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What changed in BNB PLUS CORP.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BNB PLUS CORP.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+434 added−367 removedSource: 10-K (2024-12-17) vs 10-K (2023-12-07)

Top changes in BNB PLUS CORP.'s 2024 10-K

434 paragraphs added · 367 removed · 266 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

83 edited+25 added−21 removed37 unchanged
Biggest changeAccordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our preclinical trials, future clinical trials or regulatory approvals could be suspended, which could have a material adverse effect on our business, prospects, financial condition, results of operations, and prospects. 16 Table of Contents Employees As of September 30, 2023, we had a total of 55 employees (52 fulltime and 3 part-time), consisting of 4 in executive management, 12 in research and development, 9 in quality and compliance, 3 in finance, accounting and human resources, 10 in operations/production, 5 in sales and marketing, 4 in administration and support services, 3 in information services, and 5 in clinical laboratory operations.
Biggest changeAccordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our preclinical trials, future clinical trials or regulatory approvals could be suspended, which could have a material adverse effect on our business, prospects, financial condition, results of operations, and prospects.
The Company’s core DNA Tagging and Security Products and Services, which are marketed collectively as a platform under the trademark CertainT®, include: ● SigNature® Molecular Tags, which are short non-biologic DNA taggants produced by the Company’s Linea DNA platform, provide a methodology to authenticate goods within large and complex supply chains with a focus on cotton, nutraceuticals and other products. ● SigNify® portable DNA readers and SigNify consumable reagent test kits provide definitive real-time authentication of the Company’s DNA tags in the field. ● fiberTyping® and other product genotyping services use PCR-based DNA detection to determine a cotton species or cultivar, via a product’s naturally occurring DNA sequence for the purposes of product provenance authentication. ● Isotopic analysis testing services, provided in partnership with third-party labs, use cotton’s carbon, hydrogen and oxygen elements to indicate origin of its fiber through finished goods.
The Company’s core DNA Tagging and Security Products and Services, which are marketed collectively as a platform under the trademark CertainT®, include: ● SigNature® Molecular Tags, which are short non-biologic DNA taggants produced by the Company’s LineaDNA platform, provide a methodology to authenticate goods within large and complex supply chains with a focus on cotton and other products. ● SigNify® portable DNA readers and SigNify consumable reagent test kits provide definitive real-time authentication of the Company’s DNA tags in the field. ● fiberTyping® and other product genotyping services use PCR-based DNA detection to determine a cotton species or cultivar, via a product’s naturally occurring DNA sequence for the purposes of product provenance authentication. ● Isotopic analysis testing services, provided in partnership with third-party labs, use cotton’s carbon, hydrogen and oxygen elements to indicate origin of its fiber through finished goods.
Some of our competitors that operation in the molecular and genetic diagnostic space include 23andMe, Inc., Laboratory Corporation of America (LabCorp); Quest Diagnostics Inc., Myriad Genetics, Inc., ARUP Laboratories, Sonic Healthcare USA, Fulgent Genetics, Everly Well, Inc and, Fulgent Genetics, Inc.
Some of our competitors that operation in the molecular and genetic diagnostic space include 23andMe, Inc., Laboratory Corporation of America (LabCorp); Quest Diagnostics Inc., Myriad Genetics, Inc., ARUP Laboratories, MyOme, Inc., Sonic Healthcare USA, Fulgent Genetics, Everly Well, Inc and, Fulgent Genetics, Inc.
As of June 30, 2023, the employment contract automatically renewed for an additional year. Available Information We are subject to the informational requirements of the Exchange Act, which requires us to file our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to such reports and other information with the SEC.
As of June 30, 2024, the employment contract automatically renewed for an additional year. Available Information We are subject to the informational requirements of the Exchange Act, which requires us to file our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to such reports and other information with the SEC.
DNA Tagging and Security Products and Services By leveraging our expertise in both the manufacture and detection of DNA via PCR, our DNA Tagging and Security Products and Services allow our customers to use non-biologic DNA tags manufactured on our Linea DNA platform to mark objects in a unique manner and then identify these objects by detecting the absence or presence of the DNA tag.
DNA Tagging and Security Products and Services By leveraging our expertise in both the manufacture and detection of DNA via PCR, our DNA Tagging and Security Products and Services allow our customers to use non-biologic DNA tags manufactured on our LineaDNA platform to mark objects in a unique manner and then identify these objects by detecting the absence or presence of the DNA tag.
We also have in-house capabilities to complete all authentications for our DNA Tagging and Security Products and Services segment in our Stony Brook location and textile authentications in our India location. Distribution of our Products/Services and Commercial Agreements Our products/services are distributed in the following ways: ● directly to the customer; ● through channel partners; and ● through licensed distributors.
We also have in-house capabilities to complete all authentications for our DNA Tagging and Security Products and Services segment in our Stony Brook location. Distribution of our Products/Services and Commercial Agreements Our products/services are distributed in the following ways: ● directly to the customer; ● through channel partners; and ● through licensed distributors.
Linea DNA requires only four primary ingredients, does not require living cells or complex fermentation systems and does not require multiple rounds of purification. ● Flexibility – DNA produced via the Linea DNA platform can be easily chemically modified to suit specific customer applications.
LineaDNA requires only four primary ingredients, does not require living cells or complex fermentation systems and does not require multiple rounds of purification. ● Flexibility – DNA produced via the LineaDNA platform can be easily chemically modified to suit specific customer applications.
Further, we believe that Linea DNA is also substitutable for plasmid DNA in the following nucleic acid-based therapies: ● viral vector manufacturing for in vivo and ex vivo gene editing; ● clustered regularly interspaced short palindromic repeats (“CRISPR”)-mediated gene therapy; and ● non-viral gene therapy.
Further, we believe that LineaDNA is also substitutable for plasmid DNA in the following nucleic acid-based therapies: ● viral vector manufacturing for in vivo and ex vivo gene editing; ● clustered regularly interspaced short palindromic repeats (“CRISPR”)-mediated gene therapy; and ● non-viral gene therapy.
Linea DNA Platform Our Linea DNA platform is our core enabling technology, and enables the rapid, efficient, and large-scale cell-free manufacture of high-fidelity DNA sequences for use in the manufacturing of a broad range of nucleic acid-based therapeutics.
LineaDNA Platform Our LineaDNA platform is our core enabling technology, and enables the rapid, efficient, and large-scale cell-free manufacture of high-fidelity DNA sequences for use in the manufacturing of a broad range of nucleic acid-based therapeutics.
We believe our Linea DNA platform holds several important advantages over existing cell-based plasmid DNA manufacturing platforms. Plasmid-based DNA manufacturing is based on the complex, costly and time-consuming biological process of amplifying DNA in living bacterial cells.
We believe our LineaDNA platform holds several important advantages over existing cell-based plasmid DNA manufacturing platforms. Plasmid-based DNA manufacturing is based on the complex, costly and time-consuming biological process of amplifying DNA in living bacterial cells.
Clinical laboratories must be certified under CLIA in order to perform testing on human specimens, unless they fall within an exception to CLIA certification, such as research laboratories that test human specimens but do not report patient-specific results for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of individual patients.
Clinical laboratories must be certified under CLIA in order to perform testing on human specimens, unless they fall within an exception to CLIA certification, 15 Table of Contents such as research laboratories that test human specimens but do not report patient-specific results for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of individual patients.
The Linea DNA platform enzymatically produces a linear form of DNA we call “LineaDNA” that is an alternative to plasmid-based DNA manufacturing technologies that have supplied the DNA used in biotherapeutics for the past 40 years.
The LineaDNA platform enzymatically produces a linear form of DNA we call “LineaDNA” that is an alternative to plasmid-based DNA manufacturing technologies that have supplied the DNA used in biotherapeutics for the past 40 years.
Our agreements with employees also provide that all inventions conceived by the employee in the course of employment with us or from the employee’s use of our confidential information are our exclusive property. However, such confidentiality agreements and invention assignment agreements can be breached and we may not have adequate remedies for any such breach.
Our agreements with employees 13 Table of Contents also provide that all inventions conceived by the employee in the course of employment with us or from the employee’s use of our confidential information are our exclusive property. However, such confidentiality agreements and invention assignment agreements can be breached and we may not have adequate remedies for any such breach.
Because we file documents electronically with the SEC, you may obtain this information by visiting the SEC’s website at: www.sec.gov . Our website is located at: www.adnas.com . The information on, or that may be accessed through, our website is not incorporated by reference into and should not be considered a part of this report.
Because we file documents electronically with the SEC, you may obtain this information by visiting the SEC’s website at: www.sec.gov . Our website is located at: www.adnas.com . The information on, or that may be accessed through, our website is not incorporated by reference into and should not be considered a part of this report. 16 Table of Contents
We believe competition in our principal markets is primarily driven by: ● product performance, features and liability; ● manufacturing scale and turnaround time; ● price; ● timing of product introductions; ● ability to develop, maintain and protect proprietary products and technologies; ● sales and distribution capabilities; ● technical support and service; ● brand loyalty; and ● applications support.
We believe competition in our principal markets is primarily driven by: ● product performance, features and liability; ● manufacturing scale, quality and turnaround time; ● regulatory approval; ● price; ● timing of product introductions; ● ability to develop, maintain and protect proprietary products and technologies; ● sales and distribution capabilities; ● technical support and service; ● brand loyalty; and ● applications support.
Our current plan is: (i) through our Linea IVT platform and planned near term future GMP manufacturing capabilities for IVT templates to secure commercial-scale supply contracts with clinical and commercial mRNA and/or self-amplifying mRNA (“sa-RNA”) manufacturers for Linea DNA IVT templates and/or Linea RNAP as critical starting materials; (ii) to utilize our current GLP production capacity for non-IVT template applications to secure supply and/or development contracts with pre-clinical therapy developers that use DNA in their therapy manufacturing, and (iii) upon our development of our planned future Linea DNA production under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product, to convert existing and new Linea DNA customers into large-scale supply contracts to supply Linea DNA for clinical and commercial use as, or incorporation into, a biologic, drug substance and/or drug product in a wide range of nucleic acid therapies.
Our current plan is: (i) through our Linea IVT platform and planned near term future GMP manufacturing capabilities for IVT templates at GMP Site 1 to secure commercial-scale supply contracts with clinical and commercial mRNA and/or self-amplifying mRNA (“sa- RNA”) manufacturers for LineaDNA IVT templates and/or Linea RNAP as critical starting materials; (ii) to utilize our current GLP production capacity for non-IVT template applications to secure supply and/or development contracts with pre-clinical therapy developers that use DNA in their therapy manufacturing, and (iii) upon our development of our planned future LineaDNA production under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product at our planned GMP Site 2, and/or our upgrade to GMP Site 1, to convert existing and new LineaDNA customers into large-scale supply contracts to supply LineaDNA for clinical and commercial use as, or incorporation into, a biologic, drug substance and/or drug product in a wide range of nucleic acid therapies.
Biologics include a wide range of products such as vaccines, gene therapy, and recombinant therapeutic proteins, including mRNA therapeutics. 14 Table of Contents Drug and biologic products are subject to extensive regulation by FDA and other regulatory agencies in the United States and by comparable authorities in foreign countries.
Biologics include a wide range of products such as vaccines, gene therapy, and recombinant therapeutic proteins, including mRNA therapeutics. Drug and biologic products are subject to extensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in foreign countries.
Once amplified, the DNA must be separated from the living cells and other process contaminants via multiple rounds of purification, adding further complexity and costs. Unlike plasmid-based DNA manufacturing, the Linea DNA platform does not require living cells and instead amplifies DNA via the enzymatic process of PCR.
Once amplified, the DNA must be separated from the living cells and other process contaminants via multiple rounds of purification, adding further complexity, costs and regulatory burdens. Unlike plasmid-based DNA manufacturing, the LineaDNA platform does not require living cells and instead amplifies DNA via the enzymatic process of PCR.
During June 2023 the Company and Cornell University College of Veterinary Medicine (“Cornell University”) entered into an additional Sponsored Research Agreement under which the parties seek to develop and optimize LNP formulations and lineaDNA expression vectors for use in high-value veterinary disease indications with an initial focus on equine infectious diseases.
Collaboration and Licensing Agreements Cornell University College of Veterinary Medicine. During June 2023 the Company and Cornell University College of Veterinary Medicine entered into an additional Sponsored Research Agreement (“SRA”) under which the parties seek to develop and optimize LNP formulations and lineaDNA expression vectors for use in high-value veterinary disease indications with an initial focus on equine infectious diseases.
According to the Company’s internal modeling, the ability to sell both Linea DNA IVT templates and Linea RNAP under the Linea IVT platform potentially increases the Company’s mRNA-related TAM by approximately 3x as compared to selling Linea DNA IVT templates alone, while also providing a more competitive offering to the mRNA manufacturing market.
According to the Company’s internal modeling, the ability to sell both LineaDNA IVT templates and Linea RNAP under the Linea IVT platform potentially increases the Company’s mRNA-related TAM by approximately 3-5x as compared to selling LineaDNA IVT templates alone, while also providing a more competitive offering to the mRNA manufacturing market.
Quality Grade Permitted Use Company Status GLP Research and pre-clinical discovery Currently available GMP for Starting Materials DNA critical starting materials for the production of mRNA therapies Planned availability first half of CY2024 (1) GMP DNA biologic, drug substance and/or drug product Planned availability first half of CY 2025 (1) ​ (1) Dependent on the availability of future financing.
Quality Grade Permitted Use Company Status GLP Research and pre-clinical discovery Currently available GMP for Starting Materials DNA critical starting materials for the production of mRNA therapies Planned availability in January 2025 (GMP Site 1) GMP DNA biologic, drug substance and/or drug product Planned availability first half of CY 2026 (1) (GMP Site 2) (1) Dependent on the availability of future financing.
MDx Testing Services Through Applied DNA Clinical Labs, LLC (“ADCL”), our clinical laboratory subsidiary, we leverage our expertise in DNA detection via PCR to provide and develop clinical molecular diagnostics and genetic (collectively “MDx”) testing services. ADCL is a NYSDOH CLEP-permitted, CLIA-certified laboratory which is currently permitted for virology. Permitting for genetics (molecular) is currently pending with the NYSDOH.
MDx Testing Services Through Applied DNA Clinical Labs, LLC (“ADCL”), our clinical laboratory subsidiary, we leverage our expertise in DNA and RNA detection via PCR to provide and develop clinical molecular diagnostics and genetic (collectively “MDx”) Testing Services. ADCL is a NYSDOH CLIA-certified laboratory which is currently permitted for virology and genetics (molecular).
In this regard, most recently, the “Verifying Accurate Leading-edge IVCT Development Act,” or VALID Act, was introduced in March 2020, then in June 2021, Spring 2022, and March 2023. The bill proposes a risk-based approach that would subject many LDTs to FDA regulation by creating a new in vitro clinical test, or IVCT, category of regulated products.
In this regard, most recently, the “Verifying Accurate Leading-edge IVCT Development Act,” or VALID Act, was first introduced in March 2020, and most recently reintroduced in March 2023. The bill proposes a risk-based approach that would subject many LDTs to FDA regulation by creating a new in vitro clinical test, or IVCT, category of regulated products.
We believe the key advantages of the Linea DNA platform include: ● Speed – Production of Linea DNA can be measured in terms of hours, not days and weeks as is the case with plasmid-based DNA manufacturing platforms. ● Scalability – Linea DNA production takes place on efficient bench-top instruments, allowing for rapid scalability in a minimal footprint. ● Purity – DNA produced via PCR is pure, resulting in only large quantities of only the target DNA sequence.
We believe the key advantages of the LineaDNA platform include: ● Speed – Production of LineaDNA can be measured in terms of hours or days, opposed to in terms of weeks as is the case with plasmid-based DNA manufacturing platforms. ● Scalability – LineaDNA production takes place on efficient bench-top instruments, allowing for rapid scalability in a minimal physical footprint. ● Purity – DNA produced via PCR is pure, resulting in only large quantities of only the target DNA sequence.
Some of our products may be drugs or biologics that are subjected themselves to regulation. In either case, we are unlikely to receive material revenues until the related drug or biologic candidate receives regulatory approval.
Some of our products may be incorporated into drugs and biologics that are or will be subject to regulation. Some of our products may be drugs or biologics that are subjected themselves to regulation. In either case, we are unlikely to receive material revenues until the related drug or biologic candidate receives regulatory approval.
For our Therapeutic DNA Production Services, we currently manufacture GLP grade DNA, with plans to offer GMP non-drug substance grade, and GMP drug substance grade DNA in calendar year 2024 and calendar year 2025, respectively. Linea RNAP is produced for the Company by a third-party CDMO located in the United States.
For our Therapeutic DNA Production Services, we currently manufacture GLP grade DNA, with plans to offer GMP non-drug substance grade in January 2025, and GMP drug substance grade DNA in the first half calendar year 2026. Linea RNAP is produced for the Company by a third-party CDMO located in the United States.
ADCL is offering its safeCircle TM surveillance testing in compliance with current Centers for Disease Control and Prevention (“CDC”), FDA, CMS and New York State Department of Health recommendations. In addition, clinical diagnostic testing and the review and approval of Laboratory Developed Tests (“LDTs”) in New York State falls under the jurisdiction of NYSDOH.
ADCL is offering its safeCircle TM surveillance testing in compliance with current Centers for Disease Control and Prevention (“CDC”), FDA, CMS and New York State Department of Health recommendations. In addition, clinical diagnostic testing and the review and approval of LDTs in New York State currently falls under the jurisdiction of NYSDOH and the FDA.
In providing MDx testing services, ADCL employs its own or third-party molecular diagnostic tests. We have successfully validated internally our pharmacogenomics testing services (the “PGx Testing Services”). Our PGx Testing Services will utilize a 120-target PGx panel test to evaluate the unique genotype of a specific patient to help guide individual drug therapy decisions.
In providing MDx Testing Services, ADCL employs its own or third-party molecular diagnostic tests. We have successfully internally validated our pharmacogenomics testing services (the “PGx Testing Services”). Our PGx Testing Services utilizes a 120-target PGx panel test to evaluate the unique genotype of a specific patient to help guide the patient’s healthcare provider in making individual drug therapy decisions.
Based on data generated by the Company, we believe the integrated Linea IVT platform offers the following advantages over conventional mRNA production to therapy developers and manufacturers: ● The prevention or reduction of double stranded RNA (“dsRNA”) contamination resulting in higher target mRNA yields with the potential to reduce downstream processing steps. dsRNA is a problematic immunogenic byproduct produced during conventional mRNA manufacture; ● delivery of IVT templates in as little as 14 days for milligram scale and 30 days for gram scale; and ● reduced mRNA manufacturing complexities.
Based on data generated by the Company and its collaborators, we believe the integrated Linea IVT platform offers the following advantages over conventional mRNA production to therapy developers and manufacturers: ● The prevention or reduction of double stranded RNA (“dsRNA”) contamination resulting in higher target mRNA yields with the potential to reduce downstream processing steps. dsRNA is a problematic immunogenic byproduct produced during conventional mRNA manufacture; ● delivery of IVT templates in as little as 14 days for milligram scale and 30 days for gram scale; ● reduced mRNA manufacturing complexities; and ● potentially enabling mRNA manufactures to produce mRNA drug substance in less than 45 days.
As of the third quarter of calendar year 2023, there were 3,866 gene, cell and RNA therapies in development from preclinical through pre-registration stages, almost all of which use DNA in their manufacturing process. (Source: ASGCT Gene, Cell & RNA Therapy Landscape: Q3 2023 Quarterly Report).
As of the third quarter of calendar year 2024, there were 4,099 gene, cell and RNA therapies in development from preclinical through pre-registration stages, almost all of which use DNA in their manufacturing process. (Source: ASGCT Gene, Cell & RNA Therapy Landscape: Q3 2024 Quarterly Report).
For more information, see “ Risk Factors — Risks Related to Our Intellectual Property .” As of December 4, 2023, our patent portfolio included the following issued and pending patent applications applicable to each of our three primary business markets: ● Therapeutic DNA Production Services o 6 issued patents and 13 pending patent applications in the United States o 11 issued foreign patents and 9 pending foreign patent applications ● MDx Testing Services o 5 issued patents and no pending patent applications in the United States o 4 issued foreign patents and no pending foreign patent applications ● DNA Tagging and Security Products and Services o 28 issued patents and 4 pending patent applications in the United States o 47 issued foreign patents and 14 pending foreign patent applications 13 Table of Contents In addition to patent protection, we also rely on trademarks, trade secrets, know how, other proprietary information and continuing technological innovation to develop and maintain our competitive position.
For more information, see “ Risk Factors — Risks Related to Our Intellectual Property .” As of December 9, 2024, our patent portfolio included the following issued and pending patent applications applicable to each of our three primary business markets: ● Therapeutic DNA Production Services o 8 issued patents and 11 pending patent applications in the United States o 11 issued foreign patents and 9 pending foreign patent applications ● MDx Testing Services o 5 issued patents and no pending patent applications in the United States o 4 issued foreign patents and no pending foreign patent applications ● DNA Tagging and Security Products and Services o 26 issued patents and 2 pending patent applications in the United States o 47 issued foreign patents and 10 pending foreign patent applications In addition to patent protection, we also rely on trademarks, trade secrets, know how, other proprietary information and continuing technological innovation to develop and maintain our competitive position.
We do not plan to seek approval of a drug or licensure of a biological product based on our lineaDNA platform, except with respect to the veterinary health market, but the demand for our lineaDNA is in part dependent on our customer’s ability to seek and obtain approval of a drug or biological product using our technology.
We do not plan to seek approval of a drug or licensure of a biological product based on our LineaDNA platform, but the demand for our LineaDNA is in part dependent on our customer’s ability to seek and obtain approval of a drug or biological product using our technology.
Using polymerase chain reaction (“PCR”) to enable the production and detection of DNA and RNA, we currently operate in three primary business markets: (i) the enzymatic manufacture of synthetic DNA for use in the production of nucleic acid-based therapeutics (including biologics and drugs) and, through our recent acquisition of Spindle , the development and sale of a proprietary RNA polymerase (“RNAP”) for use in the production of mRNA therapeutics (“Therapeutic DNA Production Services”); (ii) the detection of DNA and RNA in molecular diagnostics and genetic testing services (“MDx Testing Services”); and (iii) the manufacture and detection of synthetic DNA for industrial supply chain security services (“DNA Tagging and Security Products and Services”).
Using polymerase chain reaction (“PCR”) to enable the production and detection of DNA and RNA, we currently operate in three primary business markets: (i) the enzymatic manufacture of synthetic DNA for use in the production of nucleic acid-based therapeutics (including biologics and drugs), as well as the development and sale of a proprietary RNA polymerase (“RNAP”) for use in the production of messenger RNA (“mRNA”) therapeutics (“Therapeutic DNA Production Services”); (ii) the detection of DNA and RNA in molecular diagnostics and genetic testing services (“MDx Testing Services”); and (iii) the manufacture and detection of DNA for industrial supply chains and security services (“DNA Tagging and Security Products and Services”).
Our current growth strategy is to primarily focus our resources on the further development, commercialization, and customer adoption of our Therapeutic DNA Production Services, including the expansion of our contract development and manufacturing operation (“CDMO”) for the manufacture of synthetic DNA for use in the production of nucleic acid-based therapies, and to further expand and commercialize our MDx Testing Services through genetic testing.
Our current growth strategy is to primarily focus our resources on the further development, commercialization, and customer adoption of our Therapeutic DNA Production Services, including the expansion of our contract development and manufacturing operation (“CDMO”) for the manufacture of synthetic DNA and associated enzymes for use in the production of nucleic acid-based therapies.
Customers Our revenues earned from sale of products and services for the fiscal year ended September 30, 2023 includes 65% and 14% from two customers within our MDx Testing Services segment. 65% and 58% of the revenues earned for the fiscal years ended September 30, 2023 and 2022, respectively were derived from the COVID-19 testing contract with CUNY that terminated during June 2023.
Our revenues earned from 11 Table of Contents sale of products and services for the fiscal year ended September 30, 2023 includes 65% and 14% from two customers within our MDx Testing Services segment. 65% of the revenues earned for the fiscal year ended September 30, 2023 was derived from the COVID-19 testing contract with CUNY that terminated during June 2023.
On December 17, 2008, we reincorporated from the State of Nevada to the State of Delaware. Our corporate headquarters are located at the Long Island High Technology Incubator at Stony Brook University in Stony Brook, New York, where we have established laboratories for the manufacture of DNA and the detection of DNA and RNA to support our various business units.
Our corporate headquarters are located at the Long Island High Technology Incubator at Stony Brook University in Stony Brook, New York, where we have established laboratories for the manufacture of DNA and the detection of DNA and RNA to support our various business units.
Segment Business Strategy Our business strategy for our Therapeutic DNA Production Services is to capitalize upon the rapid growth of mRNA therapies in the near term via our planned near term future availability of Linea DNA IVT templates manufactured under GMP, while at the same time laying the basis for additional clinical and commercial applications of Linea DNA with our future planned availability of Linea DNA manufactured under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product.
Drug substances are the pharmaceutically active components of drug products. 8 Table of Contents Segment Business Strategy Our business strategy for our Therapeutic DNA Production Services is to capitalize upon the rapid growth of mRNA therapies in the near term via our planned near term future availability of LineaDNA IVT templates manufactured under GMP at our GMP Site 1, while at the same time laying the basis for additional clinical and commercial applications of LineaDNA with our future planned availability of LineaDNA manufactured under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product at planned GMP Site 2.
Due to what we believe are the Linea DNA platform’s numerous advantages over legacy nucleic acid-based therapeutic manufacturing platforms, we believe this large number of therapies under development represents a substantial market opportunity for the Linea DNA platform to supplant legacy manufacturing methods in the manufacture of nucleic acid-based therapies.
Due to what we believe are the LineaDNA platform’s numerous advantages over legacy nucleic acid-based therapeutic manufacturing platforms, we believe this large number of therapies under development represents a substantial market opportunity for the LineaDNA platform to supplant legacy manufacturing methods in the manufacture of nucleic acid-based therapies although no assurance can be given that we will be successful in exploiting this market opportunity.
The Linea DNA platform is simple and can rapidly produce very large quantities of DNA without the need for complex purification steps.
The LineaDNA platform is simple and can rapidly produce very large quantities of DNA utilizing a cell-free process without the need for complex purification steps.
Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to file a marketing application, to issue a Complete Response letter or to not approve pending New Drug Applications (“NDA”) or Biologics Licensing Applications (“BLA”), or to issue warning letters, untitled letters, Form 483s, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, litigation, government investigation and criminal prosecution.
Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as the FDA’s refusal to file a marketing application, to issue a Complete Response letter or to not approve pending New Drug Applications (“NDA”) or Biologics Licensing Applications (“BLA”), or to issue warning letters, untitled letters, Form 483s, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, litigation, government investigation and criminal prosecution. 14 Table of Contents Drug and biologic products that must undergo preclinical and clinical evaluation relating to product safety and efficacy before they are approved as commercial therapeutics products.
The FDA would have the authority to withdraw approvals for IVCTs for various reasons, including (for example) if there were a reasonable likelihood that the test would cause death or serious adverse health consequences.
The new regulatory framework would include quality control and post-market reporting requirements. The FDA would have the authority to withdraw approvals for IVCTs for various reasons, including (for example) if there were a reasonable likelihood that the test would cause death or serious adverse health consequences.
Generally, our customers do not have an obligation to make purchases from us and may stop ordering our products and services or may terminate existing orders or contracts at any time with little or no financial penalty. The termination of the CUNY testing contract has resulted in a significant reduction of revenues.
Generally, our customers do not have an obligation to make purchases from us and may stop ordering our products and services or may terminate existing orders or contracts at any time with little or no financial penalty.
As of the 3rd quarter of calendar 2023, there were almost 400 mRNA therapies under development, with the large majority of these therapies (68%) in the preclinical stage (Source: ASGCT Gene, Cell & RNA Therapy Landscape: Q3 2023 Quarterly Report).
As of the third quarter of calendar 2024, there were over 450 mRNA therapies under development, with the majority of these therapies (67%) in the preclinical stage (Source: ASGCT Gene, Cell & RNA Therapy Landscape: Q3 2024 Quarterly Report).
CLIA certification is also required to be eligible to bill Federal and State healthcare programs, as well as many private third-party payers, for diagnostic testing and services. ADCL is a New York State Department of Health Clinical Laboratory Evaluation Program -permitted, Clinical Laboratory Improvement Amendments-certified laboratory which is currently permitted for virology.
CLIA certification is also required to be eligible to bill Federal and State healthcare programs, as well as many private third-party payers, for diagnostic testing and services. ADCL is a NYSDOH CLEP-permitted and CLIA-certified laboratory which is currently permitted for virology and genetic (molecular).
Our PGx testing services are designed to interrogate DNA targets on over approximately 33 genes and provide genotyping information potentially relevant to certain cardiac, mental health, oncology and pain management drug therapies.
Our PGx Testing Services are designed to interrogate DNA targets on over 33 genes and provide genotyping information relevant to certain cardiac, mental health, oncology, and pain management drug therapies. On June 12, 2024 we received full approval from NYSDOH for our PGx Testing Services.
The UFLPA establishes that any goods mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (“XUAR”) of the People’s Republic of China are not entitled to entry to the United States.
The Uyghur Forced Labor Prevention Act (“UFLPA”) signed into law on December 23, 2021 establishes that any goods mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (“XUAR”) of the People’s Republic of China are not entitled to entry to the United States.
Under VALID, a precertification process would be established that would have allowed a laboratory to establish that the facilities, methods, and controls used in the development of its IVCTs meet quality system requirements. If pre-certified, low-risk IVCTs, developed by the laboratory would not be subject to pre-market review. The new regulatory framework would include quality control and post-market reporting requirements.
Under VALID, a precertification process would be established that would allow a laboratory to establish that the facilities, methods, and controls used in the development of its IVCTs meet quality system requirements. If pre-certified, certain low-risk IVCTs developed by the laboratory and falling within the scope of a certification order from the FDA would not be subject to pre-market review.
Unwanted DNA sequences such as the plasmid backbone and antibiotic resistance genes, inherent to plasmid DNA, are not present in Linea DNA. ● Simplicity – The production of Linea DNA is streamlined relative to plasmid-based DNA production.
Unwanted DNA sequences and contaminates such as the plasmid backbone, antibiotic resistance genes and host bacterial DNA, as well as endotoxin, which all inherent to plasmid DNA, are not present in LineaDNA. 6 Table of Contents ● Simplicity – The production of LineaDNA is streamlined relative to plasmid-based DNA production.
The loss of any of our significant customers, any substantial decline in sales to these customers, or any significant change in the timing or volume of purchases by our customers, could result in lower revenues and could harm our business, financial condition or results of operations. 11 Table of Contents Competition Some of our competitors that operate in the nucleic-acid based therapeutic, biologics and DNA manufacturing markets include: MilliporeSigma, Precigen, Inc., Aldevron, LLC, Charles River Laboratories,, Integrated DNA Technologies, Inc., 4basebio PLC, MaxCyte, Inc., Touchlight Genetics Ltd., Quantoom Bioscience, Syngoi Technologies, S.L.U., Generation Bio, Co., Novartis AG, Kite Pharma, Inc., Juno Therapeutics, Inc., Promega Corporation, OriGene Technologies, Inc., Blue Heron Biotech, LLC, Gene Art, GenScript Biotech Corporation, Merck & Co., Inc. and others.
Competition Some of our competitors that operate in the nucleic-acid based therapeutic, biologics and DNA manufacturing markets include: MilliporeSigma, Precigen, Inc., Aldevron, LLC, Charles River Laboratories, Integrated DNA Technologies, Inc., 4basebio PLC, MaxCyte, Inc., Touchlight Genetics Ltd., Quantoom Bioscience, Syngoi Technologies, S.L.U., Generation Bio, Co., Novartis AG, Kite Pharma, Inc., Juno Therapeutics, Inc., Promega Corporation, OriGene Technologies, Inc., Blue Heron Biotech, LLC, Gene Art, GenScript Biotech Corporation, Elegen, Inc., ANSA Biotechnologies, Merck & Co., Inc. and others.
Until we complete our GMP facility to produce DNA critical starting materials (DNA IVT templates) for mRNA manufacturing, we will not be able to realize significant revenues from this business. We estimate the cost of creating the critical starting materials fit-for-purpose manufacturing facility will be approximately $1.5 million.
Until we complete our GMP Site 1 to produce DNA critical starting materials (DNA IVT templates) for mRNA manufacturing, we will not be able to realize significant revenues from this business. We estimate the remaining capital expenditure (“CAPEX”) costs to creating GMP Site 1 will be less than $0.30 million.
Linea IVT platform development and optimization is focused on performance of the Linea RNAP enzyme, as well as increasing the manufacturing yields of the Linea RNAP.
LineaDNA platform development and optimization is focused on increased DNA yields, purification workflows, reducing costs of goods and DNA sequence fidelity. Further Linea IVT platform development and optimization is focused on performance of the Linea RNAP enzyme, as well as increasing the manufacturing yields of the Linea RNAP.
Our business plan is to leverage growing consumer and governmental awareness for product traceability catalyzed by the UFLPA to expand our existing partnerships and seek new partnerships for our DNA Tagging and Security Products and Services with a focus on cotton.
Our current business plan is to leverage consumer and governmental awareness for product traceability to expand our existing partnerships and seek new partnerships for our DNA Tagging and Security Products and Services with a focus on cotton, though this business plan could change based on the outcome of the Company’s strategic review of its business segments.
The Company currently manufactures Linea DNA pursuant to Good Laboratory Practices (“GLP”) and, subject to the availability of future financing, is creating a fit for purpose manufacturing facility within our current Stony Brook, NY laboratory space capable of producing Linea DNA IVT templates under Good Manufacturing Practices (“GMP”) suitable for use as a critical starting material for clinical and commercial mRNA therapeutics, with a planned completion date in the first half of calendar year 2024.
We are currently manufacturing LineaDNA pursuant to Good Laboratory Practices (“GLP”) and, are in the final stages of creating a fit for purpose manufacturing facility within our current Stony Brook, NY laboratory space capable of producing LineaDNA IVT templates under Good Manufacturing Practices (“GMP”) suitable for use as a critical starting material for clinical and commercial mRNA therapeutics, with an anticipated completion date in January 2025 (“GMP Site 1”).
If we were to expand the facility to enable GMP production of Linea DNA for use as, or incorporation, into a biologic, drug substance and/or drug product, the cost may be up to approximately $7 million which would require additional funding. We anticipate that the fit-for-purpose manufacturing facility would be created within our existing laboratory space.
If we were to expand our facilities to enable GMP production of LineaDNA for use as, or incorporation, into a biologic, drug substance and/or drug product as planned for GMP Site 2, the additional CAPEX may be up to approximately $10 million which would require additional funding.
Cessation of Linea RNAP production by this single provider could cause production delays and/or delays in customer deliveries as manufacturing of Linea RNAP is transferred to a new provider. 10 Table of Contents Manufacturing For our Therapeutic DNA Production Services and DNA Tagging and Security Products and Services segments, we have the capability to manufacture large quantities of DNA via our lineaDNA platform at our facility in Stony Brook.
Manufacturing For our Therapeutic DNA Production Services and DNA Tagging and Security Products and Services segments, we have the capability to manufacture large quantities of DNA via our LineaDNA platform at our facility in Stony Brook.
On June 17, 2022, the UFLPA additionally listed DNA tagging and isotopic analysis as evidence that importers may use to potentially prove that a good did not originate in XUAR.
On June 17, 2022, the UFLPA additionally listed DNA tagging and isotopic analysis as evidence that importers may use to potentially prove that a good did not originate in XUAR. Recently, in July of 2024, the Company announced a multi-year commercialization agreement for its CertainT platform with Indus Group, a multinational apparel/textile manufacturing and sourcing company.
Unforeseen discontinuation or unavailability of a certain DNAP produced by a single provider could cause production delays as we modify our product specifications and workflows to accommodate a replacement DNAP. In addition, while our Linea RNAP is manufacturable by multiple sources, it is currently manufactured by a single provider.
In addition, while our Linea RNAP is manufacturable by multiple sources, it is currently manufactured by a single provider. Cessation of Linea RNAP production by this single provider could cause production delays and/or delays in customer deliveries as manufacturing of Linea RNAP is transferred to a new provider.
The Company also plans to offer Linea DNA materials manufactured under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product, with availability expected during the first half of calendar year 2025, dependent upon future funding. GMP is a quality standard used globally and by the U.S.
We also plan to offer additional capacity for LineaDNA IVT templates as well as capacity for LineaDNA materials manufactured under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product, with availability expected during the first half of calendar year 2026, dependent upon the availability of future funding (“GMP Site 2”) and customer demand.
Our sources of raw materials also include synthesized sources of DNA templates which we are able to amplify to use in our product/services offerings and that are available from multiple sources. For our Therapeutic DNA Production Services, our services may be optimized for inputs, including DNAP, from a specific source or sources.
Raw Materials and Suppliers We utilize DNA polymerase (“DNAP”) in all of our PCR reactions to amplify DNA. DNAP is available from multiple sources. Our sources of raw materials also include synthesized sources of DNA templates which we can amplify to use in our product/services offerings and that are available from multiple sources.
In addition, this location also houses our New York State Department of Health ("NYSDOH") Clinical Laboratory Evaluation Program ("CLEP")-permitted, Clinical Laboratory Improvement Amendments ("CLIA")-certified clinical laboratory where we perform MDx testing services.
In addition, this location also houses our New York State Department of Health (“NYSDOH”) Clinical Laboratory Evaluation Program (“CLEP”)-permitted, Clinical Laboratory Improvement Amendments (“CLIA”)-certified clinical laboratory where we perform MDx testing services. The mailing address of our corporate headquarters is 50 Health Sciences Drive, Stony Brook, New York 11790, and our telephone number is (631) 240-8800.
Laboratory Developed Tests As an LDT, our MDx Testing Services are currently subject to enforcement discretion by the FDA. On September 29, 2023, however, the FDA published a proposed rule on LDTs, in which FDA proposes to end enforcement discretion for virtually all LDTs in five stages over a four-year period from the date FDA publishes a final rule.
Laboratory Developed Tests Our MDx Testing Services utilize LDTs developed and validated by the Company. Historically, the FDA has exercised enforcement discretion over most LDTs. On April 29, 2024, however, the FDA published a final rule on LDTs, in which the FDA outlines its plans to end enforcement discretion for many LDTs in five stages over a four-year period.
These complex sequences include inverted terminal repeats (ITRs) and long homopolymers such as polyadenylation sequences (poly (A) tail) important for gene therapy and messenger RNA (“mRNA”) therapies, respectively. 6 Table of Contents Preclinical studies conducted by the Company have shown that Linea DNA is substitutable for plasmid DNA in numerous nucleic acid-based therapies, including: ● DNA vaccines; ● DNA templates to produce RNA, including mRNA therapeutics; and ● adoptive cell therapy (CAR-T) manufacturing.
Preclinical studies conducted by the Company have shown that LineaDNA is substitutable for plasmid DNA in numerous nucleic acid-based therapies, including: ● DNA vaccines; ● DNA templates to produce various types of RNA, including non-replicating, and self-amplifying mRNA therapeutics; ● adoptive cell therapy (CAR-T) manufacturing, and ● homology-directed repair (HDR) mediated gene editing.
The Company believes that the mRNA market is in a nascent stage that represents a large growth opportunity for the Company via the production of DNA IVT templates to produce mRNA therapies. In August 2022, the Company launched DNA IVT templates manufactured via its Linea DNA platform and has since secured proof of concept contracts with numerous mRNA manufacturing customers.
The Company believes that the mRNA market is in a nascent stage that represents a large growth opportunity for the Company via the production and supply of DNA critical starting materials and RNAP to produce mRNA therapies.
In Phase 3 (effective three years post-finalization), labs would be required to comply with quality systems requirements. In Phase 4 (effective three and a half years post-finalization, but not before October 1, 2027), labs would be required to comply with premarket review requirements for high-risk tests ( i.e. , tests subject to premarket approval (PMA) requirement).
In Phase 4 (effective November 6, 2027), clinical laboratories will be required to comply with premarket review requirements for high-risk tests (i.e., tests subject to the premarket approval (PMA) requirement).
Recently published studies show that population-scale PGx enabled medication management can significantly reduce overall population healthcare costs, reduce adverse drug events, and increase overall population wellbeing. These benefits can result in significant cost savings to large entities and self-insured employers, the latter accounting for approximately 65% of all U.S. employers in 2022.
Recently published studies show that population-scale PGx enabled medication management can significantly reduce overall population healthcare costs, reduce adverse drug events, and increase overall population wellbeing.
In addition, the Linea DNA platform can produce a wide range of complex DNA sequences that are difficult to produce via plasmid-based DNA production platforms.
In addition, the LineaDNA platform can produce a wide range of complex DNA sequences that are difficult to produce via plasmid-based DNA production platforms. These complex sequences include inverted terminal repeats (ITRs) and long homopolymers such as polyadenylation sequences (poly (A) tail) important for gene therapy and mRNA therapies, respectively.
In the United States, the FDA regulates drugs and biologics under the Federal Food, Drug, and Cosmetic Act, or FDCA, the Public Health Service Act, or PHS Act, and their implementing regulations.
In the United States, the FDA regulates drugs and biologics under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act, and their implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources.
Corporate History We are a Delaware corporation, which was initially formed in 1983 under the laws of the State of Florida as Datalink Systems, Inc. In 1998, we reincorporated in the State of Nevada, and in 2002, we changed our name to our current name, Applied DNA Sciences, Inc.
In 1998, we reincorporated in the State of Nevada, and in 2002, we changed our name to our current name, Applied DNA Sciences, Inc. On December 17, 2008, we reincorporated from the State of Nevada to the State of Delaware.
Finally, in Phase 5 (effective four years post-finalization, but not before April 1, 2028), labs would be required to comply with premarket review requirements for moderate- and low-risk tests ( i.e. , tests subject to de novo or 510(k) requirement). Unlike previous proposals, the proposed rule does not “grandfather” existing tests.
Finally, in Phase 5 (effective May 6, 2028), clinical laboratories will be required to comply with premarket review requirements for moderate- and low-risk tests (i.e., tests subject to the de novo or 510(k) requirement). Under the final rule, several types of tests will be eligible for some degree of continued enforcement discretion.
In response to this demand, the continued growth of the mRNA therapeutic market, and the unique abilities of the Linea DNA platform, the Company acquired Spindle in July 2023 to potentially increase its mRNA-related total addressable market (“TAM”).
In response to this demand, the continued growth of the mRNA therapeutic market, and the unique abilities of the LineaDNA platform, the Company acquired Spindle in July 2023 to potentially increase its mRNA-related total addressable market (“TAM”) to include the manufacture and sale of RNAP for use in conjunction with our LineaDNA IVT templates. 7 Table of Contents Through our acquisition of Spindle, we launched our Linea IVT platform in July 2023, which combines Spindle’s proprietary high-performance RNAP, now marketed by the Company as Linea RNAP, with our enzymatically produced LineaDNA IVT templates.
We will continue to update our business strategy and monitor the use of our resources regarding our various business markets. In addition, we expect that based on available opportunities and our beliefs regarding future opportunities, we will continue to modify and refine our business strategy, which could include restructuring our business.
We will continue to update our business strategy and monitor the use of our resources regarding our various business segments.
In Phase 1 (effective one year post-finalization), labs would be required to comply with medical device (adverse event) reporting and correction/removal reporting requirements. In Phase 2 (effective two years post-finalization), labs would be required to comply with all other device requirements (e.g., registration/listing, labeling, investigational use), except for quality systems and premarket review.
In Phase 2 (effective May 6, 2026), clinical laboratories will be required to comply with all other device requirements (e.g., registration/listing, labeling, investigational use), except for the remaining QSR requirements and premarket review. In Phase 3 (effective May 6, 2027), clinical laboratories will be required to comply with all remaining applicable QSR requirements.
If and when approved by NYSDOH, we plan to leverage our PGx Testing Services to provide PGx testing services to large entities and self-insured employers. Historically, the majority of our revenue attributable to our MDx Testing Services has been derived from our safeCircle™ COVID-19 testing solutions, for which testing demand has significantly dropped.
Historically, the majority of our revenue attributable to our MDx Testing Services has been derived from our safeCircle® COVID-19 testing solutions, for which testing demand has significantly declined commencing in our fiscal third quarter of 2023, resulting in substantially reduced revenues.
Sales and Marketing We have five employees engaged in sales and marketing, of which three are directly involved with sales. Research and Development For all of our business segments, we believe that our continued development of new and enhanced technologies is essential to our future success.
Research and Development For all of our business segments, we believe that our continued development of new and enhanced technologies is essential to our future success. 10 Table of Contents In our Therapeutic DNA Production Services segment, our research and development efforts are focused on the development and optimization of our LineaDNA and Linea IVT platforms.
To date, our largest commercial application for our DNA Tagging and Security Products and Services is in the tracking and provenance authentication of cotton. 9 Table of Contents We believe the Uyghur Forced Labor Prevention Act (“UFLPA”) signed into law on December 23, 2021 has increased interest in our CertainT platform for DNA Tagging, fiberTyping and isotopic analysis services.
To date, our largest commercial application for our DNA Tagging and Security Products and Services is in the tracking and provenance authentication of cotton.
The mailing address of our corporate headquarters is 50 Health Sciences Drive, Stony Brook, New York 11790, and our telephone number is (631) 240-8800. 5 Table of Contents Industry Background and Markets Therapeutic DNA Production Services Through LineaRx, Inc. (“LRx”) our 98% owned subsidiary we are developing and commercializing our Linea DNA and Linea IVT platforms.
Industry Background and Markets Therapeutic DNA Production Services Through LineaRx, Inc. (“LRx”) our 98% owned subsidiary we are developing and commercializing our LineaDNA and Linea IVT platforms for the manufacture of synthetic DNA and associated enzymes for use in the production of nucleic acid-based therapeutics.
Currently, Linea RNAP is produced for the Company by a third-party CDMO located in the United States. 7 Table of Contents Manufacturing Scale-up The Company plans to offer several quality grades of Linea DNA, each of which will have different permitted uses.
In conjunction with Alphazyme, the Company recently completed manufacturing process development work on its Linea RNAP to increase the production scale of the enzyme and reduce unit costs. Manufacturing Scale-up The Company plans to offer several quality grades of Linea DNA, each of which will have different permitted uses.
The content and timing of any final rule on LDTs is uncertain at this time. 15 Table of Contents Congress is also working on legislative language that would clarify FDA’s authority with respect to LDTs.
Multiple lawsuits have been filed challenging the LDT final rule, in which the plaintiffs argue FDA lacks authority to regulate LDTs as medical devices. We cannot predict the likelihood of success of these lawsuits at this time. Congress is also working on legislative language that, if enacted, would clarify the FDA’s authority with respect to LDTs.
We anticipate that a facility to enable GMP production of biologic, drug substances and/or drug products would require us to acquire additional space.
We anticipate upgrades to GMP Site 1 to enable the manufacture of LineaDNA for use as, or incorporation, into a biologic, drug substance and/or drug product manufacture to be less than $1 million. We are currently building GMP Site 1 within our existing laboratory space. We anticipate that a GMP Site 2 would require us to acquire additional space.
At September 30, 2023, three customers accounted for 60% of our accounts receivable. Our revenues earned from sale of products and services for the fiscal year ended September 30, 2022 includes 58% from one customer within our MDx Testing Services segment. At September 30, 2022, two customers accounted for 89% of our accounts receivable.
The period of performance under the SRA is until June 30, 2025, and can be terminated by either party upon at least sixty (60) days written notice Customers Our revenues earned from the sale of products and services for the fiscal year ended September 30, 2024 includes 26% and 17% from two customers within our MDx Testing Services and Therapeutic DNA Production segments, respectively.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur customers may not be successful in their efforts to create a pipeline of product candidates, to develop commercially successful products, or to develop commercially successful biologic production. ● We may not successfully implement our business strategies, including achieving our growth objectives. ● We may require additional financing which may in turn require the issuance of additional shares of common stock, preferred stock or other debt or equity securities (including convertible securities) and which would dilute the ownership held by or stockholders. ● Our operating results have been and could be adversely affected by a reduction in business with our significant customers. ● We may encounter difficulties in managing our growth and these difficulties could impair our profitability. ● Our current emphasis on Therapeutic DNA Production Services may reduce our ability to maintain and expand our existing MDX Testing Services and DNA Tagging and Security Products and Services businesses. 17 Table of Contents ● If in the future our MDX Testing Services and DNA Tagging and Security Products and Services businesses do not generate significant cash flows, we may not have sufficient capital to develop, commercialize and have our customers adopt our Therapeutic DNA Production Services. ● If we are unable to expand our DNA manufacturing capacity, we could lose revenue and our business could suffer. ● Rapidly changing technology and extensive competition in synthetic biology could make the services or products we are developing obsolete or non-competitive unless we continue to develop new and improved services or products and pursue new market opportunities. ● Pharmaceutical and biologic products are highly complex, and if we or our collaborators and customers are unable to provide quality and timely offerings to our respective customers, our business could suffer. ● We will need to develop and maintain manufacturing facilities that meet GMP. ● Pharmaceutical and biologic-related revenue will be dependent on our collaborators’ and customers’ demand for our manufacturing services. ● Our safeCircle TM COVID-19 testing service could become obsolete or its utility could be significantly diminished, including in light of significantly decreasing demand for COVID-19 testing services. ● We may be unable to consistently manufacture or source our products to the necessary specifications or in quantities necessary to meet demand on a timely basis and at acceptable performance and cost levels. ● The markets for drug and biologic candidates and synthetic DNA are very competitive, and we may be unable to continue to compete effectively in these industries in the future. ● The markets for our supply chain security and product authentication solutions are very competitive, and we may be unable to continue to compete effectively in these industries in the future. ● We compete with life science, pharmaceutical and biotechnology companies, some of whom are our customers, who are substantially larger than we are and potentially capable of developing new approaches that could make our products and technology obsolete or develop their own internal capabilities that compete with our products. ● Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand. ● Pharmaceutical and biologic-related revenue is generally dependent on regulatory approval, oversight and compliance. ● If the FDA were to begin to enforce regulation of LDTs, we could incur substantial costs and delays associated with trying to obtain pre-market clearance or approval and costs associated with complying with post-market requirements. ● If we fail to comply with laboratory licensing requirements, we could lose the ability to offer our clinical testing services or experience disruptions to our business. ● If we fail to comply with healthcare laws, we could face substantial penalties and our business, operations and financial conditions could be adversely affected. ● If we are unable to continue to retain the services of Dr.
Biggest changeThis makes it difficult to evaluate our future prospects and increase the risk that we will not be successful. ● There is substantial doubt relating to our ability to continue as a going concern. ● We may not successfully implement our business strategies, including achieving our growth objectives, including the development of new production facilities for our Therapeutic DNA Production Services. ● We may require additional financing which may in turn require the issuance of additional shares of Common Stock, preferred stock or other debt or equity securities (including convertible securities) and which would dilute the ownership held by or stockholders. ● We may modify and refine our business strategy, including a possible divesture or closing of our DNA Tagging and Security Products and Services and/or MDx Testing Services segments. ● Our current emphasis on Therapeutic DNA Production Services may reduce our ability to maintain and expand our existing MDX Testing Services and DNA Tagging and Security Products and Services businesses. ● If we are unable to expand our DNA manufacturing capacity, we could lose revenue and our business could suffer. ● Rapidly changing technology and extensive competition in synthetic biology could make the services or products we are developing obsolete or non-competitive unless we continue to develop new and improved services or products and pursue new market opportunities. ● We will need to develop and maintain facilities that meet GMP. ● Pharmaceutical and biologic products are highly complex, and if we or our collaborators and customers are unable to provide quality and timely offerings to our respective customers, our business could suffer. ● Pharmaceutical and biologic-related revenue will be dependent on our collaborators’ and customers’ demand for our manufacturing services. ● We may be unable to consistently manufacture or source our products to the necessary specifications or in quantities necessary to meet demand on a timely basis and at acceptable performance and cost levels. ● The markets for drug and biologic candidates and synthetic DNA are very competitive, and we may be unable to continue to compete effectively in these industries in the future. ● The markets for our supply chain security and product authentication solutions are very competitive, and we may be unable to compete effectively in these industries in the future. ● We compete with life science, pharmaceutical and biotechnology companies, some of whom are our customers, who are substantially larger than we are and potentially capable of developing new approaches that could make our products and technology obsolete or develop their own internal capabilities that compete with our products. ● Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand. 17 Table of Contents ● Pharmaceutical and biologic-related revenue is generally dependent on regulatory approval, oversight and compliance. ● If the FDA were to begin to enforce regulation of LDTs, we could incur substantial costs and delays associated with trying to obtain pre-market clearance or approval and costs associated with complying with post-market requirements within our MDx Testing Services segment. ● If we fail to comply with laboratory licensing requirements, we could lose the ability to offer our clinical testing services or experience disruptions to our business. ● We may have conflicts of interest with our affiliates and related parties, and in the past we have engaged in transactions and entered into agreements with affiliates that were not negotiated at arms’ length. ● Stockholders may suffer substantial dilution if certain provisions in the May 2024 Series Warrants (as defined below) are utilized. ● Stockholders may suffer substantial dilution if certain provisions in the October 2024 Series D Warrants (as defined below) are utilized. ● The exercisability of the October 2024 Private Placement Warrants (as defined below) is contingent upon us obtaining Warrant Stockholder Approval (as defined below).
Many of our competitors, both in the United States and elsewhere, are major pharmaceutical, chemical and biotechnology companies, or have strategic alliances with such companies, and many of them have substantially greater capital resources, marketing experience, research and development staff, and facilities than we do.
Many of our competitors, both in the United States and elsewhere, are major pharmaceutical, chemical and biotechnology companies, or have strategic alliances with such companies, and many of them have substantially greater capital resources, marketing experience, research and development staff, and facilities than we do.
The market for our MDx Testing Services is very competitive, and we may be unable to continue to compete effectively in this industry in the future. The principal market for molecular diagnostics testing services is intensely competitive. We compete with many existing testing service providers and new competitors continue to enter the market.
The market for our MDx Testing Services is very competitive, and we may be unable to compete effectively in this industry in the future. The principal market for molecular diagnostics testing services is intensely competitive. We compete with many existing testing service providers and new competitors continue to enter the market.
Many of our competitors, both in the United States and elsewhere, are major pharmaceutical, chemical and biotechnology companies, or have strategic alliances with such companies, and many of them have substantially greater capital resources, marketing experience, research and development staff, and facilities than we do.
Many of our competitors, both in the United States and elsewhere, are major pharmaceutical, chemical and biotechnology companies, or have strategic alliances with such companies, and many of them have substantially greater capital resources, marketing experience, research and development staff, and facilities than we do.
Any regulatory approvals that our customers receive for their products that incorporate our utilize our Therapeutic DNA Production Services will be subject to limitations on the approved indicated uses for which the product may be marketed and promoted or to the conditions of approval (including the requirement to implement a Risk Evaluation and Mitigation Strategy (“REMS”) or contain requirements for potentially costly post-marketing testing.
Any regulatory approvals that our customers receive for their products that incorporate or utilize our Therapeutic DNA Production Services will be subject to limitations on the approved indicated uses for which the product may be marketed and promoted or to the conditions of approval (including the requirement to implement a Risk Evaluation and Mitigation Strategy (“REMS”) or contain requirements for potentially costly post-marketing testing.
Under our warrants sold privately that have registration rights, in the event of a “Fundamental Transaction” (as defined in the related warrant agreement, which generally includes any merger with another entity, the sale, transfer or other disposition of all or substantially all of our assets to another entity, or the acquisition by a person of more than 50% of our common stock), each warrant holder will have the right at any time prior to the consummation of the Fundamental Transaction to require us to repurchase the warrant for a purchase price in cash equal to the Black Scholes value (as calculated under the warrant agreement) of the then remaining unexercised portion of such warrant on the date of such Fundamental Transaction, which may materially adversely affect our financial condition and/or results of operations and may prevent or deter a third party from acquiring us.
Under certain of our warrants sold privately that have registration rights, in the event of a “Fundamental Transaction” (as defined in the related warrant agreement, which generally includes any merger with another entity, the sale, transfer or other disposition of all or substantially all of our assets to another entity, or the acquisition by a person of more than 50% of our Common Stock), each warrant holder will have the right at any time prior to the consummation of the Fundamental Transaction to require us to repurchase the warrant for a purchase price in cash equal to the Black Scholes value (as calculated under the warrant agreement) of the then remaining unexercised portion of such warrant on the date of such Fundamental Transaction, which may materially adversely affect our financial condition and/or results of operations and may prevent or deter a third party from acquiring us.
Any failure by us or another contract manufacturers to comply with GMP or to provide adequate and timely corrective actions in response to deficiencies identified in a regulatory inspection could result in enforcement action that could impact our ability to attract and maintain other contract manufacturing arrangements or lead to a shortage of our customers’ products and harm our business, including withdrawal of approvals previously granted, seizure, injunction or other civil or criminal penalties.
Any failure by us or other contract manufacturers to comply with GMP or to provide adequate and timely corrective actions in response to deficiencies identified in a regulatory inspection could result in enforcement action that could impact our ability to attract and maintain other contract manufacturing arrangements or lead to a shortage of our customers’ products and harm our business, including withdrawal of approvals previously granted, seizure, injunction or other civil or criminal penalties.
Our customers will rely on us for synthetic DNA and other biological materials that are used in their discovery and development programs. These materials can be difficult to produce and occasionally have variability from the product specifications. Any disruption in the supply of these biological materials consistent with our product specifications could materially adversely affect our business.
Our customers will rely on us for synthetic DNA and other biological materials that are used in their discovery and development programs. These materials can be difficult to produce and occasionally have variability from the product specifications. Any disruption in the supply of these biological materials consistent with our applicable product specifications could materially adversely affect our business.
We may encounter difficulties in managing our growth, and these difficulties could impair our profitability. Currently, we are working simultaneously on multiple projects, expanding our DNA manufacturing capacity as well as targeting several market sectors, including activities in the diagnostics, veterinary and human therapeutics, and the product security sectors.
We may encounter difficulties in managing our growth, and these difficulties could impair our profitability. Currently, we are working simultaneously on multiple projects, expanding our DNA manufacturing capacity as well as targeting several market sectors, including activities in the human therapeutics, diagnostics and product security sectors.
Any failure by us or another third-party manufacturers to comply with applicable GMP regulations or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of synthetic DNA in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of our customers’ candidates and, therefore, affect our business. 25 Table of Contents Some pharmaceutical manufacturers are also subject to extensive pre- and post-marketing oversight by the FDA and comparable regulatory authorities in the jurisdictions where the product is being studied or marketed, which include periodic unannounced and announced inspections by the FDA to assess compliance with GMP requirements.
Any failure by us or another third-party manufacturers to comply with applicable GMP regulations or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of synthetic DNA in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of our customers’ candidates and, therefore, affect our business. 23 Table of Contents Some pharmaceutical manufacturers are also subject to extensive pre- and post-marketing oversight by the FDA and comparable regulatory authorities in the jurisdictions where the product is being studied or marketed, which include periodic unannounced and announced inspections by the FDA to assess compliance with GMP requirements.
The time required to obtain approval by the FDA, USDA and comparable foreign regulatory authorities is unpredictable, typically takes many years following the commencement of clinical trials, and depends upon numerous factors, including the type, complexity and novelty of the product candidates involved.
The time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable, typically takes many years following the commencement of clinical trials, and depends upon numerous factors, including the type, complexity and novelty of the product candidates involved.
The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling.
The FDA and other agencies, including the Department of Justice and state agencies, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling.
We may need to raise funds through either debt or the sale of our shares of our common stock in order to achieve our business goals. Any additional shares issued would further dilute the percentage ownership held by the stockholders.
We may need to raise funds through either debt or the sale of our shares of our common stock in order to achieve our business goals. Any additional shares issued would further dilute the percentage ownership held by existing stockholders.
Some of our competitors that operate in the molecular diagnostics testing markets include: 23andMe, Inc., Laboratory Corporation of America (LabCorp); Quest Diagnostics Inc., Myriad Genetics, Inc., ARUP Laboratories, Sonic Healthcare USA, Everly Well, Inc., and Fulgent Genetics, Inc.
Some of our competitors that operate in the molecular diagnostics testing markets include: 23andMe, Inc., Laboratory Corporation of America (LabCorp); Quest Diagnostics Inc., Myriad Genetics, Inc., ARUP Laboratories, Sonic Healthcare USA, MyOme, Inc., Everly Well, Inc., and Fulgent Genetics, Inc.
We may have conflicts of interest with our affiliates and related parties, and in the past we have engaged in transactions and entered into agreements with affiliates that were not negotiated at arms’ length. We have engaged, and may in the future engage, in transactions with affiliates and other related parties.
Hayward. We may have conflicts of interest with our affiliates and related parties, and in the past we have engaged in transactions and entered into agreements with affiliates that were not negotiated at arms’ length. We have engaged, and may in the future engage, in transactions with affiliates and other related parties.
Many of these competitors also have: ● broader name recognition; ● longer operating histories and the benefits derived from greater economies of scale; 29 Table of Contents ● larger and more established distribution networks; ● additional product and service lines and the ability to bundle products and services to offer higher discounts or other incentives to gain a competitive advantage; ● more experience in conducting research and development, manufacturing and marketing; ● more experience in entering into collaborations or other strategic partnership arrangements; and ● more financial, manufacturing and human resources to support product development, sales and marketing and patent and other intellectual property litigation.
Many of these competitors also have: ● broader name recognition; ● longer operating histories and the benefits derived from greater economies of scale; ● larger and more established distribution networks; ● additional product and service lines and the ability to bundle products and services to offer higher discounts or other incentives to gain a competitive advantage; ● more experience in conducting research and development, manufacturing and marketing; ● more experience in entering into collaborations or other strategic partnership arrangements; and ● more financial, manufacturing and human resources to support product development, sales and marketing and patent and other intellectual property litigation.
Our business may be materially harmed by our collaborators’ and customers’ inability to obtain or maintain regulatory approvals for their products of their failure to comply with applicable regulations. In addition, we will be dependent on, and have no control over, consumer demand for the products into which our Linea DNA technology is incorporated.
Our business may be materially harmed by our collaborators’ and customers’ inability to obtain or maintain regulatory approvals for their products of their failure to comply with applicable regulations. In addition, we will be dependent on, and have no control over, consumer demand for the products into which our LineaDNA technology is incorporated.
If our customers are ultimately unable to obtain regulatory approval for products incorporating our Therapeutic DNA Production Services, we will be unable to generate product revenue and our business will be substantially harmed.
If our customers are ultimately unable to obtain regulatory approval for products incorporating our Therapeutic DNA Production Services, we will be unable to generate meaningful revenue and our business will be substantially harmed.
The extent and duration of the wars in Ukraine and Israel/Gaza and expanding geopolitical tensions and any resulting market disruptions could be significant and could potentially have a substantial impact on the global economy, market volatility and our business for an unknown period of time.
The extent and duration of the wars in Ukraine, Israel/Gaza and Lebanon, as well as expanding geopolitical tensions and any resulting market disruptions could be significant and could potentially have a substantial impact on the global economy, market volatility and our business for an unknown period of time.
Patent and Trademark Office (“USPTO”) to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our United States patent position with respect to such inventions.
Patent and Trademark Office (“USPTO”) to determine priority 28 Table of Contents of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our United States patent position with respect to such inventions.
Accordingly, in the event of such misuse, our reputation, future revenue and operating results may suffer. 22 Table of Contents Our business could be adversely impacted by inflation. Increases in inflation may have an adverse effect on our business.
Accordingly, in the event of such misuse, our reputation, future revenue and operating results may suffer. Our business could be adversely impacted by inflation. Increases in inflation may have an adverse effect on our business.
Our public offerings completed in November 2014, April 2015, December 2018, November 2019 and August 2022, our registered direct offerings during January 2021 and February 2022, our registered direct public offering and concurrent private placement during November 2015, our private placements completed in November 2016, June 2017, and August 2019, and our registered direct offering in December 2017 resulted in dilution to investors and future offerings of securities could result in further dilution to investors.
Our public offerings completed in November 2014, April 2015, December 2018, November 2019, August 2022 and May 2024, our registered direct offerings completed in December 2017, January 2021 and February 2022, our registered direct public offering and concurrent private placement completed in November 2015, January 2024 and October 2024, and our private placements completed in November 2016, June 2017, and August 2019 resulted in dilution to investors and future offerings of securities could result in further dilution to investors.
Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. 24 Table of Contents Our ability to generate revenue in the pharmaceutical and biologic market depends on our ability to manufacture products that meet exacting quality and safety standards.
Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. Our ability to generate revenue in the pharmaceutical and biologic market depends on our ability to manufacture products that meet exacting quality and safety standards.
If any of these risks occur, our business, financial condition and results of operations could be significantly harmed. 28 Table of Contents The markets for our supply chain security and product authentication solutions are very competitive, and we may be unable to continue to compete effectively in these industries in the future.
If any of these risks occur, our business, financial condition and results of operations could be significantly harmed. The markets for our supply chain security and product authentication solutions are very competitive, and we may be unable to compete effectively in these industries in the future.
The execution of our business strategy and our financial performance will continue to depend in significant part our ability to obtain sufficient financing and on our executive management team and other key management personnel, our ability to identify and complete suitable acquisitions and our executive management team's ability to execute new operational initiatives.
The execution of our business strategy and our financial performance will continue to depend in significant part our ability to obtain sufficient financing and on our executive management team and other key management personnel, our ability to identify and complete suitable acquisitions, our executive management team’s ability to execute new operational initiatives, and certain matters outside of our control.
If we are unable to manage this growth effectively, our shipments to our customers could be impacted, our time and resources could be diverted from other products and offerings and our business and operating results could suffer.
If we are unable to manage this growth and/or potential restructuring effectively, our shipments to our customers could be impacted, our time and resources could be diverted from other products and offerings and our business and operating results could suffer.
On December 1, 2023, the Company received a letter (the “Notice”) from Nasdaq notifying the Company that, because the closing bid price for its common stock has been below $1.00 per share for 30 consecutive business days, it no longer complies with the Minimum Bid Price Requirement for continued listing on The Nasdaq Capital Market.
On November 12, 2024, the Company received a letter (the “Notice”) from Nasdaq notifying the Company that, because the closing bid price for its Common Stock has been below $1.00 per share for 30 consecutive business days, it no longer complies with the Minimum Bid Price Requirement for continued listing on The Nasdaq Capital Market.
We may not successfully implement our business strategies, including achieving our growth objectives. We may not be able to fully implement our business strategies or realize, in whole or in part within the expected time frames, the anticipated benefits of our various growth or other initiatives.
We may not be able to fully implement our business strategies or realize, in whole or in part within the expected time frames, the anticipated benefits of our various growth or other initiatives.
In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application submitted by one of our customers or by us with respect to the veterinary health market.
In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application submitted by one of our customers.
We have not submitted for, or plan to obtain regulatory approval for any product candidate (except with respect to the veterinary health market), and it is possible that none of our, or our customers’ existing product candidates or any product candidates that we or our customers may seek to develop in the future that incorporate or utilize our Therapeutic DNA Production Services will ever obtain regulatory approval.
We have not submitted for, or plan to obtain regulatory approval for any product candidate, and it is possible that none of our, or our customers’ existing product candidates or any product candidates that we or our customers may seek to develop in the future that incorporate or utilize our Therapeutic DNA Production Services will ever obtain regulatory approval.
Some of our competitors that operate in the nucleic-acid based therapeutic, biologics and DNA manufacturing markets include: Precigen, Inc., Aldevron, LLC, Cobra Biologics, Limited, Integrated DNA Technologies, Inc., 4basebio PLC, Ziopharm Oncology, Inc., MaxCyte, Inc., Touchlight Genetics Ltd., Generation Bio, Co., Novartis AG, Kite Pharma, Inc., Juno Therapeutics, Inc., Promega Corporation, OriGene Technologies, Inc., Blue Heron Biotech, LLC, Gene Art, GenScript Biotech Corporation, and others.
Some of our competitors that operate in the nucleic-acid based therapeutic, biologics and DNA manufacturing markets include, without limitation: Precigen, Inc., Aldevron, LLC, Cobra Biologics, Limited, Integrated DNA Technologies, Inc., 4basebio PLC, Ziopharm Oncology, Inc., MaxCyte, Inc., Touchlight Genetics Ltd., Generation Bio, 25 Table of Contents Co., Novartis AG, Kite Pharma, Inc., Juno Therapeutics, Inc., Elegen, Inc., ANSA Biotechnologies, Promega Corporation, OriGene Technologies, Inc., Blue Heron Biotech, LLC, Gene Art, GenScript Biotech Corporation, and others.
If the products into which our Linea DNA is utilized or incorporated do not gain market acceptance, our revenues and profitability may be adversely affected. 33 Table of Contents The regulatory approval processes of the FDA, USDA and comparable foreign regulatory authorities are lengthy, time consuming, and inherently unpredictable.
If the products into which our LineaDNA is utilized or incorporated do not gain market acceptance, our revenues and profitability may be adversely affected. 29 Table of Contents The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time consuming, and inherently unpredictable.
At September 30, 2023, we had cash and cash equivalents of $7,151,800. We have concluded that these factors raise substantial doubt about our ability to continue as a going concern for one year from the issuance of the financial statements. We will continue to seek to raise additional working capital through public equity, private equity or debt financings.
At September 30, 2024, we had cash and cash equivalents of $6,431,095. We have concluded that these factors raise substantial doubt about our ability to continue as a going concern for one year from the issuance of the financial statements. We will continue to seek to raise additional working capital through public equity, private equity or debt financings.
Any failure to translate research and development expenditures into successful new product introduction could have an adverse effect on our business. In addition, research, development, and commercialization of our Therapeutic DNA Production Services and veterinary biologic products are inherently risky.
Any failure to translate research and development expenditures into successful new product introduction could have an adverse effect on our business. 27 Table of Contents In addition, research, development, and commercialization of our Therapeutic DNA Production Services are inherently risky.
While our revenues increased from $1.9 million in fiscal 2020 to $18.2 million in fiscal 2022, primarily as a result of our COVID-19 testing revenues, in fiscal 2023 our revenues declined to $13.4 million and are expected to decline further in fiscal 2024.
While our revenues 18 Table of Contents increased from $1.9 million in fiscal 2020 to $18.2 million in fiscal 2022, primarily as a result of our COVID-19 testing revenues, in fiscal 2023 our revenues declined to $13.4 million and further declined to $3.4 million in fiscal 2024.
We must continue to secure and maintain sufficient and stable supplies of components and raw materials. Certain disruptions in supply of, and changes in the competitive environment for, components and raw materials integral to the manufacturing of our products may adversely affect our profitability. We use a broad range of materials and supplies in our products.
Certain disruptions in supply of, and changes in the competitive environment for, components and raw materials integral to the manufacturing of our products may adversely affect our profitability. We use a broad range of materials and supplies in our products.
Reports of product quality defects, adverse events or unexpected results are submitted in accordance with the agency requirements. 34 Table of Contents If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product, our customer or us, including, but not limited to, requiring withdrawal or recall of the product from the market, imposing civil or criminal penalties, and imposing restrictions on our or our customers’ ability to continue to manufacture the product(s).
If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product, our customer or us, including, but not limited to, requiring withdrawal or recall of the product from the market, imposing civil or criminal penalties, and imposing restrictions on our or our customers’ ability to continue to manufacture the product(s).
If we are unable to conclude that our internal control over financial reporting or our disclosure controls are effective, or if our auditors were to express an adverse opinion on the effectiveness of our internal control over financial reporting because we had one or more material weaknesses, investors could lose confidence in the accuracy and completeness of our financial disclosures.
If we are unable to conclude that our internal control over financial reporting or our disclosure controls are effective, because we had one or more material weaknesses, investors could lose confidence in the accuracy and completeness of our financial disclosures.
Furthermore, if we raise funds in equity transactions through the issuance of convertible securities which are convertible at the time of conversion at a discount to the prevailing market price, substantial dilution is likely to occur resulting in a material decline in the price of your shares.
Furthermore, if we raise funds 19 Table of Contents in equity transactions through the issuance of convertible securities which are convertible at the time of conversion at a discount to the prevailing market price, substantial dilution is likely to occur resulting in a material decline in the price of our common stock.
If we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting or disclosure that are deemed to be material weaknesses, the market price of our stock could decline, our ability to access the capital markets could be reduced and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources. 21 Table of Contents Our operating results could be adversely affected by a reduction in business with our significant customers.
If we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting or disclosure that are deemed to be material weaknesses, the market price of our stock could decline, our ability to access the capital markets could be reduced and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources.
Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies as well as the ongoing military conflict between Russia and Ukraine.
Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies as well as the ongoing military conflicts in Ukraine and the Middle East.
We use technology in substantially all aspects of our business operations. The widespread use of technology, including mobile devices, cloud computing, and the internet, gives rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of information.
The widespread use of technology, including mobile devices, cloud computing, and the internet, gives rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of information.
If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms, if at all. 19 Table of Contents Our opportunities to work with customers to develop drug and biologics will require substantial additional funding.
If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms, if at all.
Manufacturing biologics is highly susceptible to product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics and difficulties in scaling the production process.
The process of manufacturing pharmaceutical and biologics and their components is complex, highly-regulated and subject to multiple risks. 22 Table of Contents Manufacturing biologics is highly susceptible to product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics and difficulties in scaling the production process.
Manufacturing and product quality issues may arise as we continue to increase the scale of our production. If our DNA manufacturing equipment and tools do not consistently produce DNA products that meet our customers’ performance expectations, our reputation may be harmed, and we may be unable to generate sufficient revenue to become profitable.
If our DNA manufacturing equipment and tools do not consistently produce DNA products that meet our customers’ performance expectations, our reputation may be harmed, and we may be unable to generate sufficient revenue to become profitable.
The FDA would have the authority to withdraw approvals for IVCTs for various reasons, including (for example) if there were a reasonable likelihood that the test would cause death or serious adverse health consequences.
The new regulatory framework would include quality control and post-market reporting requirements. The FDA would have the authority to withdraw approvals for IVCTs for various reasons, including (for example) if there were a reasonable likelihood that the test would cause death or serious adverse health consequences.
The issuance of shares upon exercise of our outstanding options and warrants will cause immediate and substantial dilution to our stockholders and any sale thereof may depress the market price of our common stock. We may be required to repurchase certain of our warrants.
The issuance of shares upon exercise of our outstanding options and warrants will cause immediate and substantial dilution to our stockholders and any sale thereof may depress the market price of our common stock. Stockholders may suffer substantial dilution if certain provisions in the May 2024 Series Warrants are utilized.
As of June 30, 2023, the employment contract automatically renewed for an additional year. Loss of the services of Dr. Hayward could significantly harm our business, results of operations and financial condition. We do not maintain key-person insurance on the life of Dr. Hayward.
The initial term was from July 1, 2016 through June 30, 2017, with automatic one-year renewal periods. As of June 30, 2024, the employment contract automatically renewed for an additional year. Loss of the services of Dr. Hayward could significantly harm our business, results of operations and financial condition. We do not maintain key-person insurance on the life of Dr.
Under VALID, a precertification process would be established that would have allowed a laboratory to establish that the facilities, methods, and controls used in the development of its IVCTs meet quality system requirements. If pre-certified, low-risk IVCTs, developed by the laboratory would not be subject to pre-market review. The new regulatory framework would include quality control and post-market reporting requirements.
Under VALID, a precertification process would be established that would allow a laboratory to establish that the facilities, methods, and controls used in the development of its IVCTs meet quality system requirements. If pre-certified, certain low-risk IVCTs developed by the laboratory and falling within the scope of a certification order from FDA would not be subject to pre-market review.
Pharmaceutical and biologic products and services are highly complex, and if we or our collaborators and customers are unable to provide quality and timely offerings to our respective customers, our business could suffer. The process of manufacturing pharmaceutical and biologics and their components is complex, highly-regulated and subject to multiple risks.
Pharmaceutical and biologic products and services are highly complex, and if we or our collaborators and customers are unable to provide quality and timely offerings to our respective customers, our business could suffer.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions. 35 Table of Contents If we fail to comply with healthcare laws, we could face substantial penalties and our business, operations and financial conditions could be adversely affected.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
During the compliance period, the Company’s shares of common stock will continue to be listed and traded on The Nasdaq Capital Market. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during the 180-day compliance period.
To regain compliance, the closing bid price of the Company’s Common Stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during the 180-day compliance period, with a longer period potentially required by the staff of Nasdaq (the “Staff”).
The Company may be adversely impacted if any related party agreement or transaction is made on unfavorable terms. 36 Table of Contents Risks Relating to Our Common Stock and Other Securities: There are a large number of shares of common stock underlying our outstanding options and warrants and the sale of these shares may depress the market price of our common stock and cause immediate and substantial dilution to our existing stockholders.
Risks Relating to Our Common Stock and Other Securities: There are a large number of shares of Common Stock underlying our outstanding options and warrants and the sale of these shares may depress the market price of our Common Stock and cause immediate and substantial dilution to our existing stockholders.
In addition, the approval and commercialization of any of our customers’ product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws. Risks Related to Personnel: Our failure to manage our growth in operations and acquisitions of new product lines and new businesses could harm our business.
In addition, the approval and commercialization of any of our customers’ product candidates 31 Table of Contents outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
There is substantial doubt relating to our ability to continue as a going concern. We have recurring net losses, which have resulted in an accumulated deficit of $302,447,147 as of September 30, 2023. We have incurred a net loss of $10,022,916 for the twelve-month period ended September 30, 2023.
There is substantial doubt relating to our ability to continue as a going concern. We have recurring net losses, which have resulted in an accumulated deficit of $309,672,755 as of September 30, 2024. We have incurred a net loss of $7,088,306 for the fiscal year ended September 30, 2024.
Hayward, we may not be able to continue our operations. 18 Table of Contents ● We may have conflicts of interest with our affiliates and related parties, and in the past we have engaged in transactions and entered into agreements with affiliates that were not negotiated at arms’ length. ● There are a large number of shares of common stock underlying our outstanding options and warrants and the sale of these shares may depress the market price of our common stock and cause immediate and substantial dilution to our existing stockholders. ● We have received written notice from Nasdaq that we are not in compliance with Nasdaq’s minimum bid requirements and if we are unable to regain compliance with the Nasdaq continued listing standards, which may require effecting a reverse stock split of our common stock, we could be delisted from The Nasdaq Stock Market, which would negatively impact our business, our ability to raise capital, and the market price and liquidity of our common stock. ● In addition to the above key factors, as well as other variables affecting our operating results and financial condition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.
Hayward, we may not be able to continue our operations. ● There are a large number of shares of common stock underlying our outstanding options and warrants and the sale of these shares may depress the market price of our common stock and cause immediate and substantial dilution to our existing stockholders. ● We have received written notice from Nasdaq that we are not in compliance with Nasdaq’s minimum bid requirements and if we are unable to regain compliance with the Nasdaq continued listing standards, which may require effecting a reverse stock split of our Common Stock, we could be delisted from The Nasdaq Stock Market, which would negatively impact our business, our ability to raise capital, and the market price and liquidity of our Common Stock.
We compete with life science, pharmaceutical and biotechnology companies, some of whom are our customers, who are substantially larger than we are and potentially capable of developing new approaches that could make our products and technology obsolete or develop their own internal capabilities that compete with our products.
If we are unable to successfully develop, validate and commercialize other diagnostic tests and services, our MDx Testing Services may not produce sufficient revenues to become profitable. 26 Table of Contents We compete with life science, pharmaceutical and biotechnology companies, some of whom are our customers, who are substantially larger than we are and potentially capable of developing new approaches that could make our products and technology obsolete or develop their own internal capabilities that compete with our products.
However, we cannot predict if this (or any other bill) will be enacted in its current (or any other) form and cannot quantify the effect of such proposals on our business. We have limited experience producing and supplying our products.
However, we cannot predict if this (or any other bill) will be enacted in its current (or any other) form and cannot quantify the effect of such proposals on our business. We must continue to secure and maintain sufficient and stable supplies of components and raw materials.
We cannot give any assurance that any future customers and/or collaborators of our Therapeutic DNA Production Services will receive regulatory approval for their pharmaceutical and biotherapeutic product candidates. In addition, we cannot give any assurance that any of our own veterinary biologic product candidates will receive regulatory approval, which is necessary before they can be commercialized.
We cannot give any assurance that any future customers and/or collaborators of our Therapeutic DNA Production Services will receive regulatory approval for their pharmaceutical and biotherapeutic product candidates. In addition, we cannot give any assurance that any of our synthetic DNA performance characteristics will meet or exceed DNA produced by our competitors.
Intellectual property litigation can be extremely expensive, and these expenses, as well as the consequences should we not prevail, could seriously harm our business. 31 Table of Contents If a third party claims an intellectual property right to technology we use, we might need to discontinue an important product or product line, alter our products and processes, pay license fees or cease our affected business activities.
If a third party claims an intellectual property right to technology we use, we might need to discontinue an important product or product line, alter our products and processes, pay license fees or cease our affected business activities.
Also, our business strategies may change from time to time in light of our ability to implement our business initiatives, competitive pressures, economic uncertainties or developments, or other factors. 20 Table of Contents We may require additional financing which may in turn require the issuance of additional shares of common stock, preferred stock or other debt or equity securities (including convertible securities) and which would dilute the ownership held by our stockholders.
We may require additional financing which may in turn require the issuance of additional shares of common stock, preferred stock or other debt or equity securities (including convertible securities) and which would dilute the ownership held by our stockholders.
There is no assurance that we will be able to continue to increase manufacturing capacity internally or that we will find one or more suitable partners to help us towards this objective, in order to meet the volume and quality requirements necessary for success in our existing and potential markets.
There is no assurance that we will be able to continue to increase manufacturing capacity in order to meet the volume and quality requirements necessary for success in our existing and potential markets. Manufacturing and product quality issues may arise as we continue to increase the scale of our production.
The bill proposes a risk-based approach that would subject many LDTs to FDA regulation by creating a new in vitro clinical test, or IVCT, category of regulated products.
In this regard, most recently, the “Verifying Accurate Leading-edge IVCT Development Act,” or VALID Act, was first introduced in March 2020, and most recently reintroduced in March 2023. The bill proposes a risk-based approach that would subject many LDTs to FDA regulation by creating a new in vitro clinical test, or IVCT, category of regulated products.
We incur research and development expenses to develop new products and technologies in an effort to maintain our competitive position in a market characterized by rapid rates of technological advancement. Our research and development efforts are subject to unanticipated delays, expenses and technical problems.
If we fail to create demand for our new products, services or technologies, our future business could be harmed. Our research and development efforts for new products may be unsuccessful. We incur research and development expenses to develop new products and technologies in an effort to maintain our competitive position in a market characterized by rapid rates of technological advancement.
Healthcare providers, physicians and payors play a primary role in the recommendation and prescription of any product candidates for which our customers may obtain marketing approval.
If we fail to comply with healthcare laws, we could face substantial penalties and our business, operations and financial conditions could be adversely affected. Healthcare providers, physicians and payors play a primary role in the recommendation and prescription of any product candidates for which our customers may obtain marketing approval.
There can be no assurance that any of these products or technologies will be successfully developed or that, if developed, will be commercially successful.
Our research and development efforts are subject to unanticipated delays, expenses and technical problems. There can be no assurance that any of these products or technologies will be successfully developed or that, if developed, will be commercially successful.
Customers generally order on an as-needed basis and we typically do not obtain firm, long-term purchase commitments from our customers. The quarterly fluctuations in operating results described above may cause a decline in the price of our common stock.
Customers generally order on an as-needed basis and we typically do not obtain firm, long-term purchase commitments from our customers.
In addition, the FDA’s regulations, policies or guidance may change and new or additional statutes or government regulations in the United States and other jurisdictions may be enacted that could further restrict or regulate our post-approval manufacturing activities.
If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our Company and our operating results will be adversely affected related to the demand for those customers’ products. 30 Table of Contents In addition, the FDA’s regulations, policies or guidance may change and new or additional statutes or government regulations in the United States and other jurisdictions may be enacted that could further restrict or regulate our post-approval manufacturing activities.
On September 29, 2023, however, the FDA published a proposed rule on LDTs, in which FDA proposes to end enforcement discretion for virtually all LDTs in five stages over a four-year period from the date FDA publishes a final rule.
Historically, the FDA has exercised enforcement discretion over most LDTs. On April 29, 2024, however, the FDA published a final rule on LDTs, in which the FDA outlines its plans to end enforcement discretion for many LDTs in five stages over a four-year period.
To manage such growth, we may need to improve our: ● operations and financial systems; ● procedures and controls; and ● training and management of our employees. If we are unable to continue to retain the services of Dr. Hayward, we may not be able to continue our operations.
We have a limited number of personnel and expect to continue to have a limited number of personnel for the foreseeable future. To manage such growth, we may need to improve our: ● operations and financial systems; ● procedures and controls; and ● training and management of our employees.
Our success depends to a significant extent upon the continued service of Dr. James A. Hayward, our CEO. On July 28, 2016, we entered into an employment agreement with Dr. Hayward. The initial term was from July 1, 2016 through June 30, 2017, with automatic one-year renewal periods.
If we are unable to continue to retain the services of Dr. Hayward, we may not be able to continue our operations. Our success depends to a significant extent upon the continued service of Dr. James A. Hayward, our CEO. On July 28, 2016, we entered into an employment agreement with Dr. Hayward.
Consolidation in the pharmaceutical and biologic industry may impact such spending as customers integrate acquired operations, including research and development (“R&D”) departments and manufacturing operations.
Consolidation in the pharmaceutical and biologic industry may impact such spending as customers integrate acquired operations, including research and development (“R&D”) departments and manufacturing operations. Any reduction in spending on pharmaceutical and biotechnology development and related services as a result of these and other factors could have a material adverse effect on our business, results of operations and financial condition.
In Phase 3 (effective three years post-finalization), labs would be required to comply with quality systems requirements. In Phase 4 (effective three and a half years post-finalization, but not before October 1, 2027), labs would be required to comply with premarket review requirements for high-risk tests ( i.e. , tests subject to premarket approval (PMA) requirement).
In Phase 4 (effective November 6, 2027), clinical laboratories will be required to comply with premarket review requirements for high-risk tests (i.e., tests subject to the premarket approval (PMA) requirement).
Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations.
Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained.
The ongoing military conflicts between Russia and Ukraine and Israel and Hamas has caused geopolitical instability, economic uncertainty, financial markets volatility and capital markets disruption.
The quarterly fluctuations in operating results described above may cause a decline in the price of our common stock. 20 Table of Contents The ongoing military conflicts between Russia and Ukraine, Israel and Hamas and Israel and Hezbollah have caused geopolitical instability, economic uncertainty, financial markets volatility and capital markets disruption.
The forecasted change in our strategic focus could place a significant strain on our current management resources. We have a limited number of personnel and expect to continue to have a limited number of personnel for the foreseeable future.
Risks Related to Personnel: Our failure to manage our growth in operations and acquisitions of new product lines and new businesses could harm our business. The forecasted change in our strategic focus could place a significant strain on our current management resources.
As of December 4, 2023, we had 13,687,420 shares of common stock issued and outstanding, outstanding options to purchase 2,191,535 shares of common stock, outstanding warrants to purchase 5,220,588 shares of common stock, 282,640 unvested restricted stock units, and 1,340,948 shares available for grant under our 2005 and 2020 Equity Incentive Plans.
As of December 13, 2024, we had 52,294,359 shares of Common Stock issued and outstanding, outstanding options to purchase 108,176 shares of Common Stock, outstanding warrants to purchase 136,325,980 shares of Common Stock, and 269,069 shares available for grant under our 2005 and 2020 Equity Incentive Plans.
In Phase 1 (effective one year post-finalization), labs would be required to comply with medical device (adverse event) reporting and correction/removal reporting requirements. In Phase 2 (effective two years post-finalization), labs would be required to comply with all other device requirements (e.g., registration/listing, labeling, investigational use), except for quality systems and premarket review.
In Phase 2 (effective May 6, 2026), clinical laboratories will be required to comply with all other device requirements (e.g., registration/listing, labeling, investigational use), except for the remaining QSR requirements and premarket review. In Phase 3 (effective May 6, 2027), clinical laboratories will be required to comply with all remaining applicable QSR requirements.
Finally, in Phase 5 (effective four years post-finalization, but not before April 1, 2028), labs would be required to comply with premarket review requirements for moderate- and low-risk tests ( i.e. , tests subject to de novo or 510(k) requirement). Unlike previous proposals, the proposed rule does not “grandfather” existing tests.
Finally, in Phase 5 (effective May 6, 2028), clinical laboratories will be required to comply with premarket review requirements for moderate- and low-risk tests (i.e., tests subject to the de novo or 510(k) requirement). 24 Table of Contents Under the final rule, several types of tests will be eligible for some degree of continued enforcement discretion.
Delisting could also have other negative results, including the potential loss of confidence by employees and customers, the loss of institutional investor interest and fewer business development opportunities. 37 Table of Contents We may require additional financing in the future, which may not be available or, if available, may be on terms that cause a decline in the value of the shares of our common stock held by stockholders.
Delisting could also have other negative results, including the potential loss of confidence by employees and customers, the loss of institutional investor interest and fewer business development opportunities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe laboratory lease, as well as the testing facility in Ahmedabad are both considered short-term lease obligations.
Biggest changeThe Company vacated the lease on August 31, 2024. The base rent was approximately $6,500 per annum. The laboratory lease, as well as the testing facility in Ahmedabad were both considered short-term lease obligations.
In addition, the Company also has 2,500 square feet of laboratory space, which it entered into an amended lease agreement for on February 1, 2023. The initial lease term for the laboratory space is one year from the commencement date. The lease requires monthly payments of $8,750.
In addition, the Company also has 2,500 square feet of laboratory space, which it entered into an amended lease agreement on February 1, 2023. The initial lease term for the laboratory space is one year from the commencement date and has been extended through January 31, 2025. The lease requires monthly payments of $10,417.
The Company also has a satellite testing facility in Ahmedabad, India, which occupies 1,108 square feet for a three-year term beginning November 1, 2017. During August 2023, the Company renewed this lease with a new expiration date of July 31, 2024. The base rent is approximately $6,500 per annum.
The Company also had a satellite testing facility in Ahmedabad, India, which occupied 1,108 square feet for a three-year term beginning November 1, 2017. During August 2023, the Company renewed this lease with a new expiration date of July 31, 2024. As of June 30, 2024 the Company has ceased operations of its testing facility in India.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are currently not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. 38 Table of Contents ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. PART II
Biggest changeWe are currently not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe transfer agent of our common stock is Equiniti Trust Company, LLC, 48 Wall Street, Floor 23, New York, NY 10005. Dividends We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in the foreseeable future.
Biggest changeThe transfer agent of our common stock is Equiniti Trust Company, LLC, 90 Park Avenue, New York, NY 10016. Dividends We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in the foreseeable future.
In addition, any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant. ITEM 6. RESERVED. ​
In addition, any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant. 36 Table of Contents ITEM 6. RESERVED. ​
Holders As of December 4, 2023, we had 133 holders of record of our common stock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.
Holders As of December 13, 2024, we had 375 holders of record of our Common Stock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of Common Stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe decrease in revenue is primarily due to a decrease in demand for COVID-19 testing services during the fiscal year ended September 30, 2023 compared to the same period during fiscal 2022, as well as lower testing volumes year over year under our testing contract with the City University of New York and as a result of this contract ending mid-June 2023. 44 Table of Contents Costs and Expenses Gross Profit Gross profit for the twelve-month period ended September 30, 2023 increased by $479,792 or 9% from $5,053,640 for the twelve-month period ended September 30, 2022 to $5,533,432 for the twelve-month period ended September 30,2023.
Biggest changeThe decrease in revenue is primarily due to a decrease from COVID-19 testing services. The fiscal year ended September 30, 2023 included testing revenues under our contract with CUNY, which terminated during June 2023.
The Company’s core DNA Tagging and Security Products and Services, which are marketed collectively as a platform under the trademark CertainT®, include: ● SigNature® Molecular Tags, which are short non-biologic DNA taggants produced by the Company’s Linea DNA platform, provide a methodology to authenticate goods within large and complex supply chains with a focus on cotton, nutraceuticals and other products. ● SigNify® portable DNA readers and SigNify consumable reagent test kits provide definitive real-time authentication of the Company’s DNA tags in the field. ● fiberTyping® and other product genotyping services use PCR-based DNA detection to determine a cotton species or cultivar, via a product’s naturally occurring DNA sequence for the purposes of product provenance authentication. ● Isotopic analysis testing services, provided in partnership with third-party labs, use cotton’s carbon, hydrogen and oxygen elements to indicate origin of its fiber through finished goods.
The Company’s core DNA Tagging and Security Products and Services, which are marketed collectively as a platform under the trademark CertainT®, include: ● SigNature® Molecular Tags, which are short non-biologic DNA taggants produced by the Company’s LineaDNA platform, provide a methodology to authenticate goods within large and complex supply chains with a focus on cotton, and other products. ● SigNify® portable DNA readers and SigNify consumable reagent test kits provide definitive real-time authentication of the Company’s DNA tags in the field. ● fiberTyping® and other product genotyping services use PCR-based DNA detection to determine a cotton species or cultivar, via a product’s naturally occurring DNA sequence for the purposes of product provenance authentication. ● Isotopic analysis testing services, provided in partnership with third-party labs, use cotton’s carbon, hydrogen and oxygen elements to indicate origin of its fiber through finished goods.
DNA Tagging and Security Products and Services By leveraging our expertise in both the manufacture and detection of DNA via PCR, our DNA Tagging and Security Products and Services allow our customers to use non-biologic DNA tags manufactured on our Linea DNA platform to mark objects in a unique manner and then identify these objects by detecting the absence or presence of the DNA tag.
DNA Tagging and Security Products and Services By leveraging our expertise in both the manufacture and detection of DNA via PCR, our DNA Tagging and Security Products and Services allow our customers to use non-biologic DNA tags manufactured on our LineaDNA platform to mark objects in a unique manner and then identify these objects by detecting the absence or presence of the DNA tag.
These performance obligations are satisfied at the point in time that our services are complete, which in nearly all cases is when the testing results are released to the customer. For those customers with a fixed monthly fee, the revenue is recognized over-time as the services are provided.
These performance obligations are satisfied at the point in time that Company services are complete, which in nearly all cases is when the testing results are released to the customer. For those customers with a fixed monthly fee, the revenue is recognized over-time as the services are provided.
Linea DNA requires only four primary ingredients, does not require living cells or complex fermentation systems and does not require multiple rounds of purification. ● Flexibility – DNA produced via the Linea DNA platform can be easily chemically modified to suit specific customer applications.
LineaDNA requires only four primary ingredients, does not require living cells or complex fermentation systems and does not require multiple rounds of purification. ● Flexibility – DNA produced via the LineaDNA platform can be easily chemically modified to suit specific customer applications.
The Linea DNA platform enzymatically produces a linear form of DNA we call “LineaDNA” that is an alternative to plasmid-based DNA manufacturing technologies that have supplied the DNA used in biotherapeutics for the past 40 years.
The LineaDNA platform enzymatically produces a linear form of DNA we call “LineaDNA” that is an alternative to plasmid-based DNA manufacturing technologies that have supplied the DNA used in biotherapeutics for the past 40 years.
Critical Accounting Estimates and Policies Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our financial 46 Table of Contents condition and results of operations, we view certain of these policies as critical.
Critical Accounting Estimates and Policies Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not 44 Table of Contents readily apparent from other sources.
Linea IVT Platform The number of mRNA therapies under development is growing at a rapid rate, thanks in part to the success of the mRNA COVID-19 vaccines. mRNA therapeutics are produced via a process called in vitro transcription (“IVT”) that requires DNA as a starting material.
Linea IVT Platform The number of mRNA therapies under development is growing at a rapid rate, thanks in part to the success of the mRNA COVID-19 vaccines. mRNA therapeutics are produced via a process called IVT that requires DNA as a starting material.
The Company’s current capital resources include cash and cash equivalents, accounts receivable and inventories. Historically, the Company has financed its operations principally from the sale of equity and equity-linked securities.
Our current capital resources include cash and cash equivalents, accounts receivable and inventories. Historically, the Company has financed its operations principally from the sale of equity and equity-linked securities.
These performance obligations are satisfied at the point in time we transfer control of the goods to the customer, which in nearly all cases is when title to and risk of loss of the goods transfer to the customer. The timing of transfer of title and risk of loss is dictated by customary or explicitly stated contract terms.
These performance obligations are satisfied at the point in time the Company transfers control of the goods to the customer, which in nearly all cases is when title to and risk of loss of the goods transfer to the customer. The timing of transfer of title and risk of loss is dictated by customary or explicitly stated contract terms.
Segment Business Strategy Our business strategy for our Therapeutic DNA Production Services is to capitalize upon the rapid growth of mRNA therapies in the near term via our planned near term future availability of Linea DNA IVT templates manufactured under GMP, while at the same time laying the basis for additional clinical and commercial applications of Linea DNA with our future planned availability of Linea DNA manufactured under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product.
Segment Business Strategy Our business strategy for our Therapeutic DNA Production Services is to capitalize upon the rapid growth of mRNA therapies in the near term via our planned near term future availability of LineaDNA IVT templates manufactured under GMP at our GMP Site 1, while at the same time laying the basis for additional clinical and commercial applications of LineaDNA with our future planned availability of LineaDNA manufactured under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product at planned GMP Site 2.
In addition, we expect that based on available opportunities and our beliefs regarding future opportunities, we will continue to modify and refine our business strategy.
We expect that based on available opportunities and our beliefs regarding future opportunities, we will continue to modify and refine our business strategy.
We estimate the cost of creating the critical starting materials fit-for-purpose manufacturing facility will be approximately $1.5 million. If we were to expand the facility to enable GMP production of Linea DNA for use as or, or incorporation into, a biologic, drug substance and/or drug product, the cost may be up to approximately $7 million which would require additional funding.
We estimate the cost of creating the critical starting materials fit-for-purpose manufacturing facility will be approximately $1.5 million. If we were to expand the facility to enable GMP production of LineaDNA for use as or, or incorporation into, a biologic, drug substance and/or drug product, the cost may be up to approximately $10 million which would require additional funding.
Due to the short-term nature of our contracts with customers, we have elected to apply the practical expedients under Topic 606 to: (1) expense as incurred, incremental costs of obtaining a contract and (2) not adjust the consideration for the effects of a significant financing component for contracts with an original expected duration of one year or less.
Due to the short-term nature of the Company’s contracts with customers, it has elected to apply the practical expedients under Topic 606 to: (1) expense as incurred, incremental costs of obtaining a contract and (2) not adjust the consideration for the effects of a significant financing component for contracts with an original expected duration of one year or less.
According to the Company’s internal modeling, the ability to sell both Linea DNA IVT templates and Linea RNAP under the Linea IVT platform potentially increases the Company’s mRNA-related TAM by approximately 3x as compared to selling Linea DNA IVT templates alone, while also providing a more competitive offering to the mRNA manufacturing market.
According to the Company’s internal modeling, the ability to sell both LineaDNA IVT templates and Linea RNAP under the Linea IVT platform potentially increases the Company’s mRNA-related TAM by approximately 3-5x as compared to selling LineaDNA IVT templates alone, while also providing a more competitive offering to the mRNA manufacturing market.
Quality Grade Permitted Use Company Status GLP Research and pre-clinical discovery Currently available GMP for Starting Materials DNA critical starting materials for the production of mRNA therapies Planned availability first half of CY2024 (1) GMP DNA biologic, drug substance and/or drug product Planned availability first half of CY 2025 (1) ​ (1) Dependent on the availability of future financing.
Quality Grade Permitted Use Company Status GLP Research and pre-clinical discovery Currently available GMP for Starting Materials DNA critical starting materials for the production of mRNA therapies Planned availability in January 2025 (GMP Site 1) GMP DNA biologic, drug substance and/or drug product Planned availability first half of CY 2026 (1) (GMP Site 2) (1) Dependent on the availability of future financing.
We believe the key advantages of the Linea DNA platform include: ● Speed – Production of Linea DNA can be measured in terms of hours, not days and weeks as is the case with plasmid-based DNA manufacturing platforms. ● Scalability – Linea DNA production takes place on efficient bench-top instruments, allowing for rapid scalability in a minimal footprint. ● Purity – DNA produced via PCR is pure, resulting in only large quantities of only the target DNA sequence.
We believe the key advantages of the LineaDNA platform include: ● Speed – Production of LineaDNA can be measured in terms of hours, or days, as opposed to in terms of weeks as is the case with plasmid-based DNA manufacturing platforms. ● Scalability – LineaDNA production takes place on efficient bench-top instruments, allowing for rapid scalability in a minimal physical footprint. ● Purity – DNA produced via PCR is pure, resulting in only large quantities of only the target DNA sequence.
As of the third quarter of calendar year 2023, there were 3,866 gene, cell and RNA therapies in development from preclinical through pre-registration stages, almost all of which use DNA in their manufacturing process. (Source: ASGCT Gene, Cell & RNA Therapy Landscape: Q3 2023 Quarterly Report).
As of the third quarter of calendar year 2024, there were 4,099 gene, cell and RNA therapies in development from preclinical through pre-registration stages, almost all of which use DNA in their manufacturing process. (Source: ASGCT Gene, Cell & RNA Therapy Landscape: Q3 2024 Quarterly Report ).
Our current plan is: (i) through our Linea IVT platform and planned near term future GMP manufacturing capabilities for IVT templates to secure commercial-scale supply contracts with clinical and commercial mRNA and/or self-amplifying mRNA (“sa-RNA”) manufacturers for Linea DNA IVT templates and/or Linea RNAP as critical starting materials; (ii) to utilize our current GLP production capacity for non-IVT template applications to secure supply and/or development contracts with pre-clinical therapy developers that use DNA in their therapy manufacturing, and (iii) upon our development of our planned future Linea DNA production under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product, to convert existing and new Linea DNA customers into large-scale supply contracts to supply Linea DNA for clinical and commercial use as, or incorporation into, a biologic, drug substance and/or drug product in a wide range of nucleic acid therapies.
Our current plan is: (i) through our Linea IVT platform and planned near term future GMP manufacturing capabilities for IVT templates at GMP Site 1 to secure commercial-scale supply contracts with clinical and commercial mRNA and/or sa- RNA manufacturers for LineaDNA IVT templates and/or Linea RNAP as critical starting materials; (ii) to utilize our current GLP production capacity for non-IVT template applications to secure supply and/or development contracts with pre-clinical therapy developers that use DNA in their therapy manufacturing, and (iii) upon our development of our planned future LineaDNA production under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product at our planned GMP Site 2, and/or our upgrade to GMP Site 1, to convert existing and new LineaDNA customers into large-scale supply contracts to supply LineaDNA for clinical and commercial use as, or incorporation into, a biologic, drug substance and/or drug product in a wide range of nucleic acid therapies.
Off-Balance Sheet Arrangements As a requirement of our lease agreement for our corporate headquarters entered into during January, 2023, in lieu of a security deposit, we provided a standby letter of credit of $750,000.
Off-Balance Sheet Arrangements As a requirement of our lease agreement for our corporate headquarters entered into during January, 2023, in lieu of a security deposit, we provided a standby letter of credit of $750,000. The letter of credit is effective through January 2026.
Based on data generated by the Company, we believe the integrated Linea IVT platform offers the following advantages over conventional mRNA production to therapy developers and manufacturers: ● The prevention or reduction of double stranded RNA (“dsRNA”) contamination resulting in higher target mRNA yields with the potential to reduce downstream processing steps. dsRNA is a problematic immunogenic byproduct produced during conventional mRNA manufacture; ● delivery of IVT templates in as little as 14 days for milligram scale and 30 days for gram scale; and ● reduced mRNA manufacturing complexities.
Based on data generated by the Company and its collaborators, we believe the integrated Linea IVT platform offers the following advantages over conventional mRNA production to therapy developers and manufacturers: ● The prevention or reduction of dsRNA contamination resulting in higher target mRNA yields with the potential to reduce downstream processing steps. dsRNA is a problematic immunogenic byproduct produced during conventional mRNA manufacture; ● delivery of IVT templates in as little as 14 days for milligram scale and 30 days for gram scale; ● reduced mRNA manufacturing complexities; and ● potentially enabling mRNA manufactures to produce mRNA drug substance in less than 45 days.
Product Revenues Our PCR-produced linear DNA product revenues are accounted for/recognized in accordance with contracts with customers. We recognize revenue upon satisfying our promises to transfer goods or services to customers under the terms of our contracts.
Product Revenues The Company’s PCR-produced linear DNA product revenues are accounted for/recognized in accordance with contracts with customers. The Company recognizes revenue upon satisfying its promises to transfer goods or services to customers under the terms of its contracts.
Through our acquisition of Spindle, we recently launched our Linea IVT platform, which combines Spindle’s proprietary high-performance RNA polymerase (“RNAP”), now marketed by the Company as Linea RNAP, with our enzymatically produced Linea DNA IVT templates. We believe the Linea IVT platform enables our customers to make better mRNA, faster.
Through our acquisition of Spindle, we launched our Linea IVT platform in July 2023, which combines Spindle’s proprietary high-performance RNAP, now marketed by the Company as Linea RNAP, with our enzymatically produced LineaDNA IVT templates. We believe the Linea IVT platform enables our customers to make better mRNA, faster.
In addition, the Linea DNA platform can produce a wide range of complex DNA sequences that are difficult to produce via plasmid-based DNA production platforms. These complex sequences include inverted terminal repeats (ITRs) and 40 Table of Contents long homopolymers such as polyadenylation sequences (poly (A) tail) important for gene therapy and messenger RNA (“mRNA”) therapies, respectively.
In addition, the LineaDNA platform can produce a wide range of complex DNA sequences that are difficult to produce via plasmid-based DNA production platforms. These complex sequences include ITRs and long homopolymers such as polyadenylation sequences (poly (A) tail) important for gene therapy and mRNA therapies, respectively.
Research and Development Services We record revenue for our research and development contracts using the over-time revenue recognition model. Revenue is primarily measured using the cost-to-cost method, which we believe best depicts the transfer of control to the customer.
Research and Development Services The Company records revenue for its research and development contracts using the over-time revenue recognition model. Revenue is primarily measured using the cost-to-cost method, which the Company believes best depicts the transfer of control to the customer.
Based on the closing bid price of our common stock for the thirty (30) consecutive business days from October 18, 2023 to November 30, 2023, we no longer meet the Minimum Bid Price Requirement. The Notice does not impact our listing on The Nasdaq Capital Market at this time.
Based on the closing bid price of the Company’s Common Stock for the thirty-one (31) consecutive business days from September 27, 2024 to November 11, 2024, we no longer meet the Minimum Bid Price Requirement. The Notice does not impact our listing on The Nasdaq Capital Market at this time.
We invoice customers upon shipment, and our collection terms range, on average, from 30 to 60 days. Authentication Services We recognize revenue for authentication services upon satisfying our promises to provide services to customers under the terms of our contracts.
The Company invoices customers upon shipment, and its collection terms range, on average, from 30 to 60 days. Authentication Services The Company recognizes revenue for authentication services upon satisfying its promises to provide services to customers under the terms of its contracts.
To qualify, we would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.
To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and would need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary, no later than ten (10) business days prior to May 12, 2025.
Further, we believe that Linea DNA is also substitutable for plasmid DNA in the following nucleic acid-based therapies: ● viral vector manufacturing for in vivo and ex vivo gene editing; ● clustered regularly interspaced short palindromic repeats (“CRISPR”)-mediated gene therapy; and ● non-viral gene therapy.
Further, we believe that LineaDNA is also substitutable for plasmid DNA in the following nucleic acid-based therapies: ● viral vector manufacturing for in vivo and ex vivo gene editing; ● CRISPR-mediated gene therapy; and ● non-viral gene therapy.
Unwanted DNA sequences such as the plasmid backbone and antibiotic resistance genes, inherent to plasmid DNA, are not present in Linea DNA. ● Simplicity – The production of Linea DNA is streamlined relative to plasmid-based DNA production.
Unwanted DNA sequences and contaminates such as the plasmid backbone, antibiotic resistance genes and host bacterial DNA, as well as endotoxin, which all inherent to plasmid DNA, are not present in LineaDNA. Simplicity – The production of LineaDNA is streamlined relative to plasmid-based DNA production.
While we continue to support several safeCircle customers, we are currently observing a marked decrease in market demand for COVID-19 testing, resulting in significant reduced revenues. We expect future demand for COVID-19 testing to continue to be reduced, and we intend to pursue future COVID-19 testing opportunities on an opportunistic basis.
While we continue to support several safeCircle customers, we are currently observing a marked decrease in market demand for COVID-19 testing, resulting in significantly reduced revenues. We expect future demand for COVID-19 testing to continue to be reduced.
Comparison of the Fiscal Year Ended September 30, 2023 to the Fiscal Year Ended September 30, 2022 Revenues Product revenues For the twelve-month periods ended September 30, 2023 and 2022, we generated $1,218,185 and $1,882,804 in revenues from product sales, respectively.
Comparison of the Fiscal Year Ended September 30, 2024 to the Fiscal Year Ended September 30, 2023 Revenues Product revenues For the fiscal year ended September 30, 2024 and 2023, we generated $1,074,813 and $1,218,185 in revenues from product sales, respectively.
However, if it appears to the staff of Nasdaq (the “Staff”) that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq would notify us that our securities would be subject to delisting.
However, if it appears to the Staff that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq would notify the Company that its securities would be subject to delisting.
We have successfully validated internally our pharmacogenomics testing services (the “PGx Testing Services”). Our PGx Testing Services will utilize a 120-target PGx panel test to evaluate the unique genotype of a specific patient to help guide individual drug therapy decisions.
We have successfully internally validated our PGx Testing Services. Our PGx Testing Services utilizes a 120-target PGx panel test to evaluate the unique genotype of a specific patient to help guide the patient’s healthcare provider in making individual drug therapy decisions.
The Pre-Funded Warrants have an exercise price of $0.0001 per share and were immediately exercisable and can be exercised at any time after their original issuance until such Pre-Funded Warrants are exercised in full. Each Share was sold at an offering price of $2.80 and each Pre-Funded Warrant was sold at an offering price of $2.7999.
The RDO Pre-Funded Warrants had an exercise price of $0.0001 per share and are immediately exercisable and can be exercised at any time after their original issuance until such RDO Pre-Funded Warrants are exercised in full.
Therapeutic DNA Production Services Through LRx we are developing and commercializing our Linea DNA and Linea IVT platforms. Linea DNA Platform Our Linea DNA platform is our core enabling technology, and enables the rapid, efficient, and large-scale cell-free manufacture of high-fidelity DNA sequences for use in the manufacturing of a broad range of nucleic acid-based therapeutics.
LineaDNA Platform Our LineaDNA platform is our core enabling technology, and enables the rapid, efficient, and large-scale cell-free manufacture of high-fidelity DNA sequences for use in the manufacturing of a broad range of nucleic acid-based therapeutics.
As of the 3rd quarter of calendar 2023, there were almost 400 mRNA therapies under development, with the large majority of these therapies (68%) in the preclinical stage (Source: ASGCT Gene, Cell & RNA Therapy Landscape: Q3 2023 Quarterly Report).
As of the third quarter of calendar 2024, there were over 450 mRNA therapies under development, with the majority of these therapies (67%) in the preclinical stage (Source: ASGCT Gene, Cell & RNA Therapy Landscape: Q3 2024 Quarterly Report).
Product Research and Development We anticipate spending approximately $3,000,000 for product research and development activities during the next twelve months. We plan to focus these activities on the further development and commercialization of our Therapeutic DNA Production services, including without limitation, research and development activities relating to our Linea DNA and Linea IVT platforms.
We plan to focus these activities on the further development and commercialization of our Therapeutic DNA Production services, including without limitation, research and development activities relating to our LineaDNA and Linea IVT platforms.
Until we complete our GMP facility to produce DNA critical starting materials (DNA IVT templates) for mRNA manufacturing, we will not be able to realize significant revenues from this business. We estimate the cost of creating the critical starting materials fit-for-purpose manufacturing facility will be approximately $1.5 million.
Until we complete our GMP Site 1 to produce DNA critical starting materials (DNA IVT templates) for mRNA manufacturing, we will not be able to realize significant revenues from this business. We estimate the remaining CAPEX costs to creating GMP Site 1 will be less than $0.30 million.
Our current growth strategy is to primarily focus our resources on the further development, commercialization, and customer adoption of our Therapeutic DNA Production Services, including the expansion of our contract development and manufacturing operation 39 Table of Contents (“CDMO”) for the manufacture of synthetic DNA for use in the production of nucleic acid-based therapies, and to further expand and commercialize our MDx Testing Services through genetic testing.
Our current growth strategy is to primarily focus our resources on the further development, commercialization, and customer adoption of our Therapeutic DNA Production Services, including the expansion of our CDMO for the manufacture of synthetic DNA and associated enzymes for use in the production of nucleic acid-based therapies.
Our PGx Testing Services are designed to interrogate DNA targets on over 33 genes and provide genotyping information relevant to certain cardiac, mental health, oncology, and pain management drug therapies. Our PGx Testing Services cannot commence until we receive approval from NYSDOH. On March 22, 2023, we submitted our validation package to the NYSDOH for our PGx Testing Services.
Our PGx Testing Services are designed to interrogate DNA targets on over 33 genes and provide genotyping information relevant to certain cardiac, mental health, oncology, and pain management drug therapies. On June 12, 2024 we received full approval from NYSDOH for our PGx Testing Services.
Introduction We are a biotechnology company developing and commercializing technologies to produce and detect deoxyribonucleic acid (“DNA”) and ribonucleic acid (“RNA”).
Introduction We are a biotechnology company developing and commercializing technologies to produce and detect DNA and RNA.
The UFLPA establishes that any goods mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (“XUAR”) of the People’s Republic of China are not entitled to entry to the United States.
The UFLPA signed into law on December 23, 2021 establishes that any goods mined, produced, or manufactured wholly or in part in the XUAR of the People’s Republic of China are not entitled to entry to the United States.
Unrealized gain on change in fair value of the warrants classified as a liability Unrealized gain on change in fair value of warrants classified as a liability for the twelve-month periods ended September 30, 2023 and 2022 of $854,400and $17,999,521, respectively, relates to the change in fair value of the warrants that are classified as a liability.
Unrealized gain on change in fair value of the warrants classified as a liability Unrealized gain on change in fair value of warrants classified as a liability for the fiscal year ended September 30, 2024 and 2023 of $9,430,000 and $854,400, respectively, relates to the change in fair value of the warrants that are classified as a liability.
Due to what we believe are the Linea DNA platform’s numerous advantages over legacy nucleic acid-based therapeutic manufacturing platforms, we believe this large number of therapies under development represents a substantial market opportunity for the Linea DNA platform to supplant legacy manufacturing methods in the manufacture of nucleic acid-based therapies.
Due to what we believe are the LineaDNA platform’s numerous advantages over legacy nucleic acid-based therapeutic manufacturing platforms, we believe this large number of therapies under development represents a substantial market opportunity for the LineaDNA platform to supplant legacy manufacturing methods in the manufacture of nucleic acid-based therapies although no assurance can be given that we will be successful in exploiting this market opportunity. 37 Table of Contents We believe our LineaDNA platform holds several important advantages over existing cell-based plasmid DNA manufacturing platforms.
The letter of credit is effective through January 2026. 50 Table of Contents Inflation The effect of inflation on our revenue and operating results was not significant during the fiscal years ended September 30, 2023 and 2022.
Inflation The effect of inflation on our revenue and operating results was not significant during the fiscal years ended September 30, 2024 and 2023.
We recognize revenue either at the point in time or over the period of time that performance obligations to customers are satisfied. Our contracts with customers may include multiple performance obligations (e.g., taggants, maintenance, authentication services, research and development services, etc.). For such arrangements, we allocate revenues to each performance obligation based on their relative standalone selling price.
The Company recognizes revenue either at the point in time or over the period of time that performance obligations to customers are satisfied. The Company’s contracts with customers may include multiple performance obligations (e.g. taggants, maintenance, authentication services, research and development services, etc.).
Preclinical studies conducted by the Company have shown that Linea DNA is substitutable for plasmid DNA in numerous nucleic acid-based therapies, including: ● DNA vaccines; ● DNA templates to produce RNA, including messenger RNA (“mRNA”) therapeutics; and ● adoptive cell therapy (CAR-T) manufacturing.
Preclinical studies conducted by the Company have shown that LineaDNA is substitutable for plasmid DNA in numerous nucleic acid-based therapies, including: ● DNA vaccines; ● DNA templates to produce various types of RNA, including non-replicating and self-amplifying mRNA therapeutics; ● CAR-T manufacturing, and ● HDR mediated gene editing.
Clinical laboratory service revenues For the twelve-month periods ended September 30, 2023 and 2022, we generated $11,152,392 and $15,526,735 in revenues from clinical laboratory testing services, respectively. Clinical laboratory service revenue decreased by $4,374,343 or 28% for the twelve-month period ended September 30, 2023 as compared to the prior fiscal year.
Clinical laboratory service revenues For the fiscal year ended September 30, 2024 and 2023, we generated $1,317,930 and $11,152,392 in revenues from clinical laboratory testing services, respectively. Clinical laboratory service revenue decreased by $9,834,462 or 88% for the fiscal year ended September 30, 2024 as compared to the prior fiscal year.
If we were to expand the facility to enable GMP production of Linea DNA for use as, or incorporation into, a biologic, drug substance and/or drug product, the cost may be up to approximately $7 million which would require additional funding. We anticipate that the fit-for-purpose manufacturing facility would be created within our existing laboratory space.
If we were to expand our facilities to enable GMP production of LineaDNA for use as, or incorporation, into a biologic, drug substance and/or drug product as planned for GMP Site 2, the additional CAPEX may be up to approximately $10 million which would require additional funding.
We expect future demand for COVID-19 testing to continue to be reduced. We expect future growth in revenues to be derived from our Therapeutic DNA Production Services and our MDx testing services, as the latter transitions to a focus on genetic testing.
We expect future growth in revenues to be derived from our Therapeutic DNA Production Services and our MDx testing services, as the latter transitions to a focus on genetic testing. We have continued to incur expenses in expanding our business to meet current and anticipated future demand. We have limited sources of liquidity.
As of September 30, 2023, we had working capital of $5,281,149.
As of September 30, 2024, we had working capital of $5,649,546.
Our business plan is to leverage growing consumer and governmental awareness for product traceability catalyzed by the UFLPA to expand our existing partnerships and seek new partnerships for our DNA Tagging and Security Products and Services with a focus on cotton.
Our current business plan is to leverage consumer and governmental awareness for product traceability to expand our existing partnerships and seek new partnerships for our DNA Tagging and Security Products and Services with a focus on cotto, though this business plan could change based on the outcome of the Company’s strategic review of its business segments.
Product revenue decreased by $664,619 or 35% for the twelve-month period ended September 30, 2023 as compared to the prior fiscal year.
Product revenue decreased by $143,372 or 12% for the fiscal year ended September 30, 2024 as compared to the prior fiscal year.
The Company incurred a net loss of $10,022,916 and generated negative operating cash flow of $6,217,677 for the twelve-month period ended September 30, 2023.These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements.
The Company incurred a net loss of $7,088,306 for the fiscal year ended September 30, 2024.These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements.
In response to this demand, the continued growth of the mRNA therapeutic market, and the unique abilities of the Linea DNA platform, the Company acquired Spindle in July 2023 to potentially increase its mRNA-related total addressable market (“TAM”).
In response to this demand, the continued growth of the mRNA therapeutic market, and the unique abilities of the LineaDNA platform, the Company acquired Spindle in July 2023 to potentially increase its mRNA-related TAM to include the manufacture and sale of RNAP for use in conjunction with our LineaDNA IVT templates.
On June 17, 2022, the UFLPA additionally listed DNA tagging and isotopic analysis as evidence that importers may use to potentially prove that a good did not originate in XUAR.
On June 17, 2022, the UFLPA additionally listed DNA tagging and isotopic analysis as evidence that importers may use to potentially prove that a good did not originate in XUAR. In July of 2024, the Company announced a multi-year commercialization agreement for its CertainT platform with Indus Group, a multinational apparel/textile manufacturing and sourcing company.
In the event of such a notification, we may appeal the Staff’s determination to delist our securities, but there can be no assurance the Staff would grant our request for continued listing.
In the event of such a notification, the Company may appeal the Staff’s determination to delist its securities, but there can be no assurance the Staff would grant the Company’s request for continued listing. As previously reported on its current report on Form 8-K on October 31, 2024, the Company closed on such date the October 2024 Offering.
The incremental change in fair value of these warrants as a result of the triggering event was $110,105 and is recorded as a deemed dividend in the consolidated statement of operations for the twelve-month period ended September 30, 2022.
The incremental change in fair value as a result of the modification for the warrants that are recorded to equity was $155,330 and is recorded as a deemed dividend in the condensed consolidated statement of operations for the nine-month period ended June 30, 2024.
Net Loss Net loss decreased $1,752,857, or 21% to $10,022,916 for the fiscal year ended September 30, 2023 compared to $8,270,059 for the fiscal year ended September 30, 2022, due to the factors noted above.
Net Loss Net loss decreased $2,934,610, or 29% to $7,088,306 for the fiscal year ended September 30, 2024 compared to $10,022,916 for the fiscal year ended September 30, 2023, due to the factors noted above.
Revenue Recognition We follow Financial Accounting Standards Board (“FASB”) Accounting Standards Codifications (“ASC”), Revenue Recognition (“ASC 606” or “Topic 606”). We measure revenue at the amounts that reflect the consideration to which we are expected to be entitled in exchange for transferring control of goods and services to customers.
Revenue Recognition We follow FASB issued accounting standard updates which clarify the principles for recognizing revenue arising from contracts with customers (“ASC 606” or “Topic 606”). The Company measures revenue at the amounts that reflect the consideration to which it is expected to be entitled in exchange for transferring control of goods and services to customers.
Food and Drug Administration (“FDA”) to ensure pharmaceutical quality. Drug substances are the pharmaceutically active components of drug products.
GMP is a quality standard used globally and by the FDA to ensure pharmaceutical quality. Drug substances are the pharmaceutically active components of drug products.
Using polymerase chain reaction (“PCR”) to enable the production and detection of DNA and RNA, we currently operate in three primary business markets: (i) the enzymatic manufacture of synthetic DNA for use in the production of nucleic acid-based therapeutics (including biologics and drugs) and, through our recent acquisition of Spindle Biotech, Inc.
Using PCR to enable the production and detection of DNA and RNA, we currently operate in three primary business markets: (i) the enzymatic manufacture of synthetic DNA for use in the production of nucleic acid-based therapeutics (including biologics and drugs), as well as the development and sale of a proprietary RNA polymerase RNAP for use in the our Therapeutic DNA Production Services; (ii) the detection of DNA and RNA in our MDx Testing Services; and (iii) the manufacture and detection of DNA for our DNA Tagging and Security Products and Services.
We have continued to incur expenses in expanding our business to meet current and anticipated future demand. We have limited sources of liquidity. We will continue to update our business strategy and monitor the use of our resources regarding our various business markets.
We will continue to update our business strategy and monitor the use of our resources regarding our various business markets.
For contracts where the total costs cannot be estimated, revenues are recognized for the actual costs incurred during a period until the remaining costs to complete a contract can be estimated. We have elected not to disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.
For contracts where the total costs cannot be estimated, revenues are recognized for the actual costs incurred during a period until the remaining costs to complete a contract can be estimated.
Once amplified, the DNA must be separated from the living cells and other process contaminants via multiple rounds of purification, adding further complexity and costs. Unlike plasmid-based DNA manufacturing, the Linea DNA platform does not require living cells and instead amplifies DNA via the enzymatic process of PCR.
Plasmid-based DNA manufacturing is based on the complex, costly and time-consuming biological process of amplifying DNA in living bacterial cells. Once amplified, the DNA must be separated from the living cells and other process contaminants via multiple rounds of purification, adding further complexity, costs and regulatory burdens.
The Company currently manufactures Linea DNA pursuant to Good Laboratory Practices (“GLP”) and, subject to the availability of future financing, is creating a fit for purpose manufacturing facility within our current Stony Brook, NY laboratory space capable of producing Linea DNA IVT templates under Good Manufacturing Practices (“GMP”) suitable for use as a starting material for clinical and commercial mRNA therapeutics, with a planned completion date in the first half of calendar year 2024.
We are currently manufacturing LineaDNA pursuant to GLP and, are in the final stages of creating GMP Site 1, a fit for purpose manufacturing facility within our current Stony Brook, NY laboratory space capable of producing LineaDNA IVT templates under GMP suitable for use as a critical starting material for clinical and commercial mRNA therapeutics, with an anticipated completion date in January 2025.
Warrant Liabilities We evaluated the Common Warrants and the Series A and Series B Warrants (collectively the “Warrants) in accordance with ASC 480 “Distinguishing Liabilities from Equity” and ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” and concluded that due to the terms of the warrant agreements, the instruments do not qualify for equity treatment.
The Company has elected not to disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. 45 Table of Contents Warrant Liabilities The Company evaluates its warrants issued the “Warrants) in accordance with ASC 480 “Distinguishing Liabilities from Equity” and ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” and concluded that due to the terms of certain of its warrant agreements, the instruments do not qualify for equity treatment.
The Company also plans to offer Linea DNA materials manufactured under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product, with availability expected during the first half of calendar year 2025, dependent upon future funding. GMP is a quality standard used globally and by the U.S.
We also plan to offer additional capacity for LineaDNA IVT templates as well as capacity for LineaDNA materials 39 Table of Contents manufactured under GMP suitable for use as, or incorporation into, a biologic, drug substance and/or drug product at GMP Site 2, with availability expected during the first half of calendar year 2026, dependent upon the availability of future funding and customer demand.
The Notice states that we have 180 calendar days, or until May 29, 2024, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share for a minimum of ten (10) consecutive business days.
To regain compliance, the bid price of the Company’s Common Stock must have a closing bid price of at least $1.00 per share for a minimum of ten (10) consecutive business days, with a longer period potentially required by the Staff.
Additionally, we had a net decrease in operating assets of $4,091,112 and a net decrease in operating liabilities of $1,644,485. Cash used in investing activities of $1,095,808 was primarily for cash paid of $1,062,360, for the Spindle asset purchase. The Company has recurring net losses, which have resulted in an accumulated deficit of $302,447,147 as of September 30, 2023.
Additionally, we had a net increase in operating assets of $641,805 and a net decrease in operating liabilities of $498,094. Cash used in investing activities of $407,904 was primarily for cash paid for property, plant and equipment. The Company has recurring net losses, which have resulted in an accumulated deficit of $309,672,755 as of September 30, 2024.
This increase relates to higher average cash balances in our interest-bearing accounts, coupled with increased interest rates. Other income (expense), net Other income (expense), net for the twelve-month periods ended September 30, 2023 and 2022, was income of $642 and expense of $47,305, respectively.
Interest income Interest income for the fiscal year ended September 30, 2024, increased to $176,301 from $75,332 in the same period of 2023. This increase relates to higher average cash balances in our interest-bearing accounts, coupled with increased interest rates.
The Company believes that the mRNA market is in a nascent stage that represents a large growth opportunity for the Company via the production of DNA IVT templates to produce mRNA therapies. In August 2022, the Company launched DNA IVT templates manufactured via its Linea DNA platform and has since secured proof of concept contracts with numerous mRNA manufacturing customers.
The Company believes that the mRNA market is in a nascent stage that represents a large growth opportunity for the Company via the production and supply of DNA critical starting materials and RNAP to produce mRNA therapies. 38 Table of Contents In August 2022, the Company launched DNA IVT templates manufactured via its LineaDNA platform that have resulted in evaluations of the Company’s IVT templates by numerous therapeutic developers and CDMOs in the United States, Europe and the Asia-Pacific.
Recently published studies show that population-scale PGx enabled medication management can significantly reduce overall population healthcare costs, reduce adverse drug events, and increase overall population wellbeing. These benefits can result in significant cost savings to large entities and self-insured employers, the latter accounting for approximately 65% of all U.S. employers in 2022.
Recently published studies show that population-scale PGx enabled medication management can significantly reduce overall population healthcare costs, reduce adverse drug events, and increase overall population wellbeing.
Selling, General and Administrative Selling, general and administrative expenses for the twelve-month period ended September 30, 2023 decreased by $2,345,716 or 16% to $12,751,644 from $15,097,360 in the twelve-month period ended September 30, 2022.
Selling, General and Administrative Selling, general and administrative expenses for the fiscal year ended September 30, 2024 decreased by $1,303,750 or 10% to $11,447,894 from $12,751,644 in the fiscal year ended September 30, 2023.
These performance obligations are satisfied at the point in time our services are complete, which in nearly all cases is when the authentication report is released to the customer. 47 Table of Contents Clinical Laboratory Testing Services We record revenue for our clinical laboratory testing service contracts, which includes our COVID-19 Testing Services, upon satisfying our promise to provide services to customers under the terms of our contracts.
These performance obligations are satisfied at the point in time the Company services are complete, which in nearly all cases is when the authentication report is released to the customer.
The Linea DNA platform is simple and can rapidly produce very large quantities of DNA without the need for complex purification steps.
Unlike plasmid-based DNA manufacturing, the LineaDNA platform does not require living cells and instead amplifies DNA via the enzymatic process of PCR. The LineaDNA platform is simple and can rapidly produce very large quantities of DNA utilizing a cell-free process without the need for complex purification steps.
As such, the Warrants were recorded as a liability on the consolidated balance sheet and measured at fair value at inception and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the consolidated statement of operations in the period of change. 48 Table of Contents Nasdaq Delisting Notice On December 1, 2023, we received written notice from the Listing Qualifications Department of Nasdaq notifying us that we are not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market.
As such, the Common Warrants, Series A Warrants and Private Common Warrants were recorded as a liability on the consolidated balance sheet and measured at fair value at inception and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the condensed consolidated statement of operations in the period of change.
We will continue to update our business strategy and monitor the use of our resources regarding our various business markets. In addition, we expect that based on available opportunities and our beliefs regarding future opportunities, we will continue to modify and refine our business strategy, which could include restructuring our business.
We will continue to update our business strategy and monitor the use of our resources regarding our various business segments.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Information requested by this Item is not applicable as we are electing scaled disclosure requirements available to Smaller Reporting Companies with respect to this Item. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See pages F-1 through F-30 following the Exhibit Index. ITEM 9.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Information requested by this Item is not applicable as we are electing scaled disclosure requirements available to Smaller Reporting Companies with respect to this Item. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See pages F-1 through F-32 following the Exhibit Index. ITEM 9.

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