Applied DNA Sciences posts wider loss in fiscal first quarter

Applied DNA Sciences (ADNAS) posted a $6.4m increase in net losses in the first quarter of fiscal 2013 on the back of "disappointing" revenues, according to chief executive James Hayward.

The company - which specialises in DNA-based authentication technology to protect against counterfeiting - posted revenues of a little over $300,000 in the quarter, a decline of nearly 39 per cent year-on-year.

Hayward blamed the decline to the expiration of contracts to protect electronic components for the US Defense Logistics Agency (DLA) under a subcontract with government consulting firm LMI and "slight delays in our transition to new contracts with products in our target markets."

Higher R&D and operating costs caused net losses to swell to $8.7m but the main factor was a change to the value of warrants that were issued as part of a recent $7.5m financing for the company.

The DLA introduced a requirement for DNA marking for all category 5692 electronic microcircuit products procured by the US government last year after counterfeit components were discovered to have infiltrated into the supply chain for Department of Defense (DoD) weapon systems.

"Our military electronics offering continues to have strong momentum, although the sales cycle in a government-driven business may be somewhat longer than is commonly perceived," said Hayward.

"DNA marking is a revolutionising approach to a long-standing problem," he added. "It should be no surprise then, that adoption and commercial uptake by a broad industry such as electronics requires very visible validation and a gradual acceptance."

ADNAS made a stride forward towards acceptance of its SigNature DNA marking technology earlier last month when the DLA announced that it would reimburse suppliers of electronic parts that include the technology.

"DLA has lowered any barrier to compliance with the DLA mandate by implementing subsidised costs and safe procurement through trusted sources," commented Hayward, who added that ADNAS has now signed six contracts with trusted distributors and suppliers of 5962 electronic components, with four more pending and eight firms in negotiations.

To help meet demand the company has set up third-party marking with SMT and Premier Semiconductor Services, with the latter also providing market validation services.

In other developments, ADNAS has partnered with the UK's Metropolitan Police to protect homes in some of the highest crime areas of London with its DNANet system for linking criminals to crimes, and the company continues to make headway using its DNA markets on copper and other metals prone to theft.

"Of the more than 3,000 copper utilities in US, more than 95 per cent experienced significant copper theft in the last 12 months, sometimes with a replacement cost of greater than $2m per incident, said Hayward.

The markers are also increasingly being used in the textiles sector, with a new formulation developed that for the first allows wool to be DNA-tagged as well as cotton, he added.