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Applied
DNA Quiets the Naysayers ...Again |
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If
you wanted to know why SpongeTech Delivery Systems' stock rallied nearly
80% out of nowhere - from 2.5 cents to 4.5 cents - over the
last four days, I may have at least part of the answer today.
Plus,
Applied
DNA has once again silenced some of the naysayers. You can say whatever
you want to about their sales versus their market cap (a discussion
we'll actually have below). However, you sure can't fault their progress
- the last quarter is another hint the company is far
more viable
than the market may be giving them credit for.
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SpongeTech
One Step Closer to That, err, a Share Buy-Back |
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One
of the things we've been discussing in the blog - pretty intensely
- about SpongeTech
Delivery System (OTCBB: SPNG) has been this business regarding
a potential repurchase of the shares they sold to RM Enterprises. They
issued stock to RM in order to raise money, and have mentioned more than
once they're willing to buy it back at the sale price. In the meantime
(yesterday), SpongeTech issued a compelling statement about a buyback,
though I doubt it was the one anybody was expecting.
 Here's
the deal - as of the end of the quarter, all 400 million authorized shares
had been issued (400 million more have been authorized in the meantime).
Of those 400 million in the float, 267 million are owned by RM Enterprises
...and they're restricted, meaning they can't be sold. That effectively
leaves only the remaining 133 million as free trading shares. Those are
the ones all the retail investors like you and me would own.
The
rumor was that SpongeTech wanted to buy back those restricted (RM's) shares
for the same $4.9 million they got for them, or about 1.9 cent per share.
There
was no certainty it would ever happen - it was just a possibility, albeit
a strong one.
Then
yesterday, the company announced something that hadn't been put
on the table yet ...they've authorized a repurchase of up to 25 million
of the free-trading shares. That's 18.7% of the stock actually in circulation.
As far as buybacks go, that's pretty substantial.
 There
was no dollar amount associated with the free-trading share buyback announcement
- just a number of shares. At the current price of 4.5 cents though, that's
$1.125 million worth. It's not a ton of money, but when the float is as
small as it is, the amount could have a big impact.
Like
the restricted-share buyback, there's no guarantee or legal requirement
for SpongeTech to actually complete any or all of it. But, the market sure
thinks it's in the works. Hence, the recent rally.
Just
a thought...why buy the free-trading shares back at the market price,
but not buy RM Enterprises' restricted shares back at their original
purchase price of 1.9 cents? Personally, I think they're going to
do both, but why even bother with the 25 million when you could
get 267 million for much, much less? And if that's the case, why even
bother authorizing another 400 million shares?
I've
actually got a couple of theories about their rationale, but before I speculate
I want to do some more homework. Specifically, I want to re-scour
some of the fine print from the recent 8-Ks.
In
the meantime, the news is good and the stock's come back to life.
My personal bullish line in the sand is still five cents. If SPNG can get
past there and keep cranking out their steady stream of sales increases,
I think the stock could really start to move.
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Applied
DNA Goes 4 for 4 on Quarterly Sales Increases |
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I blogged
the information yesterday, but as I suspected, the news release came out
this morning.
 Last
quarter, Applied
DNA (OTCBB: APDN) did $252K in business. It's not a ton of money,
but considering they did $122K in sales just three quarters earlier (effectively,
their first quarter ever), I think it's exciting they managed to more
than double their quarterly revenue rate in less than a year. If
anybody was doubting this company's viability, Applied DNA is doing a pretty
decent job of methodically silencing those naysayers.
See
if you notice anything about this sequence.....$122K, $123K, $207K, and
$252K. That's the last four quarter's worth of revenue, in order. Needless
to say, each one is bigger than the last. I have no reason to think the
streak will be broken.
The
news release also confirmed something I blogged - much of the business
was repeat business. I'll take that at face value. More importantly
I don't think it would be out of line to assume as more new customers are
added, they too will be repeat customers. In other words, there's a
real and in-demand product here.
I'll
be the first to admit I razzed the company a little when they did $123K
a couple of quarters ago...when the market cap was close to $30 million.
With $252K in sales this quarter though, and a market cap of about $13
million, things are different in terms of value and risk. Now I'm really
curious again. That's a significant sales increase - the fourth
in a row, and more are likely to be on the way.
So,
the question going forward isn't one about the business model or marketability
- it's a question of volume. Can Applied DNA do enough sales
volume to get over the net profit hump? Doing a quarter of a million
dollars is nice, but not enough.
I think
the answer is yes, eventually they can do enough volume.
While
much of the business this last quarter was repeat business, it still only
came from a small handful of customers. However, a couple of the major
projects they've had in the works are still on the table; they're just
not bearing revenue yet.
The
press release mentions a few of these ventures, as well as a couple of
new ones added in the meantime. I'm specifically referring to a new fiber-typing
project like the Supima project, and a potential wine authentication utility.
 The
press release didn't mention two of the collaborations I'm excited
about - IIMAK's thermal transfer ribbons and Printcolor Screen
Limited's anti-counterfeit inks. Both are big projects that can take
time to develop. When and if they do finally become marketable though,
I think it could be huge for Applied DNA and its shareholders.
None
of this is to say the stock's going to fly to the moon tomorrow, because
I don't think it is. I do think the company is going to keep making
incremental progress though, as they've proven they can.
Too
often when a start-up story like this unfolds, investors who didn't get
in early find out later the stock has quietly done very well - and they
missed out on the move because wanted to 'wait and see'.
I know
I'm
curious again after seeing the latest numbers. Maybe this is a good
time to start stepping into a long-term position. Here's the press release...
Applied
DNA Sciences Announces Increased Revenues for Third Quarter 2008
Company Provides
Business Update
STONY BROOK, N.Y.,
August 15, 2008/Business Wire/ -- Applied
DNA Sciences, Inc. (OTC Bulletin Board: APDN) a provider of DNA-based
security solutions reported its revenues for the third fiscal quarter of
2008 ending June 30, 2008.
Third Quarter
Results
Revenues increased
to $252,691, from $0 in the same quarter last year. Growth was 21.6% over
our second quarter revenues of $207,737 ending March 31, 2008. Our three
synergistic business platforms, SigNature(tm) DNA, BioMaterial Genotyping(tm)
and BioActive Ingredients(tm) all contributed to the company's fourth consecutive
quarter of continued revenue growth.
"I believe that
our third quarter results demonstrate the benefit of our diversified business
model," stated Kurt Jensen, APDN Chief Financial Officer. "We remain focused
on executing against our business plan and controlling our costs and will
continue to do so."
Nine Month
Results
Revenue increased
to $583,595 in the first nine months of fiscal 2008 compared to $0 in the
same period last year. "We remain committed to tight fiscal governance
as our revenues continue to grow," commented Dr. James Hayward, President
and CEO. "We are controlling our costs, while turning around orders in
shortened delivery times. We expect to build our business base and increase
sales, without expanding operating costs - we want to cross the profitability
barrier as quickly as possible."
Our Products
are Accepted and Our Sales Efforts are Effective - Repeat Orders and New
Customers
Customers are
recognizing our quality and service with repeat orders. Supima, the promotional
arm of the American Pima cotton growers, has commissioned a new study.
Consumer brands have placed third and fourth orders for our BioActive Ingredients(tm).
Our UK security customers are utilizing more SigNature (tm) DNA markers
each month.
New customers
have requested samples of our ingredients, and pilot studies are underway
for genotyping natural fabrics in Europe. "We intend to keep building on
our strong customer relationships which are yielding repeat orders, as
we aggressively pursue new account growth," Dr. Hayward continued.
Recent Company
Highlights:
-
Revenues increased
21.6% from the prior quarter.
-
Collaborative prototyping
projects including DNA marked tickets completed with international event
ticket-printing company.
-
New product development
projects initiated with luxury goods, wine, and fashion industries.
-
Completed Phase I
development of new proprietary reader which has demonstrated specificity
to the level of a single photon.
-
Supima Cotton Feasibility
Study completed.
-
Cotton FiberTyping(tm)
authentication testing services initiated with select Supima(r) licensees.
-
Additional re-orders
of BioActive Ingredients(tm) to multinational personal care company.
-
BioActive Ingredients(tm)
test market launch initiated in select US stores for large, multinational
company.
-
BioActive ingredients(tm)
sales and product development with new customers.
BUSINESS UPDATE
SigNature(tm)
DNA
SigNature(tm)
DNA has been prototyped and validated in a wide range of inks, threads,
paper and other substrates. It has been shown to be very stable and it
can be easily integrated with existing manufacturing processes. Unique
DNA sequences have been successfully commercialized for the UK security
industry resulting in multiple orders to date. APDN is collaborating with
PrintColor AG (Switzerland) to develop custom security solutions based
on the portfolio of SpectraCrypt security inks. SigNature(tm) DNA has been
utilized in DNA protected labels for Rhodia's Jaguar line of ingredients.
SigNature(tm) DNA has also been successfully added to cotton fiber, textiles
and fabric and can be authenticated based on the proprietary, patent-pending
methodologies developed from the Supima Cotton project. SigNature (tm)
DNA markers have been validated in thermal transfer ribbons and in laser
toner and printer cartridges.
BioMaterial
GenoTyping(tm)
BioMaterial GenoTyping(tm)
refers to the development of genetic assays to distinguish between varieties
or strains of biomaterials that contain their own source DNA, such as cotton,
wool, tobacco, fermented beverages, natural drugs, foods, etc. The seminal
feasibility study that was completed for Supima provides a strong platform
for continued business development. The two genetic tests (FiberTyping(tm)
and PimaTyping(tm)) provide the Pima Cotton industry with the first authentication
tools that can be applied throughout the US and global cotton industry
from cotton growers, mills, wholesalers, distributors, manufacturers and
retailers through trade groups such as Supima as well as government agencies.
A "soft launch" of the FiberTyping(tm) authentication services is underway
with a select retail partner and their suppliers to market test its use
for cotton fiber, yarn and fabric and we foresee future applications outside
of the cotton market for these services.
BioActive Ingredients
The BioActive
Ingredients(tm) business is based on the biofermentation expertise developed
from APDN's work with SigNature(tm) DNA and BioMaterial Genotyping(tm).
Strengethening this background with chemical formulation, in 2007 APDN
began manufacturing BioActive Ingredients(tm), primarily targeting global
personal care. These products have become a steadily growing source of
revenues over the past few quarters and we believe there is real potential
to expand beyond the current product line to custom manufacture additional
products for existing and new customers. Continued growth in revenues is
anticipated from this segment and the company is hopeful that the inroads
made in the global personal care industry will open up opportunities to
provide APDN's brand protection products and services to these customers
as well. We use our experience in molecular genetics to develop proof of
our ingredient's efficacy using human skin grown in culture.
Our Reputation
is Building - Customers Come Calling
When contrasted
against the highly focused and internally-directed sales plans for specific
industry verticals, cold inquiries coming from new customers reveal an
inflection in the response from the marketplace to our technology offering.
New projects evaluated this quarter have included the:
-
marking of automobile
components and replacement parts,
-
protection of a massive
retail shoe brand,
-
protection of luxury
branded items like watches,
-
authentication of
high value spirits,
-
protection of musical
instrument brands,
-
protection of pharmaceuticals
and specialized packaging, and,
-
establishment of
bioprovenance for certified antique instruments.
While we are optimistic
about the prospects for these new projects, we cannot guarantee their role
in future revenues.
About APDN
Applied DNA Sciences
markets and sells DNA encrypted and embedded solutions that are forensically
authenticated by machine readable devices. These solutions can be easily
integrated with a range of inks, threads, varnishes, adhesives as well
as thermal ribbon, inkjet and laser ink. Applied DNA Sciences' products
can help protect the brands and intellectual property that can easily be
eroded by counterfeiting, product diversion and fraud. APDN's common stock
is listed on the Over-The-Counter Bulletin Board under the symbol "APDN".
The statements
made by APDN may be forward-looking in nature and are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements describe APDN's future plans, projections,
strategies and expectations, and are based on assumptions and involve a
number of risks and uncertainties, many of which are beyond the control
of APDN. Actual results could differ materially from those projected due
to our short operating history, limited financial resources, limited market
acceptance, market competition and various other factors detailed from
time to time in APDN's SEC reports and filings, including our Annual Report
on Form 10-KSB, filed on January 15, 2008 and our subsequent quarterly
reports on Form 10-QSB. APDN undertakes no obligation to update publicly
any forward-looking statements to reflect new information, events or circumstances
after the date hereof to reflect the occurrence of unanticipated events.
SOURCE Applied
DNA Sciences, Inc.
/INVESTOR CONTACT:
Debbie Bailey, 631-444-8090, fax: 631-444-8848/
MEDIA CONTACT:
Deanne Eagle, 212-554-5463
/FCMN Contact:
info@adnas.com /
/Web site: http://www.ADNAS.com
/ |
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