UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Quarterly Report Pursuant to Section 13 Or 15(D) Of The Securities Act Of 1934
For the quarterly period ended December 31, 2003
Commission file number: 002-90539
APPLIED DNA SCIENCES, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 59-2262718
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
9229 West Sunset Boulevard, Suite 830, Los Angeles, CA 90069
(Address of principal executive offices)
(310) 860-1362
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $0.50 par value 20,635,344
(Class) (Outstanding as of February 17, 2004)
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis or Plan of Operation
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
APPLIED DNA SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 2003
-----------
Current assets:
Cash and Equivalents ......................................................... $624,352
-----------
Total Current Assets ......................................................... 624,352
Property, Plant and Equipment - net .......................................... 29,156
Patents - net ................................................................ 18,390
Deferred Financing Costs ..................................................... 200,000
Deposits and Prepaid Expenses ................................................ 23,559
------------
Total Assets ................................................................. $895,457
============
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities ..................................... $392,763
Accrued Liabilities Due Related Parties ...................................... 170,498
Convertible Loans ............................................................ 133,273
Due to Related Parties ....................................................... 109,944
============
Total Current Liabilities .................................................... 806,478
Note Payable ................................................................. 88,530
Commitments and Contingencies ................................................ --
Deficiency in Stockholders' Equity:
Preferred Stock, par value $.0001 per share; 10,000,000 shares authorized; -0-
issued - Common Stock, par value $0.50 per share; 100,000,000 shares authorized;
20,450,421 shares issued and oustanding 10,225,211 Common Stock Subscription
104,000 Additional Paid-In-Capital 670,504 Deficit Accumulated During the
Development Stage (10,999,266)
------------
449
Total Liabilities and Deficiency in Stockholders' Equity ..................... $895,457
============
(See accompanying notes to unaudited condensed
consolidated financial statements)
3
APPLIED DNA SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
(Unaudited)
For the Period,
September 16, 2002,
For The Three Months Ended (Inception Date)
December 31, December 31, through
2003 2002 December 31,2003
-------------- ------------ ------------
Revenues .......................... $ -- $ -- $ --
Operating expenses:
Selling, general and administrative 7,407,750 147,191 10,887,725
Depreciation and amortization ..... 351 -- 351
------------ ------------ ------------
Total operating expenses .......... 7,408,101 147,191 10,888,076
Operating loss .................... (7,408,101) (147,191) (10,888,076)
Other income (expense) ............ 685 -- 25,685
Interest expense .................. (135,074) -- (136,875)
------------ ------------ ------------
Net loss .......................... $(7,542,490) $ (147,191) $(10,999,266)
============ ============ ============
Loss per common share
(basic and assuming dilution) ..... $ (0.41) $ (0.01)
============ ============
Weighted average shares outstanding 18,503,162 10,397,385
============ ============
(See accompanying notes to unaudited condensed
consolidated financial statements)
4
APPLIED DNA SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF DEFICIENCY
IN STOCKHOLDERS' EQUITY For the period
September 16, 2002 (Date of Incorporation)
through December 31, 2003
(Unaudited)
Deficit
Accumulated
Additional Stock During
Common Stock Paid-In Subscription Development
Shares Amount Capital Due Stage Total
------------ ------------ ----------- ------------ ------------- ------------
Issuance of common stock to Founders
in exchange for services on September
16, 2002 at $0.01 per share 100,000 $ 10 $ 990 $ - $ - $ 1,000
Net Loss - - - - (11,612) (11,612)
------------ ------------ ----------- ------------ ------------- ------------
Balance at September 30, 2002 100,000 $ 10 $ 990 $ - $ (11,612) $(10,612)
Issuance of common stock in connection
with merger with ProHealth Medical
Technologies, Inc., on October 1, 2002. 10,178,352 1,000 - - - 1,000
Cancellation of Common Stock in
connection with merger with ProHealth
Medical Technologies, Inc., on
October 21, 2002. (100,000) - (1,000) - - (1,000)
Issuance of Common Stock in exchange
for services in October 2002 at
$0.065 per share. 602,000 60 39,070 - - 39,130
Issuance of Common Stock in exchange
for subscription in November and
December 2002 at $0.065 per share. 876,000 88 56,852 (56,940) - -
Cancellation of Common Stock in
January 2003 previously issued in
exchange for consulting services. (836,000) (76) (54,264) 54,340 - -
Issuance of Common Stock in exchange
for licensing services valued at
$0.065 per share in January 2003. 1,500,000 150 97,350 - - 97,500
Issuance of Common Stock in exchange
for consulting services valued at
$0.13 per share in January 2003. 586,250 58 76,155 - - 76,213
Issuance of Common Stock in exchange
for consulting services at $0.065
per share in February 2003. 9,000 1 584 - - 585
Issuance of Common Stock to Founders
in exchange for services valued at
$0.0001 per share in March 2003. 10,140,000 1,014 - - - 1,014
Issuance of Common Stock in exchange
for consulting services valued at
$2.50 per share in March 2003. 91,060 9 230,625 - - 230,634
Issuance of Common Stock in exchange
for consulting services valued at
$0.065 per share in March 2003. 6,000 1 389 - - 390
Sale of Common Stock issued at $1
per share in March 2003. - - 18,000 - - 18,000
Common Stock issued in exchange
for consulting services at $0.065
per share, April 1, 2003. 860,000 86 55,814 - - 55,900
Sale of Common Stock issued at $1.00
per share, April 9, 2003. 18,000 2 - - - 2
Common Stock issued in exchange for
consulting services at $0.065 per
share, April 9, 2003. 9,000 1 584 - - 585
Common Stock issued in exchange for
consulting services at $2.50 per
share, April 23, 2003. 5,000 1 12,499 - - 12,500
5
Common Stock issued in exchange for
consulting services at $2.50 per
share, June 12, 2003. 10,000 1 24,999 - - 25,000
Sale of Common Stock issued at $1
per share on June 17 2003. 50,000 5 49,995 - - 50,000
Common stock subscribed in exchange
for cash at $2.50 per share pursuant
to private placement, June 27, 2003. - - - 24,000 - 24,000
Common stock retired in exchange for
note payable at $0.0118 per share,
June 30, 2003. (7,500,000) (750) 750 - - -
Common stock issued in exchange for
consulting services at $0.065 per
share, June 30, 2003. 270,000 27 17,523 - - 17,550
Common stock subscribed in exchange
for cash at $1.00 per share pursuant
to private placement, June 30, 2003. - - - 10,000 - 10,000
Common stock subscribed in exchange
for cash at $2.50 per share pursuant
to private placement, June 30, 2003. - - - 24,000 - 24,000
Common stock issued in exchange for
consulting services at approximately
$2.01 per share, July 2003. 213,060 21 428,797 - - 428,818
Common stock canceled in July 2003,
previously issued for services
rendered at $2.50 per share. (24,000) (2) (59,998) - - (60,000)
Common stock issued for options
exercised at $1.00 in July 2003. 20,000 2 19,998 - - 20,000
Common stock issued for options
exercised at $1.00-subscription
payable-in July 2003. 10,000 1 9,999 (10,000) - -
Common stock issued in exchange
for consulting services at
approximately $2.38 per share,
August 2003. 172,500 17 410,913 - - 410,931
Common stock issued for options
exercised at $1.00 in August 2003. 29,000 3 28,997 - - 29,000
Common stock issued in exchange for
consulting services at approximately
$2.41 per share, September 2003. 395,260 40 952,957 - - 952,997
Common stock issued for subscription
payable at $2.50 per share
September 2003. 19,200 2 47,998 (48,000) - -
Common stock issued for cash at $2.50
per share pursuant to private placement
September 2003. 6,400 1 15,999 - - 16,000
Common stock issued for options exercised
at $1.00 in September 2003. 95,000 10 94,991 - - 95,000
Common stock subscription receivable
reclassed -September 2003. - - - 2,600 - 2,600
Common Stock subscibed for cash at $2.50
per share in September 2003. - - - 300,000 - 300,000
Net Loss. - - - - (3,445,164) (3,445,164)
------------ ------------ ----------- ------------ ------------- ------------
Balance at September 30, 2003. 17,811,082 $ 1,781 $ 2,577,566 $ 300,000 $ (3,456,776) $ (577,427)
Common stock issued in exchange for
consulting services at approximately
$2.85 per share, October 2003. 287,439 29 820,389 - - 820,418
Common stock issued for subscription
payable at $2.50 per share
October 2003. 120,000 12 299,988 (300,000) - -
6
Common stock canceled in October 2003,
previously issued for services
rendered at $2.50 per share. (100,000) (10) (249,990) - - (250,000)
Common stock issued in exchange for
consulting services at approximately
$2.85 per share, November 2003. 100,000 10 299,990 - - 300,000
Sale of Common stock subscribed for cash
at $2.50 per share pursuant to private
placement, November, 2003. 100,000 10 249,990 - - 250,000
Sale of Common stock subscribed for cash
at $2.50 per share pursuant to private
placement, Decemeber, 2003. 6,400 1 15,999 - - 16,000
Common stock issued in exchange for
consulting services at approximately
$2.59 per share, December 2003. 2,125,500 213 5,504,737 - - 5,504,950
Common Stock subscibed for cash at $2.50
per share in December 2003. - - - 104,000 - 104,000
Common Stock subscibed for cash at $2.50
per share in December 2003 - - - 104,000 104,000
Beneficial conversion feature relating
to notes payable - - 1,168,474 - - 1,168,474
Beneficial conversion feature relating
to warrants - - 206,526 - - 206,526
Adjust common stock par value from $0.0001
to $0.50 per share, per amendment of
articles dated Dec 2003. - 10,223,166 (10,223,166) - - -
Net Loss. - - - - (7,542,490) (7,542,490)
------------ ------------ ----------- ---------- ------------- ------------
Balance at December 31, 2003. 20,450,421 $ 10,225,211 $ 670,504 $ 104,000 $(10,999,266)$ 499
============ ============ =========== ========== ============= ============
7
APPLIED DNA SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
For the period
September 16, 2002
(Inception Date)
For The Three Months Ended through
December 31, December 31, December 31,
2003 2002 2003
-------------- ------------- -------------
Cash flows from operating activities:
Net loss from operating activities .......................... $ (7,542,490) $ (147,191) $(10,999,266)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation ................................................ 351 -- 351
Amortization of beneficial conversion feature ............... 133,273 133,273
Common stock retired ........................................ -- -- 88,500
Common stock issued in exchange for services rendered ....... 6,625,368 39,130 9,037,523
Common stock canceled-previously issued for services rendered (282,000) -- (282,000)
Changes in Assets and Liabilities: .......................... -- -- --
Prepaid Expenses and Deposits ............................... (23,559) (23,559)
Increase (decrease) in: ..................................... --
Accounts payable and accrued liabilities .................... (61,589) 101,144 392,411
Cash disbursed in excess of available funds ................. -- -- --
-------------- ------------- -------------
Net cash provided by (used in) operating activities ......... (1,150,646) (6,917) (1,652,767)
Cash flows from investing activities:
Capital expenditures ........................................ (29,507) -- (29,507)
-------------- ------------- -------------
Net cash provided by (used in) investing activities ......... (29,507) -- (29,507)
Cash flows from financing activities:
Proceeds from sale of common stock, net of cost ............. 266,000 -- 698,000
Proceeds from ssubscription of common stock ................. 104,000 -- 104,000
Proceeds from sale of options ............................... 32,000 -- 186,000
Advances from shareholders .................................. 34,004 7,000 143,596
Proceeds from loans ......................................... 1,175,030 -- 1,175,030
-------------- ------------- -------------
Net cash provided by (used in) financing activities ......... 1,611,034 7,000 2,306,626
Net increase (decrease) in cash and cash equivalents ........ 430,881 83 624,352
Cash and cash equivalents at beginning of period ............ 193,471 -- --
-------------- ------------- -------------
Cash and cash equivalents at end of period .................. $ 624,352 $ 83 $ 624,352
============== ============= =============
Supplemental Disclosures of Cash Flow Information:
Cash paid during period for interest ........................ $ -- $ -- --
============== ============= =============
Cash paid during period for taxes ........................... $ -- $ -- --
============== ============= =============
Non-cash transaction
Common stock issued for services ............................ $ 6,625,368 $ 39,130 $ 9,037,523
============== ============= =============
Common stock canceled-previously issued for services rendered $ (282,000) $ -- $ (282,000)
============== ============= =============
Common stock retired ........................................ $ -- $ -- $ 88,500
============== ============= =============
Acquisition
Common stock retained ....................................... $ -- $ 1,015 $ 1,015
============== ============= =============
Assets acquired ............................................. $ -- $ 135 $ 135
============== ============= =============
Acquisition cost ............................................ $ -- $ 880 $ 880
============== ============= =============
Deferred financing costs .................................... $ 200,000 $ -- $ 200,000
============== ============= =============
Beneficial conversion feature relating to notes payable ..... $ 1,168,474 $ -- $ 1,168,474
============== ============= =============
Beneficial conversion feature relating to warrants .......... $ 206,526 $ -- $ 206,526
============== ============= =============
(See accompanying notes to unaudited condensed
consolidated financial statements)
8
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB, and therefore, do
not include all the information necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended December 31, 2003 is not
necessarily indicative of the results that may be expected for the year ended
September 30, 2004. The unaudited condensed consolidated financial statements
should be read in conjunction with September 30, 2003 financial statements.
Business and Basis of Presentation
On September 16, 2002, Applied DNA Sciences, Inc. (the "Company") was
incorporated under the laws of the State of Nevada. The Company is in the
development stage , as defined by Statement of Financial Accounting Standards
No. 7 ("SFAS No. 7") and its efforts have been principally devoted to developing
DNA embedded biotechnology security solutions in the United States. To date, the
Company has generated nominal sales revenues, has incurred expenses and has
sustained losses. Consequently, its operations are subject to all the risks
inherent in the establishment of a new business enterprise. For the period from
inception through December 31, 2003, the Company has accumulated losses of
$10,999,266.
The consolidated financial statements include the accounts of the Company, and
its wholly-owned subsidiary ProHealth Medical Technologies, Inc. Significant
inter-company transactions have been eliminated in Consolidation.
Reclassification
Certain prior period amounts have been reclassified for comparative purposes.
Stock Based Compensation
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in APB
Opinion No. 25 and related interpretations. Accordingly, compensation expense
for stock options is measured as the excess, if any, of the fair market value of
the Company's stock at the date of the grant over the exercise price of the
related option. The Company has adopted the annual disclosure provisions of SFAS
No. 148 in its financial reports for the year ended September 30, 2003 and for
the subsequent periods.
Had compensation costs for the Company's stock options been determined based on
the fair value at the grant dates for the awards, the Company's net loss and
losses per share would have been as follows (transactions involving stock
options issued to employees and Black-Scholes model assumptions are presented in
Note E / F):
9
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF ACCOUNTING POLICIES (Continued)
Stock Based Compensation (Continued)
For the Period
September 16,
2002 (Date of
For The Three For The Three Inception)
Months ended Months ended through
December 31, December 31, December 31,
2003 2002 2003
Net loss - as reported $(7, 542,490) $(147,191) $(10,999,266)
Add: Total stock based employee compensation expense as
reported under intrinsic value method (APB. No. 25) - - -
Deduct: Total stock based employee compensation expense as
reported under fair value based method (SFAS No. 123) - - -
- - -
Net loss - Pro Forma $(7, 542,490) $(147,191) $(10,999,266)
============= ========== ==============
Net loss attributable to common stockholders - Pro forma
$(7, 542,490) $(147,191) $(10, 999,266)
============= ========== ==============
Basic (and assuming dilution) loss per share - as reported $ (0.40) $ (0.01) $ (0.63)
========= ========== =========
Basic (and assuming dilution) loss per share - Pro forma $ (0.40) $ (0.01) $ (0.63)
========= ========== =========
NOTE B - MERGER
Acquisition
On October 21, 2002, the Company completed a Plan and Agreement of
Reorganization ("Merger") with ProHealth Medical Technologies, Inc.
("ProHealth") an inactive publicly registered shell corporation with no
significant assets or operations. For accounting purposes, the Company shall be
the surviving entity. The transaction is accounted for using the purchase method
of accounting. The total purchase price and carrying value of net assets
acquired of was $ 880. From November 1988 until the date of the merger,
ProHealth was an inactive entity with no significant assets and liabilities
Effective with the Merger, all previously outstanding common stock, preferred
stock, options and warrants owned by the Company's shareholders were exchanged
for an aggregate of 10,178,352 shares of ProHealth common stock. The value of
the stock that was issued was the historical cost of the ProHealth's net
tangible assets, which did not differ materially from their fair value. In
accordance with SFAS No. 141, the Company is the acquiring entity.
Effective with the Merger, ProHealth changed its name to Applied DNA Sciences,
Inc.
The total purchase price and carrying value of net assets acquired of ProHealth
was $1. The net assets acquired were as follows:
Common stock retained by ProHealth shareholders $1,015
Assets acquired (135)
Total consideration paid $880
In accordance with SOP 98-5, the Company expensed $880 as organization costs.
10
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE C - RELATED PARTY TRANSACTIONS
Included in current liabilities is $109,944 and $17,612 at December 31, 2003 and
2002, respectively, which represents advances from the stockholders of the
Company. No formal agreements or repayment terms exist.
Also, the Company owed $170,498 and $18,045, at December 31, 2003 and 2002,
respectively to the stockholders and other related parties towards accrued
expenses.
The Company leases office space under a sub lease agreement with an entity
controlled by a significant former shareholder of the Company.
The Company has entered into long term employment and consulting agreements with
Company's President and Chief Executive Officer and an entity controlled by a
former significant Company shareholder, respectively.
NOTE D - CAPITAL STOCK
The Company is authorized to issue 10,000,000 shares of preferred stock. As of
December 31, 2003, there are no preferred shares issued and outstanding.
The Company is authorized to issue 100,000,000 shares of common stock, with an
original par value of $0.0001 par value per share. In December 2003, the Company
amended its Articles of Incorporation changing the par value of the Company's
common to $ 0.50 per share. In connection with the amendment, the Company
increased the book value of its common stock from $2,044 to $10,225,211 and
decreased Additional Paid In Capital from $9,518,670 to $670,504. As of December
31, 2003, the Company has issued and outstanding 20,450,421 shares of common
stock.
In October 2003, the Company issued 255,439 shares of common stock in exchange
for consulting services. The Company valued the shares issued at approximately
$3.09 per share for a total of $788,418, which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.
In October 2003, the Company issued 32,000 shares of common stock for
non-compensatory warrants exercised at $1.00 per share.
In October 2003, the Company issued 120,000 shares of common stock for shares
previously subscribed at $2.50 per share in September 2003.
In October 2003, the Company canceled 100,000 shares of common stock previously
issued in exchange for services at $2.50 per share
In November 2003, the Company issued 100,000 shares of common stock in exchange
for consulting services. The Company valued the shares issued at approximately
$3.00 per share, which represents the fair value of the services received which
did not differ materially from the value of the stock issued.
In November 2003, the Company sold 100,000 shares of common stock subscribed for
cash at $2.50 per share pursuant to private placement.
In December 2003, the Company sold 6,400 shares of common stock subscribed for
cash at $2.50 per share pursuant to private placement.
In December 2003, the Company issued 2,125,500 shares of common stock in
exchange for consulting services. . The Company valued the shares issued at
approximately $2.59 per share, which represents the fair value of the services
received which did not differ materially from the value of the stock issued.
11
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE D - CAPITAL STOCK (Continued)
In December 2003, the Company received $104,000 in exchange for a common stock
subscription at $2.50 per share pursuant to private placement.
In accordance with EITF 96-18 the measurement date to determine fair value was
the date at which a commitment for performance by the counter party to earn the
equity instrument was reached. The Company valued the shares issued for
consulting services at the rate which represents the fair value of the services
received which did not differ materially from the value of the stock issued.
NOTE E - WARRANTS
Warrants
The following table summarizes the changes in warrants outstanding and the
related prices for the shares of the Company's common stock issued to
non-employees of the Company. These warrants were granted in lieu of cash
compensation for services performed or financing expenses in connection with the
sale of the Company's common stock.
Warrants
Warrants Outstanding Exercisable
Remaining Weighted Weighted Weighted
Number Contractual Average Average Average
Exercise Prices Outstanding Life (Years) Exercise Price Exercisable Exercise Price
--------------- ----------- -------------- ----------- --------------
$1.00 306,000 5 $1.00 306,000 $1.00
$0.10 275,000 5 $0.10 183,333 $0.10
$3.20 1,375,000 5 $3.20 1,375,000 $3.20
$3.50 33,250 2 $3.50 33,250 $3.50
$3.50 45,500 2 $3.50 45,500 $3.50
----------- -----------
2,034,750 2,034,750
=========== ===========
Transactions involving warrants are summarized as follows:
Number of Shares Weighted Average
Price Per Share
Outstanding at September 30, 2003 383,500 $ 1.00
Granted 1,683,250 2.72
Exercised (32,000) 1.00
Canceled or expired - -
-------------------
Outstanding at December 31, 2003 2,034,750 $ 2.42
===================
The estimated value of the compensatory warrants granted to non-employees in
exchange for services and financing expenses was determined using the
Black-Scholes pricing model and the following assumptions: contractual term of 2
to 5 years, a risk free interest rate of 1.00%, a dividend yield of 0% and
volatility of 22.9%. The amount of the expense charged to operations for
compensatory warrants granted in exchange for services was $-0- for the three
months ended December 31, 2003 and 2002.
12
APPLIED DNA SCIENCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE F - CONVERTIBLE PROMISSORY NOTES PAYABLE
A summary of convertible promissory notes payable at December 31, 2003
(Unaudited) and September 30, 2003 is as follows:
December 31, 2003
(Unaudited)
-----------------
Convertible notes payable ("Bridge Unit Offering"), in quarterly
installments of interest only at 10% per annum, secured by all
assets of the Company and due on the earlier of the 9-month
anniversary date of the initial closing of the Offering, or
the completion of any equity financing of $3M or more; The
Company, in its sole discretion, may prepay principal at any
time without penalty. The Notes are convertible into shares
of common stock of the Company at a price of $2.50 per share. $ 1,375,000
Debt Discount - beneficial conversion feature, net of
accumulated amortization of $129,831 as of December 31, 2003 (1,149,000)
Debt Discount - value attributable to warrants attached to
notes, net of accumulated amortization of $3,442 as of
December 31, 2003 (203,084)
-----------------
$ 133,273
=================
Convertible Debentures
During the three months ended December 31, 2003, the Company sold 27.5 units
(the "Units") to accredited investors at a price of $50,000 per Unit (the
"Bridge Offering") for a total of $1,375,000. Each Unit consists of (i) a
$50,000 Principal Amount 10% Secured Convertible Promissory Note ("Note" or
"Notes"), (ii) warrants to purchase 50,000 shares of our common stock,
exercisable for a period of five years at a price of $3.20 per share ("$3.20
Warrant") and (iii) warrants to purchase 10,000 shares of our common stock,
exercisable for a period of five years at a price of $0.10 per share ("$0.10
Warrant" and together with the $3.20 Warrant, the "Warrants"). The Notes are
convertible into shares of our common stock at a price of $2.50 per share.
In accordance with EMERGING ISSUES TASK FORCE ISSUE 98-5, ACCOUNTING FOR
CONVERTIBLE SECURITIES WITH A BENEFICIAL CONVERSION FEATURES OR CONTINGENTLY
ADJUSTABLE CONVERSION RATIOS ("EITF 98-5"), the Company recognized an imbedded
beneficial conversion feature present in the Bridge Offering note. The Company
allocated a portion of the proceeds equal to the intrinsic value of that feature
to additional paid in capital. The Company recognized and measured an aggregate
of $1,168,474 of the proceeds, which is equal to the intrinsic value of the
imbedded beneficial conversion feature, to additional paid in capital and a
discount against the Bridge Offering. The debt discount attributed to the
beneficial conversion feature is amortized over the Bridge Offering's maturity
period of 5 years as interest expense.
In connection with the placement of the Bridge Offering notes, the Company
issued for each Unit non-detachable warrants to purchase 50,000 shares of our
common stock, exercisable for a period of five years at a price of $3.20 per
share ("$3.20 Warrant") and (iii) warrants to purchase 10,000 shares of our
common stock, exercisable for a period of five years at a price of $0.10 per
share ("$0.10 Warrant" and together with the $3.20 Warrant, the "Warrants"). In
accordance with EMERGING ISSUES TASK FORCE ISSUE 00-27, APPLICATION OF ISSUE NO.
98-5 TO CERTAIN CONVERTIBLE INSTRUMENTS ("EITF - 0027"), the Company recognized
the value attributable to the warrants in the amount of $206,526 to additional
paid in capital and a discount against the Bridge Offering. The Company valued
the warrants in accordance with EITF 00-27 using the Black-Scholes pricing model
and the following assumptions:
13
contractual terms of 5 years, an average risk free interest rate of 1.00%, a
dividend yield of 0.00%, and volatility of 22.9%. The debt discount attributed
to the value of the warrants issued is amortized over the Bridge Offering 's
maturity period 5 years as interest expense.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS FOR THE THREE
MONTHS ENDED DECEMBER 31, 2003
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere within
this report. The quarterly report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, including statements using
terminology such as "can", "may", "believe", "designated to", "will", "expect",
"plan", "anticipate", "estimate", "potential" or "continue", or the negative
thereof or other comparable terminology regarding beliefs, plans, expectations
or intentions regarding the future. Forward looking statements involve risks and
uncertainties and actual results could differ materially from those discussed in
forward-looking statements. All forward looking statements and risk factors
included in this document are made as of the date hereof, based on information
available to the Company as of the date thereof, and the Company assumes no
obligations to update any forward-looking statement or risk factor, unless the
Company is required to do so by law.
Plan of Operation
The Company presently does not have any available credit, bank financing or
other external sources of liquidity. Due to its brief history and historical
operating losses, the Company's operations have not been a source of liquidity.
The Company will need to obtain additional capital in order to expand operations
and become profitable. The Company intends to pursue the building of a re-seller
network outside the United States, and if successful, the re-seller agreements
would constitute an additional source of liquidity and capital over time... In
order to obtain capital, the Company may need to sell additional shares of its
common stock or borrow funds from private lenders. There can be no assurance
that the Company will be successful in obtaining additional funding and and
execution of re-seller agreements outside the Unites States.
During the three months ended December 31, 2003 and 2002 and from September 16,
2002 (inception) through December 31 2003, the Company's priorities were to
recruit and build its team, organize its new infrastructure and to develop a
successful strategy how best to exploit its exclusive Biowell license agreement.
No revenues were generated. Expenses of $7,407,750, $147,191 and $10,887,775
were incurred stemming from general, selling, and administrative expenses.
Although the management of the Company is of the opinion that continuing to
develop and finance the Company's present business of providing DNA
anti-counterfeit technology may ultimately be successful, management
nevertheless expects that the Company will need substantial additional capital
before the Company's operations can be fully implemented.
Liquidity and Capital Resources
As of December 31, 2003, we had a working capital deficit of $71,770. As a
result of our operating losses from our inception through December 31, 2003, we
generated a cash flow deficit of $1,652,767 from operating activities. We met
our cash requirements during this period from advances of $143,596 from the
Company's officer and principal shareholders, cash proceeds received of $802,000
for shares sold, and $1,175,030 received for a 10% Secured Convertible
Promissory Note to be issued pursuant to a private placement offering and
$186,000 received as a result of registered options exercised at $1.00 per
shares.
While we have raised capital to meet our working capital and financing needs in
the past, additional financing is required in order to meet our current and
projected cash flow deficits from operations and development. We are seeking
financing in the form of equity through a Private Placement Memorandum in order
to provide the necessary working capital. We currently have no commitments for
financing. There is no guarantee that we will be successful in raising the funds
required.
By adjusting its operations and development to the level of capitalization ,
management believes it has sufficient capital resources to meet projected cash
flow deficits through the next twelve months. However, if thereafter, we are not
successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to us, this could have a
material adverse effect on our business, results of operations, liquidity and
financial condition.
14
The effect of inflation on the Company's operating results was not significant.
The Company's operations are located in North America and there are no seasonal
aspects that would have a material effect on the Company's financial condition
or results of operations.
The Company's independent certified public accountant has stated in their report
included in the Company's September 30, 2003 Form 10-KSB, that the Company has
incurred operating losses from its inception , and that the Company is dependent
upon management's ability to develop profitable operations. These factors among
others may raise substantial doubt about the Company's ability to continue as a
going concern.
Bridge Unit Offering
From November through December 2003, we sold 27.5 units (the "Units") to
accredited investors at a price of $50,000 per Unit (the "Offering") for a total
of $1,375,000. Each Unit consists of (i) a $50,000 Principal Amount 10% Secured
Convertible Promissory Note ("Note" or "Notes"), (ii) warrants to purchase
50,000 shares of our common stock, exercisable for a period of five years at a
price of $3.20 per share ("$3.20 Warrant") and (iii) warrants to purchase 10,000
shares of our common stock, exercisable for a period of five years at a price of
$0.10 per share ("$0.10 Warrant" and together with the $3.20 Warrant, the
"Warrants"). The Notes are convertible into shares of our common stock at a
price of $2.50 per share.
Notes
The aggregate principal amount of Notes sold was $1,375,000. The Notes are
secured and bear interest at 10% per annum, computed on the basis of a 365-day
year, accruing from the date an investor's subscription was closed upon by the
Company. Principal and all accrued interest will be payable in full on the
earlier of (i) the 9-month anniversary date of the initial closing of the
Offering, or (ii) the completion of any equity financing of $3,000,000 or more.
The Company, in its sole discretion, may prepay principal at any time without
penalty. The Notes are convertible into shares of common stock of the Company at
a price of $2.50 per share.
The Notes are secured by a security agreement giving the Holder a security
interest in all the patents, licenses, equipment, fixtures, inventory and
accounts receivable of the Company, and/or any of its subsidiaries.
The following events constitute events of default under the Notes:
(i) Default in the payment of the principal or accrued interest on any Note or
upon any other indebtedness of the Company that is greater than $100,000, as and
when the same shall become due, whether by default or otherwise, which Default
shall have continued for a period of five (5) business days; or (ii) Any
representation or warranty made by the Company or any officer of the Company in
the Notes, or in any agreement, report, certificate or other document delivered
to the Holder pursuant to the Notes shall have been incorrect in any material
respect when made which shall not have been remedied ten (10) days after written
notice thereof shall have been given by the Holder; or (iii) The Company shall
fail to perform or observe any affirmative covenant contained in Section 4 of
the Notes and such Default, if capable of being remedied, shall not have been
remedied ten (10) days after written notice thereof shall have been given by the
Holder; or (iv) The Company or any subsidiary (A) shall institute any proceeding
or voluntary case seeking to adjudicate it bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of any order for relief or the appointment of a receiver, trustee,
custodian or other similar official for such Company or any subsidiary or for
any substantial part of its property, or shall consent to the commencement
against it of such a proceeding or case, or shall file an answer in any such
case or proceeding commenced against it consenting to or acquiescing in the
commencement of such case or proceeding, or shall consent to or acquiesce in the
appointment of such a receiver, trustee, custodian or similar official; (B)
shall be unable to pay its debts as such debts become due, or shall admit in
writing its inability to apply its debts generally; (C) shall make a general
assignment for the benefit of creditors; or (D) shall take any action to
authorize or effect any of the actions set forth above ; or (v) Any proceeding
shall be instituted against the Company seeking to adjudicate it bankrupt or
insolvent,
15
or seeking dissolution, liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other similar
official for the Company or for any substantial part of its property, and either
such proceeding shall not have been dismissed or shall not have been stayed for
a period of sixty (60) days or any of the actions sought in such proceeding
(including, without limitation, the entry of any order for relief against it or
the appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its property) shall occur; or (vi) One or more
final judgments, arbitration awards or orders for the payment of money in excess
of $100,000 in the aggregate shall be rendered against the Company, which
judgment remains unsatisfied for thirty (30) days after the date of such entry;
or (vii)Delisting of the Common Stock from the principal market or exchange on
which the Common Stock is listed for trading; Company's failure to comply with
the conditions for listing; or notification that the Company is not in
compliance with the conditions for such continued listing; or (viii)The issuance
of an SEC stop trade order or an order suspending trading of the Common Stock
from the principal market or exchange on which the Common Stock is listed for
trading for longer than five (5) trading days; or (ix) The failure by the
Company to issue shares of Common Stock to the Holder upon exercise by the
Holder of the conversion rights of the Holder in accordance with the terms of
the Notes, or the failure to transfer or cause its transfer agent to transfer
(electronically or in certificated form) any certificate for shares of Common
Stock issued to the Holder upon conversion of or otherwise pursuant to the Notes
as and when required by the Notes, or the failure to remove any restrictive
legend (or to withdraw any stop transfer instructions in respect thereof) on any
certificate for any shares of Common Stock issued to the Holder upon conversion
of or otherwise pursuant to the Notes as and when required by the Notes, and any
such failure shall continue uncured for ten (10) days after the Company shall
have been notified thereof in writing by the Holder; or (x) The failure by the
Company to file the Registration Statement within forty-five (45) days following
the Closing Date (as defined in the Subscription Agreement) or obtain
effectiveness with the Securities and Exchange Commission of the Registration
Statement within one hundred thirty five (135) days following the Closing Date
(as defined in the Subscription Agreement) or such Registration Statement lapses
in effect (or sales cannot otherwise be made thereunder effective, whether by
reason of the Company's failure to amend or supplement the prospectus included
therein) for more than twenty (20) consecutive days or forty (40) days in any
twelve month period after the Registration Statement becomes effective; or (xi)
The Company shall encumber or hypothecate the collateral subject to the Security
Agreement to any party; or (xii) A default by the Company of a material term,
covenant, warranty or undertaking of any other agreement to which the Company
and Holder are parties, or the occurrence of an event of default under any such
other agreement.
Holders shall, at any time prior to the Maturity Date, have the right to convert
the Note into Shares of the Company at $2.50 per such Share, which right shall
be exercised in the Holder's sole and absolute discretion. Holders shall, with
respect to any Shares acquired thereby, be granted the same demand and
piggy-back registration rights as if such Shares were purchased as part of the
Units.
In the event of and immediately upon the occurrence of an "Event of Default,"
the Notes shall become immediately due and payable without any action by the
Holder and the Notes shall bear interest until paid at the rate of 12% per annum
or such amount as shall be allowed by law.
In the event that the sum due under the Note is not repaid on the Maturity Date,
the Holder will have the option to either have the Note accrue interest at 12%
or such amount as legally allowed until paid, or to convert the entirety of the
debt then outstanding under the Note into the number of shares derived by
dividing the sum of such debt by the dollar value equal to 80% of the closing
ask price of the shares on the last trading day immediately preceding the
Maturity Date as reported on the market upon which the shares shall then be
trading, provided, however, that the conversion price shall never be less than
$1.00 per share. Any shares acquired thereby shall carry with them the demand
and piggy back registration rights granted to the Holder under the terms of the
Note.
Bridge Offering Warrants
Each Unit, or $50,000 principal amount of the Note, entitles the holder to
50,000 warrants exercisable on a one for one basis into shares of Common Stock
at an exercise price of $3.20 during a five-year period commencing on the
initial closing of the Offering (which was December 15, 2003, 2003). per share.
In addition, each Unit also entitles the holder to 10,000 warrants exercisable
on a one for one basis into shares of Common Stock at an exercise price of $0.10
per share during a five-year period commencing on the initial closing of the
Offering (which was December 15, 2003) In the event a holder of Warrants fails
to
16
exercise the Warrants prior to their expiration, the Warrants will expire, and
the holder thereof will have no further rights with respect to the Warrants.
The Warrants expire at 5:00 p.m., New York time, on the fifth anniversary after
the initial closing of the Offering. In the event a holder of Warrants fails to
exercise the Warrants prior to their expiration, the Warrants will expire and
the holder thereof will have no further rights with respect to the Warrants.
Product Research and Development
Without substantial financial resources we do not anticipate incurring material
research and development costs during the next twelve months.
Acquisition of Plant and Equipment and Other Assets
We do not anticipate the sale of any material property , plant or equipment
during the next 12 months. Without substantial financial resources we do not
anticipate the acquisition of any material property, plant or equipment during
the next 12 months.
Number of Employees
From our inception through the period ended June 30, 2003 , we have relied on
the services of outside consultants for services and have no employees. In order
for us to attract and retain quality personnel, we anticipate we will have to
offer competitive salaries to future employees. We anticipate that it may become
desirable to add additional full and or part time employees to discharge certain
critical functions during the next 12 months. This projected increase in
personnel is dependent upon our ability to generate revenues and obtain sources
of financing. There is no guarantee that we will be successful in raising the
funds required or generating revenues sufficient to fund the projected increase
in the number of employees. As we continue to expand, we will incur additional
cost for personnel.
Trends, Risks and Uncertainties
We have sought to identify what we believe to be the most significant risks to
our business, but we cannot predict whether, or to what extent, any of such
risks may be realized nor can we guarantee that we have identified all possible
risks that might arise. Investors should carefully consider all of such risk
factors before making an investment decision with respect to the Company's
Common Stock.
Risks
Applied DNA Sciences, Inc. is a small company entering a technical and
specialized scientific industry. The Company's growth will depend upon the
working capital and financial support, which we are in the process of seeking.
The Company will need substantial additional capital to expand and to exploit
its potential. While the management team has strong contacts in the geographic
and product territories, the Company is small with limited assets and a limited
operating history and may, as a result, have difficulties securing large enough
and increasing financial commitments from potential investors. Thus the Company
may be subject to the high risks associated with start-up companies and small
business.
The Company relies on a small number of key individuals to implement plans and
operations. Although the Company may obtain key person life insurance coverage
on the Company's key individuals once substantial financial resources are
obtained, the Company has not done so at this time. Should for some reason their
services become unavailable, the Company will be required to retain other
qualified personnel.
Reductions or delays in research and development budgets and in government
funding may negatively impact the Company's sales. Future clients may include
researchers at pharmaceutical and biotechnology companies as well as other
industrial sectors, academic institutions and government and private
laboratories. Fluctuations in the research and development budgets of these
researchers and their organizations could have a significant effect on demand
for the Company's products. Research and development budgets fluctuate due to
numerous factors that are outside the Company's control and are difficult to
predict, including changes in available resources, spending priorities and
institutional budgetary policies. The Company's business could be seriously
damaged by any decrease in life science research and
17
development expenditures by pharmaceutical, biotechnological and other
industrial sector companies, academic institutions or government and private
laboratories. Although the level of research funding has increased during the
past several years, we cannot assure that this trend will continue. Government
funding of research and development is subject to the political process, which
is inherently fluid and unpredictable. Also government proposals to reduce or
eliminate budgetary deficits have sometimes included reduced allocations to
government agencies that fund research and development activities. Also, our
potential customers receive funds from approved grants at particular times of
the year, as determined by the federal government. Grants have, in the past,
been frozen for extended periods or have otherwise become unavailable to various
institutions without advance notice. The timing of receipt of grant funds
affects the timing of purchase decisions by our customers and, as a result, can
cause fluctuations in our sales and operating results.
The Company regards trademarks, trade secrets and other intellectual property as
a component of its success, The Company relies on trademark law and trade secret
protection and confidentiality and /or license agreements with consultants,
customers, partners and others to protect our intellectual property. Effective
trademark and trade secret protection may not be available in every country in
which the Company's products are available. The Company cannot be certain that
the Company has taken adequate steps to protect its intellectual property,
especially in countries where the laws may not protect the Company's rights as
fully as in the United States. In addition, the Company's third party
non-disclosure and confidentiality agreements can be breached and, if they are,
there may not be adequate remedy available to the Company. If the Company's
trade secrets become known, the Company may lose its competitive edge.
The Company may be unable to protect its trademarks, trade secrets and other
intellectual property rights that are important to its business. The Company
regards its trademarks, trade secrets and other intellectual property as a
component of its success. The Company relies on trademark law and trade secret
protection and confidentiality and/or license agreements with consultants,
employees, customers, partners and others to protect our intellectual property.
Litigation as regards the Company intellectual property or other subject matters
could harm the Company's business. Litigation regarding patents and other
intellectual property rights is extensive in the biotechnology industry. The
Company is aware that patents have been applied for, and in some cases issued to
others, claiming technologies that are closely related to Applied DNA Sciences,
Inc. As a result, and in part due to the ambiguities and evolving nature of
intellectual property law, the Company periodically receives notices of
potential infringements of patents held by others. Although to date the Company
has successfully resolved these types of claims, the Company may not be able to
do so in the future. In the event of an intellectual property dispute, the
Company may be forced to litigate. This litigation could involve proceedings
declared by the U.S. Patent and Trademark Office or the International Trade
Commission, as well as proceedings brought directly by affected third parties.
Intellectual property litigation can be extremely expensive, and these expenses,
as well as the consequences should the Company not prevail, could seriously harm
the Company's business, If a third party claimed an intellectual property right
to technology the Company uses, the Company might need to discontinue an
important product or product line, alter its products and processes, pay license
fees or cease its affected business activities, Although the Company might under
these circumstances attempt to obtain a license to this intellectual property,
it may not be able to do so on favorable terms, or at all.
In addition to intellectual property rights litigation, other substantial,
complex or extended litigation could result in large expenditures for the
Company and distraction of its management. For example, law suits by employees,
shareholders, collaborators, distributors or re-sellers could be very costly and
substantially disrupt the Company's business. Disputes from time to time with
companies or individuals are not uncommon in the industry and the Company cannot
assure that it will always be able to resolve them out of court.
The Company's growth depends upon the ability to undertake sales in current
markets and to expand sales nationally to additional market segments and to
Europe, South America, Australia and parts of the Middle East. There can be no
certainty that the Company's efforts to increase and expand sales can be
accomplished on a profitable basis. The expansion to other delivery methods and
to other venues will depend on a number of factors, most notably the timely and
successful promotion and sale of the Company's products and related services
directly or via re-sellers agreements.. The Company's inability to expand sales,
in a timely manner, would have a material adverse effect on its business,
operating results and its financial condition.
18
ITEM 3. CONTROLS AND PROCEDURES
The Company's management including the Chief Executive Officer, President and
Chief Financial Officer, have evaluated, within 90 days prior to the filing of
this quarterly report, the effectiveness of the design, maintenance and
operation of the Company's disclosure controls and procedures. Management
determined that the Company's disclosure controls and procedures were effective
in ensuring that the information required to be disclosed by the Company in the
reports that it files under the Exchange Act is accurate and is recorded,
processed , summarized and reported within the time periods specified in the
Commission's rules and regulations.
Disclosure controls and procedures, no matter how well designed and implemented,
can provide only reasonable assurance of achieving an entity's disclosure
objectives. The likelihood of achieving such objectives is affected by
limitations inherent in disclosure controls and procedures. These include the
fact that human judgment in decision making can be fully faulty and that
breakdowns in internal control can occur because of human failures such as
errors or mistakes or intentional circumvention of the established process.
There have been no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the date of the
evaluation thereof, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
From October 7 through to October 30, 2003, we issued a total of 255,439 shares
of our Common Stock to eight consultants for their marketing, investor relations
and advisory services. These issuances are considered exempt from registration
by reason of the Section 4(2) of the Securities Act of 1933.
On October 9, 2003, we issued 120,000 shares to an investor in our 2003 Private
Placement of Units for total proceeds of $300,000. This issuance is considered
exempt from registration by reason of Section 4(2) of the Securities Act of 1933
as well as Regulation D of the Act, and Rule 506 promulgated thereunder.
In October 2003, the Company issued 32,000 shares of common stock in exchange
for previously issued non-compensatory warrants exercised at $1.00 per share.
This issuance is considered exempt from registration by reason of Section 4(2)
of the Securities Act of 1933.
19
On November 3, 2003, we issued 100,000 shares to an employee as a signing bonus
and for sales and marketing services in lieu of salary. This issuance is
considered exempt from registration by reason of Section 4(2) of the Securities
Act of 1933.
From November 18, 2003 through December 5, 2003, we issued a total of 106,400
shares of our Common Stock to two investors in our 2003 Private Placement of
Units for total proceeds of $266,000. These issuances are considered exempt from
registration by reason of Section 4(2) of the Securities Act of 1933 as well as
Regulation D of the Act, and Rule 506 promulgated thereunder.
From December 5 2003 through December 24, 2004, we issued a total of 275,500
shares of our Common Stock to consultants and employees for their investor
relations, sales, marketing and advisory services. These issuances are
considered exempt from registration by reason of the Section 4(2) of the
Securities Act of 1933.
On December 17, 2003, we issued a total of 1,850,000 shares to ten consultants
in connection with our agreement with the company's investment bankers, Vertical
Capital Partners, Inc.. These issuances are considered exempt from registration
by reason of the Section 4(2) of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Principal Executive Officer certification pursuant to Rule 13a-14 and
15d-14 under the Securities Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herein.
31.2 Principal Financial Officer certification pursuant to Rule 13a-14 and
15d-14 under the Securities Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herein.
32.1 Chief Executive Officer certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. Filed herein.
32.2 Chief Financial Officer certification pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Filed herein.
(b) Reports on Form 8-K filed during the three months ended December 31,
2003.
20
On December 3, 2003, the Company filed a Current Report on Form 8-K dated
November 26, 2003, reporting under Item 5, the NASD erroneously appended and "E"
to the Company's common stock symbol.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: April 6, 2004 Applied DNA Sciences, Inc.
/s/ Rob Hutchinson
------------------
Rob Hutchinson
Chief Executive Officer
/s/Gerhard Wehr
----------------
Gerhard Wehr
Chief Financial Officer
21