subsidiaries

Form 10-Q for the Quarterly Period Ended March 31, 2025

Table of Contents

		Page
PART I - FINANCIAL INFORMATION

Item 1 - Condensed Consolidated Financial Statements (unaudited)		1

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		22

Item 3 - Quantitative and Qualitative Disclosures About Market Risk		34

Item 4 - Controls and Procedures		35

PART II - OTHER INFORMATION

Item 1 – Legal Proceedings		36

Item 1A – Risk Factors		36

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		36

Item 3 – Defaults Upon Senior Securities		36

Item 4 – Mine Safety Disclosures		36

Item 5 – Other Information		36

Item 6 – Exhibits		38

Table of Contents

Part I - Financial Information

Item 1 - Financial Statements

APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31,		September 30,
	2025		2024
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	6,823,260	$	6,431,095
Accounts receivable, net of allowance for credit losses of $82,723 and $75,000 at March 31, 2025 and September 30, 2024, respectively		689,887		362,013
Inventories		348,866		438,592
Prepaid expenses and other current assets		568,398		815,970
Total current assets		8,430,411		8,047,670

Property and equipment, net		683,887		553,233
Other assets:
Restricted cash		750,000		750,000
Intangible assets		2,698,975		2,698,975
Operating right of use asset		472,390		739,162
Total assets	$	13,035,663	$	12,789,040

LIABILITIES AND EQUITY

Current liabilities:
Accounts payable and accrued liabilities	$	1,409,628	$	1,793,427
Operating lease liability, current		472,390		545,912
Deferred revenue		12,285		58,785
Total current liabilities		1,894,303		2,398,124

Long term accrued liabilities		31,467		31,467
Deferred revenue, long term		194,000		194,000
Operating lease liability, long term		—		193,249
Deferred tax liability, net		684,115		684,115
Warrants classified as a liability		7,570		320,000
Total liabilities		2,811,455		3,820,955

Commitments and contingencies (Note G)

Applied DNA Sciences, Inc. stockholders’ equity:
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; -0- shares issued and outstanding as of March 31, 2025 and September 30, 2024		—		—
Series A Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; -0- issued and outstanding as of March 31, 2025 and September 30, 2024		—		—
Series B Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; -0- issued and outstanding as of March 31, 2025 and September 30, 2024		—		—

Common stock, par value $0.001 per share; 200,000,000 shares authorized as of March 31, 2025 and September 30, 2024; 6,331,410 and 206,324 shares issued and outstanding as of March 31, 2025 and September 30, 2024, respectively		6,331		206
Additional paid in capital		364,896,649		318,815,166
Accumulated deficit		(354,442,994)		(309,672,755)
Applied DNA Sciences, Inc. stockholders’ equity		10,459,986		9,142,617
Noncontrolling interest		(235,778)		(174,532)
Total equity		10,224,208		8,968,085

Total liabilities and equity	$	13,035,663	$	12,789,040

See the accompanying notes to the unaudited condensed consolidated financial statements

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months Ended March 31,				Six months Ended March 31,
	2025		2024		2025		2024
Revenues
Product revenues	$	548,638	$	393,125	$	1,044,485	$	700,442
Service revenues		214,184		205,486		588,628		452,633
Clinical laboratory service revenues		220,552		331,020		546,878		667,720
Total revenues		983,374		929,631		2,179,991		1,820,795

Cost of product revenues		367,304		340,301		631,356		622,846
Cost of clinical laboratory service revenues		245,223		293,679		493,681		671,201
Total cost of revenues		612,527		633,980		1,125,037		1,294,047

Gross profit		370,847		295,651		1,054,954		526,748

Operating expenses:
Selling, general and administrative		2,983,284		3,000,208		5,616,382		6,084,557
Research and development		849,358		913,194		1,864,368		1,849,009
Total operating expenses		3,832,642		3,913,402		7,480,750		7,933,566

LOSS FROM OPERATIONS		(3,461,795)		(3,617,751)		(6,425,796)		(7,406,818)

Interest income		60,340		15,352		131,780		48,676
Transaction costs allocated to warrant liabilities		—		(633,198)		—		(633,198)
Unrealized gain on change in fair value of warrants classified as a liability		68,430		1,765,000		312,430		4,404,000
Unrealized loss on change in fair value of warrants classified as a liability - warrant modification		—		(394,000)		—		(394,000)
Loss on issuance of warrants		—		(1,633,767)		—		(1,633,767)
Other (expense) income, net		(3,095)		4,581		(23,247)		(8,957)

Loss before provision for income taxes		(3,336,120)		(4,493,783)		(6,004,833)		(5,624,064)

Provision for income taxes		—		—		—		—

NET LOSS	$	(3,336,120)	$	(4,493,783)	$	(6,004,833)	$	(5,624,064)

Less: Net loss attributable to noncontrolling interest		31,945		23,309		61,246		48,490
NET LOSS attributable to Applied DNA Sciences, Inc.	$	(3,304,175)	$	(4,470,474)	$	(5,943,587)	$	(5,575,574)
Deemed dividend related to warrant modifications		(23,919,429)		(155,330)		(38,826,652)		(233,087)
NET LOSS attributable to common stockholders	$	(27,223,604)	$	(4,625,804)	$	(44,770,239)	$	(5,808,661)
Net loss per share attributable to common stockholders-basic and diluted	$	(15.35)	$	(265.45)	$	(33.82)	$	(373.55)

Weighted average shares outstanding- basic and diluted		1,773,086		17,426		1,323,913		15,550

See the accompanying notes to the unaudited condensed consolidated financial statements

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)


	Six-Month Period ended March 31, 2024
		Common		Additional
	Common	Stock		Paid in		Accumulated		Noncontrolling
	Shares	Amount		Capital		Deficit		Interest		Total
Balance, October 1, 2023	13,659	$	14	$	307,398,292	$	(302,447,147)	$	(78,747)	$	4,872,412
Exercise of warrants, cashlessly	2		—		—		—		—		—
Stock based compensation expense	—		—		340,705		—		—		340,705
Common stock issued in ATM, net of offering costs	88		—		45,566		—		—		45,566
Deemed dividend - warrant repricing	—		—		77,757		(77,757)		—		—
Net Loss	—		—		—		(1,105,100)		(25,181)		(1,130,281)
Balance December 31, 2023	13,749		14		307,862,320		(303,630,004)		(103,928)		4,128,402
Common stock issued in ATM, net of offering costs	88		—		18,831		—		—		18,831
Common stock issued in Registered direct offering, net of offering costs	3,228		3		158		—		—		161
Stock based compensation expense	—		—		171,004		—		—		171,004
Share issued upon restricted stock vesting	283		—		—		—		—		—
Deemed dividend - warrant repricing	—		—		155,330		(155,330)		—		—
Net loss	—		—		—		(4,470,474)		(23,309)		(4,493,783)
Balance, March 31, 2024	17,348	$	17	$	308,207,643	$	(308,255,808)	$	(127,237)	$	(175,385)


	Six-Month Period ended March 31, 2025
		Common		Additional
	Common	Stock		Paid in		Accumulated		Noncontrolling
	Shares	Amount		Capital		Deficit		Interest		Total
Balance, October 1, 2024	206,324	$	206	$	318,815,166	$	(309,672,755)	$	(174,532)	$	8,968,085
Exercise of warrants	51,323		51		508,549		—		—		508,600
Exercise of warrants, cashlessly	418,419		418		(418)		—		—		—
Stock based compensation expense	—		—		28,973		—		—		28,973
Common stock and pre-funded warrants issued in registered direct offering, net of offering costs	406,250		406		5,712,294		—		—		5,712,700
Deemed dividend - warrant repricing	—		—		14,907,223		(14,907,223)		—		—
Net Loss	—		—		—		(2,639,412)		(29,301)		(2,668,713)
Balance December 31, 2024	1,082,316		1,081		339,971,787		(327,219,390)		(203,833)		12,549,645

Exercise of warrants	450,040		450		983,722		—		—		984,172
Exercise of warrants, cashlessly	4,722,672		4,723		(4,723)		—		—		—
Stock based compensation expense	—		—		26,511		—		—		26,511
Deemed dividend - warrant repricing	—		—		23,919,429		(23,919,429)		—		—
Adjustment for reverse split	76,382		77		(77)		—		—		—
Net loss	—		—		—		(3,304,175)		(31,945)		(3,336,120)
Balance, March 31, 2025	6,331,410	$	6,331	$	364,896,649	$	(354,442,994)	$	(235,778)	$	10,224,208

See the accompanying notes to the unaudited condensed consolidated financial statements

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended March 31,
	2025		2024
Cash flows from operating activities:
Net loss	$	(6,004,833)	$	(5,624,064)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		177,255		485,277
Loss on write-off of property and equipment		5,212		—
Unrealized gain on change in fair value of warrants classified as a liability		(312,430)		(4,404,000)
Unrealized loss on change in fair value of warrants classified as a liability-warrant modification		—		394,000
Transaction costs allocated to warrant liabilities		—		633,198
Loss on issuance of warrants		—		1,633,767
Stock-based compensation		55,484		511,709
Change in provision for bad debts		5,423		—
Change in operating assets and liabilities:
Accounts receivable		(423,297)		(153,350)
Inventories		89,726		(5,916)
Prepaid expenses, other current assets and deposits		247,572		(81,043)
Accounts payable and accrued liabilities		(394,721)		(332,100)
Deferred revenue		43,500		(25,150)

Net cash used in operating activities		(6,511,109)		(6,967,672)

Cash flows from investing activities:
Purchase of property and equipment		(302,198)		(14,828)
Net cash used in investing activities		(302,198)		(14,828)

Cash flows from financing activities:
Net proceeds from exercise of warrants		1,492,772		—
Net proceeds from issuance of common stock		5,712,700		2,980,340

Net cash provided by financing activities		7,205,472		2,980,340

Net increase (decrease) in cash, cash equivalents and restricted cash		392,165		(4,002,160)
Cash, cash equivalents and restricted cash at beginning of period		7,181,095		7,901,800
Cash, cash equivalents and restricted cash at end of period	$	7,573,260	$	3,899,640

Supplemental Disclosures of Cash Flow Information:
Cash paid during period for interest	$	—	$	—
Cash paid during period for income taxes	$	—	$	—

Non-cash investing and financing activities:
Transaction costs included in accounts payable	$	—	$	111,747
Deemed dividend warrant modifications	$	38,826,652	$	233,087
Warrants issued, cashlessly	$	5,141	$	—
Property and equipment acquired and included in accounts payable	$	10,923	$	—

See the accompanying notes to the unaudited condensed consolidated financial statements

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE A — NATURE OF THE BUSINESS

Applied DNA Sciences, Inc. (“Applied DNA” or the “Company”) is a biotechnology company developing and commercializing technologies to produce and detect deoxyribonucleic acid (“DNA”) and ribonucleic acid (“RNA”). Using polymerase chain reaction (“PCR”) to enable the production and detection of DNA and RNA, the Company currently operates in two primary business markets: (i) the enzymatic manufacture of synthetic DNA for use in the production of nucleic acid - based therapeutics (including biologics and drugs), as well as the development and sale of a proprietary RNA polymerase (“RNAP”) for use in the production of messenger RNA (“mRNA”) therapeutics (“Therapeutic DNA Production Services”); and (ii) the detection of DNA and RNA in molecular diagnostics and genetic testing services (“MDx Testing Services”). Previously, the Company operated in a third business market: the manufacture and detection of DNA for industrial supply chains and security services (“DNA Tagging and Security Products and Services”). On February 13, 2025, the Company announced it was exiting its DNA Tagging and Security Products and Services business. As a result of exiting this market, during January 2025, the Company completed a workforce reduction of approximately 20% of its total headcount and approximately 13% in annual payroll costs. As a result of these actions, during the three-month period ended March 31, 2025 and through April 2025, the Company incurred one-time personnel-related charges of approximately $305,000. The Company continues to strategically exit contracts relating to its DNA Tagging and Security Products and Services segment pursuant to applicable terms and conditions and currently plans to continue to service certain of its existing DNA Tagging and Security Products and Services customer contracts. The Company’s management has also been and currently remains engaged in a strategic review of its MDx Testing Services business segment.

On March 13, 2025, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment of its Certificate of Incorporation that effected a one-for-fifty (1:50) reverse stock split of its common stock, par value $0.001 per share, effective at 12:01 a.m. on March 14, 2025 (the “March 2025 Reverse Split”). All warrant, option, share, and per share information in the condensed consolidated financial statements gives retroactive effect to the March 2025 Reverse Split. Please see Note E for more information.

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

Interim Financial Statements

The accompanying condensed consolidated financial statements as of March 31, 2025, and for the three and six-month periods ended March 31, 2025, and 2024 are unaudited. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and are presented in accordance with the requirements of Regulation S-X of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.

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 and six-month periods ended March 31, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2025. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the fiscal year ended September 30, 2024 and footnotes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on December 17, 2024. The condensed consolidated balance sheet as of September 30, 2024 contained herein has been derived from the audited consolidated financial statements as of September 30, 2024 but does not include all disclosures required by GAAP.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, APDN (B.V.I.) Inc., Applied DNA Sciences India Private Limited (which currently has no operations), Applied DNA Clinical Labs, LLC (“ADCL”), Spindle Biotech, Inc., Applied DNA Sciences Europe Limited (which currently has no operations) and its majority-owned subsidiary, LineaRx, Inc. (“LRx”). Significant inter-company transactions and balances have been eliminated in consolidation.

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES, continued

Going Concern and Management’s Plan

The Company has recurring net losses. The Company incurred a net loss of $6,004,833 and generated negative operating cash flow of $6,511,109 for the six-month period ended March 31, 2025. At March 31, 2025, the Company had cash and cash equivalents of $6,823,260. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date of issuance of these financial statements. The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, raise capital, and generate revenues. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The Company’s current capital resources include cash and cash equivalents. Historically, the Company has financed its operations principally from the sale of equity and equity-linked securities.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The most significant estimates include revenue recognition, recoverability of long-lived assets, including the values assigned to intangible assets, fair value calculations for warrants, contingencies, and management’s anticipated liquidity. Management reviews its estimates on a regular basis and the effects of any material revisions are reflected in the consolidated financial statements in the period they are deemed necessary. Accordingly, actual results could differ from those estimates.

Revenue Recognition

The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codifications (“ASC”), Revenue Recognition (“ASC 606” or “Topic 606”).

The Company measures revenue at the amounts that reflect the consideration to which it is expected to be entitled in exchange for transferring control of goods and services to customers. The Company recognizes revenue either at the point in time or over the period of time that performance obligations to customers are satisfied. The Company’s contracts with customers may include multiple performance obligations (e.g. taggants, maintenance, authentication services, research and development services, etc.). For such arrangements, the Company allocates revenues to each performance obligation based on their relative standalone selling price.

Due to the short-term nature of the Company’s contracts with customers, it has elected to apply the practical expedients under Topic 606 to: (1) expense as incurred, incremental costs of obtaining a contract and (2) not adjust the consideration for the effects of a significant financing component for contracts with an original expected duration of one year or less.

Product Revenues

The Company’s PCR-produced linear DNA product revenues are accounted for/recognized in accordance with contracts with customers. The Company recognizes revenue upon satisfying its promises to transfer goods or services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time the Company transfers control of the goods to the customer, which in nearly all cases is when title to and risk of loss of the goods transfer to the customer. The timing of transfer of title and risk of loss is dictated by customary or explicitly stated contract terms. The Company invoices customers upon shipment, and its collection terms range, on average, from 30 to 60 days.

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES, continued

Revenue Recognition, continued

Authentication Services

The Company recognizes revenue for authentication services upon satisfying its promises to provide services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time the Company services are complete, which in nearly all cases is when the authentication report is released to the customer.

Clinical Laboratory Testing Services

The Company records revenue for its clinical laboratory testing service contracts, which includes its COVID-19 testing services and pharmacogenomic testing services, upon satisfying its promise to provide services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time that Company services are complete, which is when the testing results are released to the customer. For those customers with a fixed monthly fee, the revenue is recognized over-time as the services are provided.

Research and Development Services

The Company records revenue for its research and development contracts using the over-time revenue recognition model. Revenue is primarily measured using the cost-to-cost method, which the Company believes best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation.

Revenues are recorded proportionally as costs are incurred. For contracts where the total costs cannot be estimated, revenues are recognized for the actual costs incurred during a period until the remaining costs to complete a contract can be estimated. The Company has elected not to disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

Disaggregation of Revenue

The following table presents revenues disaggregated by our business operations and timing of revenue recognition:


	Three Month Period Ended:
	March 31,		March 31,
	2025		2024
Research and development services (over-time)	$	133,547	$	65,200
Clinical laboratory testing services (point-in-time)		—		6,440
Clinical laboratory testing services (over-time)		220,552		324,580
Product and authentication services (point-in-time):
Supply chain		290,229		275,259
Large Scale DNA Production		333,662		258,152
Asset Marking		5,384		—
Total	$	983,374	$	929,631

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES, continued

Revenue Recognition, continued


	Six Month Period Ended:
	March 31,		March 31,
	2025		2024
Research and development services (over-time)	$	280,989	$	142,735
Clinical laboratory testing services (point-in-time)		1,746		18,560
Clinical laboratory testing services (over-time)		545,132		649,160
Product and authentication services (point-in-time):
Supply chain		1,013,078		742,746
Large Scale DNA Production		333,662		258,152
Asset marking		5,384		9,442
Total	$	2,179,991	$	1,820,795

Contract balances

As of March 31, 2025, the Company has entered into contracts with customers for which revenue has not yet been recognized. Consideration received from a customer prior to revenue recognition is recorded to a contract liability and is recognized as revenue when the Company satisfies the related performance obligations under the terms of the contract. The Company’s contract liabilities, which are reported as deferred revenue on the condensed consolidated balance sheet, consist almost entirely of research and development contracts where consideration has been received and the development services have not yet been fully performed.

The opening and closing balances of the Company’s contract balances are as follows:


		October 1,		March 31,		$
	Balance sheet classification	2024		2025		change
Contract liabilities	Deferred revenue	$	252,785	$	206,285	$	46,500

For the three and six-month periods ended March 31, 2025, the Company recognized $9,600 and $21,885, respectively, of revenue that was included in contract liabilities as of October 1, 2024.

Cash, Cash Equivalents, and Restricted Cash

For the purpose of the accompanying consolidated financial statements, all highly liquid investments with a maturity of three months or less from when purchased are considered to be cash equivalents. The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts shown in the statement of cash flows.


	March 31,		September 30,
	2025		2024
Cash and cash equivalents	$	6,823,260	$	6,431,095
Restricted cash		750,000		750,000
Total cash, cash equivalents and restricted cash	$	7,573,260	$	7,181,095

Inventories

Inventories, which consist primarily of raw materials, work in progress and finished goods, are stated at the lower of cost or net realizable value, with cost determined by using the first-in, first-out (FIFO) method.

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES, continued

Net Loss Per Share

The Company presents loss per share utilizing a dual presentation of basic and diluted loss per share. Basic loss per share includes no dilution and has been calculated based upon the weighted average number of common shares outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company’s stock options, restricted stock units and warrants.

Securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share because to do so would have been anti-dilutive for the three and six-month periods ended March 31, 2025 and 2024 are as follows:


	2025	2024
Warrants	12,780,471	16,501
Stock options	2,124	2,187
Total	12,782,595	18,688

Concentrations

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and cash equivalents with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit. As of March 31, 2025, the Company had cash and cash equivalents of approximately $6.7 million in excess of the FDIC insurance limit.

The Company’s revenues earned from sale of products and services for the three-month period ended March 31, 2025 included an aggregate of 34% and 15% from two customers within the Therapeutic DNA Production Services and the MDx Testing Services segments, respectively. The Company’s revenue earned from the sale of products and services for the six-month period ended March 31, 2025 included an aggregate of 20%, 17%, and 15%, from three customers within the DNA Tagging and Security Products and Services, MDx Testing Services and Therapeutic DNA Production Services segments, respectively.

The Company’s revenues earned from sale of products and services for the three and six-month periods ended March 31, 2024 included an aggregate of 24% and 25% from one customer, respectively within the MDx Testing Services segment and an aggregate of 28% and 14%, respectively from one customer within the Therapeutic DNA Production Services segment. Four customers accounted for 79% of the Company’s accounts receivable at March 31, 2025 and three customers accounted for 60% of the Company’s accounts receivable at September 30, 2024.

Warrant Liabilities

The Company evaluates its issued warrants in accordance with ASC 480 “Distinguishing Liabilities from Equity” and ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” and concluded that due to the terms of certain of its warrant agreements, the instruments do not qualify for equity treatment. As such, certain of the Company’s issued warrants were recorded as a liability on the condensed consolidated balance sheet and measured at fair value at inception and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the condensed consolidated statement of operations in the period of change.

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES, continued

Segment Reporting

The Company has three reportable segments: (1) Therapeutic DNA Production Services; (2) MDx Testing Services; and (3) DNA Tagging and Security Products and Services. Resources are allocated by the Company’s Chief Executive Officer (“CEO”), Chief Operating Officer and President of the Company (“COO”), Chief Financial Officer (“CFO”) and Chief Legal Officer and President of LineaRx, Inc. (“CLO”) whom, collectively, the Company has determined to be our Chief Operating Decision Maker (“CODM”). The following is a brief description of our reportable segments.

Therapeutic DNA Production Services — Segment operations consist of the enzymatic manufacture of synthetic DNA for use in the production of nucleic acid - based therapeutics, the development and sale of a proprietary RNAP for use in the production of mRNA therapeutics, and large-scale manufacture of linear DNA for use in diagnostics.

MDx Testing Services — Segment operations consist of performing and developing clinical molecular diagnostic and genetic tests and clinical laboratory testing services. Under the Company’s MDx Testing Services, ADCL offers COVID-19 testing services and pharmacogenomics testing services that were approved by the New York State Department of Health (“NYSDOH”) during June 2024.

DNA Tagging and Security Products and Services — Segment operations consist of the manufacture and detection of DNA for industrial supply chains and security services. As discussed above, on February 13, 2025, the Company announced it was exiting its DNA Tagging and Security Products and Services business segment. The Company continues to strategically exit contracts relating to this segment and currently plans to continue to service certain of its existing DNA Tagging and Security Products and Services customer contracts.

The Company evaluates the performance of its segments and allocates resources to them based on revenues and operating income (losses). Operating income (loss) includes intersegment revenues, as well as a charge allocating all corporate headquarters costs. Since each vertical has shared employee resources, payroll and certain other general expenses such as rent, and utilities were allocated based on an estimate by management of the percentage of employee time spent in each vertical. Segment assets are not reported to, or used by, the CODM to allocate resources to, or assess performance of, the segments and therefore, total segment assets have not been disclosed.

Fair Value of Financial Instruments

The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related asset or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities.

The Company utilizes observable market inputs (quoted market prices) when measuring fair value whenever possible.

The development and determination of the unobservable inputs, as well as the valuation policies and procedures for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Chief Financial Officer.

As of March 31, 2025, there were no transfers between Levels 1, 2 and 3 of the fair value hierarchy.

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MARCH 31, 2025

(unaudited)

NOTE B — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES, continued

Recent Accounting Standards

In November 2024, the FASB issued Accounting Standards Update (ASU) No. 2024-03, Disaggregation of Income Statement Expenses, that requires public companies provide additional disclosure of the nature of expenses included in the income statement. This ASU requires disclosure about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. This guidance is effective within annual reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application, early adoption is permitted. The Company is currently evaluating the impact of this ASU on its condensed consolidated statement of operations and on its disclosures.

In December 2023, the FASB issued Accounting Standards Update (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, that enhances the transparency of income tax disclosures by expanding annual disclosure requirements related to the rate reconciliation and income taxes paid. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied prospectively with the option of retrospective application. The Company is currently evaluating the impact of adopting this ASU on its disclosures.

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure.” The ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. These disclosures are required quarterly. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with early adoption permitted. The Company adopted this ASU as of October 1, 2024 and updated its segment reporting disclosures accordingly for the three and six-month periods ended March 31, 2025 and 2024.

In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40).” The objective of this update is to simplify the accounting for convertible preferred stock by removing the existing guidance in ASC 470-20, “Debt: Debt with Conversion and Other Options,” that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives. In addition, the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract. This amendment also further revises the guidance in ASU 260, “Earnings per Share,” to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. The amendments in ASU 2020-06 were effective for the Company beginning October 1, 2024. The adoption of ASU 2020-06 did not have a significant impact on the Company’s condensed consolidated financial statements.

NOTE C — INVENTORIES

Inventories consist of the following:


	March 31,		September 30,
	2025		2024
	(unaudited)
Raw materials	$	122,869	$	81,008
Work-in-progress		221,250		221,250
Finished goods		4,747		136,334
Total	$	348,866	$	438,592

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE D — ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities are as follows:


	March 31,		September 30,
	2025		2024
	(unaudited)
Accounts payable	$	885,050	$	1,165,727
Accrued salaries payable		450,045		509,281
Other accrued expenses		74,533		118,419
Total	$	1,409,628	$	1,793,427

NOTE E — CAPITAL STOCK

Reverse Stock Split

On September 30, 2024, the Company held its annual shareholders’ meeting where its stockholders approved a proposal to grant the Company’s Board of Directors discretionary authority for twelve months to amend the Company’s Certificate of Incorporation to authorize a reverse stock split in the range from one-for five to one-for fifty. The Company’s Board of Directors determined on March 3, 2025 that the split ratio would be one-for-fifty shares.

The March 2025 Reverse Split was effected as of 12:01 a.m. Eastern Time on Friday, March 14, 2025 and combined each fifty shares of the Company’s outstanding common stock into one share of common stock, without any change in the par value per share. Moreover, the March 2025 Reverse Split correspondingly adjusted: (i) the per share exercise price and the number of shares issuable upon the exercise of all outstanding options; and (ii) the number of shares underlying any of our outstanding warrants by adjusting the conversion ratio for each instrument and increasing the applicable exercise price or conversion price in accordance with the terms of each instrument and based on the reverse stock split ratio. No fractional shares were issued in connection with the March 2025 Reverse Split. Any fractional shares resulting from the March 2025 Reverse Split were rounded up to the nearest whole share.

Registered Direct Offering and Concurrent Private Placement

On October 31, 2024, the Company closed a registered direct offering (the “October Registered Direct Offering”) in which, pursuant to the Securities Purchase Agreement dated October 30, 2024 (the “October Purchase Agreement”), by and between the Company and certain institutional investors (the “October Purchasers”), the Company issued and sold 384,950 shares of the Company’s Common Stock and pre-funded warrants (“October Pre-Funded Warrants”) to purchase up to 21,300 shares of Common Stock, and (ii) in a concurrent private placement (the “October Private Placement”, and together with the October Registered Direct Offering the “October Offering”), unregistered Series C Common Stock Purchase Warrants (“October Series C Warrants”) to purchase up to 406,250 shares of Common Stock and unregistered Series D Common Stock Purchase Warrants (“October Series D Warrants”, and together with the October Series C Warrants, the “October Series Warrants”, and, together with the October Pre-Funded Warrants and the October Series C Warrants, the “October Warrants”) to purchase up to 406,250 shares of Common Stock. The purchase price for each share of Common Stock and accompanying October Series C Warrant and October Series D Warrant was $16.00 and the purchase price for each October Pre-Funded Warrant and accompanying October Series C Warrant and October Series D Warrant was $16.00. Craig-Hallum Capital Group LLC (“Craig Hallum”) acted as placement agent in connection with the October Offering.

The Company received net proceeds from the October Registered Direct Offering, after deducting placement agent fees and other offering expenses payable by the Company, of approximately $5.7 million.

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MARCH 31, 2025

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NOTE E — CAPITAL STOCK, continued

Registered Direct Offering and Concurrent Private Placement, continued

The exercisability of the October Series Warrants and the Placement Agent Warrants (as defined below) will be available only upon receipt of such stockholder approval (“Warrant Stockholder Approval”) as may be required by the applicable rules and regulations of The Nasdaq Stock Market LLC. Each October Series C Warrant has an exercise price of $16.00 per share of Common Stock, will become exercisable upon the first trading day (the “Stockholder Approval Date”) following the Company’s notice to warrantholders of Warrant Stockholder Approval, and will expire on the five-year anniversary of the Stockholder Approval Date. Each October Series D Warrant has an exercise price of $16.00 per share of Common Stock, will become exercisable upon the Stockholder Approval Date, and will expire on the 18-month anniversary of the Stockholder Approval Date. The Pre-Funded Warrants have an exercise price of $0.0001 per share and were immediately exercisable and can be exercised at any time after their original issuance until such October Pre-Funded Warrants are exercised in full. All of the pre-funded warrants were exercised during the six-month period ended March 31, 2025. Each October Placement Agent warrant has an exercise price of $16.00, will become exercisable upon the Stockholder Approval Date and will expire on October 30, 2029.

Pursuant to that certain engagement letter, dated August 23, 2024, by and between the Company and Craig-Hallum, the Company agreed to pay Craig-Hallum a cash placement fee equal to 6.0% of the aggregate gross proceeds raised in the October Offering from sales arranged for by Craig-Hallum. Subject to certain conditions, the Company also agreed to reimburse certain expenses of Craig-Hallum in connection with the October Registered Direct Offering, including but not limited to legal fees, up to a maximum of $100,000. The Company also agreed to issue to Craig-Hallum, or its respective designees, warrants (“Placement Agent Warrants”) to purchase up to 20,313 shares of Common Stock (which equals 5.0% of the number of shares of Common Stock and October Pre-Funded Warrants offered).

The Company agreed to hold a special meeting of stockholders to obtain the Warrant Stockholder Approval no later than 90 days after the closing of the October Registered Direct Offering and, if Warrant Stockholder Approval is not obtained at such meeting, to call a meeting every 90 days thereafter to seek Warrant Stockholder Approval until the earlier of the date on which Warrant Stockholder Approval is obtained or the October Series C Warrants and October Series D Warrants are no longer outstanding. The Company agreed to file a preliminary proxy statement with respect to obtaining Warrant Stockholder Approval at such special meeting of stockholders within 20 days following the closing date of the October Purchase Agreement, and filed such preliminary proxy statement with the SEC on November 14, 2024. Pursuant to a definitive proxy statement filed with the SEC on December 10, 2024, the Company held a special meeting of stockholders on January 23, 2025, but the meeting was adjourned until February 14, 2025 and then subsequently adjourned until February 28, 2025 as a result of a failure to receive the required quorum to hold such meeting. At the February 28, 2025 re-convening of the special meeting of stockholders, the Company again failed to receive the required quorum to hold the meeting. As such, the Company is now seeking to obtain Warrant Stockholder Approval at the Annual Meeting of Stockholders to be held on May 22, 2025.

Under the alternate cashless exercise option of the October Series D Warrants, the holder of an October Series D Warrant has the right to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of Common Stock that would be issuable upon a cash exercise of the October Series D Warrant and (y) 1.0. In addition, the October Series D Warrants include a provision that resets their exercise price in the event of a reverse split of our Common Stock, to a price equal to the lesser of (i) the then exercise price and (ii) lowest volume weighted average price (VWAP) during the period commencing five trading days immediately preceding and the five trading days commencing on the date the Company effects a reverse stock split in the future with a proportionate adjustment to the number of shares underlying the October Series D Warrants, subject to a floor of $3.17.

On March 14, 2025, the Company completed the March 2025 Reverse Stock Split. As a result, the exercise price reset mechanism was triggered, which resulted in the number of shares of Common Stock issuable upon exercise of the October Series D Warrants increasing from 406,250 to 2,050,472. The exercise price of the October Series D Warrants was adjusted from $16.00 per share to $3.17 per share.

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MARCH 31, 2025

(unaudited)

NOTE E — CAPITAL STOCK, continued

Registered Direct Offering and Concurrent Private Placement, continued

The October Series Warrants and the Placement Agent Warrants are not registered under the Securities Act of 1933, as amended (the “Securities Act”). The October Series Warrants and the Placement Agent Warrants were issued, and the shares of Common Stock issuable upon exercise thereof will be issued (unless an effective registration statement is available), in reliance on the exemptions from registration provided by Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder, for transactions not involving a public offering.

Pursuant to the October Purchase Agreement, within 20 calendar days from the date of the October Purchase Agreement, the Company agreed to file a registration statement on Form S-1 providing for the resale by the purchasers of the shares of Common Stock issuable upon exercise of the October Series Warrants and the Placement Agent Warrants. The registration statement was declared effective by the SEC on January 17, 2025.

In the event of any fundamental transaction, as described in the October Warrants and generally including any merger with or into another entity, sale of all or substantially all of the Company’s assets, tender offer or exchange offer, reclassification of the shares of Common Stock, or the acquisition of greater than 50% of the Company’s then outstanding shares of Common Stock by a person or persons, subject to certain exceptions, then upon any subsequent exercise of an October Warrant, the holder will have the right to receive as alternative consideration, for each share of Common Stock that would have been issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of Common Stock of the successor or acquiring corporation of the Company, if it is the surviving corporation, and any additional consideration receivable upon or as a result of such transaction by a holder of the number of shares of Common Stock for which the October Warrant is exercisable immediately prior to such event. Notwithstanding the foregoing, in the event of a fundamental transaction, the holders of the October Warrants have the right to require the Company or a successor entity to purchase the October Warrants for cash in the amount of the Black Scholes Value (as defined in the October Warrants) of the unexercised portion of the October Warrants concurrently with or within 30 days following the consummation of a fundamental transaction. However, in the event of a fundamental transaction which is not in the Company’s control or in which the consideration payable consists of equity securities of a successor entity that is quoted or listed on a nationally recognized securities exchange, the holders of the October Warrants will only be entitled to receive from the Company or its successor entity, as of the date of consummation of such fundamental transaction the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of the October Warrants that is being offered and paid to the holders of Common Stock in connection with the fundamental transaction, whether that consideration is in the form of cash, stock or any combination of cash and stock, or whether the holders of Common Stock are given the choice to receive alternative forms of consideration in connection with the fundamental transaction.

Amendment to May 2024 Series A Warrants

On October 30, 2024, the Company entered into amendments (the “Warrant Amendments”) with certain holders of an aggregate of 183,077 Series A Warrants issued in a transaction which closed in May of 2024 (the “May 2024 Series A Warrants”). The Warrant Amendments amended the May 2024 Series A Warrants to revise the price reset mechanism (the “Price Reset Mechanism”) of the May 2024 Series A Warrants, which, subject to certain exceptions, provided for an adjustment to the exercise price and number of shares underlying the May 2024 Series A Warrants upon the Company’s issuance of common stock or common stock equivalents at a price per share that is less than the exercise price of the May 2024 Series A Warrants. The Warrant Amendments amended the Price Reset Mechanism such that the Floor Price (as defined in the May 2024 Series A Warrants) will not be lower than $10.00. In addition, the Warrant Amendments revised the definition of “Material Subsidiary” in Section 3(d) of the May 2024 Series A Warrants to clarify that Applied DNA Clinical Labs LLC is not a Material Subsidiary.

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE E — CAPITAL STOCK, continued

Amendment to May 2024 Series A Warrants, continued

In connection with the October Registered Direct Offering, the Price Reset Mechanism in the May 2024 Series A Warrants was triggered, which resulted in the number of shares of Common Stock issuable upon exercise of the May 2024 Series A Warrants increasing from 184,615 to 1,837,814. The exercise price of the May 2024 Series A Warrants was adjusted from $99.50 per share to $10.00 per share with the respect to the May 2024 Series A Warrants amended by the Warrant Amendment and to $9.50 with respect to the May 2024 Series A Warrants not amended by the Warrant Amendment. As a result of the March 2025 Reverse Stock Split, the exercise price reset mechanism was triggered for the May 2024 Series A Warrants, which resulted in the number of shares of Common Stock issuable upon exercise of the May 2024 Series A Warrants increasing from 436,923 to 9,835,143. The exercise price of the May 2024 Series A Warrants was adjusted from $10.00 per share for the amended May 2024 Series A Warrants and $9.50 per share for the May 2024 Series A Warrants that were not amended to $1.79 per share for all of the May 2024 Series A warrants.

May 2024 Series B Warrants Price and Share Adjustment

As a result of the March 2025 Reverse Stock Split, the exercise price reset mechanism was triggered for the May 2024 Series B Warrants, which resulted in the number of shares of Common Stock issuable upon exercise of the May 2024 Series B Warrants increasing from 45,141 to 2,445,282. The exercise price of the May 2024 Series B Warrants was adjusted from $99.50 per share to $1.79 per share.

The incremental change in fair value as a result of the modifications for the May 2024 Series A Warrants, the May 2024 Series B Warrants and the October 2024 Series D Warrants for the three and six-month periods ended March 31, 2025 was $23,919,429 and $38,826,652, respectively, and is recorded as a deemed dividend in the condensed consolidated statement of operations.

Nasdaq Minimum Bid Price Requirement Deficiency Notification

On November 12, 2024, the Company received written notice (the “Notification Letter”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it was not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of thirty (30) consecutive business days (collectively, the “Bid Price Rule”). Based on the closing bid price of the Company’s Common Stock for the thirty-one (31) consecutive business days from September 27, 2024 to November 11, 2024, the Company no longer met the requirements of the Bid Price Rule. The Notification Letter did not impact the Company’s listing on The Nasdaq Capital Market at that time. The Notification Letter stated that the Company had 180 calendar days, or until May 12, 2025, to regain compliance with the Bid Price Rule.

On April 7, 2025, the Company received written notice (the “Compliance Notice”) from Nasdaq informing the Company that it has regained compliance with Nasdaq Listing Rule 5550(a)(2), which requires that companies listed on The Nasdaq Capital Market maintain a minimum bid price of $1.00 per share. Nasdaq notified the Company in the Compliance Notice that, from March 14, 2025 to April 4, 2025, the closing bid price of the Company’s common stock had been at $1.00 per share or greater and, accordingly, the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was now closed.

Pursuant to the October Purchase Agreement, the Company is required to effect a reverse stock split of its outstanding shares of Common Stock if, after the Stockholder Approval Date, it is not in compliance with Nasdaq’s Bid Price Rule and has received a deficiency letter from the Listing Qualifications Department of Nasdaq and the Company’s stockholders have previously approved a reverse split. The Company must effect such reverse stock split within 30 days of the Stockholder Approval Date; provided that if within such 30-day period the Company regains compliance with the Bid Price Rule, the Company shall have no obligation to effect such reverse stock split. If required to regain and/or maintain compliance with the Bid Price Rule and subject to stockholder approval of the reverse split proposal at the Annual Meeting of Stockholders, the Company intends to implement a reverse stock split of its outstanding securities to regain and/or maintain compliance with the Bid Price Rule and to comply with the provisions of the October Purchase Agreement. The closing price of the Company’s common stock is currently below $1.00.

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FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE F —WARRANTS

Warrants

The following table summarizes the changes in warrants outstanding. These warrants were granted as part of financing transactions, as well as in lieu of cash compensation for services performed or as financing expenses in connection with the sales of the Company’s common stock. See Note E for details on the warrant activity during the six-month period ended March 31, 2025.


		Weighted
		Average
		Exercise
	Number of	Price Per
	Shares	Share
Balance at October 1, 2024	394,965	$	139.00
Granted	17,022,826		2.48
Exercised	(2,236,362)		1.74
Cancelled or expired	(2,400,958)		3.04
Balance at March 31, 2025	12,780,471	$	3.90

During the three and six-month periods ended March 31, 2025, 1,574,224 and 1,713,698, respectively, of the May 2024 Series B Warrants were exercised cashlessly and resulted in the issuance of 4,722,672 and 5,141,091 shares of the Company’s Common Stock, respectively.

During the three and six-month periods ended March 31, 2025, an aggregate of 450,040 and 501,363 May 2024 Series A Warrants to purchase shares of the Company’s Common Stock were exercised, respectively, for aggregate total proceeds of $984,172 for the three-month period ended March 31, 2025 and aggregate total proceeds of $1,492,772 for the six-month period ended March 31, 2025. Subsequent to March 31, 2025 an additional 8,319 May 2024 Series A Warrants were exercised for aggregate total proceeds of approximately $15,000.

NOTE G — COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office space under an operating lease in Stony Brook, New York for its corporate headquarters. The lease is for a 30,000 square foot building. The Company entered into an amended lease agreement on February 1, 2023. The initial term is for three years and expires on February 1, 2026. The lease for the corporate headquarters requires monthly payments of $48,861, which is adjusted annually based on the US Consumer Price Index (“CPI”) and was adjusted to monthly payments of $52,440 commencing on February 1, 2025. In lieu of a security deposit, the Company provided a standby letter of credit of $750,000. In addition, the Company also had 2,500 square feet of laboratory space, for which it entered into an amended lease agreement on February 1, 2023. The initial lease term for the laboratory space was one year from the commencement date and was extended until January 31, 2025. Effective February 1, 2025, the Company extended this lease for 2,000 square feet of laboratory space until January 31, 2026. On February 28, 2025, the Company vacated one of its laboratory suites and currently leases 1,000 square feet under this lease amendment. The base rent for the new lease term is monthly payments of $4,346 and the lease is terminable by the Company upon one month’s written notice to the landlord. The total rent expense for the three and six-month periods ended March 31, 2025 was $178,612 and $364,582, respectively.

Employment Agreement

The employment agreement with Dr. James Hayward, the Company’s CEO, entered into in July 2016 provides that he will be the Company’s CEO and will continue to serve on the Company’s board of directors (“Board of Directors”). The initial term was from July 1, 2016 through June 30, 2017, with automatic one-year renewal periods unless either party provides the other with 90 days’ advance written notice of non-renewal. On July 28, 2017, the employment agreement was renewed for a successive one-year term and the employment agreement has been renewed for successive one-year terms, most recently as of June 30, 2024. The Board of Directors,

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MARCH 31, 2025

(unaudited)

acting in its discretion, may grant annual bonuses to the CEO. The CEO will be entitled to certain benefits and perquisites and will be eligible to participate in retirement, welfare and incentive plans available to the Company’s other employees.

NOTE G — COMMITMENTS AND CONTINGENCIES continued

Employment Agreement, continued

The employment agreement with the CEO also provides that if he is terminated before the end of the initial or a renewal term by the Company without cause or if the CEO terminates his employment for good reason, then, in addition to previously earned and unpaid salary, bonus and benefits, and subject to the delivery of a general release and continuing compliance with restrictive covenants, the CEO will be entitled to receive a pro rata portion of the greater of either (X) the annual bonus he would have received if employment had continued through the end of the year of termination or (Y) the prior year’s bonus; salary continuation payments for two years following termination equal to the greater of (i) three times base salary or (ii) two times base salary plus bonus; Company-paid COBRA continuation coverage for 18 months post-termination; continuing life insurance benefits (if any) for two years; and extended exercisability of outstanding vested options (for three years from termination date or, if earlier, the expiration of the fixed option term). If termination of employment as described above occurs within six months before or two years after a change in control of the Company, then, in addition to the above payments and benefits, all of the CEO’s outstanding options and other equity incentive awards will become fully vested and the CEO will receive a lump sum payment of the amounts that would otherwise be paid as salary continuation. In general, a change in control will include a 30% or more change in ownership of the Company.

Upon termination due to death or disability, the CEO will generally be entitled to receive the same payments and benefits he would have received if his employment had been terminated by the Company without cause (as described in the preceding paragraph), other than salary continuation payments.

On October 29, 2021, the Board of Directors amended the existing compensatory arrangement with the CEO to increase his salary to $450,000, effective November 1, 2021. On January 24, 2025, the Company entered into a voluntary letter agreement with the CEO to provide for an 11% reduction to the CEO’s annual base salary, from $450,000 to $400,000, effective as of January 18, 2025 through December 31, 2025. The CEO also agreed to waive any right to resign for “good reason” under his employment agreement with the Company as a result of the foregoing salary reduction.

Litigation

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the recorded liability includes probable and estimable legal costs associated with the claim or potential claim. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. There is no pending litigation involving the Company at this time.

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE H – SEGMENT INFORMATION

As detailed in Note B above, the Company has three reportable segments: (1) Therapeutic DNA Production Services; (2) MDx Testing Services; and (3) DNA Tagging and Security Products and Services. Resources are allocated by our CEO, COO, CFO and CLO whom, collectively, the Company has determined to be our CODM.

Information regarding operations by segment for the three-month period ended March 31, 2025 is as follows:


	Therapeutic DNA		MDx Testing		DNA Tagging and
	Production		Services and Kits		Security Products		Consolidated
Revenues:
Product revenues	$	419,412	$	—	$	129,226	$	548,638
Service revenues		47,797		—		166,387	$	214,184
Clinical laboratory service revenues		—		221,272		—	$	221,272
Less intersegment revenues		—		(720)		—	$	(720)
Total revenues	$	467,209	$	220,552	$	295,613	$	983,374

Gross profit	$	290,735	$	(52,283)	$	132,395	$	370,847

Segment operating expenses
Selling, general and administrative	$	1,053,968	$	298,839	$	329,904	$	1,682,711
Research and development		652,473		73,129		60,127		785,729
Total segment operating expenses	$	1,706,441	$	371,968	$	390,031	$	2,468,440
Loss from segment operations (a)	$	(1,415,706)	$	(424,251)	$	(257,636)	$	(2,097,593)

Information regarding operations by segment for the three-month period ended March 31, 2024 is as follows:


	Therapeutic DNA		MDx Testing		DNA Tagging and
	Production		Services and Kits		Security Products		Consolidated
Revenues:
Product revenues	$	258,152	$	—	$	134,973	$	393,125
Service revenues		65,200		—		140,286		205,486
Clinical laboratory service revenues		—		335,580		—		335,580
Less intersegment revenues		—		(4,560)		—		(4,560)
Total revenues		323,352		331,020		275,259		929,631

Gross profit		190,588		18,515		86,548		295,651

Segment operating expenses
Selling, general and administrative	$	778,297	$	246,839	$	371,887	$	1,397,023
Research and development		577,740		70,267		214,713		862,720
Total segment operating expenses	$	1,356,037	$	317,106	$	586,600	$	2,259,743
Loss from segment operations (a)		(1,165,449)		(298,591)		(500,052)		(1,964,092)

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE H – SEGMENT INFORMATION, continued

Information regarding operations by segment for the six-month period ended March 31, 2025 is as follows:


	Therapeutic DNA		MDx Testing		DNA Tagging and
	Production		Services and Kits		Security Products		Consolidated
Revenues:
Product revenues	$	507,408	$	—	$	537,077	$	1,044,485
Service revenues		107,242		—		481,386	$	588,628
Clinical laboratory service revenues		—		548,438		—	$	548,438
Less intersegment revenues		—		(1,560)		—	$	(1,560)
Total revenues	$	614,650	$	546,878	$	1,018,463	$	2,179,991

Gross profit	$	403,233	$	1,963	$	649,758	$	1,054,954

Segment operating expenses
Selling, general and administrative	$	1,856,769	$	551,924	$	1,038,060	$	3,446,753
Research and development		1,424,798		136,766		197,776		1,759,340
Total segment operating expenses	$	3,281,567	$	688,690	$	1,235,836	$	5,206,093
(Loss) income from segment operations (a)	$	(2,878,334)	$	(686,727)	$	(586,078)	$	(4,151,139)

Information regarding operations by segment for the six-month period ended March 31, 2024 is as follows:


	Therapeutic DNA		MDx Testing		DNA Tagging and
	Production		Services and Kits		Security Products		Consolidated
Revenues:
Product revenues	$	258,152	$	—	$	442,290	$	700,442
Service revenues		142,735		—		309,898		452,633
Clinical laboratory service revenues		—		678,320		—		678,320
Less intersegment revenues		—		(10,600)		—		(10,600)
Total revenues	$	400,887	$	667,720	$	752,188	$	1,820,795

Gross profit	$	268,123	$	(44,443)	$	303,068	$	526,748

Segment operating expenses
Selling, general and administrative	$	1,518,582	$	605,516	$	1,153,357	$	3,277,455
Research and development		1,174,036		145,144		434,066		1,753,246
Total segment operating expenses	$	2,692,618	$	750,660	$	1,587,423	$	5,030,701
(Loss) income from segment operations (a)	$	(2,424,495)	$	(795,103)	$	(1,284,355)	$	(4,503,953)

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE H – SEGMENT INFORMATION, continued

Reconciliation of loss from segment operations to Corporate loss for the three-month periods ended March 31, 2025 and 2024 is as follows:


	March 31,
	2025		2024
Loss from operations of reportable segments	$	(2,097,593)	$	(1,964,092)
General corporate expenses (b)		(1,364,202)		(1,653,659)
Interest income		60,340		15,352
Unrealized gain on change in fair value of warrants classified as a liability		68,430		1,765,000
Unrealized loss on change in fair value of warrants classified as a liability - warrant modification		—		(394,000)
Transaction costs allocated to warrant liabilities		—		(633,198)
Loss on issuance of warrants		—		(1,633,767)
Other (expense) income, net		(3,095)		4,581
Consolidated loss before provision for income taxes	$	(3,336,120)	$	(4,493,783)

Reconciliation of loss from segment operations to Corporate loss for the six-month periods ended March 31, 2025 and 2024 is as follows:


	March 31,
	2025		2024
Loss from operations of reportable segments	$	(4,151,139)	$	(4,503,953)
General corporate expenses (b)		(2,274,657)		(2,902,865)
Interest income		131,780		48,676
Unrealized gain on change in fair value of warrants classified as a liability		312,430		4,404,000
Unrealized loss on change in fair value of warrants classified as a liability - warrant modification		—		(394,000)
Transaction costs allocated to warrant liabilities		—		(633,198)
Loss on issuance of warrants		—		(1,633,767)
Other (expense) income, net		(23,247)		(8,957)
Consolidated loss before provision for income taxes	$	(6,004,833)	$	(5,624,064)

(a)

Segment operating loss consists of net sales, less cost of sales, specifically identifiable research and development, and selling, general and administrative expenses.

(b)

General corporate expenses consist of selling, general and administrative expenses that are not specifically identifiable to a segment.

NOTE I – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments at fair value are measured on a recurring basis. Related unrealized gains or losses are recognized in unrealized gain (loss) on change in fair value of the warrants classified as a liability in the condensed consolidated statements of operations. For additional disclosures regarding methods and assumptions used in estimating fair values of these financial instruments, see Note B.

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APPLIED DNA SCIENCES, INC. AND SUBSIDIARIES

FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(unaudited)

NOTE I – FAIR VALUE OF FINANCIAL INSTRUMENTS, continued

The following table presents the fair value of the Company’s financial instruments as of March 31, 2025 and summarizes the significant unobservable inputs in fair value measurement of Level 3 financial assets and liabilities as of March 31, 2025. The Company did not have any assets or liabilities categorized as Level 1 or 2 as of March 31, 2025.


	Fair value at		Valuation	Unobservable	Volatility
	March 31, 2025		Technique	Input	Input
Liabilities:
Common Warrants	$	1,000	Monte Carlo simulation	Annualized volatility	177.50	%
Series A Warrants	$	140	Monte Carlo simulation	Annualized volatility	182.50	%
Series A Warrants - modified	$	430	Monte Carlo simulation	Annualized volatility	177.50	%
Private Common Warrants	$	6,000	Monte Carlo simulation	Annualized volatility	165.00	%

The change in fair value of the Common Warrants, the Series A Warrants and the Private Common Warrants for the three-month period ended March 31, 2025 is summarized as follows:


					Series A		Private
	Common		Series A		Warrants-		Common
	Warrants		Warrants		modified		Warrants		Totals
Fair value at January 1, 2025	$	7,000	$	3,000		4,000		62,000	$	76,000
Change in fair value		(6,000)		(2,860)		(3,570)		(56,000)		(68,430)
Fair Value at March 31, 2025	$	1,000	$	140	$	430	$	6,000	$	7,570

The change in fair value of the Common Warrants, the Series A Warrants and the Private Common Warrants for the six-month period ended March 31, 2025 is summarized as follows:


					Series A		Private
	Common		Series A		Warrants-		Common
	Warrants		Warrants		modified		Warrants		Totals
Fair value at October 1, 2024	$	27,000	$	15,000	$	16,000	$	262,000	$	320,000
Change in fair value		(26,000)		(14,860)		(15,570)		(256,000)		(312,430)
Fair Value at March 31, 2025	$	1,000	$	140	$	430	$	6,000	$	7,570

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Item 2. — Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q (including but not limited to this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are intended to qualify for the “safe harbor” created by those sections. In addition, we may make forward-looking statements in other documents filed with or furnished to the SEC, and our management and other representatives may make forward-looking statements orally or in writing to analysts, investors, representatives of the media and others. These statements relate to future events or to our future operating or financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

Forward-looking statements can generally be identified by the fact that they do not relate strictly to historical or current facts and include, but are not limited to, statements using terminology such as “can”, “may”, “could”, “should”, “assume”, “forecasts”, “believe”, “designed to”, “will”, “expect”, “plan”, “anticipate”, “estimate”, “potential”, “position”, “predicts”, “strategy”, “guidance”, “intend”, “budget”, “seek”, “project” or “continue”, or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. You should read statements that contain these words carefully because they:

●

discuss our future expectations;

●

contain projections of our future results of operations or of our financial condition; and

●

state other “forward-looking” information.

We believe it is important to communicate our expectations. However, forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry and are subject to known and unknown risks, uncertainties and other factors. Accordingly, our actual results and the timing of certain events may differ materially from those expressed or implied in such forward-looking statements due to a variety of factors and risks, including, but not limited to, those set forth in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report, those set forth from time to time in our other filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, and the following factors and risks:

●

our expectations of future revenues, expenditures, capital or other funding requirements;

●

the adequacy of our cash and working capital to fund present and planned operations and growth;

●

the substantial doubt relating to our ability to continue as a going concern;

●

our need for additional financing which may in turn require the issuance of additional shares of common stock, preferred stock or other debt or equity securities (including convertible securities) which would dilute the ownership held by stockholders;

●

our identification of a material weakness in our internal control over financial reporting;

●

our business strategy and the timing of our expansion plans, including the development of new production facilities for our Therapeutic DNA Production Services;

●

demand for Therapeutic DNA Production Services;

●

demand for MDx Testing Services in light of unknown demand and potential business segment closure or divestiture;

●

our expectations concerning existing or potential development and license agreements for third-party collaborations or joint ventures;

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●

regulatory approval and compliance for our Therapeutic DNA Production Services, upon which our business strategy is substantially dependent;

●

the effect of governmental regulations generally;

●

our expectations of when regulatory submissions may be filed or when regulatory approvals may be received;

●

our expectations concerning restructuring of our business model with an emphasis on Therapeutic DNA Production Services;

●

our expectations of when or if we will become profitable;

●

the risk that our stockholders may suffer substantial dilution if certain provisions of our outstanding warrants are utilized;

●

the reverse stock split may decrease the liquidity of the shares of our common stock and the resulting market price of our common stock may not attract or satisfy the investing requirements of new investors, including institutional investors;

●

the risk that our common stock may be delisted from Nasdaq if we fail to comply with the $1.00 minimum price requirement even if we implement future stock splits. The closing price of our common stock is currently below $1.00 per share;

●

the risk that any stock splits we may implement in the future may decrease our liquidity and the price of our common stock;

●

the potential impact of amended Nasdaq Listing Rules 5810 and 5815, which may in certain circumstances prevent the Company from utilizing reverse stock splits to regain compliance with Nasdaq Listing Rules;

●

the risk that our Laboratory Developed Tests (“LDTs”) may become subject to additional regulatory requirements due to U.S. Food and Drug Administration (“FDA”) rulemaking activity, and that compliance with such requirements may be expensive and time-consuming, resulting in significant or unanticipated delays;

●

the unknown future markets for our MDx Testing Services, including without limitation, testing for mpox virus, COVID-19, pharmacogenomics and, if approved by NSYDOH, influenza A (H5) virus, also known as H5 bird flu; and

●

any impacts from current global, economic, sovereign and political conditions and uncertainties, including the effects of, and uncertainty regarding new or proposed tariff or trade regulations.

Any or all of our forward-looking statements may turn out to be wrong. They may be affected by inaccurate assumptions that we might make or by known or unknown risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in our forward-looking statements. Among the factors that could affect future results are:

●

the inherent uncertainties of product development based on our new and as yet not fully proven technologies;

●

the risks and uncertainties regarding the actual effect on humans of seemingly safe and efficacious formulations and treatments when tested clinically;

●

the inherent uncertainties of formulations and treatments that utilize our Therapeutic DNA Production Services;

●

the inherent uncertainties associated with clinical trials of product candidates, including product candidates that utilize our Therapeutic DNA Production Services;

●

the inherent uncertainties associated with the process of obtaining regulatory clearance or approval to market product candidates, including product candidates that utilize our Therapeutic DNA Production Services;

●

the inherent uncertainties associated with commercialization of products that have received regulatory clearance or approval, including products that utilize our Therapeutic DNA Production Services;

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●

the inherent uncertainties associated with the commercialization of our MDx Testing Services;

●

economic and industry conditions generally and in our specific markets;

●

the volatility of, and decline in, our stock price; and

●

our ability to obtain the necessary financing to fund our operations and effect our strategic development plan.

Forward-looking statements may include our plans and objectives for future operations, including plans and objectives relating to our products and our future economic performance, projections, business strategy and timing and likelihood of success. Assumptions relating to the forward-looking statements included in this Quarterly Report involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, regulatory outcomes, safety and efficacy, demand for our products and services, and the time and money required to successfully complete development and commercialization of our technologies, all of which are difficult or impossible to predict accurately and many of which are beyond our control.

Any of the assumptions underlying the forward-looking statements contained in this Quarterly Report could prove inaccurate and, therefore, we cannot assure you that any of the results or events contemplated in any of such forward-looking statements will be realized. Based on the significant uncertainties inherent in these forward-looking statements, the inclusion of any such statement should not be regarded as a representation or as a guarantee by us that our objectives or plans will be achieved, and we caution you against relying on any of the forward looking statements contained herein.

Our trademarks currently used in the United States include Applied DNA Sciences®, SigNature® T molecular tags, fiberTyping®, SigNify®, Beacon®, CertainT®, LineaDNA®, Linea™ COVID-19 Diagnostic Assay Kit, safeCircle^TM COVID-19 testing and TR8® pharmacogenetic testing. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. All trademarks, service marks and trade names included in this Quarterly Report on Form 10-Q are the property of the respective owners.

Introduction

We are a biotechnology company developing and commercializing technologies to produce and detect DNA and RNA. Using PCR to enable the production and detection of DNA and RNA, we currently operate in two primary business markets: (i) the enzymatic manufacture of synthetic DNA for use in the production of nucleic acid-based therapeutics (including biologics and drugs), as well as the development and sale of a proprietary RNAP for use in the production of mRNA therapeutics ; and (ii) the detection of DNA and RNA in molecular diagnostics and genetic testing services. Previously, we operated in a third business market: the manufacture and detection of DNA for industrial supply chains and security services, which, as detailed below, on February 13, 2025, we announced we were exiting.

Our current growth strategy is to primarily focus our resources on the further development, commercialization, and customer adoption of our Therapeutic DNA Production Services, including the expansion of our contract development and manufacturing operation (“CDMO”) for the sale of synthetic DNA and associated enzymes for use in the production of nucleic acid-based therapies.

We will continue to update our business strategy and monitor the use of our resources regarding our various business segments. Our management engaged in a strategic review of our DNA Tagging and Security Products and Services business segment. As a result of this strategic review, on February 13, 2025, we announced we were exiting our DNA Tagging and Security Products and Services business. As a result of exiting this segment, during January 2025, we completed a workforce reduction of approximately 20% of our total headcount and approximately 13% in annual payroll costs. As a result of these actions, during the three-month period ended March 31, 2025 and through April 2025, we incurred one-time personnel-related charges of approximately $305,000. We continue to strategically exit contracts related to our DNA Tagging and Security Products and Services segment pursuant to applicable terms and conditions and currently plan to continue to service certain of our existing DNA Tagging and Security Products and Services customer contracts. The Company’s management has also been and currently remains engaged in a strategic review of its MDx Testing Services business segment.

We expect that based on available opportunities and our beliefs regarding future opportunities, we will continue to modify and refine our business strategy.

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Therapeutic DNA Production Services

Through LRx we are developing and commercializing our LineaDNA and Linea IVT platforms for the sale of synthetic DNA and associated enzymes for use in the production of nucleic acid-based therapeutics.

LineaDNA Platform

Our LineaDNA platform is our core enabling technology, and enables the rapid, efficient, and large-scale cell-free manufacture of high-fidelity DNA sequences for use in the manufacturing of a broad range of nucleic acid-based therapeutics. The LineaDNA platform enzymatically produces a linear form of DNA we call “LineaDNA” that is an alternative to plasmid-based DNA manufacturing technologies that have supplied the DNA used in biotherapeutics for the past 40 years.

As of the first quarter of calendar year 2025, there were 4,418 gene, cell and RNA therapies in development from preclinical through pre-registration stages, almost all of which use DNA in their manufacturing process. (Source: ASGCT Gene, Cell & RNA Therapy Landscape: Q1 2025 Quarterly Report). Due to what we believe are the LineaDNA platform’s numerous advantages over legacy nucleic acid-based therapeutic manufacturing platforms, we believe this large number of therapies under development represents a substantial market opportunity for the LineaDNA platform to supplant legacy manufacturing methods in the manufacture of nucleic acid-based therapies although no assurance can be given that we will be successful in exploiting this market opportunity.

We believe our LineaDNA platform holds several important advantages over existing cell-based plasmid DNA manufacturing platforms. Plasmid-based DNA manufacturing is based on the complex, costly and time-consuming biological process of amplifying DNA in living bacterial cells. Once amplified, the DNA must be separated from the living cells and other process contaminants via multiple rounds of purification, adding further complexity and costs. Unlike plasmid-based DNA manufacturing, the LineaDNA platform does not require living cells and instead amplifies DNA via the enzymatic process of PCR. The LineaDNA platform is simple and can rapidly produce very large quantities of DNA without the need for complex purification steps.

We believe the key advantages of the Linea DNA platform include:

●

Speed – Production of LineaDNA can be measured in terms of hours, not days and weeks as is the case with plasmid-based DNA manufacturing platforms.

●

Scalability – LineaDNA production takes place on efficient bench-top instruments, allowing for rapid scalability in a minimal footprint.

●

Purity – DNA produced via PCR is pure, resulting in only large quantities of only the target DNA sequence. Unwanted DNA sequences such as the plasmid backbone and antibiotic resistance genes, inherent to plasmid DNA, are not present in LineaDNA.

●

Simplicity – The production of LineaDNA is streamlined relative to plasmid-based DNA production. LineaDNA requires only four primary ingredients, does not require living cells or complex fermentation systems and does not require multiple rounds of purification.

●

Flexibility – DNA produced via the LineaDNA platform can be easily chemically modified to suit specific customer applications. In addition, the LineaDNA platform can produce a wide range of complex DNA sequences that are difficult to produce via plasmid-based DNA production platforms. These complex sequences include inverted terminal repeats and long homopolymers such as polyadenylation sequences (poly (A) tail) important for gene therapy and mRNA therapies, respectively.

Preclinical studies conducted by the Company have shown that LineaDNA is substitutable for plasmid DNA in numerous nucleic acid-based therapies, including:

●

DNA vaccines;

●

DNA templates to produce RNA, including mRNA therapeutics;

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●

adoptive cell therapy (CAR-T) manufacturing; and

●

homology-directed repair (HDR)-mediated gene editing.

Further, we believe that LineaDNA is also substitutable for plasmid DNA in the following nucleic acid-based therapies:

●

viral vector manufacturing for in vivo and ex vivo gene editing;

●

clustered regularly interspaced short palindromic repeats-mediated gene therapy; and

●

non-viral gene therapy.

Linea IVT Platform

The number of mRNA therapies under development is growing at a rapid rate, thanks in part to the success of the mRNA COVID-19 vaccines. mRNA therapeutics are produced via a process called in vitro transcription (“IVT”) that requires DNA as a starting material. As of the first quarter of calendar 2025, there were over 450 mRNA therapies under development, with the majority of these therapies (65%) in the preclinical stage (Source: ASGCT Gene, Cell & RNA Therapy Landscape: Q1 2025 Quarterly Report). The Company believes that the mRNA market is in a nascent stage that represents a large growth opportunity for the Company via the production and supply of DNA critical starting materials and RNAP to produce mRNA therapies. In August 2022, the Company launched DNA IVT templates manufactured via its LineaDNA platform that have resulted in evaluations of the Company’s IVT templates by numerous therapeutic developers and CDMOs in the United States and the Asia-Pacific. The Company is currently producing research use only IVT templates for CDMOs located in the United States and Japan. However, there can be no assurance that the Company will enter into related long-term contracts. In response to this perceived demand, the continued growth of the mRNA therapeutic market, and the unique abilities of the LineaDNA platform, the Company acquired Spindle Biotech, Inc. (“Spindle”) in July 2023 to potentially increase its mRNA-related total addressable market (“TAM”) to include the manufacture and sale of RNAP for use in conjunction with our LineaDNA IVT templates.

Through our acquisition of Spindle, we launched our Linea IVT platform in July 2023, which combines Spindle’s proprietary high-performance RNAP, now marketed by the Company as Linea RNAP, with our enzymatically produced LineaDNA IVT templates. We believe the Linea IVT platform enables our customers to make better mRNA, faster. Based on data generated by the Company, we believe the integrated Linea IVT platform offers the following advantages over conventional mRNA production to therapy developers and manufacturers:

●

the prevention or reduction of double stranded RNA (“dsRNA”) contamination resulting in higher target mRNA yields with the potential to reduce downstream processing steps. dsRNA is a problematic immunogenic byproduct produced during conventional mRNA manufacture;

●

delivery of IVT templates in as little as 14 days for milligram scale and 30 days for gram scale;

●

reduced mRNA manufacturing complexities; and

●

potentially enabling mRNA manufactures to produce mRNA drug substance in less than 45 days.

According to the Company’s internal modeling, the ability to sell both Linea DNA IVT templates and Linea RNAP under the Linea IVT platform potentially increases the Company’s mRNA-related TAM by approximately 3x as compared to selling LineaDNA IVT templates alone, while also providing a more competitive offering to the mRNA manufacturing market. Currently, Linea RNAP is produced for the Company under an ISO 13485 quality system by Alphazyme, LLC (“Alphazyme”) a third-party CDMO located in the United States, which the Company believes is sufficient for early-stage clinical use of the enzyme. In conjunction with Alphazyme, the Company completed in calendar year 2024 manufacturing process and scale-up development work on its Linea RNAP to increase production scale of the enzyme and reduce costs.

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Manufacturing Scale-up

The Company plans to offer several quality grades of Linea DNA, each of which will have different permitted uses.

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	Currently available
GMP	DNA biologic, drug substance and/or drug product	Planned availability first half of CY 2026 (1) (GMP Site 2 or upgrade of GMP Site 1)

(1)

Dependent on the availability of future funding.

We are currently manufacturing LineaDNA pursuant to Good Laboratory Practices (“GLP”) and have recently completed the buildout of a fit for purpose manufacturing facility within our current Stony Brook, NY laboratory space capable of producing LineaDNA IVT templates under Good Manufacturing Practices (“GMP”) suitable for use as a critical starting material for clinical and commercial mRNA therapeutics (“GMP Site 1”). GMP site 1 achieved operation status as of January 31, 2025. We also plan to offer additional capacity for LineaDNA IVT templates as well as capacity for LineaDNA materials manufactured under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product, with availability expected during the first half of calendar year 2026, dependent upon the availability of future funding and customer demand (“GMP Site 2”). GMP is a quality standard used globally and by the FDA to ensure pharmaceutical quality. Drug substances are the pharmaceutically active components of drug products.

Segment Business Strategy

Our business strategy for our Therapeutic DNA Production Services is to capitalize upon the rapid growth of mRNA therapies in the near term via our ability to manufacture LineaDNA IVT templates under GMP at our GMP Site 1, while at the same time laying the basis for additional clinical and commercial applications of LineaDNA with our future planned availability of LineaDNA manufactured under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product at planned GMP Site 2. Planned GMP Site 2 may also be used for additional LineaDNA IVT template manufacturing if customer demand exceeds capacity of GMP Site 1. In addition, we believe GMP Site 1 is capable of manufacturing LineaDNA for use as, or incorporation into, a biologic, drug substance, and/or drug product manufacturing via facility upgrades to its existing footprint.

Our current plan is: (i) through our Linea IVT platform and GMP manufacturing capabilities for IVT templates at GMP Site 1 to secure commercial-scale supply contracts with clinical and commercial mRNA and/or self-amplifying mRNA (“sa-RNA”) manufacturers for LineaDNA IVT templates and/or Linea RNAP as critical starting materials; (ii) to utilize our current GLP production capacity for non-IVT template applications to secure supply and/or development contracts with pre-clinical therapy developers that use DNA in their therapy manufacturing, and (iii) upon our development of our planned future LineaDNA production under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product at planned GMP Site 2 and/or our upgrade to GMP Site 1, to convert existing and new LineaDNA customers into large-scale supply contracts to supply LineaDNA for clinical and commercial use as, or incorporation into, a biologic, drug substance and/or drug product in a wide range of nucleic acid therapies. In addition, the Company plans to utilize its current and planned DNA manufacturing capabilities in GMP Site 1 and/or GMP Site 2 to convert new and existing LineaDNA IVT template customers to LineaDNA IVT platform customers to increase the Company’s mRNA-related TAM.

If we were to expand our facilities to enable GMP production of LineaDNA for use as, or incorporation, into a biologic, drug substance and/or drug product as planned for GMP Site 2, the additional CAPEX may be up to approximately $10 million which would require additional funding. We anticipate upgrades to GMP Site 1 to enable the manufacture of LineaDNA for use as, or incorporation into, a biologic, drug substance and/or drug product manufacture to cost less than $1 million. Potential upgrades to GMP Site 1 would not alter its current footprint within our existing laboratory space. We anticipate that a GMP Site 2 would require us to acquire additional space.

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MDx Testing Services

Through ADCL, we leverage our expertise in DNA and RNA detection via PCR to provide and develop clinical molecular diagnostics and genetic testing services. ADCL is a NYSDOH clinical laboratory improvement amendments (“CLIA”)-certified laboratory which is currently permitted for virology and genetics (molecular). In providing MDx Testing Services, ADCL employs its own or third-party molecular diagnostic tests.

ADCL currently has the ability to offer testing services for pharmacogenomics, COVID-19 and mpox. On March 26, 2025, ADCL submitted a validation package to NYSDOH to expand its testing services to the detection and subtyping of influenza A (H5) virus, also known as H5 bird flu.

We have successfully internally validated our pharmacogenomics testing services (the “PGx Testing Services”). Our PGx Testing Services utilizes a 120-target PGx panel test to evaluate the unique genotype of a specific patient to help guide the patient’s healthcare provider in making individual drug therapy decisions. Our PGx Testing Services are designed to interrogate DNA targets on over 33 genes and provide genotyping information relevant to certain cardiac, mental health, oncology, and pain management drug therapies.

On June 12, 2024 we received full approval from NYSDOH for our PGx Testing Services. Recently published studies showed that population-scale PGx enabled medication management can significantly reduce overall population healthcare costs, reduce adverse drug events, and increase overall population wellbeing. These benefits can result in significant cost savings to large entities and self-insured employers, the latter accounting for approximately 65% of all U.S. employers in 2022.We plan to leverage our PGx Testing Services to provide PGx testing services to large entities, self-insured employers and other types of healthcare providers. Currently, ADCL is undertaking a strategic review of its commercialization of PGx Testing Services, including, but not limited to creating subpanels for targeted indications.

On September 11, 2024, we announced that ADCL launched an expansion of its clinical testing services for the detection of Mpox (formerly monkeypox) to include testing for both Mpox Clade I and Clade II. The launch of the expanded Mpox testing service comes after ADCL’s interaction with relevant regulatory bodies, including the NYSDOH and the FDA. The Company believes that ADCL will be able to support New York and other states’ response to the threat of Mpox. ADCL’s Linea Mpox Virus 1.0 Assay was previously approved as a laboratory-developed test for the detection of Mpox Clade II by NYSDOH in September 2022. In August 2024, ADCL conducted additional validation testing showing the Assay can also detect the genetic sequence of Mpox Clade I, which is the subject of the World Health Organization’s (WHO) August 14, 2024 declaration of a public health emergency of international concern. ADCL will provide the testing service from its CLEP/CLIA molecular diagnostics laboratory in Stony Brook, N.Y. Currently, Mpox instances in the United States are very low and the future path of Mpox is currently unknown. Accordingly, there can be no assurance that we will be able to generate revenue and profits from our approved Mpox testing.

On March 26, 2025 we announced that ADCL had submitted a validation package to the NYSDOH to request approval as a laboratory-developed test (LDT) for a PCR-based assay for the detection and subtyping of influenza A (H5) virus, also known as H5 bird flu, highly pathogenic avian influenza, or H5N1 (collectively “H5 bird flu”). ADCL’s Linea™ Avian Influenza H5 Dx assay (“AIH5 Dx”) is a highly sensitive, multi-target diagnostic assay capable of detecting and discriminating between pan-influenza A and H5 bird flu. The timeline for NYSDOH’s review of the Company’s validation package is unknown, as is whether such approval will be granted. No testing for H5 bird flu can be performed by ADCL until full approval is received from NYSDOH. Further, there can be no assurance that we will be able to generate revenue and profits if and when NYSDOH approval of our test for H5 bird flu is granted.

Historically, the majority of our revenue attributable to our MDx Testing Services has been derived from our safeCircle® COVID-19 testing solutions, for which testing demand has significantly declined commencing in our fiscal third quarter of 2023, resulting in substantially reduced revenues. We expect future demand for COVID-19 testing to continue to be reduced and we may terminate COVID-19 testing services in the future.

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Comparison of Results of Operations for the Three -Month Periods Ended March 31, 2025 and 2024

Revenues

Product revenues

For the three-month periods ended March 31, 2025 and 2024, we generated $548,638 and $393,125 in revenues from product sales, respectively. Product revenues increased by $155,513 or 40% for the three-month period ended March 31, 2025 as compared to the three-month period ended March 31, 2024. The increase in product revenues was primarily related to an increase of approximately $161,000 due to the timing of orders from our large-scale DNA manufacturing business within our Therapeutic DNA Production Services segment.

Service Revenues

For the three-month periods ended March 31, 2025 and 2024, we generated $214,184 and $205,486 in revenues from sales of services, respectively. The increase in service revenues of $8,698 or 4% for the three-month period ended March 31, 2025, as compared to the same period in the prior fiscal year is attributable to an increase of $26,000 within our DNA Tagging and Security Products and Services segment due to an increase in our textile isotopic testing services. This increase was offset by a decrease of approximately $17,000 within our Therapeutic DNA Production Services segment due to decreased research and development projects.

Clinical Laboratory Service Revenues

For the three-month periods ended March 31, 2025 and 2024, we generated $220,552 and $331,020 in revenues from our clinical laboratory testing services, respectively. The decrease in service revenues of $110,468 or 33% for the three-month period ended March 31, 2025 as compared to the same period in the prior fiscal year is attributable to a decrease from COVID surveillance testing, as two customer contracts stopped testing during the three-month period ended March 31, 2025.

Cost and Expenses

Gross Profit

Gross profit for the three-month period ended March 31, 2025, increased by $75,196 or 25% from $295,651 for the three-month period ended March 31, 2024 to $370,847. The gross profit percentage was 38% and 32% for the three-month periods ended March 31, 2025 and 2024, respectively. The improvement in gross profit percentage was primarily the result of product mix, as during the three-month period ended March 31, 2025, the majority of our product revenue was for the shipment of large-scale DNA production, which is at a higher gross margin compared to the product sales during the same period in the prior fiscal year. To a lesser extent, the improvement in gross profit percentage was due to higher product revenues during the three-month period ended March 31, 2025 as compared to the same period in the prior fiscal year. The higher volume of product revenues in the current period was able to better absorb the fixed costs that are included in cost of product revenues.

Selling, General and Administrative

Selling, general and administrative expenses for the three-month period ended March 31, 2025 decreased by $16,924 or 1% to $2,983,284 as compared to $3,000,208 for the three-month period ended March 31, 2024. The decrease is attributable to a decrease in deferred offering costs incurred for the ATM transaction that were written off during the prior fiscal year period when the ATM facility was terminated of $217,000, as well as a decrease in stock-based compensation expense of approximately $144,000. These decreases were offset by increases in expenses related to the March 2025 Reverse Split and the special stockholders’ meetings and adjournments of approximately $113,000, and an increase of approximately $140,000 in franchise taxes.

Research and Development

Research and development expenses decreased to $849,358 for the three-month period ended March 31, 2025 from $913,194 for the three-month period ended March 31, 2024, a decrease of $63,836 or 7%. This decrease was attributable to decreased payroll charges of $51,000 as well as decreased consulting charges of $35,190 relating to a development project during the prior three-month period within the Therapeutic DNA Production Services segment, as well as a net decrease in service contracts of approximately $16,000. These decreases were offset by an increase in laboratory supplies of approximately $71,000 for the development of an enzyme within our Therapeutic DNA Production Services segment.

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Interest income

Interest income for the three-month period ended March 31, 2025 increased $44,988 or 293% to $60,340 as compared to $15,352 in the three-month period ended March 31, 2024 due to interest earned on our money market accounts.

Transaction costs allocated to warrant liabilities

Transaction cost allocated to warrant liabilities for the three-month period ended March 31, 2024 were $633,198. These transaction costs represent the closing costs from the February 2024 financing transaction. These costs were expensed as it would have resulted in negative additional paid in capital.

Unrealized gain on change in fair value of warrants classified as a liability

Unrealized gain on change in fair value of warrants classified as a liability for the three-month periods ended March 31, 2025 and 2024 was $68,430 and $1,765,000, respectively, which relates to the change in fair value of the warrants that are classified as a liability. The primary driver of the change is the decrease in our stock price.

Unrealized loss on change in fair value of warrants classified as a liability-warrant modification

Unrealized loss on change in fair value of warrants classified as a liability-warrant modification of $394,000 for the three-month period ended March 31, 2024 represents the change in fair value for the modifications made to certain warrants as a result of the February 2024 financing transaction.

Loss on issuance of warrants

The loss on issuance of warrants of $1,633,767 for the three-month period ended March 31, 2024 relates to the February 2024 financing transaction and is the result of the fair value of the warrants being greater than the cash received from the financing.

Other (expense) income, net

Other (expense) income, net for the three-month periods ended March 31, 2025 and 2024, was expense of $3,095 and income of $4,581, respectively.

Loss from operations

Loss from operations decreased 155,956, or 4% to $3,461,795 for the three-month period ended March 31, 2025 compared to $3,617,751 for the three-month period ended March 31, 2024 due to the factors noted above.

Comparison of Results of Operations for the Six-Month Periods Ended March 31, 2025 and 2024

Revenues

Product revenues

For the six-month periods ended March 31, 2025 and 2024, we generated $1,044,485 and $700,442 in revenues from product sales, respectively. Product revenue increased by $344,043 or 49% for the six-month period ended March 31, 2025 as compared to the same period in the prior fiscal year. The increase in product revenues was primarily within our Therapeutic DNA Production Services segment for an increase in shipments for our large-scale DNA manufacturing business of approximately $249,000, as well as a net increase of approximately $95,000 within our DNA Tagging and Security Products and Services segment primarily attributable to an increase of approximately $233,000 year over year in cotton DNA tagging revenue, offset by a decrease of approximately $87,000 in sales to a nutraceutical customer.

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Service revenues

For the six-month periods ended March 31, 2025 and 2024 we generated $588,628 and $452,633 in revenues from sales of services, respectively. The increase in service revenues of $135,995 or 30% for the six-month period ended March 31, 2025, as compared to the same period in the prior fiscal year is attributable to increases of approximately $193,000 for isotopic testing services for textiles within our DNA Tagging and Security Products and Services segment, offset primarily by a decrease of approximately $35,000 related to research and development projects within our Therapeutic DNA Production Services segment.

Clinical laboratory service revenues

For the six-month periods ended March 31, 2025 and 2024, we generated $546,878 and $667,720 in revenues from our clinical laboratory testing services, respectively. The decrease in clinical laboratory service revenues of $120,842 or 18% for the six-month period ended March 31, 2025 as compared to the same period in the prior fiscal year is attributable to a decrease from COVID testing services, as two customer contracts stopped testing during February, 2025.

Cost and Expenses

Gross Profit

Gross profit for the six-month period ended March 31, 2025, increased by $528,206 or 100% from $526,748 for the six-month period ended March 31, 2024 to $1,054,954. The gross profit percentage was 48% and 29% for the six-month periods ended March 31, 2025 and 2024, respectively. The increase in gross profit percentage was primarily the result of higher product revenues during the six-month period ended March 31, 2025 as compared to the same period in the prior fiscal year. The higher volume of product revenues in the current period was able to better absorb the fixed costs that are included in cost of product revenues. To a lesser extent, the improved gross profit percentage was due to product mix, as during the six-months ended March 31, 2025, the majority of our product revenue was for the shipment of DNA for cotton tagging within our DNA Tagging and Security Products and Services segment, which is at a higher gross margin compared to the product sales during the same period in the prior fiscal year.

Selling, General and Administrative

Selling, general and administrative expenses for the six-month period ended March 31, 2025 decreased by $468,175 or 8% to $5,616,382 as compared to $6,084,557 for the six-month period ended March 31, 2024. The decrease is attributable to a decrease in stock-based compensation expense of approximately $455,000, which primarily relates to the timing of the annual non-employee board of director grant that vests one-year from the date of grant, which was granted during the second quarter of fiscal 2023. Additional decreases related to a decrease in consulting expense of approximately $158,000. The decrease in consulting expense was from the closure of our APDN Europe subsidiary within our DNA Tagging and Security Products and Services segment, as well as a decrease in consulting expense from our MDx Testing Services segment. These decreases were offset by an increase in expenses of approximately $168,000 related to the March 2025 Reverse Split and the special stockholders’ meeting and adjournments.

Research and Development

Research and development expenses remained fairly consistent at $1,864,368 for the six-month period ended March 31, 2025 compared to $1,849,009 for the six-month period ended March 31, 2024, an increase of $15,359 or 1%.

Interest income

Interest income for the six-month period ended March 31, 2025 increased $83,104 or 171% to $131,780 as compared to $48,676 in the six-month period ended March 31, 2024 due to interest earned on our money market accounts, which had higher cash balances during the current period.

Transaction costs allocated to warrant liabilities

Transaction cost allocated to warrant liabilities for the six-month period ended March 31, 2024 was $633,198. These transaction costs represent the closing costs from the February 2024 financing transaction. These costs were expensed as it would have resulted in negative additional paid in capital.

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Unrealized gain on change in fair value of warrants classified as a liability

Unrealized gain on change in fair value of Common Warrants for the six -month period ended March 31, 2025 and 2024 was $312,430 and $4,404,000, respectively, and relates to the change in fair value of the warrants that are classified as a liability. The primary driver of the change is the decrease in our stock price.

Unrealized loss on change in fair value of warrants classified as a liability-warrant modification

Unrealized loss on change in fair value of warrants classified as a liability-warrant modification of $394,000 for the six-month period ended March 31, 2024 represents the change in fair value for the modifications made to certain warrants as a result of the February 2024 financing transaction.

Loss on issuance of warrants

The loss on issuance of warrants of $1,633,767 for the six-month period ended March 31, 2024 relates to the February 2024 financing transaction and is the result of the fair value of the warrants being greater than the cash received from the financing.

Other (expense) income , net

Other (expense) income, net for the six-month periods ended March 31, 2025 and 2024, was income of $23,247 and $8,957, respectively.

Loss from operations

Loss from operations decreased 981,022, or 13% to $6,425,796 for the six-month period ended March 31, 2025 compared to $7,406,818 for the six-month period ended March 31, 2024 due to the factors noted above.

Liquidity and Capital Resources

Our liquidity needs consist of our working capital requirements and research and development expenditure funding. As of March 31, 2025, we had working capital of $6,536,108. For the six-month period ended March 31, 2025, we used cash in operating activities of $6,511,109 consisting primarily of our loss of $6,004,833 net with non-cash adjustments of $177,255 in depreciation and amortization charges, $312,430 in unrealized gain on change in fair value of warrants classified as a liability, $5,212 in write-off of property and equipment, and $55,484 in stock-based compensation expense. Additionally, we had a net increase in operating assets of $85,999 and a net decrease in operating liabilities of $351,221. At March 31, 2025, we had cash and cash equivalents of $6,823,260.

We have recurring net losses. We incurred a net loss of $6,004,833 and generated negative operating cash flow of $6,511,109 for the six-month period ended March 31, 2025. These factors raise substantial doubt about our ability to continue as a going concern for one year from the issuance of these financial statements. The ability of the Company to continue as a going concern is dependent on our ability to further implement our business plan, raise capital, and generate revenues. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Our current capital resources include cash and cash equivalents, accounts receivable and inventories. Historically, we have financed our operations principally from the sale of equity and equity-linked securities.

As discussed in Note E to our condensed consolidated financial statements, on October 31, 2024, we closed on a registered direct offering and received net proceeds, after deducting placement agent fees and other offering expenses payable by us, of approximately $5.7 million.

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Critical Accounting Estimates and Policies

Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.

We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our condensed consolidated results of operations, financial position or liquidity for the periods presented in this report.

The accounting policies identified as critical are as follows:

●

Revenue recognition; and

●

Warrant Liabilities.

Critical Accounting Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The most critical estimates include recoverability of long-lived assets, including the values assigned to intangible assets, fair value calculations for warrants, and contingencies. Management reviews its estimates on a regular basis and the effects of any material revisions are reflected in the consolidated financial statements in the period they are deemed necessary. Accordingly, actual results could differ from those estimates.

Revenue Recognition

We follow FASB issued accounting standard updates which clarify the principles for recognizing revenue arising from contracts with customers (“ASC 606” or “Topic 606”).

Product Revenues

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Authentication Services

Clinical Laboratory Testing Services

The Company records revenue for its clinical laboratory testing service contracts, which includes its COVID-19 testing services, upon satisfying its promise to provide services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time that Company services are complete, which is when the testing results are released to the customer. For those customers with a fixed monthly fee, the revenue is recognized over-time as the services are provided.

Research and Development Services

Warrant Liabilities

The Company evaluates its issued warrants in accordance with ASC 480 “Distinguishing Liabilities from Equity” and ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” and concluded that due to the terms of certain of its warrant agreements, the instruments do not qualify for equity treatment. As such, the Common Warrants, Series A Warrants and Private Common Warrants were recorded as a liability on the consolidated balance sheet and measured at fair value at inception and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the condensed consolidated statement of operations in the period of change.

Off-Balance Sheet Arrangements

As a requirement of our lease agreement for our corporate headquarters entered into during January 2023, in lieu of security deposit, we provided a standby letter of credit of $750,000. The letter of credit is effective through January 2026.

Inflation

The effect of inflation on our revenue and operating results was not significant.

Item 3. — Quantitative and Qualitative Disclosures About Market Risk.

Information requested by this Item is not applicable as we are electing scaled disclosure requirements available to smaller reporting companies with respect to this Item.

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Item 4. — Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are those controls and procedures designed to provide reasonable assurance that the information required to be disclosed in our Exchange Act filings is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2025, our disclosure controls and procedures were not effective because of a material weakness in our internal control over financial reporting as of March 31, 2025. The material weakness is further described below.

Material Weakness in Internal Control Over Financial Reporting

In connection with the review of our condensed consolidated financial statements for the three and six-month periods ended March 31, 2025, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. For the three and six-month periods ended March 31, 2025, the material weakness related to the controls around the preparation and review of the inputs utilized in fair value calculations, specifically as it related to warrant modifications. Nonetheless, we have concluded that this material weakness does not require a restatement of or change in our consolidated financial statements for any prior interim period. We also developed a remediation plan for this material weakness which is described below.

Remediation of Material Weakness

We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that this material weakness is remediated as soon as possible. To remediate this material weakness, we have implemented controls to ensure that all inputs in our fair value calculations agree to the underlying documents and are properly reviewed. We will consider the material weakness remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended March 31, 2025, other than the plan discussed above under “Remediation of Material Weakness,” there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II - Other Information

Item 1. — Legal Proceedings.

None.

Item 1A. — Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K of the Company filed with the SEC on December 17, 2024, and as updated and supplemented in subsequent filings. These risk factors could materially harm our business, operating results and financial condition. Additional factors and uncertainties not currently known to us or that we currently consider immaterial also may materially adversely affect our business, financial condition or future results.

Item 2. — Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. — Defaults Upon Senior Securities.

None.

Item 4. — Mine Safety Disclosures.

Not applicable.

Item 5. — Other Information.

In order for a stockholder proposal to be considered for inclusion in the Company’s proxy statement for the 2026 annual meeting of stockholders, the written proposal must have been received by the Corporate Secretary at the address below no earlier than January 22, 2026 and no later than February 21, 2026. In the event that the annual meeting of stockholders is called for a date that is not within 30 days before or after the first anniversary of the date of this year’s annual meeting, the proposal must be received no later than a reasonable time before the Company begins to print and mail its proxy materials. The proposal will also need to comply with the SEC’s regulations under Rule 14a - 8 under the Exchange Act regarding the inclusion of stockholder proposals in company sponsored proxy materials. Proposals should have been addressed to:

Corporate Secretary

Applied DNA Sciences, Inc.

50 Health Sciences Drive

Stony Brook, New York 11790

For a stockholder proposal that is not intended to be included in the proxy statement for the 2026 annual meeting of stockholders, or if you want to nominate a person for election as a director, you must provide written notice to the Corporate Secretary at the address above. The Secretary must receive this notice not earlier than January 22, 2026 and no later than February 21, 2026. However, if our 2026 annual meeting of stockholders is held more than 30 days before or more than 60 days after May 22, 2026, then the Secretary must receive this notice not earlier than the close of business on the 120th day prior to the date of our 2025 annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which we make a public announcement of the date of the meeting. The notice of a proposed item of business must provide information as required in our bylaws which, in general, require that the notice include for each matter a brief description of the matter to be brought before the meeting; the reason for bringing the matter before the meeting; the text of the proposal or matter; your name, address, and number of shares you own beneficially or of record; and any material interest you have in the proposal.

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Effective September 1, 2022, Rule 14a - 19 under the Exchange Act requires the use of a universal proxy card in contested director elections. Under this “universal proxy rule,” a stockholder intending to engage in a director election contest with respect to an annual meeting of stockholders must give the Company notice of its intent to solicit proxies by providing the name (s) of the stockholder’s nominee (s) and certain other information at least 60 calendar days prior to the anniversary of the previous year’s annual meeting date, or March 23, 2026 (except that, if the Company did not hold an annual meeting during the previous year, or if the date of the meeting has changed by more than 30 calendar days from the previous year, then notice must be provided by the later of 60 calendar days prior to the date of the annual meeting or the 10th calendar day following the day on which public announcement of the date of the annual meeting is first made by the Company).

The notice of a proposed director nomination must provide information and documentation as required in our bylaws which, in general, require that the notice of a director nomination include the information about the nominee that would be required to be disclosed in the solicitation of proxies for the election of a director under federal securities laws; the nominee’s written consent to be named in the proxy statement as a nominee and to serve as a director if elected; a description of any transaction or arrangement during the last three years between the stockholder making the nomination and the nominee in which the nominee had a direct or indirect material interest; and a completed and signed questionnaire, together with a written representation and agreement that such nominee is not and will not become a party to certain voting commitments. A copy of the bylaw requirements will be provided upon request to the Corporate Secretary at the address above.

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Item 6. — Exhibits.

Incorporated by Reference to SEC Filing

Filed or Furnished with

Exhibit

this Form

No.

Filed Exhibit Description

Form

No.

File No.

Date Filed

10-Q

3.1

Conformed version of Certificate of Incorporation of Applied DNA Sciences, Inc., as most recently amended by the Sixth Certificate of Amendment, effective Thursday, April 25, 2024

S-1

3.1

333-278890

05/15/2024

3.2

Conformed version of By-Laws, as amended by the Certificate of Amendment to the By-laws, effective November 7, 2024

S-1

3.2

333-283315

11/19/2024

3.3

Form of Seventh Certificate of Amendment to the Certificate of Incorporation

8-K

3.1

001-36745

03/12/2025

31.1**

Certification of Chief Executive Officer, pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2**

Certification of Chief Financial Officer, pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**

Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**

Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 INS*

Inline XBRL Instance Document

101 SCH*

Inline XBRL Taxonomy Extension Schema Document

101 CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101 DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document

101 LAB*

Inline XBRL Extension Label Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101)

* Filed herewith

** Furnished herewith

Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act or the Exchange Act, except as otherwise stated in any such filing.

Table of Contents

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Applied DNA Sciences, Inc.

Dated: May 15, 2025		/s/ JAMES A. HAYWARD
		James A. Hayward, Ph.D.
		Chief Executive Officer
		(Duly authorized officer and principal executive officer)

		/s/ BETH JANTZEN
Dated: May 15, 2025		Beth Jantzen, CPA
		Chief Financial Officer
		(Duly authorized officer and principal financial and accounting officer)