Applied DNA Sciences (APDN) 10-Q 6 Feb 20 2020 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Dec. 31, 2019	Feb. 03, 2020
Document and Entity Information [Abstract]
Entity Registrant Name	APPLIED DNA SCIENCES INC
Entity Central Index Key	0000744452
Trading Symbol	APDN
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Current Fiscal Year End Date	--09-30
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		3,485,399
Document Type	10-Q
Document Period End Date	Dec. 31, 2019
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Dec. 31, 2019	Sep. 30, 2019
Current assets:
Cash and cash equivalents	$ 8,662,853	$ 558,988
Accounts receivable, net of allowance of $4,500 at December 31, 2019 and September 30, 2019, respectively	273,969	839,951
Inventories	82,683	142,629
Prepaid expenses and other current assets	618,077	604,740
Total current assets	9,637,582	2,146,308
Property and equipment, net	184,101	226,221
Other assets:
Deferred offering costs		109,698
Deposits	62,350	62,351
Goodwill	285,386	285,386
Intangible assets, net	702,412	734,771
Total Assets	10,871,831	3,564,735
Current liabilities:
Accounts payable and accrued liabilities	1,053,554	1,616,997
Deferred revenue	455,051	628,993
Total current liabilities	1,508,605	2,245,990
Long term accrued liabilities	659,692	621,970
Secured convertible notes payable, net of debt issuance costs	1,479,254	1,442,497
Secured convertible notes payable, recorded at fair value		102,777
Total liabilities	3,647,551	4,413,234
Commitments and contingencies
Applied DNA Sciences, Inc. Stockholders' Equity (Deficit):
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; -0 shares issued and outstanding as of December 31, 2019 and September 30, 2019 respectively
Common stock, par value $0.001 per share; 500,000,000 shares authorized; 3,485,399 and 1,200,399 shares issued and outstanding as of December 31, 2019 and September 30, 2019, respectively	3,485	1,200
Additional paid in capital	266,699,007	255,962,930
Accumulated deficit	(259,471,142)	(256,805,589)
Applied DNA Sciences, Inc. stockholders' equity (deficit):	7,231,350	(841,459)
Noncontrolling interest	(7,070)	(7,040)
Total equity (deficit)	7,224,280	(848,499)
Total liabilities and (deficit) equity	10,871,831	3,564,735
Series A Preferred Stock [Member]
Applied DNA Sciences, Inc. Stockholders' Equity (Deficit):
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; -0 shares issued and outstanding as of December 31, 2019 and September 30, 2019 respectively
Series B Preferred Stock [Member]
Applied DNA Sciences, Inc. Stockholders' Equity (Deficit):
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; -0 shares issued and outstanding as of December 31, 2019 and September 30, 2019 respectively

CONDENSED CONSOLIDATED BALANC_2

CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)	Dec. 31, 2019	Sep. 30, 2019
Allowance on accounts receivable (in dollars)	$ 4,500	$ 4,500
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	3,485,399	1,200,399
Common stock, shares outstanding	3,485,399	1,200,399
Series A Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Series B Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Revenues:
Total revenues	$ 633,519	$ 884,322
Cost of revenues	232,031	153,485
Operating expenses:
Selling, general and administrative	2,373,413	3,082,380
Research and development	564,426	709,564
Depreciation and amortization	75,067	135,052
Total operating expenses	3,012,906	3,926,996
LOSS FROM OPERATIONS	(2,611,418)	(3,196,159)
Other (expense) income:
Interest (expense) income, net (including related party of $23,470 for the three month period ended December 31, 2018)	(29,091)	(31,611)
Other expense, net	(22,232)	(6,550)
Loss before provision for income taxes	(2,662,741)	(3,234,320)
Provision for income taxes	0	0
NET LOSS	(2,662,741)	(3,234,320)
Less: Net loss attributable to noncontrolling interest	30
NET LOSS attributable to Applied DNA Sciences, Inc.	(2,662,711)	(3,234,320)
Deemed dividend related to warrant modifications	(2,842)
NET LOSS applicable to common stockholders	$ (2,665,553)	$ (3,234,320)
Net loss per share applicable to common stockholders-basic and diluted	$ (1.12)	$ (4.25)
Weighted average shares outstanding-basic and diluted (in shares)	2,380,564	761,769
Product
Revenues:
Total revenues	$ 237,870	$ 321,875
Service
Revenues:
Total revenues	$ 395,649	$ 562,447

CONDENSED CONSOLIDATED STATEM_2

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parentheticals)	3 Months Ended
	Dec. 31, 2018USD ($)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Interest (expense) income, related party interest	$ 23,470

CONDENSED CONSOLIDATED STATEM_3

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Noncontrolling Interest [Member]	Total
Balance at Sep. 30, 2018	$ 753	$ 249,119,833	$ (248,366,083)		$ 754,503
Balance (in shares) at Sep. 30, 2018	752,802
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued in public offering, net of offering costs	$ 137	2,262,234			2,262,371
Common stock issued in public offering, net of offering costs (in shares)	137,500
Impact of adoption of new accounting pronouncements included in accumulated deficit			493,223		493,223
Stock based compensation expense		490,244			490,244
Net loss			(3,234,320)		(3,234,320)
Balance at Dec. 31, 2018	$ 890	251,872,311	(251,107,180)		766,021
Balance (in shares) at Dec. 31, 2018	890,302
Balance at Sep. 30, 2019	$ 1,200	255,962,930	(256,805,589)	$ (7,040)	$ (848,499)
Balance (in shares) at Sep. 30, 2019	1,200,399				1,200,399
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued in public offering, net of offering costs	$ 2,285	10,527,745			$ 10,530,030
Common stock issued in public offering, net of offering costs (in shares)	2,285,000
Deemed dividend - warrant repricing		2,842	(2,842)
Stock based compensation expense		205,490			205,490
Net loss			(2,662,711)	(30)	(2,662,741)
Balance at Dec. 31, 2019	$ 3,485	$ 266,699,007	$ (259,471,142)	$ (7,070)	$ 7,224,280
Balance (in shares) at Dec. 31, 2019	3,485,399				3,485,399

CONDENSED CONSOLIDATED STATEM_4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities:
Net loss	$ (2,662,741)	$ (3,234,320)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	75,067	135,052
Stock based compensation expense	205,490	490,244
Amortization of debt issuance costs	6,157	4,492
Provision for bad debts	0	(8,633)
Change in operating assets and liabilities:
Accounts receivable	565,982	879,807
Inventories	59,946	(3,920)
Prepaid expenses, other current assets and deposits	(13,337)	6,314
Accounts payable and accrued liabilities	(793,895)	198,713
Deferred revenue	(173,942)	18,583
Net cash used in operating activities	(2,731,273)	(1,513,668)
Cash flows from investing activities:
Purchase of property and equipment	0	(52,051)
Net cash used in investing activities	0	(52,051)
Cash flows from financing activities:
Net proceeds from secured convertible promissory notes, related parties	0	550,000
Repayment of secured convertible promissory notes	(107,802)	0
Net proceeds from sale of common stock and warrants	10,942,940	2,493,999
Net cash provided by financing activities	10,835,138	3,043,999
Net increase in cash and cash equivalents	8,103,865	1,478,280
Cash and cash equivalents at beginning of period	558,988	1,659,564
Cash and cash equivalents at end of period	8,662,853	3,137,844
Supplemental Disclosures of Cash Flow Information:
Cash paid during year for interest	0	0
Cash paid during year for income taxes	0	0
Non-cash investing and financing activities:
Interest paid in kind	35,625	0
Deemed dividend-warrant repricing	2,842	0
Impact of adoption of new accounting pronouncements included in accumulated deficit	0	493,223
Deferred offering costs reclassified to additional paid in capital	109,698	0
Public offering costs incurred, and included in accounts payable	$ 303,212	$ 231,520

SUMMARY OF ACCOUNTING POLICIES

SUMMARY OF ACCOUNTING POLICIES	3 Months Ended
	Dec. 31, 2019
SUMMARY OF ACCOUNTING POLICIES
SUMMARY OF ACCOUNTING POLICIES	NOTE A — SUMMARY OF ACCOUNTING POLICIES General The accompanying condensed consolidated financial statements as of December 31, 2019 and for the three month periods ended December 31, 2019 and 2018 are unaudited. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and are presented in accordance with the requirements of Regulation S-X of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10‑Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended December 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2020. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the fiscal year ended September 30, 2019 and footnotes thereto included in the Annual Report on Form 10‑K of Applied DNA Sciences, Inc. (the “Company”) filed with the SEC on December 12, 2019, as amended. The condensed consolidated balance sheet as of September 30, 2019 contained herein has been derived from the audited consolidated financial statements as of September 30, 2019 but does not include all disclosures required by GAAP. Business and Basis of Presentation The Company is principally devoted to developing and marketing linear DNA technology solutions in the United States, Europe and Asia. These solutions are used in, among other things, supply chain security, brand protection, law enforcement and drug and biologic applications. To date, the Company has produced limited recurring revenues from its products and services and has incurred expenses and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment and development of a biotechnology company. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, APDN (B.V.I.) Inc., Applied DNA Sciences Europe Limited, and Applied DNA Sciences India Private Limited, and its majority-owned subsidiary, LineaRx, Inc. (“LRx”). Significant inter-company transactions and balances have been eliminated in consolidation. To facilitate comparison of information across periods, certain reclassifications have been made to prior year amounts to conform to the current year’s presentation. On October 31, 2019, the Company filed a Certificate of Amendment of its Certificate of Incorporation with the Secretary of State of the State of Delaware that effected a one-for-forty (1:40) reverse stock split of its common stock, par value $.001 per share (“Common Stock”), effective November 1, 2019. All warrant, option, share, and per share information in the condensed consolidated financial statements gives retroactive effect to a one-for-forty reverse stock split that was affected on November 1, 2019. Inventories Inventories, which consist primarily of raw materials, and finished goods, are stated at the lower of cost or net realizable value, with cost determined by using the first-in, first-out (FIFO) method. Revenue Recognition In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting standard updates which clarified principles for recognizing revenue arising from contracts with customers (“ASC 606” or “Topic 606”) and superseded most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue standard is that an entity recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 applies a five-step model for revenue measurement and recognition and also requires increased disclosures including the nature, amount, timing, and uncertainty of revenue and cash flows related to contracts with clients. The Company measures revenue at the amounts that reflect the consideration to which it is expected to be entitled in exchange for transferring control of goods and services to customers. The Company recognizes revenue either at the point in time or over the period of time that performance obligations to customers are satisfied. The Company’s contracts with customers may include multiple performance obligations (e.g. taggants, maintenance, authentication services, research and development services, etc.). For such arrangements, the Company allocates revenues to each performance obligation based on their relative standalone selling price. The Company recognizes revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration it expects to receive for those goods or services, including any variable consideration. Due to the short-term nature of the Company’s contracts with customers, it has elected to apply the practical expedients under Topic 606 to: (1) expense as incurred, incremental costs of obtaining a contract and (2) not adjust the consideration for the effects of a significant financing component for contracts with an original expected duration of one year or less. Product Revenues and Authentication Services The Company’s PCR-produced linear DNA products, including molecular taggants are manufactured in accordance with contracts with customers. The Company recognizes revenue upon satisfying its promises to transfer goods or services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time the Company transfers control of the goods to the customer, which in nearly all cases is when title to and risk of loss of the goods transfer to the customer. The timing of transfer of title and risk of loss is dictated by customary or explicitly stated contract terms. The Company does not consider payment terms a performance obligation for customers with contractual terms that are one year or less and has elected the practical expedient. Nearly all of the Company’s sales contracts reflect market pricing at the time the contract is executed, or are one year or less, and generally provide for shipment within 30 to 60 days after the price has been agreed upon with the customer. The Company invoices customers upon shipment, and its collection terms range, on average from 30 to 60 days. The cotton ginning season in the United States takes place between September and March each year; therefore, revenues from these customer contracts may be seasonal and are recognized primarily during the first and fourth quarters of the Company’s fiscal year. Authentication Services The Company recognizes revenue for authentication services upon satisfying its promises to provide services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time the Company services are complete, which in nearly all cases is when the authentication report is released to the customer. Research and Development Services The Company records revenue for its research and development contracts using the over-time revenue recognition model. Revenue is primarily measured using the cost-to-cost method, which the Company believes best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Revenues are recorded proportionally as costs are incurred. For contracts where the total costs cannot be estimated, revenues are recognized for the actual costs incurred during a period until the remaining costs to complete a contract can be estimated. The Company has elected to not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Disaggregation of Revenue The following table presents revenues disaggregated by our business operations and timing of revenue recognition: Three Month Period Ended: December 31, December 31, 2019 2018 Research and development services (over-time) $ 366,834 $ 473,178 Product and authentication services (point-in-time): Supply chain 18,674 250,098 Asset marking 108,572 161,046 Large scale DNA production 139,439 — Total $ 633,519 $ 884,322 Contract balances As of December 31, 2019, the Company has entered into contracts with customers for which revenue has not yet been recognized. Consideration received from a customer prior to revenue recognition is recorded to a contract liability and is recognized as revenue when the Company satisfies the related performance obligations under the terms of the contract. The Company’s contract liabilities, which are reported as deferred revenue on the condensed consolidated balance sheet, consist almost entirely of research and development contracts where consideration has been received and the development services have not yet been fully performed. The opening and closing balances of the Company’s contract balances are as follows: October 1, December 31, $ Balance sheet classification 2019 2019 change Contract liabilities Deferred revenue $ 628,993 $ 455,051 $ 173,942 For the three month period ended December 31, 2019, the Company recognized $244,484 of revenue that was included in Contract liabilities as of October 1, 2019. Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The most complex and subjective estimates include revenue recognition, recoverability of long-lived assets, including the values assigned to goodwill, intangible assets and property and equipment, fair value calculations for stock-based compensation and convertible promissory notes, contingencies, allowance for doubtful accounts and management’s anticipated liquidity. Management reviews its estimates on a regular basis and the effects of any material revisions are reflected in the condensed consolidated financial statements in the period they are deemed necessary. Accordingly, actual results could differ from those estimates. Income Taxes The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction. In its interim financial statements, the Company follows the guidance in ASC 270, “Interim Reporting” and ASC 740 “Income Taxes”, whereby the Company utilizes the expected annual effective tax rate in determining its income tax provisions for the interim periods. That rate differs from U.S. statutory rates primarily as a result of valuation allowance related to the Company’s net operating loss carryforward as a result of the historical losses of the Company. Net Loss Per Share The Company presents loss per share utilizing a dual presentation of basic and diluted loss per share. Basic loss per share includes no dilution and has been calculated based upon the weighted average number of common shares outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company’s stock options and warrants. For the three month periods ended December 31, 2019 and 2018, common stock equivalent shares are excluded from the computation of the diluted loss per share as their effect would be anti-dilutive. Securities that could potentially dilute basic net income per share in the future were not included in the computation of diluted net loss per share because to do so would have been anti-dilutive for the three month periods ended December 31, 2019 and 2018 are as follows: 2019 2018 Warrants 2,692,798 462,713 Stock options 220,241 154,430 Secured convertible notes 70,963 101,852 2,984,002 718,995 Stock-Based Compensation The Company accounts for stock-based compensation for employees, directors and nonemployees in accordance with ASC 718, Compensation (“ASC 718”). ASC 718 requires all share-based payments, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. Under the provisions of ASC 718, stock-based compensation costs are measured at the grant date, based on the fair value of the award, and are recognized as expense over the requisite service period (generally the vesting period of the equity grant). The fair value of the Company’s common stock options are estimated using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life. The Company expenses stock-based compensation by using the straight-line method. In accordance with ASC 740, excess tax benefits realized from the exercise of stock-based awards are classified as cash flows from operating activities. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income tax expense or benefit in the condensed consolidated statements of operations. Concentrations Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and cash equivalents with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit. The Company’s revenues earned from sale of products and services for the three month period ended December 31, 2019 included an aggregate of 27%, 22% and 10% from three customers, respectively. The Company’s revenues earned from sale of products and services for the three month period ended December 31, 2018 included an aggregate of 27%, 23%, 14% and 12% from four customers, respectively. Five customers accounted for 70% of the Company’s accounts receivable at December 31, 2019 and one customer accounted for an aggregate of 77% of the Company's accounts receivable at September 30, 2019. Fair Value of Financial Instruments The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related asset or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities. The Company utilizes observable market inputs (quoted market prices) when measuring fair value whenever possible. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, who report to the Chief Financial Officer, determine its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Chief Financial Officer. As of December 31, 2019, there were no transfers between Levels 1, 2 and 3 of the fair value hierarchy. Summary of Significant Valuation Techniques Level 3 Measurements: Secured convertible notes payable : For the Existing Notes (as defined in Note E), the Company has elected to record them at fair value. The fair value for the Existing Notes is estimated using the Monte Carlo simulation model. Significant observable and unobservable inputs include stock price, conversion price, annual risk free rate, term, likelihood of an event of default, and expected volatility. An increase or decrease in these inputs could significantly increase or decrease the fair value of the secured convertible notes payable. See Note E. Recent Accounting Standards In February 2016, the FASB issued ASU No. 2016‑02, “Leases (Topic 842).” The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company adopted Topic 842 as of October 1, 2019 utilizing the modified retrospective approach. The adoption of Topic 842 did not have a significant impact on its condensed consolidated financial statements, as the Company does not currently have any long-term lease obligations. The Company has elected the short-term lease measurement and recognition exemption as all of the Company's leases are for twelve months or less.

LIQUIDITY AND MANAGEMENT'S PLAN

LIQUIDITY AND MANAGEMENT'S PLAN	3 Months Ended
	Dec. 31, 2019
LIQUIDITY AND MANAGEMENT'S PLAN
LIQUIDITY AND MANAGEMENT'S PLAN	NOTE B — LIQUIDITY AND MANAGEMENT’S PLAN The Company has recurring net losses, which have resulted in an accumulated deficit of $259,471,142 as of December 31, 2019. The Company incurred a net loss of $2,662,741 and generated negative operating cash flow of $2,731,273 for the three month period ended December 31, 2019. At December 31, 2019 the Company had cash and cash equivalents of $8,662,853 and working capital of $8,128,977. The Company’s current capital resources include cash and cash equivalents, accounts receivable and inventories. The Company expects to finance its operations primarily through cash received from the November 2019 underwritten public offering, discussed below, as well as collection of its accounts receivable. The Company estimates that it will have sufficient cash and cash equivalents to fund operations for the next twelve months from the date of filing of this quarterly report. Historically, the Company has financed its operations principally from the sale of equity and equity-linked securities. As discussed in Note F, on November 15, 2019 the Company closed on an underwritten public offering of 2,285,000 shares of Common Stock and warrants to purchase up to an aggregate of 2,285,000 shares of Common Stock. Each share of Common Stock was sold together with one warrant to purchase one share of Common Stock at a combined effective price to the public of $5.25 per share and accompanying warrant. Gross proceeds, before underwriting discounts and commissions and estimated offering expenses, were approximately $12.0 million. After deducting underwriting discounts and commissions and other offering expenses, the total net proceeds were $10.5 million. The Company may require additional funds to complete the continued development of its products, product manufacturing, and to fund expected additional losses from operations until revenues are sufficient to cover its operating expenses. If revenues are not sufficient to cover the Company's operating expenses, and if the Company is not successful in obtaining the necessary additional financing, the Company will most likely be forced to reduce operations.

INVENTORIES

INVENTORIES	3 Months Ended
	Dec. 31, 2019
INVENTORIES
INVENTORIES	NOTE C — INVENTORIES Inventories consist of the following: December 31, September 30, 2019 2019 (unaudited) Raw materials $ 69,418 $ 87,886 Finished goods 13,265 54,743 Total $ 82,683 $ 142,629

ACCOUNTS PAYABLE AND ACCRUED LI

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES	3 Months Ended
	Dec. 31, 2019
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES	NOTE D — ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities are as follows: December 31, September 30, 2019 2019 (unaudited) Accounts payable $ 832,747 $ 1,152,103 Accrued salaries payable 114,511 319,260 Other accrued expenses 106,296 145,634 Total $ 1,053,554 $ 1,616,997

SECURED CONVERTIBLE NOTES PAYAB

SECURED CONVERTIBLE NOTES PAYABLE	3 Months Ended
	Dec. 31, 2019
SECURED CONVERTIBLE NOTES PAYABLE
SECURED CONVERTIBLE NOTES PAYABLE	NOTE E — SECURED CONVERTIBLE NOTES PAYABLE During December 2019, the remaining outstanding balance of the secured convertible notes payable entered into during August and November 2018 (“The Existing Notes”), for a total of $107,802, was repaid by the Company. During the three month period ended December 31, 2019, the Company reclassified $32,795 from accrued liabilities to senior secured notes payable to represent interest due to noteholders that was paid in kind and therefore increased the convertible note balance outstanding at December 31, 2019. The Company incurred $64,608 of debt issuance costs based on the cost incurred to issue the secured convertible notes payable that were issued during July 2019 (the "July 2019 Notes"). As disclosed in Note F, the holder of the July 2019 Notes also participated in the November 15, 2019 underwritten public offering. During the three month periods ended December 31, 2019 and 2018 the Company amortized $6,157 and $4,492, respectively, of debt issuance costs resulting in unamortized debt issuance costs of $53,525 and the secured notes payable of $1,479,254 at December 31, 2019. The debt issuance cost will be amortized over the life of the July 2019 Notes. During the three month periods ended December 31, 2019 and 2018, the Company incurred $28,543 and $27,120 of interest expense, respectively. The effective interest rate for the three month periods ended December 31, 2019 and 2018 was 8.0% and 7.0%, respectively.

CAPITAL STOCK

CAPITAL STOCK	3 Months Ended
	Dec. 31, 2019
CAPITAL STOCK
CAPITAL STOCK	NOTE F — CAPITAL STOCK On October 31, 2019, the Company filed a Certificate of Amendment of its Certificate of Incorporation with the Secretary of State of the State of Delaware that effected a one-for-forty (1:40) reverse stock split of its Common Stock effective November 1, 2019. All warrant, option, share, and per share information in the consolidated financial statements gives retroactive effect to the one-for-forty reverse stock split that was effected on November 1, 2019. On November 15, 2019, the Company closed an underwritten public offering (the “Offering”) in which, pursuant to the Underwriting Agreement dated November 13, 2019 by and between the Company and Maxim Group LLC (“Maxim”), as Representative of the Underwriters, the Company issued and sold 2,285,000 shares of the Company’s Common Stock and 2,285,000 accompanying warrants each with the right to purchase one share of Common Stock at an exercise price of $5.25 per share (the “Common Warrants”). The shares of Common Stock and accompanying Common Warrants were sold at a combined offering price of $5.25 before underwriting discounts. The Common Stock and the Common Warrants are collectively referred to herein as the “Securities.” As part of the Offering, the Company granted Maxim a 45-day option to purchase an additional 342,750 shares of Common Stock and/or additional Common Warrants to purchase 342,750 shares of Common Stock (the “Option Warrants”, together with the Common Warrants, the “Warrants”) at the public offering price, less discounts and commissions, to cover any over-allotments made by the Underwriters in the sale and distribution of the Securities. The gross proceeds of the offering, before deducting Underwriter discounts and commissions and other offering expenses, were approximately $12.0 million. After deducting underwriting discounts and commissions and other expenses related to the offering, the aggregate net proceeds were approximately $10.5 million. On December 17, 2019, the Company closed on the Underwriters’ partial exercise of its over-allotment option for 342,750 Common Warrants for gross proceeds of $3,428. The total number of Common Stock and Warrants issued under this offering, including the exercise of the over-allotment option was 2,285,000 and 2,627,750, respectively. The gross proceeds to us were approximately $12.0 million and net proceeds after deducting underwriting expenses and other estimated offering expenses was approximately $10.5 million. Pursuant to the Warrant Agreement, each Common Warrant will be exercisable beginning on the date of issuance thereof and ending on November 15, 2024. The Common Warrants include an adjustment provision that, subject to certain exceptions, reduces their exercise price if the Company issues Common Stock or Common Stock equivalents at a price lower than the then-current exercise price of the Common Warrants, subject to a minimum exercise price of $1.47 per share. Subject to limited exceptions, a holder of a Common Warrant will not have the right to exercise any portion of its Common Warrant if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, 9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that upon 61 days’ prior notice to us, the holder may increase the Beneficial Ownership Limitation, provided that in no event shall the Beneficial Ownership Limitation exceed 9.99%. The exercise price and number of the shares of Common Stock issuable upon the exercise of the Common Warrant will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrant Agreement. As a result of this financing, the exercise price of the 8,375 remaining warrants issued during December 2018 was reduced to an exercise price of $5.60 per share in accordance with the adjustment provision contained in the Warrant Agreement. The incremental change in fair value of these warrants as a result of the triggering event was $2,842.

WARRANTS

WARRANTS	3 Months Ended
	Dec. 31, 2019
WARRANTS
WARRANTS	NOTE G —WARRANTS Warrants The following table summarizes the changes in warrants outstanding. These warrants were granted in lieu of cash compensation for services performed or as financing expenses in connection with the sales of the Company’s Common Stock. Transactions involving warrants (see Note F) are summarized as follows: Weighted Average Exercise Number of Price Per Shares Share Balance at October 1, 2019 263,592 $ 131.12 Granted 2,636,125 5.25 Exercised — — Cancelled or expired (206,919) 134.96 Balance at December 31, 2019 2,692,798 $ 7.60

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Dec. 31, 2019
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES	NOTE H — COMMITMENTS AND CONTINGENCIES Operating Leases The Company leases office space under an operating lease in Stony Brook, New York for its corporate headquarters. The lease is for a 30,000 square foot building. The term of the lease commenced on June 15, 2013 and expired on May 31, 2017, with the option to extend the lease for two additional three-year periods. The Company has exercised its option to extend the lease for one additional three-year period ending May 31, 2019. The base rent during the additional three-year period is $458,098 per annum. During November 2019, the Company extended this lease until January 15, 2020. In addition to the office space, the Company also has 2,200 square feet of laboratory space. On January 20, 2020, the Company entered into an agreement to amend both of these leases, extending the term for the corporate headquarters as well as the laboratory space until January 15, 2021, with a one-year renewal option. 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. The base rent is approximately $6,500 per annum. The Company's total short-term lease obligation as of December 31, 2019 is $572,482. The total rent expense for the three month periods ended December 31, 2019 and 2018 were $133,604 and $129,193, respectively. Employment Agreement On July 28, 2016, the Company entered into an employment agreement with Dr. James Hayward, its Chief Executive Officer (“CEO”), effective July 1, 2016. The initial term was through June 30, 2017, with automatic one-year renewal periods. As of June 30, 2019, the employment agreement renewed for an additional year. Under the employment agreement, the CEO will be eligible for a special cash incentive bonus of up to $800,000, $300,000 of which will be payable if and when annual revenue reaches $8 million and $100,000 of which would be payable for each $2 million of annual revenue in excess of $8 million, provided that the CEO is still employed by the Company on such date(s). Pursuant to the employment agreement, the CEO’s initial annual salary was $400,000 and the Company will pay or reimburse the CEO in an amount of up to $1,500 per month for costs associated with an automobile used by the CEO. As of December 31, 2019, the CEO’s base salary is equal to $150,000. The agreement with the CEO also provides that if he is terminated by the Company without cause or if the CEO terminates his employment for good reason, then, in addition to earned and unpaid salary, bonus and benefits, and subject to the delivery of a general release and continuing compliance with restrictive covenants, the CEO will be entitled to receive a pro rata portion (based on the number of days elapsed from the beginning of the Company’s fiscal year) of the greater of (X) the annual bonus he would have received if employment had continued through the end of the year of termination or (Y) the prior year’s bonus; installment payments for two years following termination in an aggregate amount equal to the greater of (i) 2.99 times the CEO’s base salary or (ii) two times the sum of (A) the CEO’s base salary and (B) the CEO’s prior year’s bonus (or, if greater, the CEO’s target bonus for the year of termination); Company-paid COBRA continuation coverage for 18 months post-termination; continuing life insurance benefits (if any) for two years; and extended exercisability of outstanding vested options (for three years from termination date or, if earlier, the expiration of the fixed option term). If termination of employment as described above occurs within six months before or two years after a change in control of the Company, then, in addition to the above payments and benefits, the CEO will receive a lump sum payment of the amounts that would otherwise be paid as installment payments. In general, a change in control will include a 30% or more change in ownership of the Company. Further, all of the CEO’s outstanding options and other equity incentive awards will become fully vested upon the occurrence of a change in control of the Company (whether or not his employment is terminated in connection with such change in control). Upon termination due to death or disability, the CEO will generally be entitled to receive the same payments and benefits he would have received if his employment had been terminated by the Company without cause (as described in the preceding paragraph), other than the installment payments. Effective March 15, 2018, the Compensation Committee of the Company’s Board of Directors, approved a bonus of $121,125 that would be payable to the CEO when the Company reaches $3,000,000 in revenues for two consecutive quarters or $12,000,000 in revenues for a fiscal year, provided that the CEO is still employed by the Company on such date (the “Revenue Bonus”). Effective May 2, 2018, the Compensation Committee of the Company’s Board of Directors, increased the amount of the Revenue Bonus to $403,623. Effective December 11, 2019, the compensation committee approved an additional bonus opportunity of $250,000 for the calendar year-ended December 31, 2020 that would be payable to the CEO under the same terms as described above. The accrual for the Revenue Bonus of $628,225 is recorded to long term accrued liabilities on the balance sheet as of December 31, 2019. Litigation From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the recorded liability includes probable and estimable legal costs associated with the claim or potential claim. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. There is no pending litigation involving the Company at this time.

GEOGRAPHIC AREA INFORMATION

GEOGRAPHIC AREA INFORMATION	3 Months Ended
	Dec. 31, 2019
GEOGRAPHIC AREA INFORMATION
GEOGRAPHIC AREA INFORMATION	NOTE I — GEOGRAPHIC AREA INFORMATION Net revenues by geographic location of customers are as follows: Three Month Period Ended December 31, 2019 2018 Americas $ 393,490 $ 687,364 Europe 69,239 150,669 Asia and other 170,790 46,289 Total $ 633,519 $ 884,322

FAIR VALUE OF FINANCIAL INSTRUM

FAIR VALUE OF FINANCIAL INSTRUMENTS	3 Months Ended
	Dec. 31, 2019
FAIR VALUE OF FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS	NOTE J — FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments are measured at fair value on a recurring basis. Related unrealized gains or losses are recognized in unrealized gain on change in fair value of secured convertible notes payable in the consolidated statements of operations. For additional disclosures regarding methods and assumptions used in estimating fair values of these financial instruments, see Note A. The Existing Notes (as defined in Note E) were repaid in full during December 31, 2019. The fair value of the Existing Notes was calculated immediately prior to repayment. The fair value was calculated using the Monte Carlo simulation model and the significant unobservable output utilized in the calculation was annualized volatility at a rate of 170.3%. The Company did not have any assets or liabilities categorized as Level 1 or 2 as of December 31, 2019. The following table presents a summary of changes in fair value of the Existing Notes (Level 3 financial liabilities) which are marked to market on a periodic basis: December 31, 2019 Beginning balance, October 1, 2019 $ 102,777 Change in fair value included in earnings 10,926 Change in fair value for repayment of notes payable (113,703) Ending balance, December 31, 2019 $ —

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	3 Months Ended
	Dec. 31, 2019
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS	NOTE K — RELATED PARTY TRANSACTIONS On December 12, 2019, the Company entered into a consulting agreement, with Meadow Hill Place, LLC (“Meadow Hill”), a company wholly owned by Scott L. Anchin (“Mr. Anchin”), a board member, whereby Meadow Hill will provide certain advisory services to the Company. The initial term of the agreement will continue through June 12, 2020 and may be renewed by the Company at its option for an additional six months through December 12, 2020. The agreement provides for compensation in the form of both cash and equity. Meadow Hill will be eligible to receive $25,000 for the first month of the term, $20,000 for each of the second through sixth months of the term, and if the Company chooses to renew the term, $12,500 for each month during the renewal term. In addition, in satisfaction of the equity compensation portion of the agreement, (i) the Company granted an option to purchase 20,834 shares of its Common Stock to Mr. Anchin on December 12, 2019 at an exercise price equal to $4.26 per share, which is eligible to vest on June 12, 2020, subject to Meadow Hill providing services to the Company through such date, and (ii) the Company granted an option to purchase 20,786 shares of its Common Stock to Mr. Anchin on January 2, 2020 at an exercise price equal to $4.43 per share, of which 9,121 are eligible to vest on July 2, 2020 and 11,665 are eligible to vest on December 12, 2020, in each case subject to Meadow Hill providing services to the Company through the applicable date.

SUMMARY OF ACCOUNTING POLICIES

SUMMARY OF ACCOUNTING POLICIES (Policies)	3 Months Ended
	Dec. 31, 2019
SUMMARY OF ACCOUNTING POLICIES
Business and Basis of Presentation	Business and Basis of Presentation The Company is principally devoted to developing and marketing linear DNA technology solutions in the United States, Europe and Asia. These solutions are used in, among other things, supply chain security, brand protection, law enforcement and drug and biologic applications. To date, the Company has produced limited recurring revenues from its products and services and has incurred expenses and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment and development of a biotechnology company. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, APDN (B.V.I.) Inc., Applied DNA Sciences Europe Limited, and Applied DNA Sciences India Private Limited, and its majority-owned subsidiary, LineaRx, Inc. (“LRx”). Significant inter-company transactions and balances have been eliminated in consolidation. To facilitate comparison of information across periods, certain reclassifications have been made to prior year amounts to conform to the current year’s presentation. On October 31, 2019, the Company filed a Certificate of Amendment of its Certificate of Incorporation with the Secretary of State of the State of Delaware that effected a one-for-forty (1:40) reverse stock split of its common stock, par value $.001 per share (“Common Stock”), effective November 1, 2019. All warrant, option, share, and per share information in the condensed consolidated financial statements gives retroactive effect to a one-for-forty reverse stock split that was affected on November 1, 2019.
Inventories	Inventories Inventories, which consist primarily of raw materials, and finished goods, are stated at the lower of cost or net realizable value, with cost determined by using the first-in, first-out (FIFO) method.
Revenue Recognition	Revenue Recognition In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting standard updates which clarified principles for recognizing revenue arising from contracts with customers (“ASC 606” or “Topic 606”) and superseded most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue standard is that an entity recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 applies a five-step model for revenue measurement and recognition and also requires increased disclosures including the nature, amount, timing, and uncertainty of revenue and cash flows related to contracts with clients. The Company measures revenue at the amounts that reflect the consideration to which it is expected to be entitled in exchange for transferring control of goods and services to customers. The Company recognizes revenue either at the point in time or over the period of time that performance obligations to customers are satisfied. The Company’s contracts with customers may include multiple performance obligations (e.g. taggants, maintenance, authentication services, research and development services, etc.). For such arrangements, the Company allocates revenues to each performance obligation based on their relative standalone selling price. The Company recognizes revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration it expects to receive for those goods or services, including any variable consideration. Due to the short-term nature of the Company’s contracts with customers, it has elected to apply the practical expedients under Topic 606 to: (1) expense as incurred, incremental costs of obtaining a contract and (2) not adjust the consideration for the effects of a significant financing component for contracts with an original expected duration of one year or less. Product Revenues and Authentication Services The Company’s PCR-produced linear DNA products, including molecular taggants are manufactured in accordance with contracts with customers. The Company recognizes revenue upon satisfying its promises to transfer goods or services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time the Company transfers control of the goods to the customer, which in nearly all cases is when title to and risk of loss of the goods transfer to the customer. The timing of transfer of title and risk of loss is dictated by customary or explicitly stated contract terms. The Company does not consider payment terms a performance obligation for customers with contractual terms that are one year or less and has elected the practical expedient. Nearly all of the Company’s sales contracts reflect market pricing at the time the contract is executed, or are one year or less, and generally provide for shipment within 30 to 60 days after the price has been agreed upon with the customer. The Company invoices customers upon shipment, and its collection terms range, on average from 30 to 60 days. The cotton ginning season in the United States takes place between September and March each year; therefore, revenues from these customer contracts may be seasonal and are recognized primarily during the first and fourth quarters of the Company’s fiscal year. Authentication Services The Company recognizes revenue for authentication services upon satisfying its promises to provide services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time the Company services are complete, which in nearly all cases is when the authentication report is released to the customer. Research and Development Services The Company records revenue for its research and development contracts using the over-time revenue recognition model. Revenue is primarily measured using the cost-to-cost method, which the Company believes best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Revenues are recorded proportionally as costs are incurred. For contracts where the total costs cannot be estimated, revenues are recognized for the actual costs incurred during a period until the remaining costs to complete a contract can be estimated. The Company has elected to not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Disaggregation of Revenue The following table presents revenues disaggregated by our business operations and timing of revenue recognition: Three Month Period Ended: December 31, December 31, 2019 2018 Research and development services (over-time) $ 366,834 $ 473,178 Product and authentication services (point-in-time): Supply chain 18,674 250,098 Asset marking 108,572 161,046 Large scale DNA production 139,439 — Total $ 633,519 $ 884,322 Contract balances As of December 31, 2019, the Company has entered into contracts with customers for which revenue has not yet been recognized. Consideration received from a customer prior to revenue recognition is recorded to a contract liability and is recognized as revenue when the Company satisfies the related performance obligations under the terms of the contract. The Company’s contract liabilities, which are reported as deferred revenue on the condensed consolidated balance sheet, consist almost entirely of research and development contracts where consideration has been received and the development services have not yet been fully performed. The opening and closing balances of the Company’s contract balances are as follows: October 1, December 31, $ Balance sheet classification 2019 2019 change Contract liabilities Deferred revenue $ 628,993 $ 455,051 $ 173,942 For the three month period ended December 31, 2019, the Company recognized $244,484 of revenue that was included in Contract liabilities as of October 1, 2019.
Use of Estimates	Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The most complex and subjective estimates include revenue recognition, recoverability of long-lived assets, including the values assigned to goodwill, intangible assets and property and equipment, fair value calculations for stock-based compensation and convertible promissory notes, contingencies, allowance for doubtful accounts and management’s anticipated liquidity. Management reviews its estimates on a regular basis and the effects of any material revisions are reflected in the condensed consolidated financial statements in the period they are deemed necessary. Accordingly, actual results could differ from those estimates.
Income Taxes	Income Taxes The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction. In its interim financial statements, the Company follows the guidance in ASC 270, “Interim Reporting” and ASC 740 “Income Taxes”, whereby the Company utilizes the expected annual effective tax rate in determining its income tax provisions for the interim periods. That rate differs from U.S. statutory rates primarily as a result of valuation allowance related to the Company’s net operating loss carryforward as a result of the historical losses of the Company.
Net Loss per Share	Net Loss Per Share The Company presents loss per share utilizing a dual presentation of basic and diluted loss per share. Basic loss per share includes no dilution and has been calculated based upon the weighted average number of common shares outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company’s stock options and warrants. For the three month periods ended December 31, 2019 and 2018, common stock equivalent shares are excluded from the computation of the diluted loss per share as their effect would be anti-dilutive. Securities that could potentially dilute basic net income per share in the future were not included in the computation of diluted net loss per share because to do so would have been anti-dilutive for the three month periods ended December 31, 2019 and 2018 are as follows: 2019 2018 Warrants 2,692,798 462,713 Stock options 220,241 154,430 Secured convertible notes 70,963 101,852 2,984,002 718,995
Stock-Based Compensation	Stock-Based Compensation The Company accounts for stock-based compensation for employees, directors and nonemployees in accordance with ASC 718, Compensation (“ASC 718”). ASC 718 requires all share-based payments, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. Under the provisions of ASC 718, stock-based compensation costs are measured at the grant date, based on the fair value of the award, and are recognized as expense over the requisite service period (generally the vesting period of the equity grant). The fair value of the Company’s common stock options are estimated using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life. The Company expenses stock-based compensation by using the straight-line method. In accordance with ASC 740, excess tax benefits realized from the exercise of stock-based awards are classified as cash flows from operating activities. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income tax expense or benefit in the condensed consolidated statements of operations.
Concentrations	Concentrations Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and cash equivalents with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit. The Company’s revenues earned from sale of products and services for the three month period ended December 31, 2019 included an aggregate of 27%, 22% and 10% from three customers, respectively. The Company’s revenues earned from sale of products and services for the three month period ended December 31, 2018 included an aggregate of 27%, 23%, 14% and 12% from four customers, respectively. Five customers accounted for 70% of the Company’s accounts receivable at December 31, 2019 and one customer accounted for an aggregate of 77% of the Company's accounts receivable at September 30, 2019.
Fair Value of Financial Instruments	Fair Value of Financial Instruments The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related asset or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities. The Company utilizes observable market inputs (quoted market prices) when measuring fair value whenever possible. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, who report to the Chief Financial Officer, determine its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Chief Financial Officer. As of December 31, 2019, there were no transfers between Levels 1, 2 and 3 of the fair value hierarchy.
Summary of Significant Valuation Techniques	Summary of Significant Valuation Techniques Level 3 Measurements: Secured convertible notes payable : For the Existing Notes (as defined in Note E), the Company has elected to record them at fair value. The fair value for the Existing Notes is estimated using the Monte Carlo simulation model. Significant observable and unobservable inputs include stock price, conversion price, annual risk free rate, term, likelihood of an event of default, and expected volatility. An increase or decrease in these inputs could significantly increase or decrease the fair value of the secured convertible notes payable. See Note E.
Recent Accounting Standards	Recent Accounting Standards In February 2016, the FASB issued ASU No. 2016‑02, “Leases (Topic 842).” The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company adopted Topic 842 as of October 1, 2019 utilizing the modified retrospective approach. The adoption of Topic 842 did not have a significant impact on its condensed consolidated financial statements, as the Company does not currently have any long-term lease obligations. The Company has elected the short-term lease measurement and recognition exemption as all of the Company's leases are for twelve months or less.

SUMMARY OF ACCOUNTING POLICIE_2

SUMMARY OF ACCOUNTING POLICIES (Tables)	3 Months Ended
	Dec. 31, 2019
SUMMARY OF ACCOUNTING POLICIES
Schedule of operations and timing of revenue recognition	The following table presents revenues disaggregated by our business operations and timing of revenue recognition: Three Month Period Ended: December 31, December 31, 2019 2018 Research and development services (over-time) $ 366,834 $ 473,178 Product and authentication services (point-in-time): Supply chain 18,674 250,098 Asset marking 108,572 161,046 Large scale DNA production 139,439 — Total $ 633,519 $ 884,322
Schedule of opening and closing contract balances	The opening and closing balances of the Company’s contract balances are as follows: October 1, December 31, $ Balance sheet classification 2019 2019 change Contract liabilities Deferred revenue $ 628,993 $ 455,051 $ 173,942
Schedule of anti-dilutive securities not included computation of net loss per share	2019 2018 Warrants 2,692,798 462,713 Stock options 220,241 154,430 Secured convertible notes 70,963 101,852 2,984,002 718,995

INVENTORIES (Tables)

INVENTORIES (Tables)	3 Months Ended
	Dec. 31, 2019
INVENTORIES
Schedule of inventories	December 31, September 30, 2019 2019 (unaudited) Raw materials $ 69,418 $ 87,886 Finished goods 13,265 54,743 Total $ 82,683 $ 142,629

ACCOUNTS PAYABLE AND ACCRUED _2

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)	3 Months Ended
	Dec. 31, 2019
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Schedule of accounts payable and accrued liabilities	December 31, September 30, 2019 2019 (unaudited) Accounts payable $ 832,747 $ 1,152,103 Accrued salaries payable 114,511 319,260 Other accrued expenses 106,296 145,634 Total $ 1,053,554 $ 1,616,997

WARRANTS (Tables)

WARRANTS (Tables)	3 Months Ended
	Dec. 31, 2019
WARRANTS
Schedule of transactions involving warrants	Weighted Average Exercise Number of Price Per Shares Share Balance at October 1, 2019 263,592 $ 131.12 Granted 2,636,125 5.25 Exercised — — Cancelled or expired (206,919) 134.96 Balance at December 31, 2019 2,692,798 $ 7.60

GEOGRAPHIC AREA INFORMATION (Ta

GEOGRAPHIC AREA INFORMATION (Tables)	3 Months Ended
	Dec. 31, 2019
GEOGRAPHIC AREA INFORMATION
Schedule of net sales by geographic location of customers	Three Month Period Ended December 31, 2019 2018 Americas $ 393,490 $ 687,364 Europe 69,239 150,669 Asia and other 170,790 46,289 Total $ 633,519 $ 884,322

FAIR VALUE OF FINANCIAL INSTR_2

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)	3 Months Ended
	Dec. 31, 2019
FAIR VALUE OF FINANCIAL INSTRUMENTS
Summary of changes in fair value of the secured convertible notes (Level 3 financial liabilities)	December 31, 2019 Beginning balance, October 1, 2019 $ 102,777 Change in fair value included in earnings 10,926 Change in fair value for repayment of notes payable (113,703) Ending balance, December 31, 2019 $ —

SUMMARY OF ACCOUNTING POLICIE_3

SUMMARY OF ACCOUNTING POLICIES (Details)	Oct. 31, 2019$ / shares	Oct. 31, 2019$ / shares	Dec. 31, 2019USD ($)customer$ / shares	Dec. 31, 2018customer	Sep. 30, 2019USD ($)customer$ / shares	Oct. 01, 2019USD ($)
Concentration Risk [Line Items]
Contract liabilities			$ 455,051		$ 628,993
Revenue recognized in contract liabilities			$ 244,484
Reverse stock split of its common stock	0.025	0.025
Common stock, par value | $ / shares	$ 0.001	$ 0.001	$ 0.001		$ 0.001
Transfers from Level 1 to Level 2, Assets			$ 0
Transfers from Level 2 to Level 1, Assets			0
Transfers from Level 1 to Level 2, Liabilities			0
Transfers from Level 2 to Level 1, Liabilities			0
Transfers Into Level 3, Assets			0
Transfers out of Level 3, Assets			0
Transfers Into Level 3, Liabilities			0
Transfers out of Level 3, Liabilities			0
Deferred Revenue
Concentration Risk [Line Items]
Contract liabilities			455,051			$ 628,993
Change in contract liabilities			$ 173,942
Customer Concentration Risk | Total Revenue
Concentration Risk [Line Items]
Number of customers | customer			3	4
Customer Concentration Risk | Total Revenue | One customer
Concentration Risk [Line Items]
Concentration risk percentage			27.00%	27.00%
Customer Concentration Risk | Total Revenue | Two customer
Concentration Risk [Line Items]
Concentration risk percentage			22.00%	23.00%
Customer Concentration Risk | Total Revenue | Three customers
Concentration Risk [Line Items]
Concentration risk percentage			10.00%	14.00%
Customer Concentration Risk | Total Revenue | Four customer
Concentration Risk [Line Items]
Concentration risk percentage				12.00%
Customer Concentration Risk | Accounts Receivable
Concentration Risk [Line Items]
Number of customers | customer			5		1
Customer Concentration Risk | Accounts Receivable | One customer
Concentration Risk [Line Items]
Concentration risk percentage					77.00%
Customer Concentration Risk | Accounts Receivable | Five customers
Concentration Risk [Line Items]
Concentration risk percentage			70.00%

SUMMARY OF ACCOUNTING POLICIE_4

SUMMARY OF ACCOUNTING POLICIES - Summary of revenues disaggregated by our business operations and timing of revenue recognition (Details) - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Disaggregation of Revenue [Line Items]
Total	$ 633,519	$ 884,322
Research and development services (over-time)
Disaggregation of Revenue [Line Items]
Total	366,834	473,178
Product and authentication services (point-in-time):
Disaggregation of Revenue [Line Items]
Total		0
Supply chain
Disaggregation of Revenue [Line Items]
Total	18,674	250,098
Asset marking
Disaggregation of Revenue [Line Items]
Total	108,572	161,046
Large scale DNA production
Disaggregation of Revenue [Line Items]
Total	$ 139,439	$ 0

SUMMARY OF ACCOUNTING POLICIE_5

SUMMARY OF ACCOUNTING POLICIES - Summary of potential stock issuances under various options, and warrants (Details 3) - shares	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from the computation of diluted net loss per share	2,984,002	718,995
Warrant
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from the computation of diluted net loss per share	2,692,798	462,713
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from the computation of diluted net loss per share	220,241	154,430
Secured convertible notes
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from the computation of diluted net loss per share	70,963	101,852

LIQUIDITY AND MANAGEMENT'S PL_2

LIQUIDITY AND MANAGEMENT'S PLAN (Details) - USD ($)	Nov. 15, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 17, 2019	Sep. 30, 2019
Liquidity And Managements Plan [Line items]
Accumulated deficit		$ (259,471,142)			$ (256,805,589)
Net loss		(2,662,741)	$ (3,234,320)
Cash and cash equivalents		8,662,853			$ 558,988
Working capital		$ 8,128,977
Offering
Liquidity And Managements Plan [Line items]
Common stock issued in private placement, net of offering costs (in shares)	2,285,000
Number of common stock called by warrants	2,285,000			2,627,750
Number of shares per warrant	1
Public offering price for each share together with warrant	$ 5.25
Gross proceeds of offering before underwriter discounts, commissions and other offering expenses	$ 12,000,000
Net proceeds of offering after underwriter discounts, commissions and other offering expenses	$ 10,500,000
Additional number of common stock called by warrants	342,750
Warrants exercisable expiration period	45 days

INVENTORIES (Details)

INVENTORIES (Details) - USD ($)	Dec. 31, 2019	Sep. 30, 2019
INVENTORIES
Raw materials	$ 69,418	$ 87,886
Finished goods	13,265	54,743
Total	$ 82,683	$ 142,629

ACCOUNTS PAYABLE AND ACCRUED _3

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($)	Dec. 31, 2019	Sep. 30, 2019
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable	$ 832,747	$ 1,152,103
Accrued salaries payable	114,511	319,260
Other accrued expenses	106,296	145,634
Total	$ 1,053,554	$ 1,616,997

SECURED CONVERTIBLE NOTES PAY_2

SECURED CONVERTIBLE NOTES PAYABLE (Details) - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Repayments of Notes Payable	$ 107,802	$ 0
Reclassified amount from accrued liabilities to senior secured notes payable	32,795
Amortization of debt issuance costs	6,157	4,492
Unamortization of debt issuance costs	53,525
Secured notes payable	1,479,254
Interest expense	$ 28,543	$ 27,120
Effective interest rate	8.00%	7.00%
Secured Convertible Notes ("Existing Notes")
Debt Instrument [Line Items]
Debt issuance costs based on financing	$ 64,608

CAPITAL STOCK (Details)

CAPITAL STOCK (Details)	Dec. 17, 2019USD ($)shares	Nov. 15, 2019USD ($)$ / sharesshares	Oct. 31, 2019$ / shares	Oct. 31, 2019$ / shares	Dec. 31, 2019USD ($)$ / sharesshares	Sep. 30, 2019$ / sharesshares
Share-Based Compensation Arrangement By Share-Based Payment Award [Line Items]
Reverse stock split			0.025	0.025
Common stock, par value | $ / shares			$ 0.001	$ 0.001	$ 0.001	$ 0.001
Number of warrants outstanding					2,692,798	263,592
Offering
Share-Based Compensation Arrangement By Share-Based Payment Award [Line Items]
Common stock issued in private placement, net of offering costs (in shares)		2,285,000
Number of common stock called by warrants	2,627,750	2,285,000
Number of common shares that each warrant has right to purchase		1
Exercise price of warrants (in dollars per share) | $ / shares		$ 5.25			$ 5.60
Public offering price for each share together with warrant | $ / shares		$ 5.25
Additional number of common stock called by warrants		342,750
Warrants exercisable expiration period		45 days
Gross proceeds of offering before underwriter discounts, commissions and other offering expenses | $		$ 12,000,000
Net proceeds from offering after deducting underwriting fees and other expense | $		$ 10,500,000
Minimum exercise price | $ / shares		$ 1.47
Beneficial Ownership Limitation (as a percent)		4.99%
Beneficial Ownership Limitation, at the election of the holder (as a percent)		9.99%
Prior notice period to increase beneficial ownership		61 days
Number of warrants outstanding					8,375
Amount of common shares issued under underwriters partial exercise of over-allotment option | $	$ 3,428
Incremental change in fair value of warrants | $					$ 2,842

WARRANTS - Transactions involvi

WARRANTS - Transactions involving warrants (Details)	3 Months Ended
	Dec. 31, 2019$ / sharesshares
Number of Shares
Balance at October 1, 2019 | shares	263,592
Granted | shares	2,636,125
Exercised | shares	0
Cancelled or expired | shares	(206,919)
Balance at December 31, 2019 | shares	2,692,798
Weighted Average Exercise Price Per Share
Balance at October 1, 2019 | $ / shares	$ 131.12
Granted | $ / shares	5.25
Exercised | $ / shares	0
Cancelled or expired | $ / shares	134.96
Balance at December 31, 2019 | $ / shares	$ 7.60

COMMITMENTS AND CONTINGENCIES -

COMMITMENTS AND CONTINGENCIES - Operating Leases (Details)	Nov. 01, 2017USD ($)ft²	Jun. 15, 2013USD ($)ft²	Dec. 31, 2019USD ($)	Dec. 31, 2018USD ($)
COMMITMENTS AND CONTINGENCIES
Area of property under operating lease | ft²		30,000
Extended operating lease for additional period		3 years
Base rent during initial lease term per annum		$ 458,098
Area of laboratory space | ft²		2,200
Lease for satellite testing | ft²	1,108
Term lease	3 years
Base rent	$ 6,500
Short-term lease obligation			$ 572,482
Total lease rental expenses			$ 133,604	$ 129,193

COMMITMENTS AND CONTINGENCIES_2

COMMITMENTS AND CONTINGENCIES - Employment Agreement (Details) - USD ($)	Dec. 11, 2019	May 02, 2018	Mar. 15, 2018	Jul. 28, 2016	Dec. 31, 2019
COMMITMENTS AND CONTINGENCIES
Revenue bonus recorded to long term accrued liabilities					$ 628,225
Employment Agreement [Member] | CEO
COMMITMENTS AND CONTINGENCIES
Additional Bonus Opportunity	$ 250,000
Approved bonus		$ 403,623	$ 121,125
Threshold revenue for two consecutive quarters			3,000,000
Threshold revenue for fiscal year			$ 12,000,000
New Employment Agreement | CEO
COMMITMENTS AND CONTINGENCIES
Agreement renewal period				1 year
Special cash incentive bonus				$ 800,000
Special cash incentive bonus payable on completing threshold annual revenue				300,000
Threshold annual revenue				8,000,000
Special cash incentive bonus payable on completing threshold annual revenue in excess of first threshold				100,000
Threshold annual revenue in excess of first threshold				2,000,000
Annual base salary				400,000	$ 150,000
Reimbursement of costs				$ 1,500
Compensation Description					The agreement with the CEO also provides that if he is terminated by the Company without cause or if the CEO terminates his employment for good reason, then, in addition to earned and unpaid salary, bonus and benefits, and subject to the delivery of a general release and continuing compliance with restrictive covenants, the CEO will be entitled to receive a pro rata portion (based on the number of days elapsed from the beginning of the Company's fiscal year) of the greater of (X) the annual bonus he would have received if employment had continued through the end of the year of termination or (Y) the prior year's bonus; installment payments for two years following termination in an aggregate amount equal to the greater of (i) 2.99 times the CEO's base salary or (ii) two times the sum of (A) the CEO's base salary and (B) the CEO's prior year's bonus (or, if greater, the CEO's target bonus for the year of termination); Company-paid COBRA continuation coverage for 18 months post-termination; continuing life insurance benefits (if any) for two years; and extended exercisability of outstanding vested options (for three years from termination date or, if earlier, the expiration of the fixed option term).If termination of employment as described above occurs within six months before or two years after a change in control of the Company, then, in addition to the above payments and benefits, the CEO will receive a lump sum payment of the amounts that would otherwise be paid as installment payments. In general, a change in control will include a 30% or more change in ownership of the Company. Further, all of the CEO's outstanding options and other equity incentive awards will become fully vested upon the occurrence of a change in control of the Company (whether or not his employment is terminated in connection with such change in control).Upon termination due to death or disability, the CEO will generally be entitled to receive the same payments and benefits he would have received if his employment had been terminated by the Company without cause (as described in the preceding paragraph), other than the installment payments.

GEOGRAPHIC AREA INFORMATION (De

GEOGRAPHIC AREA INFORMATION (Details) - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
GEOGRAPHIC AREA INFORMATION
Total	$ 633,519	$ 884,322
Americas
GEOGRAPHIC AREA INFORMATION
Total	393,490	687,364
Europe
GEOGRAPHIC AREA INFORMATION
Total	69,239	150,669
Asia and other
GEOGRAPHIC AREA INFORMATION
Total	$ 170,790	$ 46,289

FAIR VALUE OF FINANCIAL INSTR_3

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Level 3 - Secured Convertible Notes ("Existing Notes")	3 Months Ended
	Dec. 31, 2019USD ($)	Dec. 31, 2019USD ($)
Liabilities
Fair value	$ 0	$ 0
Measurement input (in percent)		170.3
Changes in fair value of the secured convertible notes
Beginning balance	102,777
Change in fair value included in earnings	10,926
Change in fair value for repayment of notes payable	(113,703)
Ending balance	$ 0

RELATED PARTY TRANSACTIONS (Det

RELATED PARTY TRANSACTIONS (Details) - USD ($)	Dec. 12, 2020	Jul. 02, 2020	Jan. 02, 2020	Dec. 12, 2019
Meadow Hill
Related Party Transaction [Line Items]
Renewal term of the agreement				6 months
Eligible amount receivable by related party for the first month of the term				$ 25,000
Eligible amount receivable by related party for each of the second through sixth months of the term				20,000
Eligible amount receivable by related party for each month during the renewal term				$ 12,500
Mr. Anchin
Related Party Transaction [Line Items]
Stock options granted (in shares)				20,834
Exercise price per share of options granted				$ 4.26
Subsequent Event | Mr. Anchin
Related Party Transaction [Line Items]
Stock options granted (in shares)			20,786
Exercise price per share of options granted			$ 4.43
Stock options eligible to vest (in shares)	11,665	9,121