UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended March 31, 2007
 
Commission file number 002-90519
 
 
APPLIED DNA SCIENCES, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
59-2262718
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification Number)
   
25 Health Sciences Drive, Suite 113
 
Stony Brook, New York
11790
(Address of Principal Executive Offices)
(Zip Code)

(631) 444-6861
(Registrant’s telephone number, including area code)
 

·
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the last 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 Noo
 
·
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes o No x
 
·
The number of shares of Common Stock, $0.001 par value, outstanding on May 15, 2007, was approximately 130,808,137 shares.
 
·
Transitional Small Business Disclosure Format (check one):
 
Yes o No x
 

 
APPLIED DNA SCIENCES, INC
QUARTERLY REPORT ON FORM 10-QSB FOR THE
QUARTERLY PERIOD ENDING MARCH 31, 2007
     
Table of Contents
     
PART I. FINANCIAL INFORMATION  
       
  Item 1. Financial Statements  
       
   
Condensed Consolidated Balance Sheet: March 31, 2007 (Unaudited)
1
       
   
Condensed Consolidated Statements of Losses:
Three Months Ended March 31, 2007 and 2006 (Unaudited) and the Period from September 16, 2002 (Date of Inception) Through March 31, 2007 (Unaudited)
2
       
   
Condensed Consolidated Statement of Stockholder’s Equity (Deficiency):
For the Period from September 16, 2002 (Date of Inception) Through March 31, 2007 (Unaudited)
3
       
   
Condensed Consolidated Statements of Cash Flows:
Three Months Ended March 31, 2007 and 2006 (Unaudited) and the Period from September 16, 2002 (Date of Inception) Through March 31, 2007 (Unaudited)
17
       
   
Notes to Unaudited Condensed Consolidated Financial Information: March 31, 2007
19-42
       
  Item 2. Management’s Discussion and Analysis
43
       
  Item 3 Controls and Procedures
60
     
PART II. OTHER INFORMATION
       
  Item 1. Legal Proceedings
62
       
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
63
       
  Item 3. Defaults Upon Senior Securities
63
       
  Item 4. Submission of Matters to a Vote of Security Holders
63
       
  Item 5. Other Information
63
       
 
Item 6. Exhibits
63
       
  Signatures
64


 
PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
 
APPLIED DNA SCIENCES, INC.
 
(A Development stage company)
 
CONDENSED CONSOLIDATED BALANCE SHEET
 
(unaudited)
 
   
March 31,
 
   
2007
 
ASSETS
 
Current assets:
       
Cash
 
$
89,232
 
Prepaid expenses
   
26,667
 
Total current assets
   
115,899
 
         
Property, plant and equipment-net of accumulated depreciation of $51,800
   
136,561
 
         
Other assets:
       
Deposits
   
13,822
 
Capitalized finance costs-net of accumulated amortization of $1,413,563
   
271,537
 
         
Intangible assets:
       
Patients, net of accumulated amortization of $22,019 (Note B)
   
12,238
 
Intellectual property, net of accumulated amortization and write off of $7,520,996 (Note B)
   
1,909,904
 
         
Total Assets
 
$
2,459,961
 
         
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
         
Current liabilities:
       
Accounts payable and accrued liabilities
 
$
7,926,210
 
Convertible notes payable, net of unamortized discount (Note D)
   
4,930,894
 
Total current liabilities
   
12,857,104
 
         
Debt derivative and warrant liability
   
8,820,085
 
         
Commitments and contingencies (Note J)
       
         
Deficiency in Stockholders' Equity- (Note F)
       
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; 60,000 issued and outstanding
   
6
 
Common stock, par value $0.001 per share; 410,000,000 shares authorized; 121,162,385 issued and outstanding (see Note J)
   
121,162
 
Additional paid in capital
   
83,037,855
 
Accumulated deficit
   
(102,376,251
)
Total deficiency in stockholders' equity
   
(19,217,228
)
         
Total liabilities and Deficiency in Stockholders' Equity
 
$
2,459,961
 
         
See the accompanying notes to the consolidated financial statements
       

1

 
APPLIED DNA SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
(unaudited)
               
           
From September 16, 2002
 
   
For the three months Ended March 31,
 
For the six months Ended March 31,
 
(Date of Inception)
 
   
2007
 
2006
 
2007
 
2006
 
Through March 31, 2007
 
       
RESTATED
     
RESTATED
     
Sales
 
$
-
 
$
-
 
$
-
 
$
-
 
$
18,900
 
Cost of sales
   
-
   
-
   
-
   
-
   
15,639
 
Gross Profit
   
-
   
-
   
-
   
-
   
3,261
 
                                 
Operating expenses:
                               
Selling, general and administrative
   
1,988,931
   
949,634
   
4,043,386
   
2,794,311
   
84,109,344
 
Research and development
   
39,479
   
75,033
   
68,785
   
91,303
   
1,099,384
 
Impairment of intangible asset(s)
   
-
   
-
   
-
   
-
   
5,655,011
 
Depreciation and amortization
   
108,358
   
341,676
   
216,237
   
684,375
   
1,945,963
 
                                 
Total operating expenses
   
2,136,768
   
1,366,343
   
4,328,408
   
3,569,989
   
92,809,702
 
                                 
NET LOSS FROM OPERATIONS
   
(2,136,768
)
 
(1,366,343
)
 
(4,328,408
)
 
(3,569,989
)
 
(92,806,441
)
                                 
Net gain (loss) in revaluation of debt derivative and warrant liabilities
   
(6,387,761
)
 
3,967,870
   
(4,289,290
)
 
10,756,660
   
29,256,537
 
Other income
   
-
   
3,520
   
977
   
9,493
   
111,807
 
Interest expense
   
(845,709
)
 
(571,696
)
 
(1,424,739
)
 
(2,350,402
)
 
(38,938,153
)
                                 
Net income (loss) before provision for income taxes
   
(9,370,238
)
 
2,033,351
   
(10,041,460
)
 
4,845,762
   
(102,376,251
)
                                 
Income taxes (benefit)
   
-
   
-
   
-
   
-
   
-
 
                                 
NET INCOME (LOSS)
 
$
(9,370,238
)
$
2,033,351
 
$
(10,041,460
)
$
4,845,762
 
$
(102,376,251
)
                                 
Net income (loss) per share-basic
 
$
(0.08
)
$
0.02
 
$
(0.08
)
$
0.04
       
                                 
Net loss per share-assuming fully diluted-Note A
       
$
(0.02
)
     
$
(0.03
)
     
                                 
Weighted average shares outstanding-
                               
Basic
   
121,162,385
   
116,483,044
   
121,091,176
   
114,487,589
       
Fully diluted
         
119,483,044
         
117,487,589
       
                                 
 
See the accompanying notes to the consolidated financial statements
       
 
2

 
APPLIED DNA SCIENCES, INC
 
(A development stage company)
 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 
FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH MARCH 31, 2007
(unaudited)
 
                                       
                               
Deficit
     
                   
Additional
         
Accumulated
     
       
Preferred
     
Common
 
Paid in
 
Common
 
Stock
 
During
     
   
Preferred
 
Shares
 
Common
 
Stock
 
Capital
 
Stock
 
Subscription
 
Development
     
   
Shares
 
Amount
 
Shares
 
Amount
 
Amount
 
Subscribed
 
Receivable
 
Stage
 
Total
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock
                                                       
to Founders in exchange
                                                       
for services on September
                                                       
16, 2002 at $.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
   
1,015
   
-
   
-
   
-
   
-
   
1,015
 
                                                         
Cancellation of common stock
                                                       
in connection with merger with
                                                       
Prohealth Medical
                                                       
Technologies, Inc on October
                                                       
21, 2002
   
-
   
-
   
(100,000
)
 
(10
)
 
(1,000
)
 
-
   
-
   
-
   
(1,010
)
                                                         
Issuance of common stock in
                                                       
exchange for services in
                                                       
October 2002 at $0.65 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
)
 
(84
)
 
(54,264
)
 
-
   
54,340
   
-
   
(8
)
                                                         
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
 
 
3

 
 
APPLIED DNA SCIENCES, INC
 
(A development stage company)
 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 
FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH MARCH 31, 2007
(unaudited)
 
                                                     
                                           
Deficit
       
                           
Additional
             
Accumulated
       
         
Preferred
       
Common
 
Paid in
 
Common
 
Stock
 
During
       
   
Preferred
 
Shares
 
Common
 
Stock
 
Capital
 
Stock
 
Subscription
 
Development
       
   
Shares
 
Amount
 
Shares
 
Amount
 
Amount
 
Subscribed
 
Receivable
 
Stage
 
Total
 
Issuance of common stock in
                                                       
exchange for consulting
                                                       
services valued at $2.50 per
                                                       
share in March 2003
   
-
   
-
   
91,060
   
10
   
230,624
   
-
   
-
   
-
   
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
 
                                                         
Common stock subscribed in
                                                       
exchange for cash at $1 per
                                                       
share in March 2003
   
-
   
-
   
-
   
-
   
18,000
   
-
   
-
   
-
   
18,000
 
                                                         
Common stock issued in
                                                       
exchange for consulting
                                                       
services at $0.065 per
                                                       
share on April 1, 2003
   
-
   
-
   
860,000
   
86
   
55,814
   
-
   
-
   
-
   
55,900
 
                                                         
Common stock issued in
                                                       
exchange for cash at $1.00 per
                                                       
share on April 9, 2003
   
-
   
-
   
18,000
   
2
   
-
   
-
   
-
   
-
   
2
 
                                                         
Common stock issued in
                                                       
exchange for consulting services
                                                       
at $0.065 per share on April 9,
                                                       
2003
   
-
   
-
   
9,000
   
1
   
584
   
-
   
-
   
-
   
585
 
                                                         
Common stock issued in
                                                       
exchange for consulting services
                                                       
at $2.50 per share on April 23,
                                                       
2003
   
-
   
-
   
5,000
   
1
   
12,499
   
-
   
-
   
-
   
12,500
 
                                                         
Common stock issued in
                                                       
exchange for consulting services
                                                       
at $2.50 per share, on June 12,
                                                       
2003
   
-
   
-
   
10,000
   
1
   
24,999
   
-
   
-
   
-
   
25,000
 
                                                         
Common stock issued in
                                                       
exchange for cash at $1.00 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 a private
                                                       
placement on June 27, 2003
   
-
   
-
   
-
   
-
   
-
   
24,000
   
-
   
-
   
24,000
 
                                                         
Common stock retired in
                                                       
exchange for note payable
                                                       
at $0.0118 per share,
                                                       
in June 30, 2003
   
-
   
-
   
(7,500,000
)
 
(750
)
 
750
   
-
   
-
   
-
   
-
 
                                                         
Common stock issued in
                                                       
exchange for consulting services
                                                       
at $0.065 per share, on June 30,
                                                       
2003
   
-
   
-
   
270,000
   
27
   
17,523
   
-
   
-
   
-
   
17,550
 
                                                         
Common stock subscribed in
                                                       
exchange for cash at $1.00 per
                                                       
share pursuant to a private
                                                       
placement on June 30, 2003
   
-
   
-
   
-
   
-
   
-
   
10,000
   
-
   
-
   
10,000
 
 
4

 
 
APPLIED DNA SCIENCES, INC
 
(A development stage company)
 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 
FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH MARCH 31, 2007
(unaudited)
 
 
                               
Deficit
     
                   
Additional
         
Accumulated
     
       
Preferred
     
Common
 
Paid in
 
Common
 
Stock
 
During
     
   
Preferred
 
Shares
 
Common
 
 Stock
 
Capital
 
Stock
 
Subscription
 
Development
     
   
Shares
 
Amount
 
Shares
 
Amount
 
Amount
 
Subscribed
 
Receivable
 
Stage
 
Total
 
Common stock subscribed in
                                                       
exchange for cash at $2.50 per
                                                       
share pursuant to a private
                                                       
placement on 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
   
428,798
   
-
   
-
   
-
   
428,819
 
                                                         
                                                         
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 in
                                                       
exchange for options exercised
                                                       
at $1.00 per share in July 2003
   
-
   
-
   
20,000
   
2
   
19,998
   
-
   
-
   
-
   
20,000
 
                                                         
Common stock issued in
                                                       
exchange for exercise of
                                                       
options previously subscribed at
                                                       
$1.00 per share in July 2003
   
-
   
-
   
10,000
   
1
   
9,999
   
(10,000
)
 
-
   
-
   
-
 
                                                         
Common stock issued in
                                                       
exchange for consulting services
                                                       
at approximately $2.38 per
                                                       
Share in August 2003
   
-
   
-
   
172,500
   
17
   
410,915
   
-
   
-
   
-
   
410,932
 
                                                         
Common stock issued in
                                                       
exchange for options exercised
                                                       
at $1.00 per share in August 2003
   
-
   
-
   
29,000
   
3
   
28,997
   
-
   
-
   
-
   
29,000
 
                                                         
Common stock issued in
                                                       
exchange for consulting services
                                                       
at approximately $2.42 per
                                                       
share in September 2003
   
-
   
-
   
395,260
   
40
   
952,957
   
-
   
-
   
-
   
952,997
 
                                                         
Common stock issued in
                                                       
exchange for cash at $2.50 per
                                                       
share-subscription
                                                       
payable in September 2003
   
-
   
-
   
19,200
   
2
   
47,998
   
(48,000
)
 
-
   
-
   
-
 
                                                         
Common stock issued in
                                                       
exchange for cash at $2.50 per
                                                       
share pursuant to a private
                                                       
placement in September 2003
   
-
   
-
   
6,400
   
1
   
15,999
   
-
   
-
   
-
   
16,000
 
                                                         
Common stock issued in
                                                       
exchange for options exercised
                                                       
at $1.00 per share in September 2003
   
-
   
-
   
95,000
   
10
   
94,991
   
-
   
-
   
-
   
95,001
 
                                                         
Common stock subscription
                                                       
receivable reclassification
                                                       
adjustment
   
-
   
-
   
-
   
-
   
-
   
-
   
2,600
   
-
   
2,600
 
                                                         
Common Stock subscribed to
                                                       
at $2.50 per share in September
                                                       
2003
   
-
   
-
   
-
   
-
   
-
   
300,000
   
-
   
-
   
300,000
 
 
5

 
APPLIED DNA SCIENCES, INC
 
(A development stage company)
 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 
FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH MARCH 31, 2007
(unaudited)
 
 
                               
Deficit
     
                   
Additional
         
Accumulated
     
       
Preferred
     
Common
 
Paid in
 
Common
 
Stock
 
During
     
   
Preferred
 
Shares
 
Common
 
 Stock
 
Capital
 
Stock
 
Subscription
 
Development
     
   
Shares
 
Amount
 
Shares
 
Amount
 
Amount
 
Subscribed
 
Receivable
 
Stage
 
Total
 
Net Loss for the year
                                                       
ended September 30, 2003
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
(3,445,164
)
 
(3,445,164
)
                                                         
Balance at September 30, 2003
   
-
 
$
-
   
17,811,082
 
$
1,781
 
$
2,577,568
 
$
300,000
 
$
-
 
$
(3,456,776
)
$
(577,427
)
                                                         
Preferred shares issued in
                                                       
exchange for services at $25.00
                                                       
per share in October 2003
   
15,000
   
15
   
-
   
-
   
-
   
-
   
-
   
-
   
15
 
                                                         
Common stock issued in
                                                       
exchange for consulting services
                                                       
at approximately $2.85 per
                                                       
Share in October 2003
   
-
   
-
   
287,439
   
29
   
820,389
   
-
   
-
   
-
   
820,418
 
                                                         
Common stock issued in
                                                       
exchange for cash at $2.50 per
                                                       
share-subscription
                                                       
payable in October 2003
   
-
   
-
   
120,000
   
12
   
299,988
   
(300,000
)
 
-
   
-
   
-
 
                                                         
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 $3 per share in