Applied DNA Sciences raises $7.5m in financing

Forensic tagging specialist Applied DNA Sciences (APDN) stands to raise $7.5m from existing investor Crede in a fund-raising round.

The firm said the financing - which includes $2m straight away and another $5.5m at a later date - will allow it to continue to scale its operations and broaden its product line to meet the demand of "a growing number of contracts in electronics" as well as other industrial sectors.

The money may also be used to hire new staff, accelerate the development of technology acquired along with UK firm RedWeb, and "further expand the company's market share in Europe".

APDN stands to benefit from the passage in the US of the National Defense Authorisation Act (NDAA), and specifically provisions to protect the supply chain for electronic parts from counterfeits, including support for the Department of Defense's item unique identification (IUID) initiative.

The NDAA ties in with a controversial initiative set up by the US Defense Logistics Agency (DLA) last year to require Federal Supply Class (FSC) 5962 electronic microcircuits sold to the DoD to be marked with botanically-derived DNA markets unique to each supplier.

The intent is to prevent counterfeit parts from entering the DoD supply chain by authenticating each piece with a unique DNA-based signature.At the moment APDN is the sole supplier of the type of marker covered by the mandate.

From a public security perspective it is hard to argue against the DLA proposals for an authentication system, although critics suggest it should consider the use of alternative approaches. 

The Semiconductor Industry Association (SIA) has voiced its opposition to the DLA mandate, suggesting it posed "practical, financial and … legal" challenges, and that the issue was one of the DoD's procurement policy. Security would be better achieved by setting up a restricted network of authorised suppliers.

In February, the DLA tried to effect a compromise by allowing third-party companies to apply the DNA markers, which at the moment means APDN or any future authorised licensees. It also
said it would reimburse suppliers of electronic parts that include the technology.

Concerns remain, however, for example that liability and warranty issues may be created if APDN or its licensees handle, unpack and mark components.

For its part, the DLA said in a Frequently-Asked Questions (FAQ) document published last month that DNA marking is just one part of its drive to rid the supply chain from counterfeits, and other tools include product testing, buying from qualified and reputable sources, and software systems that detect anomalies in the buying process.

"We are open to other solutions and tools as we learn about them," it says.

- Just last week, a Massachusetts man was indicted for selling counterfeit semiconductors which the Department of Justice (DoJ) said were intended for use in nuclear submarines. Peter Picone and co-conspirators shipped the fake semiconductors to a US naval submarine base at Groton, Connecticut, between November 2011 and February 2012, said the DoJ.