Borislav Tonev

Good News And Bad News For Applied DNA Sciences Inc (OTCBB:APDN)

by Borislav Tonev August 1, 2013
3APDN.pngOn July 22 Applied DNA Sciences Inc (OTCBB:APDN, APDN message board) issued a press release with which they announced that they have secured a total of $7.5 million in financing. Whichever way you look at it, this is some good news. We already mentioned in our previous articles that APDN's financial statement is not as awful as what we're normally used to seeing from penny stocks, but we also said that they have set themselves an ambitious task which requires quite a lot of money to be invested. With the additional proceeds, they might be able to finally put the revolutionary DNA markers on the market which should be a great milestone for the company since so far, they have managed to secure revenues only through performing authentication services. Yet, despite the additional funding, the session was not that great. The number of shares traded on that particular day exceeded 2.5 million and when the closing bell rang, the ticker was standing around 6% below previous value.

The stock performance since then has been less than impressive as well and there could be a couple of reasons for this. We already mentioned that dilution has been something of a problem for APDN and from the message boards, we can see that shareholders' general attitude towards the issuance of stock is not that positive. As you might have guessed, the financing deal means that some more shares might see the light of day which could have prompted some of the believers to run for the hills. Then again, the reason for the ticker's rather poor behavior might also be a bit more complex.

Normally, when investors hear some good news, the tickers tend to move violently and register some great gains but looking at the historical records, it would appear that APDN seems a little bit different. In fact, the last time the stock did a notable run in the green direction was on July 11 when a press release announced that APDN have increased their work force by a whopping 72%, they informed us about a new building that they're moving into and said that the growth will be translated into the financial statements to come. Even so, the 10% in daily gains are hardly impressive when you have in mind the magnitude of the news. What's more, the ticker has wiped out around a fifth of its value since then which means that visions of prices above the $0.20 per share mark seem more and more distant.

That really is the biggest problem for APDN. The company gets all the exposure it needs and, to some extent, rightly so. As we already mentioned, APDN have taken on a rather interesting approach to personal security and they plan to use the complexity of the DNA code which should mean that counterfeiting becomes all but impossible. As we saw, they also have financial resources that other small cap ventures can only dream of and yet, the price movement fails to reflect the fact that they do seem like an operational venture.

Dilution is certainly playing its part in this particular field and if APDN are to ensure a less erratic behavior of the ticker, they will either need to do something about the endless share issuance, or they will need to make sure that profits are coming in as quickly as possible. If they don't do that soon, they might risk having some pretty upset investors on their hands which in turn could land a massive blow on the company credibility.

9APDN_logo.gifOne thing that might stop the gradual but constant descend is the next financial statement, but a better-looking performance will only be achieved if APDN manage to present us with some rather good-looking figures in the revenues section. The next 10-Q should also shed some light on the developments around the two patent infringement lawsuits that we read about in the latest report. APDN seem eerily quiet on that front but we're pretty sure that if the court rules in favor of the plaintiffs, the ticker could be in for a serious plunge.

In the meantime, all potential investors and shareholders have to work with is the press releases and as we mentioned a few paragraphs up, their effect on the price is rather unpredictable. That's why APDN still presents a risky investment option and it is absolutely crucial to consider all the odds carefully before making your final decision. On the plus side, the ticker manages to stay away from paid promotions which is more than can be said about other small cap ventures like Sanborn Resources Ltd (OTCBB:SANB) and Arch Therapeutics Inc (OTCBB:ARTH).

Comments 1

1. Guest
September 05, 2013, 09:25AM

Quotes Good analysis Boris! 'Am following your advice and as we say in dutch : I'm watching the cat from up in the tree!

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