Applied DNA Sciences Reports Year End and Fiscal Fourth Quarter Results

Company To Hold Conference Call and Webcast Today, Thursday, December
28, 2017 at 4:30 PM EST

STONY BROOK, N.Y.–(BUSINESS WIRE)–Applied DNA Sciences, Inc. (NASDAQ: APDN) (“Applied DNA” or the
"Company"), announced financial results for the full fiscal year and
quarter ended September 30, 2017.

Commenting on Applied DNA’s performance for the fiscal year, Dr. James
A. Hayward, president and chief executive officer, stated, “Fiscal 2017
did not fulfill our revenue expectations, but nonetheless stands out for
the growing validation of our disruptive DNA technology platform by
leading global companies and government agencies, resulting in a broader
base of business activity and new revenue opportunities, and drove our
expected annual recurring revenue to increase to over $6.5 million per
year. In addition, working diligently to execute on our growth strategy,
we exited the fiscal year with 23 feasibility pilots in our pipeline, an
increase from 14 at the end of the third fiscal quarter, with two of the
23 pilots now commercialized.”

“Entering fiscal 2018, momentum in business activity is increasing
following the recent signing of new strategic partnerships across
several of our key business verticals,” continued Dr. Hayward. “Videojet
gives us direct line-of-sight into multiple commercial ecosystems,
including enhanced opportunities to tag Federal Supply Classes within
the Defense Logistics Agency in which we do not yet have a presence, and
in pharmaceuticals, where the global healthcare industry is moving to
comply with federally mandated regulations, such as the U.S. Drug
Supply Chain Security Act (US DSCSA) and the EU’s Falsified Medicine
Directive (EUFMD), both of which require serialized pharmaceutical
packaging. Our new memorandum of understanding with Colorcon
potentially broadens the applicability of our platform and gives us
access to both the pharmaceutical and nutraceutical industries.
Similarly, through our partnership with Rosier S.A. for DNA-tagged
fertilizer, we are preparing to enter markets that represent over 60% of
total global fertilizer consumption. Having established a foundation of
growing recurring revenues, an expanding pipeline of pilot projects and
with the addition of several new strategic partnerships expected to
contribute to revenue in the current year, we believe we are firmly on a
trajectory for growth in fiscal 2018.”

Fiscal 2017 Financial Results:

• Revenues increased 13% to $4.8 million as compared to $4.2 million in
  the prior fiscal year. The increase in year-over-year total revenues
  is attributable to increases in product revenue of approximately $1.4
  million in the textile industry primarily for protecting cotton supply
  chains, offset by a net decrease in service revenues from government
  contract awards of approximately $800 thousand, primarily as a result
  of two awards which expired in July and August 2016.
• Total operating expenses were $16.5 million, compared with $15.2
  million in the prior fiscal year, an increase of approximately $1.3
  million or 8%. The increase is primarily attributable to an increase
  in stock based compensation expense, offset by a decrease in R&D due
  to the expiration of the two government contract awards.
• Net loss for fiscal 2017 was $12.9 million, or $0.49 per share,
  compared with a net loss of $12.2 million, or $ 0.51 per share, in the
  prior fiscal year.
• Excluding non-cash expenses, Adjusted EBITDA for fiscal 2017 was
  negative $8.3 million, as compared to a negative Adjusted EBITDA of
  $9.2 million in the prior fiscal year. See below for information
  regarding non-GAAP measures.

Fiscal Fourth Quarter Results:

• Revenues decreased 30% for the fourth quarter of fiscal 2017 to $1.1
  million, compared with $1.6 million reported in the fourth quarter of
  fiscal 2016, and decreased 36% from the $1.8 million reported in the
  third fiscal quarter ended June 30, 2017. The year-over-year quarterly
  decrease in revenues resulted primarily from decreased sales to the
  textile industry. The year-over-year quarterly decrease in textile
  industry sales was due to the fact that the shipments of DNA
  concentrate took place in the third quarter of fiscal 2017 as compared
  to fiscal 2016 when they took place in the fourth quarter, as well as
  the restructuring of payment terms under the June 23, 2017 licensing
  agreement with Himatsingka America, Inc. The timing of the shipments
  is also the reason for the decrease in revenues for the fourth quarter
  of fiscal 2017 as compared to the prior fiscal quarter.
• Total operating expenses remained fairly flat at $3.7 million for the
  fourth fiscal quarter of 2017, compared with $3.6 million in the prior
  fiscal year’s quarter.
• Net loss for the quarter ended September 30, 2017 was $2.9 million, or
  $0.10 per share, compared with a net loss of $2.4 million, or $0.10
  per share, for the quarter ended September 30, 2016 and a net loss of
  $2.6 million, or $0.10 per share, for the quarter ended June 30, 2017.
• Excluding non-cash expenses, Adjusted EBITDA was constant at a
  negative $1.7 million for both the quarters ended September 30, 2017
  and for the same quarter last year and a negative Adjusted EBITDA of
  $1.5 million in the prior fiscal quarter ended June 30, 2017.
• Net cash used in operating activities in the fourth quarter of fiscal
  2017 was $914 thousand. This compares with $1.9 million in the
  corresponding prior-quarter period. See below for information
  regarding non-GAAP measures.

Fiscal Fourth Quarter Operational Highlights:

• On December 20, the Company entered into a securities purchase
  agreement with certain institutional investors to purchase an
  aggregate of 2,735,000 shares of common stock and warrants to purchase
  an aggregate of 2,735,000 shares of common stock in a registered
  direct offering. The offering closed on December 22, 2017 with net
  proceeds anticipated to be approximately $4.2 million, exclusive of
  warrant exercise proceeds. Applied DNA intends to use the net proceeds
  of the offering for working capital, capital expenditures, business
  development and research and development expenditures and the
  acquisitions of new technologies or businesses.
• On December 18, Applied DNA and Colorcon entered into a technology
  license memorandum of understanding (“MOU”) that combines Applied
  DNA’s proprietary molecular taggant and authentication technology with
  Colorcon’s portfolio of film coating systems, inks and color
  dispersions for use in solid oral dosage forms in the pharmaceutical
  and nutraceutical industries. The MOU is non-binding and is expected
  to be followed by a definitive agreement.
  Colorcon is one
  of the biggest players in the pharmaceutical supply chain ecosystem,
  bringing their quality film coatings and other excipients directly
  into almost all of the large pharmaceutical companies in the world. As
  part of this licensing collaboration, the MOU provides for the Company
  to provide exclusive rights to Colorcon for utilizing its molecular
  taggant directly in their film coatings so that customers receive a
  seamless solution. The Company expects to sign the definitive
  agreement shortly, for which it will receive milestone payments, as
  well as revenue sharing for product sales and authentication services.

• On December 14, the Company announced the renewal of a contract to
  provide its SigNature® DNA via Safesolution SmartDNA AB, its Swedish
  Distributor, to a prestigious German car manufacturer to prevent
  vehicle theft. Safesolution SmartDNA AB has been Applied DNA’s Swedish
  distributor for the last seven years.
• On December 5, Applied DNA announced its intention to enter West
  Africa and Asia with its molecular tagging technology to prevent
  fertilizer adulteration, geographies that cumulatively account for
  over 60% of total global fertilizer consumption. Concurrently, the
  Company announced that in the Republic of Turkey, legislators have
  mandated DNA-tagging of all domestically produced fertilizer
  by January 1, 2018, and the use of secure packaging. To the Company’s
  knowledge, it is the only company to have publicly demonstrated the
  capacity to tag fertilizer at scale and successfully track it through
  all aspects of the supply chain. Turkey’s mandate comes in response to
  a series of acts of terror that utilized fertilizer-based explosives
  in Turkey in 2016. The Company believes that business activities in
  these geographies could serve as catalysts of sales in calendar 2018.
• On November 20, the Company announced that the Defense Logistics
  Agency (DLA) had awarded it a one-year extension of its current
  contract to DNA-mark Federal Supply Class 5962 microcircuits through
  October 13, 2018. The extension ensured the uninterrupted support for
  FSC 5962 microcircuits, an award originally established at the DLA’s
  Land and Maritime facility in Columbus, OH in December 2014. To date,
  the Company has DNA-marked over 800,000 microcircuits.
• On November 3, Applied DNA announced that it was awarded U.S. patents
  on its SigNature® T Molecular Tag and Multimode Reader (MMR)
  Authentication device. The patents provide the Company with broad
  long-term market exclusivity; the MMR device paves the way for the
  instant authentication of a broad range of taggants, and licensing
  opportunities.
• On October 24, the Company signed a new CertainT® trademark license
  agreement with Palmetto
  Synthetics (Palmetto), a leader in the production of high quality,
  specialty synthetic fiber. The licensing agreement will enable
  Palmetto to reach its goals of bringing transparency to its own
  manufacturing processes, and also to provide its customers with
  traceability and trust in the original tagged synthetic fiber.
• On October 23, Applied DNA signed a new CertainT trademark license
  agreement with Techmer
  PM (Techmer), a respected producer of value added colors and
  additives for the plastic and fiber industries, and a long-standing
  customer of the Company’s SigNature T molecular tags. The expansion of
  the Company’s existing relationship with Techmer to include trademark
  licensing highlights the growing awareness and adoption of Applied
  DNA’s CertainT platform with a public-facing trademark that stands for
  authenticity, transparency and performance.
• On September 26, the Company entered into a strategic partnership with Videojet
  Technologies (Videojet). As part of their partnership, the companies
  have collaborated in the design of co-branded Applied DNA SigNature
  molecular-tagged Videojet inks and a co-branded printer that
  electronically restricts the use of ink cartridges to only those that
  contain SigNature DNA inks. This relationship brings the potential to
  empower the tagging of countless commercial items, all of which are
  candidates for a CertainT licensing agreement, enabling traceability
  along the entire supply chain. Subsequently, on November 28, the
  Company announced an exhibit of its new security print platform
  developed with Videojet
  at the Defense Manufacturing Conference 2017 (DMC 2017) in Tampa,
  FL.
• On September 12, Applied DNA announced the signing of a Cooperative
  Research and Development Agreement (“CRADA”) with the U.S. Army
  Research, Development and Engineering Command’s Edgewood Chemical
  Biological Center (ECBC) to study the commercialization of ECBC’s
  innovative rapid, in-field DNA microarray technology for use in
  military and commercial supply chains. The Company views rapid,
  hand-held in-field DNA detection as essential to the long-term growth
  of its technology platform, and believes the ECBC’s innovative
  in-field DNA detection technology is a complement to its DNA
  authentication products for supply chain integrity capable of rapid
  detection anywhere, anytime, for global supply chains.

Fiscal Fourth Quarter 2017 Conference Call Information

The Company will hold a conference call and webcast to discuss its
fiscal fourth quarter and year-end 2017 results on Thursday, December
28, 2017 at 4:30 PM ET. To participate on the conference call, please
follow the instructions below. While every attempt will be made to
answer investors’ questions on the Q&A portion of the call, due to the
large number of expected participants, not all questions may be answered.

To Participate:

• Participant Toll Free:1-844-887-9402
• Participant Toll: 1-412-317-6798
• Please ask to be joined to the Applied DNA Sciences call

Live webcast: https://services.choruscall.com/links/apdn171205.html

Replay (available 1 hour following the conclusion of the live call
through December 29, 2017):

• Participant Toll Free: 1-877-344-7529
• Participant Toll: 1-412-317-0088
• Participant Passcode: 10113295
• Webcast replay: https://services.choruscall.com/links/apdn171205.html

For those investors unable to attend the live call, a copy of the
presentation is expected to be posted by end of business on December 28,
2017 and available under the ‘Presentations’ section of the company’s
Investor Relations web site: http://adnas.com/adnas_home/investors/.

Information about Non-GAAP Financial Measures

As used herein, “GAAP” refers to accounting principles generally
accepted in the United States of America. To supplement our condensed
consolidated financial statements prepared and presented in accordance
with GAAP, this earnings release includes Adjusted EBITDA, which is a
non-GAAP financial measure as defined in Rule 101 of Regulation G
promulgated by the Securities and Exchange Commission. Generally, a
non-GAAP financial measure is a numerical measure of a company’s
historical or future performance, financial position, or cash flows that
either excludes or includes amounts that are not normally excluded or
included in the most directly comparable measure calculated and
presented in accordance with GAAP. The presentation of this non-GAAP
financial information is not intended to be considered in isolation or
as a substitute for, or superior to, the financial information presented
in accordance with GAAP. We use this non-GAAP financial measure for
internal financial and operational decision making purposes and as a
means to evaluate period-to-period comparisons of the performance and
results of operations of our core business. Our management believes that
these non-GAAP financial measures provide meaningful supplemental
information regarding the performance of our business by excluding
non-cash expenses that may not be indicative of our recurring operating
results. We believe this non-GAAP financial measure is useful to
investors as they allow for greater transparency with respect to key
metrics used by management in its financial and operational decision
making.

“EBITDA”- is defined as earnings (loss) before interest expense, income
tax expense and depreciation and amortization expense.

“Adjusted EBITDA”- is defined as EBITDA adjusted to exclude (i) change
in fair value of warrant liability, (ii) the loss on conversion of
promissory notes, (iii) stock-based compensation and (iv) other non-cash
expenses.

About Applied DNA Sciences

Applied DNA is a provider of molecular technologies that enable supply
chain security, anti-counterfeiting and anti-theft technology, product
genotyping and DNA mass production for diagnostics and therapeutics.

We make life real and safe by providing innovative, molecular-based
technology solutions and services that can help protect products,
brands, entire supply chains, and intellectual property of companies,
governments and consumers from theft, counterfeiting, fraud and
diversion. The proprietary DNA-based CertainT® platform can
be used to identify, tag, test, and track products, to help assure
authenticity, origin, traceability, sustainability and quality of
products.

SigNature® DNA describes the core technology ingredient that
is at the heart of a family of uncopyable, security and authentication
solutions such as SigNature®T and fiberTyping®,
targeted towards textiles and apparel, BackTrac® and DNAnet®,
for anti-theft and loss prevention, and digitalDNA®,
providing powerful track-and-trace. All provide a forensic chain of
evidence, and can be used to prosecute perpetrators. Applied DNA
Sciences is also engaged in the large-scale production of specific DNA
sequences using the polymerase chain reaction.

Visit adnas.com for
more information. Follow us on Twitter and LinkedIn.
Join our mailing
list.

Forward-Looking Statements

The statements made by APDN in this press release may be
“forward-looking” in nature within the meaning of the Private Securities
Litigation Act of 1995. Forward-looking statements describe APDN’s
future plans, projections, strategies and expectations, and are based on
assumptions and involve a number of risks and uncertainties, many of
which are beyond the control of APDN. Actual results could differ
materially from those projected due to our short operating history,
limited financial resources, limited market acceptance, market
competition and various other factors detailed from time to time in
APDN’s SEC reports and filings, including our Annual Report on Form 10-K
filed on December 28, 2017, which is available at www.sec.gov.
APDN undertakes no obligation to update publicly any forward-looking
statements to reflect new information, events or circumstances after the
date hereof to reflect the occurrence of unanticipated events, unless
otherwise required by law.

Financial Tables Follow

Contacts

Investors:
LHA
Sanjay M. Hurry, 212-838-3777
[email protected]
Media:
Dian
Griesel Int’l.
Susan Forman, 212-825-3210
[email protected]
Web:
www.adnas.com
Twitter:
@APDN