Borislav Tonev

Applied DNA Sciences Inc (OTCMKTS:APDN)'s Performance Stabilizes a Bit

by Borislav Tonev July 21, 2014

Applied DNA Sciences Inc (OTCMKTS:APDN, APDN message board) was one of the more volatile stocks on the OTC Markets during 2013. It peaked at well over $0.20 per share in May, but less than three months later, it was sitting at under $0.09. The wild swings continued during the first half of this year, but fortunately for the shareholders, APDN now appears to be a bit more consistent.

It's been a while since we've seen huge spikes or scary drops and the ticker seems to be pretty happy with the $0.12 to $0.13 range. Unfortunately, there's another problem – the lack of interest. There have been a few days of significant volumes, but on the whole, investors aren't paying too much attention to the stock. Which is a shame since APDN does appear to be moving forward with its business plan.

Last week, they proudly announced that the Missile Defense Agency has awarded them a Phase II Small Business Innovation Research contract which will result in total proceeds of around $975 thousand over a two-year period. Their DNA-based anti-counterfeiting products seem to be drawing more and more attention and they even appeared in a report for a Swedish national TV station.

There's no doubt that the technology is sound and the recent contracts reveal that more and more institutions are interested in it. Unfortunately, APDN are still unable to establish a steady stream of revenues and profit from it. Here's what they recorded on March 31:

  • cash: $2 million
  • current assets: $2.7 million
  • current liabilities: $1.7 million
  • quarterly revenue: $637 thousand
  • quarterly net loss: $2.75 million

It's fair to say that some penny stocks have shown us balance sheets that look much worse than this one, but even so, there are a few issues. There has been an 85% jump in the revenues year over year, but even this wasn't enough to offset the huge expenses. What's more, when you take a look at some of the previous reports, you'll see that the sales figures are not that consistent (during the third calendar quarter of 2013, for example, they logged $729 thousand in revenues).

Still, with the new contracts in place, the shareholders have every right to hope that the revenue stream will be much steadier in the future. And that brings us on to a rather puzzling question: “Why aren't investors interested in APDN?”.

Coming up with a definitive answer is not easy, but we can see from the message boards that a lot of people are anxious about the proposals that will be discussed during the Annual Stockholders' Meeting in August.

APDN's Board of Directors apparently think that effectuating a reverse split is a good call and they are awaiting the shareholders' approval. The ratio is still unknown, but the proxy statement published on the company website says that it will be between 1-for-40 and 1-for-60. The same document also says that the company wants to perform the split in order to uplist the stock to either NASDAQ or NYSE MKT.

If they manage to do it, APDN should be in a much better position to monetize on the clever piece of DNA Marking technology. It would appear, however, that investors are still not confident enough in the company's ability to meet all the requirements. If the uplist fails, the reverse split could pose a serious threat to the share price.

Lots of things should be revealed during the Annual Meeting of the Stockholders and people apparently prefer to wait for the details to come to light before jumping in. Considering the wild swings that APDN made during 2013, this might not be such a bad call.

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