Good morning and welcome to our Applied DNA Sciences' Quarterly Conference Call. My name is Debbie Bailey, and I'm the Director of Investor Relations.

I would like to thank everyone for joining us here today. On today's call, we will be hearing first from Beth Jantzen, Chief Financial Officer for the company; and then from Dr.

James Hayward, our CEO and President, after which, they will together answer questions from our shareholders and analysts. Please note that some of the information you will hear today during our discussion today may consist of forward-looking statements, including without limitation those regarding revenue, gross margin, operating expenses, other income and expense, stock-based compensation expense, taxes, earnings per share and future products.

Actual results or trends could differ materially. For more information, please refer to the risk factors discussed in Applied DNA Sciences' Form 10-K for fiscal 2014.

Applied DNA Sciences assumes no obligation to update any forward-looking statements or information. At this time, I would like to turn the call over to Beth Jantzen.

Thank you, Debbie. Good morning everyone and thank you for joining us today.

My first few months as CFO have been quite busy and productive. For starters, on April 1st, we closed on a public offering for gross proceeds of $12 million and on April 30, we closed on an over allotment for an additional $264,000.

This public offering, including the over-allotment, resulted in net proceeds after underwriter discounts and offering expenses of approximately $11.2 million. This is the first time we have raised money since our up-listing to NASDAQ last October, and we feel that this, along with the cleanup of our balance sheet from the November financing, was instrumental in the success of this raise, which is our largest single financing to-date.

This offer, primarily consisted of institutional investors, which we believe will be a stabilizing factor for all of our shareholders. We intend to use the proceeds from this offering for our working capital needs, as well as to support the continued development and growth of our business.

Management feels that this raise will allow the company to achieve a positive operating cash flow position, and provides a runway to focus on growing our business. As of April 30th, our current cash balance was approximately $11.6 million.

If our revenues and cash burn rate were to remain at our current levels, then we expect our cash balance to last us for at least the next 12 months. Also, we continue to manage our expenses, looking to strategically lower costs, in line with our current and near future market opportunities.

We continue to manage the cost savings plan that was implemented earlier this fiscal year, which is designed to reduce our expenditures and cash burn. Our business plan ensures that we have the capacity and expertise to meet our most immediate market needs, as well as being prepared for the needs of our customers in the near future.

Next, I'd like to highlight a number of factors, with respect to our March 31, 2015 10-Q, which was filed yesterday. As you can see from our balance sheet, as of March 31, 2015, total current assets do not reflect the recent $12 million financing, which as I stated earlier, closed on the first day of our third fiscal quarter.

As was discussed, during last quarter's call, the liabilities and stockholders' equity on our balance sheet has improved greatly, due to the repurchase of the warrant liability and the conversion of the promissory notes, that occurred as part of the November offering. As a result, as of March 31 and currently, we do not have any outstanding debt.

Moving to the statement of operations, revenues for the second quarter of fiscal 2015 were a record $1.5 million, an increase of 138%, compared with $637,000 reported in the second quarter of fiscal 2014, and a 22% increase compared to the first quarter of fiscal 2015 ended December 31. For the first six months of this fiscal year, we reported revenues of almost $2.8 million.

This represents an increase of 124% from the same period last year. I would also like to emphasize, that these represent record revenues, as they exceed our revenues fro the full fiscal year 2014, and every other fiscal year on the company's history.

The increase in revenues for this fiscal quarter, as well as the first six months, was primarily the result of an increase in revenues from government contract awards, including the Rapid Innovation Funds, or RIF projects we announced last August, which was awarded by the office of the Secretary of Defense, and in the phase-II SBIR contract announced last July. Just to remind you, the RIF program is a two year, $2.97 million contract, to develop a single authentication platform of our signature DNA and complementary technologies to identify authentic products and deter counterfeits, from infiltrating six Department of Defense federal supply groups.

The SBIR contract is for approximately $975,000, over two years and is focused on the scale-up of our technology platform, which was established in the phase-I award, to accommodate as many as 100 electronic component manufacturers. Beyond just product development, these contracts are enabling us to recruit industry leaders in electronics, aerospace and other industries as pilot partners to demonstrate the benefits of our technology platform.

The increase in revenues for the first six months, was also related to textile sales, for protecting the cotton supply chains. Jim will discuss the advancements in textiles in more detail in a moment.

Revenues from customers, both in and outside of the United States, continued to contribute to our total revenues. As an example, we experienced an increase in sales for the first six months of fiscal 2015 of DNAnet Asset Marking Kits through a distributor in Europe.

Operating expenses were $3.4 million for the three month period ended March 31, 2015, a decrease of $367,000, or 10% from $3.8 million for the same period in the prior fiscal year. This decrease, is primarily attributable to a conscious effort to reduce selling, general and administrative expenses, in accordance with the cost savings plan that was implemented by management earlier this fiscal year.

This decrease, is also a result of lower legal fees incurred, in connection with the dismissal of the Smartwater litigation. Our total operating expenses decreased 33% or approximately $1.7 million from $3.4 million for the three months ended March 31, 2015, compared with $5.1 million for the first fiscal quarter of 2015.

This decrease primarily relates to a decrease in non-cash stock based compensation expense of approximately $1.5 million. Excluding stock-based compensation, operating expenses would have decreased approximately 7% this quarter as compared to the first quarter of fiscal 2015, primarily due to decreases in payroll and consulting expenses.

For the first six months of this fiscal year, operating expenses increased slightly, due mainly to an increase in non-cash stock based compensation expense, for awards granted to employees this past December. This increase, was offset by decreases in both legal and consulting expenses.

Net loss for the three months ended March 31, 2015 was $1.9 million, compared with a net loss of $2.8 million for the same period in the prior fiscal year. Excluding non-cash expenses, adjusted EBITDA for this quarter would have been a negative $1.2 million, compared to a negative $2.6 million for the same quarter last year, as well as a negative $1.7 million for the prior quarter of this fiscal year.

Adjusted EBITDA for the first six months of fiscal 2015, was a negative $2.9 million compared to a negative $5 million for the same period last year. These non-cash items have no impact on our liquidity, so our actual cash losses decreased compared to our prior quarter, the same quarter last year, as well as year-to-date.

We continue to have a number of funded pilot studies ongoing, which if successful, could generate revenues more in line with our current expenses. In summary, it has been a very busy and positive quarter for Applied DNA Sciences.

We are working hard to manage our expenses, turn our pilot studies and early commercial projects into large scale commercial contracts, and to strategically manage the business for the benefit of all of our shareholders. Thank you for your attention.

And I would now like to turn it over to Jim for his report.

Thank you, Beth, and first of all, its great having you onboard these calls, welcome.

Thank you.

Today, I would like to focus my comments on the textile and Home Asset marking businesses, which both represent tremendous near term opportunities for our company. But first, a comment on our numbers.

In our last earnings call, we reported our highest earnings ever, with dramatic increases in year-over-year and quarter-over-quarter performance for the quarter. I stated then, that we expected the trend to continue, and just as Beth described, it has, and with the added benefit of cost savings, tight controls over our operating expenses and a significant decrease in our adjusted EBITDA loss.

Now our steady progress is perhaps best exemplified by our revenue history in our government and military industry vertical. This group is strongly managed with excellent executive management, sales management and both product and project management.

They are strongly supported by our operations group, marketing, and information technology, and their incredible perseverance and customer service took them from first and second pilots, four and five years ago on the far left, to a projected growth for this year, that should more than double their year-over-year revenue by the end of the first year. Now their growth is no longer a steady positive slope, but an incremental step-function this year.

Thanks to two predictable contracts and new businesses. Unfortunately, the predictability of this sector is still limited, and I can't really predict beyond this fiscal year.

However, the step-wise increment is what we expect to see from our other industry verticals, as they close on pilots and new additive contracts, so you should keep this model in mind, as we consider other aspects of the business. Now another perfect example of that growth model, comes from our textile business.

At this time, I will discuss only cotton, but our textile business will eventually include all natural and synthetic fibers. Textiles represent very complex supply chains, with a finished product typically produced as the fibers globetrot throughout India and Asia, increasing in value, as they advance from fiber to finished goods, in quantum increments from country-to-country.

Economic pressure on the industrial converters often leads to substitution, duping retailers, brand owners, governments and ultimately, the consumer. But how can such a complex supply chain be purified, and the veracity of its content guaranteed?

We believe that, we have the only solution, marking the fibers with signature DNA, but we have demonstrated we can bring much more value than simply fixing leaky supply chains. How can the apparent disport claims of extra long stable pima cotton, or their grown in America claim, or the sustainable, or certified organic claims of the farmers who dedicate their agricultural practices to living these value-added practices.

Using unique DNA marks can affordably add traceability to the fibers, that enable these specific claims. Now recently, we announced that we signed a licensing agreement with Divatex, a leading supplier of home textiles, to commercialize the world's first DNA verified cotton supply chain.

Divatex is responsible for marketing in this arrangement, while applied DNA, licenses it's patented SigNature T technology for application to the fibers, and also licenses its proprietary on-site authentication system, to ensure the veracity of the product throughout the supply chain. But there is more to it.

One of the world's largest commodity merchants has managed secure logistics for us, and is expected to fund installation of our DNA transfer units, at multiple U.S. gins.

Last year, under a pilot study with Divatex and a major retailer, 5 million pounds of the pima cotton harvest were SigNature T DNA tagged. The first finished product made from this tagged fiber, will be offered for sale across the U.S.

later this year, under a Pima Cot, content branded label. Now Pima Cot is the consumer driven bed brand, based on SigNature T DNA marked pima cotton.

The pima cotton website was launched last week, I would highly recommend that you take a look at it, at www.pimacot.com. Our pilot study is now transitioned to a full commercial endeavor.

APDN will enjoy revenue from five sources; the placement of our DNA transfer devices at the gin; FiberTyping the original fibers, to ensure their authenticity before DNA marking; the supply of DNA marking, for marking the bulk fibers, the placement of on-site testing devices, along with supply chain, and the licensing of the Pima Cot brand to retailers and brand owners. While the initial production of the first commercially available consumer goods is just nearing completion, we have already begun to receive follow-on orders for the coming season; and have early commitments for more than 10 million pounds of DNA-marked Pima Cot for production this fall.

Multiple retailers and brand owners are being recruited. We can start to see our way to a $1 million to $2 million initial revenue after the ginning season begins with an upside for customers who we hope will continue to sign on right through January.

Now as global cotton is $600 billion annual business, this represents a very large total addressable market for Applied DNA and our shareholders. In the coming season, we will integrate our track-and-trace offering, which combines our IT platform with biotechnology, using authenticatable QR codes, every participant in the supply chain, including the consumer, will be able to track their product from farm to garment.

Our participating farmers are very anxious to become real to the consumer and digital DNA will enable their visibility in the same manner as the campaigns that involve farmers in the farm to table campaigns. This model will be expanded to include wool, other textiles, and can be used just as readily with nutritional supplements, the materials used in personal care, coffee, commercial woods, foods, natural oils and other materials, so the market is wide open.

Now let me pick up on a rapidly developing, exciting new vertical. Exciting, because it touches employees and investors alike, where they live, because it helps to protect your personal assets.

I hope that you have seen the recent press, that support that surrounded the launch of this business here in New York, it was really exciting, and we are pleased to be offering these DNAnets in our own community. What some of you may not be aware of, is that we have been offering these products in Europe for some time now.

Let me tell you why there is a need for a product like this, there is almost 3 million household burglaries per year in the U.S., and almost 800,000 motor vehicle thefts. Over 1 million victims are present, at the time these crimes occur, with over 250,000 of them becoming violent.

Imagine, being able to mark your personal possessions and your cars with the DNAnet kit that will deter crime, and in the event of a crime, assist the police in solving the crime and returning the stolen property to you, its rightful owner. Imagine, if the insurance company would either give you the DNAnets free of charge or reduce your premiums for using the kits.

This is what is happening in Europe, and we hope to replicate this model more here in the coming months. While the DNA kits are affordable on an individual basis, we believe that the business model is sound, based on the large volume of business we are forecasting in this vertical market.

So DNAnet is a kit, which brings multiple value to its user. It can strengthen any personal asset security strategy.

It involves the community, and provides the community protection program. It provides for the police, a direct link between stolen property and the criminal who committed the crime.

It increases the likelihood of return or lost or stolen items that find their way to police property rooms, and it creates a heightened level of crime deterrents. In our prior trials across Europe, we seem remarkably effective deterrence rates, with decrements in crimes, in high double digits.

Now we expect to expand this market, and we believe that the revenue from the sale of our products outside the U.S. will continue to grow in the future through multiple sales channels, where as our EMA, Middle East, Europe and Africa team continues to manage and add distributors, focused on security and CVIT products, our U.S.

team has been primarily focused on these directly complex solutions. We have begun marketing to development and salesforce redesign to leverage our success more globally.

Our diverse and global business plan, means less reliance on any one customer, country or industry, and suggest less concentrated risk. In order to lessen that risk, we see us moving from municipalities to enterprises, large businesses that could provide these two their employee base.

The same is true for small businesses. Homeowners Associations have expressed a strong interest in providing DNAnet security to the entire community.

Insurance companies are looking at lowering their costs, by preempting a crime. Now, we have successfully completed a number of other programs, I will touch on one or two quickly, because I think they deserve it and many of you have expressed interest.

We have successfully completed the pilot study for olefins -- for polyolefins and we believe, based on our results, that marking polyolefins with SigNature DNA is now ready for commercialization, and we are in the process of recruiting two customers with our partner for the commercial stage. At this time, the exclusivity with our initial customer has expired, and we have begun to broaden the scope of this opportunity to other polyolefin companies.

Our previously announced optical detection, in-field readers and digital tracking solutions are progressing on-track, and provide additional value to our marking and forensic authentication services. We look forward to receiving your continued feedback, as we work to improve our interactions with you, our shareholders, and our customers and we would be happy to take questions from our investors, and for the first time since our up-listing, our analysts.

Thank you, Jim. Our first questions this morning are going to come from Brian Kinstlinger from The Maxim Group.

Good morning Brian.

Can you hear me? Hello?

Good morning.

Good morning Brian. We have you.

That was great detail you provided, I am wondering, as you talk about the Divatex agreement and your branded cotton, I am curious, it sounds like a lot of different revenue sources, can you talk about how this pertains to your large retail title that you discussed? Is this with the backing of them, are they the first large customer, are there several customers, maybe if you can go through that please?

Yeah, our program with Divatex is driven by the interest of a large American retailer. However, we have now solicited the interest of many retailers, especially here in the United States, but across Europe as well.

And right now in terms of the cotton season, cotton has just been planted, and you know California has been through a heck of a time with drought. So that the retailers and brandowners are queuing up quickly, to ensure that they have the supply of raw fibers; now, raw DNA-marked fibers, necessary to assure the authenticity throughout their supply chain.

So we are expecting to recruit, in the coming months, more and more brand-owners and retailers. We have our first firm commitments for 10 million pounds of DNA marked cotton, and our subsequent commitments are beginning to crystallize, too early for me to mention them, because the nature, the way that supply chain works, the commitments come in 'loosely first' and then become more and more solid, as the retailers and brand-owners lay out their expectations for the coming fall.

Hope that answers your question.

Yeah, it does. And then, you mentioned $1 million to $2 million eventually for -- and I think what you meant, that revenue per quarter for this entire branded cotton with the customers, what did you mean by the $1 million to $2 million in revenue?

Yeah, the $1 million to $2 million we think will come from the existing commitments we have in Pima Cot. But we are growing demand in Pima Cot, and so the revenue could grow proportionately.

And I should point out, that our programs for cotton marketing extend well beyond what is known as extra long staple or pima cotton. In America, 99% of the cotton produced is upland, and there is great value for example, in being able to demonstrate the claim of American upland cotton with the authenticity of DNA, which is a program we are also running.

Truth is, that's a much larger program, and our hopes are that we are able to integrate programs across multiple cotton claims, from Pima, which is the business we have in hand, to grown in America, which is the business we are growing toward, toward unique claims such as certified organic, sustainable, grown without the use of child labor, and recycled, and claims such as that, which can't be easily measured chemically, and of course, there is no impact on the DNA, so we can design a unique DNA marker to represent each claim, and that's just what we are doing.

So then, if I take that, what you're saying in addition to your current business with federal suppliers and other ongoing progress, should we be seeing a $2 million to $2.5 million quarter, as we exit this fiscal year?

Well you know, it’s a bit early for us to give guidance. We have not given guidance up until now.

Today, we took a couple of bold steps, which I hope the investors will come to appreciate, as quite early guidance. But until this business becomes one that is integrated with contracts, we are left awaiting the arrival of purchase orders, which become a much more difficult to predict business pace.

So at the moment, I would hold comment. But other than to say, I am very hopeful.

Great. And then on the federal piece of the business, have you been able to expand to other parts -- other than say semiconductors, and what about the expansion of federal suppliers?

Have you been able to successfully expand the suppliers to the government?

Well that's a very critical element, really, of both of our DoD contracts. So in particular, the contract that comes from the Office of the Secretary of Defense, has us expanding our DNA marking campaign, from a single, simple federal supply class called 5962, which is really the semiconductors to a much broader base, that totals 66 new federal supply classes.

This is a lot of work to be done in the execution of that contract. And what that contract does, is build revenue for us, as we diversify the marking base.

So the answer is, yes, we are making progress, reaching out to companies that manufacture things like ball bearings, wire harnesses, wire coatings, and other industrial kinds of materials, and we are beginning those programs of DNA marking a wide variety of materials, and evaluating their performance in military circumstances.

So to be clear, you are marking more than semiconductors right now, or you are evaluating other items?

It is not yet in commercial supply, but it is in the evaluation stage.

Great. Last question I have is, in some of your investor presentations, you used to have the number of large pilots that are currently active.

Can you just sort of talk about the numbers of large pilots you have right now, and maybe touch on the pharmaceutical pilot -- particularly, you had a great press release about that, I thought that was a huge win for the company, and maybe talk about how that industry you expect to progress?

Okay. Thanks.

I will answer the first portion of your question first. And that is, that our pilots -- we have a very large number of items that go into our total forecasting pipeline.

But in particular, we, very closely track, something under a dozen pilots, each of which has the capacity for very significant impact on the company. In fact, in our view, each of these pilots alone has the capacity to fund our conversion to profitability.

Now of those pilots, many of them are nearing the end term, so I mentioned Borealis, we have executed flawlessly on the first phase of that contract. The second phase is now the recruitment of commercial partners, that's underway.

So we tackled the initial stages of scale-up, which would be followed by full blown scale-up, and we will continue to do that. And if you consider our relationship with Divatex and the initial pilot of 5 million pounds of cotton in California, that has gone incredibly well, with now finished commercial off-the-shelf product, arriving in the United States in the course of this month, and through the summer.

So those projects, those pilots which are large, substantial, and would have a long term impact on the company are progressing very nicely. In the case of pharmaceutics, we are very pleased with our progress.

We always knew that DNA marking was suitable for foods and drugs, but we were very gratified to get a legal opinion from Peter Barton Hutt, who is counsel at Covington & Burling, perhaps the world's most renowned regulatory law firm. And Peter himself was an assistant commissioner under Dennis Kessler, and he was General Counsel for FDA, so who knows those laws better?

Really, no one in the U.S., is the general consensus. Peter's opinion, is that we are fully compliant with the FDA guidelines for physical and chemical identifiers, suitable for us in the unit doses of drugs.

So that means our signature DNA markers, one of the few materials that can actually be used, not just on packaging, but on the actual unit doses, and that's very important in controlling the supply chain, because very often what happens, the way counterfeit drugs make their way back into the United States' supply chain, is that diverted legitimate drug is removed from the supply chain, finds its way in the third world, and on its way back to the United States, carried by those entrepreneurs who can take bits of the gross margin as they bring this counterfeit product to the United States; the quantity of counterfeit relative to the returning, divergent original product, grows and grows and grows, and that's typical of how that happens. We can really impact that, and ensure that counterfeit product does not get past customs and border patrol.

We are, in a significant trial in Asia, with a very large pharmaceutic company, marking unit doses and we are very pleased with the results to-date. We still have another few months, I am not sure, whether it’s a quarter or two, before we close on that pilot in particular.

Great. Thanks so much.

You're welcome. Thank you.

Thank you, Brian. Our next questions will come from Grant Zeng from Zacks.

Hi. Good morning.

Can you hear me okay?

Yes.

Hi. Thanks for taking my call.

And first, congratulations on a great quarter. I am very pleased to see rapid revenue growth year-over-year and quarter-by-quarter.

I just have a quick question about the financial statements, and when I look at the operating expenses, I don't see any expense related to the cost of goods sold. So can you give us any color on this issue, so when you have 100% gross margin here, what do you mean here -- so means that the cost of goods sold is very tiny, or it's including operating expenses?

Sure. We are currently all -- they are mainly our expenses which you would assimilate to cost of goods sold, are really developing costs, because we are mainly doing pilot programs and things in the early development stage.

So currently, all our costs are included in there. I would expect to see, as we turn things over to commercialization, that we will start to breaking them out and showing cost of goods sold on the statement of operations.

Okay. Thanks.

So it means that the cost of goods is actually very tiny, it's including the development costs?

Typically, our margins from the manufacturer of the DNA are very good in nature, and again, it's just all in the R&D line for right now, just because of the nature of our customers and contracts.

Great. Thank you for the color [ph].

Congratulations again. It’s a great success.

Thank you.

Thank you.

Thank you. Okay folks.

Thank you very much for participating. Today was great fun, having the analysts online.

Thank you for your questions, and thank you for your loyalty and perseverance. Have a good day.