MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Introduction
The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion and analysis includes certain forward-looking statements that involve risks, uncertainties and assumptions. You should review the Risk Factors section of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by such forward-looking statements. See "Forward-Looking Information" at the beginning of this Annual Report on Form 10-K.
Company Overview
We are a digital asset treasury ("DAT") company that has adopted BNB, the native cryptocurrency of the Binance blockchain ecosystem as our primary reserve asset. By using proceeds from financings, as well as potential cashflow from our operations, we seek to strategically accumulate BNB and utilize the accumulated BNB as a productive treasury asset to produce yield via Binance native and DeFi opportunities.
In addition, via LineaRx we are commercializing proprietary nucleic acid production solutions for the biopharmaceutical and diagnostics markets. Our nucleic acid production solutions enable cell-free manufacturing of DNA and RNA, which are essential components for a new generation of advanced biotherapeutics, such as gene therapies, adoptive cell therapies, messenger RNA therapeutics and DNA vaccines, as well as diagnostic applications.
On February 13, 2025, we announced our exit from our business operations relating to the manufacture and detection of DNA for industrial supply chains and security services ("DNA Tagging and Security Products and Services") segment and completion of a workforce reduction of approximately 20% of our total headcount as of such date related primarily to employees within such segment.
On June 27, 2025, we announced a strategic restructuring and realignment of resources to focus exclusively on our synthetic DNA manufacturing business, LineaRx. As part of the actions undertaken, we implemented a workforce reduction of approximately 27% of headcount as of June 27, 2025 and have ceased operations at ADCL, effective June 27, 2025.
Our actions were intended to substantially reduce our operating costs and concentrate resources behind LineaRx to: (i) enhance the capabilities of LineaRx's LineaDNA™ and LineaIVT™ platforms while scaling commercial adoption; (ii) expand our service offerings; and (iii) pursue strategic partnerships. As of June 27, 2025, the workforce reduction equated to a projected 23% reduction in annual payroll costs, excluding payroll expenses incurred as a result of the previously announced retirement of our former Chairman and Chief Executive Officer. The projected annual payroll savings were partially offset by $277,732 in one-time charges related to the workforce reduction and ceasing of operations at ADCL, primarily for separation benefits. We incurred these workforce reduction-related costs related to this restructuring by September 30, 2025, excluding expenses associated with the retirement of the Company's former Chairman and Chief Executive Officer.
In addition, on October 6, 2025, the Board authorized, and our officers implemented, a further restructuring plan pursuant to which we reduced overall operating expenses to focus resources on our BNB Strategy. The restructuring plan includes a reduction of our current workforce as of September 30, 2025 by sixteen employees, or approximately 60%. We will incur aggregate pre-tax charges of approximately $1.4 million in connection with the reduction-in-force, primarily consisting of severance payments, employee benefits, and related costs. The reduction-in-force was substantially completed by October 31, 2025 and the associated charges will be recorded in the first quarter of fiscal 2026. We estimate that the restructuring will result in annualized cost savings of approximately $2.8 million. We may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the restructuring plan.
We launched our DAT strategy in October 2025 with the closing of a private placement wherein we received $26.8 million in cash and crypto assets with the potential for up to an additional $30.8 million in cash gross proceeds in future investment from warrant exercises, for total potential gross proceeds of up to $57.6 million.
BNB Strategy
Our current strategy is to primarily focus our resources on our BNB-focused DAT strategy wherein we manage digital assets, primarily in the native cryptocurrency of the Binance Coin blockchain commonly referred to as "BNB", including staking, restaking, and liquid staking of BNB, and participation in other unique Binance ecosystem and DeFi yield opportunities to contribute the BNB to the Company's treasury operations (together, the "BNB Strategy"). Currently, the Company is in the process of accumulating BNB tokens and building the operational framework necessary to implement its BNB Strategy.
LineaRx Business Strategy (Therapeutic DNA Production Services)
Through LineaRx, our nucleic-acid production solutions enable the rapid and efficient cell-free manufacturing of high-quality DNA and RNA, which are essential components for a new generation of advanced biotherapeutics such as gene therapies, personalized medicine, adoptive cell therapies and mRNA and DNA-based vaccines, as well as IVD applications (collectively "Therapeutic DNA Production Services").
We have developed three distinct and complementary technology solutions:
| ● | LineaDNA™: A proprietary, cell-free DNA production system that uses a large-scale PCR process. This technology allows for the rapid and efficient production of high-fidelity synthetic DNA without the use of living cells. The resulting DNA can be used in the manufacturing of various biotherapeutics, serve as the starting material for mRNA therapeutics and vaccines, and as a critical component of IVDs. |
| ● | LineaRNAP™: A next-generation RNAP used to transform DNA into mRNA. Our RNAP is engineered with a patented DNA-binding domain that we believe results in high mRNA yields and reduced dsDNA contamination, a common problematic byproduct produced during mRNA production. |
| ● | LineaIVT™: An integrated system that combines the Company's LineaDNA and LineaRNAP technologies. This innovative solution simplifies the mRNA production workflow resulting in a streamlined production process with fewer impurities than traditional methods. |
Our LineaRx business strategy is to continue advancing our Therapeutic DNA Production Services to support potential future sales and/or licensing agreements with third-party partners.
Comparison of the Fiscal Year Ended September 30, 2025 to the Fiscal Year Ended September 30, 2024
During October 2025, we initiated a strategic pivot to transition from our traditional operating model to a digital asset treasury model that has adopted BNB, the native cryptocurrency of the Binance blockchain ecosystem as our primary reserve asset. By using proceeds from financings, as well as potential cashflow from our operations, we seek to strategically accumulate BNB and utilize the accumulated BNB as a productive treasury asset to produce yield via Binance native opportunities.
While our historical financial results reflect our prior operating business, our future performance will be driven primarily by our BNB Strategy.
In addition, via our LineaRx, Inc. subsidiary, we are commercializing proprietary nucleic acid production solutions for the biopharmaceutical and diagnostics markets and expect, in the near term to continue to have product and service revenue from LineaRx.
Revenues
Product revenues
For the fiscal years ended September 30, 2025 and 2024, we generated $1,424,147 and $1,074,813 in revenues from product sales, respectively. Product revenue increased by $349,334 or 33% for the fiscal year ended September 30, 2025 as compared to the prior fiscal year. The increase in product revenues was primarily within our Therapeutic DNA Production Services segment due to an increase in shipments for our large-scale DNA manufacturing business of approximately $269,000, as well as a net increase of approximately $81,000 within our DNA Tagging and Security Products and Services segment primarily attributable to an increase of approximately $226,000 year over year in cotton DNA tagging revenue, offset by decreases of approximately $87,000 in sales to a nutraceutical customer, as well as a decrease of approximately $20,000 and $18,000 in sales to consumer asset marking and cash and valuables in transit customers, respectively.
Service revenues
For the fiscal years ended September 30, 2025 and 2024, we generated $712,788 and $1,038,677 in service revenues, respectively. Service revenue decreased by $325,889 or 31% for the fiscal year ended September 30, 2025 as compared to the prior fiscal year. The decrease in service revenues is primarily related to a $129,000 decrease within our DNA Tagging and Security Products and Services segment due to a decrease in our textile isotopic testing services. Additionally, our Therapeutic DNA Production Services segment decreased by $176,000 due to decreased research and development projects.
Costs and Expenses
Gross Profit
Gross profit for fiscal year ended September 30, 2025 decreased by $135,933 or 14% from $974,840 for the fiscal year ended September 30, 2024 to $838,907 for the fiscal year ended September 30, 2025. The gross profit percentage was 39% and 46% for the fiscal years ended September 30, 2025 and 2024, respectively. The decrease in gross profit percentage was primarily the result of a change in product mix as there was a significant decrease in service revenue during the fiscal year ended September 30, 2025 as compared to during the prior fiscal year.
Selling, General and Administrative
Selling, general and administrative expenses for the fiscal year ended September 30, 2025 decreased by $180,947 or 2% to $10,868,590 from $11,049,537 in the fiscal year ended September 30, 2024. The decrease is attributable to a decrease in stock based compensation expense of $469,000, as well as a decrease in professional fees, mainly for legal, investor relations and consulting expenses of approximately $651,000. These decreases were offset by an increase in payroll expenses mainly for the accrual of the board compensation of $500,000 and the termination payments for the former CEO per his separation agreement of approximately $450,000.
Research and Development
Research and development expenses for the fiscal year ended September 30, 2025 increased by $2,423,162 or 67% to $6,016,912 from $3,593,750 in the fiscal year ended September 30, 2024. This increase is due to a $2.7 million impairment charge related to in process R&D acquired as part of the Spindle acquisition. The Company has stopped the further development of the IPR&D, which was the LineaRNAP enzyme, as the Company has determined that further technical development would not yield considerably improved results over the current state of the LineaRNAP technology.
Loss from operations
Loss from operations increased $2,378,148, or 17% to $16,046,595 for the fiscal year ended September 30, 2025 compared to $13,668,447 for the fiscal year ended September 30, 2024, due to the factors noted above.
Interest income
Interest income for the fiscal year ended September 30, 2025, increased to $192,915 from $120,482 in the same period of fiscal 2024. This increase relates to higher average cash balances in our interest-bearing accounts, coupled with increased interest rates.
Other expense, net
Other expense, net for the fiscal years ended September 30, 2025 and 2024, was expense of $106,580 and $8,877, respectively.
Transaction costs allocated to warrant liabilities
Transaction costs allocated to warrant liabilities for the fiscal years ended September 30, 2025 and 2024 was $0 and $633,198, respectively. These transaction costs represent the closing costs from the February 2024 financing transaction. These costs were expensed as it would have resulted in negative additional paid in capital.
Unrealized gain on change in fair value of the warrants classified as a liability
Unrealized gain on change in fair value of warrants classified as a liability for the fiscal years ended September 30, 2025 and 2024 of $319,630 and $9,430,000, respectively, relates to the change in fair value of the warrants that are classified as a liability. The primary driver of the change is the decrease in our stock price.
Unrealized loss on change in fair value of warrants classified as a liability-warrant modification
Unrealized loss on change in fair value of warrants classified as a liability-warrant modification of $0 and $394,000 for the fiscal years ended September 30, 2025 and 2024, respectively represents the change in fair value for the modifications made to certain warrants as a result of the February 2024 financing.
Loss on issuance of warrants
The loss on issuance of warrants of $1,633,767 for the fiscal year ended September 30, 2024 relates to the February 2024 financing transaction and is the result of the fair value of the warrants being greater than the cash received from the financing.
Recently Issued Accounting Pronouncements
See Note C, "Recent Accounting Standards," to the accompanying consolidated financial statements for a description of accounting standards which may impact our consolidated financial statements in future reporting periods.
Liquidity and Capital Resources
Our liquidity needs consist of our working capital requirements and building out our BNB Strategy. As of September 30, 2025, we had a negative working capital of $225,485. For the fiscal year ended September 30, 2025, we used cash in operating activities from continuing operations of $12,242,654 consisting primarily of our net loss from continuing operations of $14,956,515 net with non-cash adjustments of $384,165 in depreciation and amortization charges, deferred income tax benefit of $684,115, $102,021 in stock-based compensation expense, $319,630 in unrealized gain on change in fair value of warrants classified as a liability, $2,698,975 impairment of intangible asset, and loss on write-off of property and equipment of $145,131. Additionally, we had a net decrease in operating assets of $854,065 and a net decrease in operating liabilities of $473,216. Cash used in investing activities of $313,121 was primarily for cash paid for property, plant and equipment. The Company had cashflows from financing activities of $8,054,492, primarily from the issuance of common stock and pre-funded warrants, as well as from proceeds received from the exercise of warrants. There was also $255,041 net cash used in discontinued operations.
The Company has recurring net losses, which have resulted in an accumulated deficit of $379,160,375 as of September 30, 2025. The Company incurred a net loss of $15,349,246 and incurred negative operating cash flow of $12,242,654 for the fiscal year ended September 30, 2025.
The Company's current capital resources include cash and cash equivalents, and cryptocurrency assets. Historically, the Company has financed its operations principally from the sale of equity and equity-linked securities.
As discussed in Note N to the accompanying consolidated financial statements, during October 2025, the Company closed the Private Placement of its common stock and/or pre-funded warrants, and Series E-1 Warrants, and Series E-2 Warrants. Upon the closing of the Private Placement, the Company received $26.8 million in gross proceeds. The Company also received proceeds from warrants exercised of approximately $732 thousand during October 2025 and is actively implementing its BNB strategy.
The Company has mitigated its previously reported substantial doubt of a going concern through the cash received from the Private Placement and the warrant exercises described above. The Company estimates that it will have sufficient cash and cash equivalents, as well as liquid cryptocurrency to fund operations for the next twelve months from the date of filing this annual report.
We expect remaining capital expenditure to be less than $70,000 in fiscal 2026. Our primary investments are expected to be in our Therapeutic DNA Production segment's research and development activities.
Substantially all of the real property used in our business is leased under operating lease agreements.
Critical Accounting Estimates and Policies
Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.
We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.
The accounting policies identified as critical are as follows:
| ● | Revenue recognition; |
| ● | Warrant Liabilities. |
Critical Accounting Estimates
The preparation of the financial statements in conformity with Generally Accepted Accounting Principles in the United States of America ("GAAP") requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The most critical estimates include recoverability of long-lived assets, including the values assigned to intangible assets, fair value calculations for warrants, and contingencies. Management reviews its estimates on a regular basis and the effects of any material revisions are reflected in the consolidated financial statements in the period they are deemed necessary. Accordingly, actual results could differ from those estimates.
Revenue Recognition
We follow FASB issued accounting standard updates which clarify the principles for recognizing revenue arising from contracts with customers ("ASC 606" or "Topic 606").
The Company measures revenue at the amounts that reflect the consideration to which it is expected to be entitled in exchange for transferring control of goods and services to customers. The Company recognizes revenue either at the point in time or over the period of time that performance obligations to customers are satisfied. The Company's contracts with customers may include multiple performance obligations (e.g. DNA products, maintenance, authentication services, research and development services, etc.). For such arrangements, the Company allocates revenues to each performance obligation based on their relative standalone selling price.
Due to the short-term nature of the Company's current contracts with customers, it has elected to apply the practical expedients under Topic 606 to: (1) expense as incurred, incremental costs of obtaining a contract and (2) not adjust the consideration for the effects of a significant financing component for contracts with an original expected duration of one year or less.
Product Revenues
The Company's DNA product revenues are accounted for/recognized in accordance with contracts with customers. The Company recognizes revenue upon satisfying its promises to transfer goods or services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time the Company transfers control of the goods to the customer, which in nearly all cases is when title to and risk of loss of the goods transfer to the customer. The timing of transfer of title and risk of loss is dictated by customary or explicitly stated contract terms. The Company invoices customers upon shipment, and its collection terms range, on average, from 30 to 60 days.
Authentication Services
The Company recognizes revenue from authentication services upon satisfying its promises to provide services to customers under the terms of its contracts. These performance obligations are satisfied at the point in time the Company services are complete, which in nearly all cases is when the authentication report is released to the customer.
Research and Development Services
The Company's revenue from its research and development contracts are accounted for/recognized when the performance obligations per the contract are satisfied. These performance obligations are satisfied at the point in time, either when the Company's services are complete, or when the Company transfers control of the goods to the customer, which in nearly all cases is when title to and risk of loss of the goods transfer to the customer, or when a report is released to a customer. The timing of transfer of title and risk of loss is dictated by customary or explicitly stated contract terms. The Company invoices customers upon shipment, or completion of the services and its collection terms range, on average, from 30 to 60 days.
Warrant Liabilities
The Company evaluates its issued warrants in accordance with ASC 480 "Distinguishing Liabilities from Equity" and ASC 815-40, "Derivatives and Hedging - Contracts in Entity's Own Equity" and concluded that due to the terms of certain of its warrant agreements, the instruments do not qualify for equity treatment. As such, the Common Warrants, Series A Warrants and Private Common Warrants were recorded as a liability on the consolidated balance sheet and measured at fair value at inception and at each reporting date in accordance with ASC 820, "Fair Value Measurement", with changes in fair value recognized in the consolidated statement of operations in the period of change.
Recent Debt and Equity Financing Transactions
At the Market Offering
On November 4, 2025 the Company entered into the ATM Agreement with the Agent, pursuant to which we may, from time to time, offer and sell shares of its common stock, with an aggregate offering price of up to $8,157,932 through the Agent. Subject to the terms and conditions of the Agreement, the Agent will use its commercially reasonable efforts to sell the Shares from time to time, based upon the Company's instructions. The Company has no obligation to sell any of the Shares, and may at any time suspend sales under the Agreement or terminate the Agreement in accordance with its terms. The Company has provided the Agent with customary indemnification rights. The Agreement contains customary representations and warranties, and the Company is required to deliver customary closing documents and certificates in connection with sales of the Shares. As of December 15, 2025, the Company has sold 10,759 shares of common stock for net proceeds of $31,791, after deducting commissions of $983.
Private Placement Offering
On October 3, 2025, the Company completed the Cash Private Placement and on October 23, 2025 completed the Cryptocurrency Private Placement in which the Company: (i) entered into the Cash Securities Purchase Agreement with the Cash Purchasers pursuant to which the Company agreed to sell and issue to the Cash Purchasers in the Cash Private Placement, at an offering price of $3.32 per share, an aggregate of 4,620,485 Shares, and/or Cash Pre-Funded Warrants, and Series E-1 Warrants to purchase 4,620,485 shares of our common stock at a per share exercise price of $3.82 and (ii) entered into the Cryptocurrency Securities Purchase Agreement, with the Cryptocurrency Purchasers pursuant to which the Company agreed to sell and issue to the Cryptocurrency Purchasers in the Cryptocurrency Private Placement 3,444,191 Cryptocurrency Pre-Funded Warrants, at an offering price of $3.32 per share, to purchase shares of our common stock at a per share exercise price of $0.0001 and 3,444,191 Series E-2 Warrants and, together with the Series E-1 Warrants, the "Series E Warrants") at a per share exercise price of $3.82. In the Cash Private Placement, the Cash Purchasers tendered U.S. dollars or the cryptocurrency stablecoin issued by Circle Internet Group, Inc. commonly referred to as "USDC" to the Company as consideration for the Shares and/or Cash Pre-Funded Warrants and the Series E-1 Warrants. In the Cryptocurrency Private Placement, the Cryptocurrency Purchasers tendered units of OBNB Trust Units as consideration, with the Company receiving 0.126 units per Cryptocurrency Pre-Funded Warrant together with accompanying Series E-2 Warrant sold. Lucid Capital Markets acted as sole placement agent for the Private Placement.
Upon the closing of the Private Placement, the Company received $26.8 million with the potential for up to an additional $30.8 million in gross proceeds in future investment from warrant exercises, for total potential gross proceeds of up to $57.6 million.
Each of the Cash Pre-Funded Warrants and the Cryptocurrency Pre-Funded Warrants is exercisable for one share of our common stock at the exercise price of $0.0001 per share of our common stock underlying the Cash Pre-Funded Warrant or Cryptocurrency Pre-Funded Warrant. The Cash Pre-Funded Warrants were immediately exercisable and may be exercised at any time until all of the Cash Pre-Funded Warrants issued in the Cash Private Placement are exercised in full. The Cryptocurrency Pre-Funded Warrants are exercisable on or after the later of (i) the Stockholder Approval date and (ii) the date that as to each Cryptocurrency Purchaser, the aggregate amount to be paid for warrants purchased under the Cryptocurrency Securities Purchase Agreement as specified below such Cryptocurrency Purchaser's name on the signature page of the Cryptocurrency Securities Purchase Agreement and next to the heading "Subscription Amount" thereof in the cash equivalent of crypto-currency (or trust units or interests that that hold crypto-currency) acceptable (in form and value) to the Company and the Placement Agent in their sole discretion, minus, such Cryptocurrency Purchaser's aggregate exercise price of the Cryptocurrency Pre-Funded Warrants, which amounts shall be paid as and when such Cryptocurrency Pre-Funded Warrants are exercised (the "Cryptocurrency Subscription Amount") is delivered in transferrable form reasonably acceptable to the Company with good and marketable title and is free and clear of any security interests, pledges, liens, restrictions, claims or encumbrances of any kind, and thereafter may be exercised at any time until all of the Cryptocurrency Pre-Funded Warrants issued in the Cryptocurrency
Private Placement are exercised in full. Each holder's ability to exercise its Cash Pre-Funded Warrants or Cryptocurrency Pre-Funded Warrants in exchange for shares of our common stock is subject to certain beneficial ownership limitations set forth therein. Each of the Series E Warrants is exercisable for one share of our common stock at the exercise price of $3.82 per share of our common stock (a "Common Warrant Share"). Stockholder Approval was obtained on December 12, 2025.
The Series E-1 Warrants are immediately exercisable for cash for a period of five years from the date of issuance and may also be exercised on a cashless basis at any time beginning six months after their initial issuance if, at the time of exercise, there is no effective registration statement registering, or the prospectus contained therein is not available for, the resale of the Common Warrant Shares by the holder thereof and are subject to cancellation by the Company if they are not exercised after certain specified trading criteria of our common stock is satisfied. The Series E-2 Warrants are exercisable for cash on or after the later of (i) the date the Stockholder Approval is obtained and (ii) the date that the Cryptocurrency Subscription Amount is delivered in transferrable form reasonably acceptable to the Company with good and marketable title and is free and clear of any security interests, pledges, liens, restrictions, claims or encumbrances of any kind, and on or prior to 5:00 p.m. (New York City time) on the five year anniversary of such date, and may also be exercised on a cashless basis at any time beginning six months after their initial issuance if, at the time of exercise, there is no effective registration statement registering, or the prospectus contained therein is not available for, the resale of the Common Warrant Shares by the holder thereof and are subject to cancellation by the Company if they are not exercised after certain specified trading criteria of our common stock is satisfied. Notwithstanding the foregoing, the Company shall not effect any exercise of the Cryptocurrency Pre-Funded Warrants or the Series E-2 Warrants unless the Company receives good and marketable title to the consideration paid under the Cryptocurrency Subscription Amount and such consideration is free and clear of any security interests, pledges, liens, restrictions, claims or encumbrances of any kind. Stockholder Approval was obtained on December 12, 2025.
In connection with the Cash Securities Purchase Agreement, the Company and the Cash Purchasers party thereto entered into the Cash Registration Rights Agreement on September 29, 2025. In connection with the Cryptocurrency Securities Purchase Agreement, the Company and the Cryptocurrency Purchasers party thereto entered into the Cryptocurrency Registration Rights Agreement on September 29, 2025. Pursuant to the Registration Rights Agreements, the Company agreed to file a registration statement with the SEC within thirty days of the applicable closing date registering, as applicable, the resale of our common stock sold in the Private Placement or underlying the Cash Pre-Funded Warrants, the Cryptocurrency Pre-Funded Warrants and the Series E Warrants. In Compliance with the Registration Rights Agreements, the Company filed the required resale registration statement on October 30, 2025.
Registered Direct Offering and Concurrent Private Placement
On October 31, 2024, we closed the October 2024 Offering in which, pursuant to the October 2024 Securities Purchase Agreement dated October 31, 2024, by and between the Company and the October 2024 Purchasers, the Company issued and sold 25,663 shares of the Company's Common Stock, and October 2024 Pre-Funded Warrants ("October 2024 Pre-Funded Warrants") to purchase up to 1,420 shares of Common Stock, and (ii) in the October 2024 Private Placement, October 2024 Series C Warrants to purchase up to 27,083 shares of Common Stock and October 2024 Series D Warrants to purchase up to 27,083 shares of Common Stock. The purchase price for each share of Common Stock and accompanying October 2024 Series C Warrant and October 2024 Series D Warrant was $240.00 and the purchase price for each October 2024 Pre-Funded Warrant and accompanying October 2024 Series C Warrant and October 2024 Series D Warrant was $240.00. Craig-Hallum acted as placement agent in connection with the October 2024 Offering.
The Company received net proceeds from the October 2024 Offering, after deducting placement agent fees and other estimated offering expenses payable by the Company, of approximately $5.7 million.
Pursuant to that certain engagement letter, dated August 23, 2024, by and between the Company and Craig-Hallum, the Company agreed to pay the Placement Agent a cash placement fee equal to 6.0% of the aggregate gross proceeds raised in the October 2024 Offering from sales arranged for by Craig-Hallum. Subject to certain conditions, the Company also agreed to reimburse certain expenses of Craig-Hallum in connection with the October 2024 Offering, including but not limited to legal fees, up to a maximum of $100,000. The Company also agreed to issue to Craig-Hallum, or its respective designees, October 2024 Placement Agent Warrants to purchase up to 1,354 shares of Common Stock (which equals 5.0% of the number of shares of Common Stock and October 2024 Pre-Funded Warrants offered) with an exercise price per share of $240.00.
The exercisability of the October Series Warrants and the Placement Agent Warrants required approval of the Company's stockholders, which was obtained at the Company's annual meeting held on May 22, 2025. Each October Series C Warrant has an exercise price of $240.00 per share of the Company's common stock, became exercisable on May 23, 2025 (the "Initial Exercise Date") and will expire on the five-year anniversary of the Initial Exercise Date. Each October Series D Warrant has an exercise price of $240.00 per share of
the Company's common stock, became exercisable on the Initial Exercise Date, and will expire on the 18-month anniversary of the Initial Exercise Date. The October Pre-Funded Warrants have an exercise price of $0.0001 per share, were immediately exercisable and can be exercised at any time after their original issuance until such October Pre-Funded Warrants are exercised in full. All of the October Pre-Funded Warrants were exercised during the fiscal year ended September 30, 2025. Each Placement Agent Warrant became exercisable on the Initial Exercise Date and will expire on October 30, 2029.
Under the alternate cashless exercise option of the October Series D Warrants, the holder of an October Series D Warrant has the right to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of the Company's common stock that would be issuable upon a cash exercise of the October Series D Warrant and (y) 1.0. In addition, the October Series D Warrants include a provision that resets their exercise price in the event of a reverse split of the Company's common stock, to a price equal to the lesser of (i) the then exercise price and (ii) lowest volume weighted average price (VWAP) during the period commencing five trading days immediately preceding and the five trading days commencing on the date the Company effects a reverse stock split in the future with a proportionate adjustment to the number of shares underlying the October Series D Warrants, subject to a floor of $47.55.
On March 14, 2025, the Company completed the March 2025 Reverse Stock Split. As a result, the exercise price reset mechanism was triggered, which resulted in the number of shares of common stock issuable upon exercise of the October Series D Warrants increasing from 27,083 to 136,698. The exercise price of the October Series D Warrants was adjusted from $240.00 per share to $47.55 per share. All of the Series D Warrants were exercised during the fiscal year ended September 30, 2025.
The October Series Warrants and the Placement Agent Warrants are not registered under the Securities Act. The October Series Warrants and the Placement Agent Warrants were issued, and the shares of the Company's common stock issuable upon exercise thereof will be issued (unless an effective registration statement is available), in reliance on the exemptions from registration provided by Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder, for transactions not involving a public offering.
Pursuant to the October Purchase Agreement, within 20 calendar days from the date of the October Purchase Agreement, the Company agreed to file a registration statement on Form S-1 providing for the resale by the purchasers of the shares of common stock issuable upon exercise of the October Series Warrants and the Placement Agent Warrants. The registration statement registering such shares was declared effective by the SEC on January 17, 2025.
In the event of any fundamental transaction, as described in the October Warrants and generally including any merger with or into another entity, sale of all or substantially all of the Company's assets, tender offer or exchange offer, reclassification of the shares of common stock, or the acquisition of greater than 50% of the Company's then outstanding shares of common stock by a person or persons, subject to certain exceptions, then upon any subsequent exercise of an October Warrant, the holder will have the right to receive as alternative consideration, for each share of the Company's common stock that would have been issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of common stock of the successor or acquiring corporation of the Company, if it is the surviving corporation, and any additional consideration receivable upon or as a result of such transaction by a holder of the number of shares of common stock for which the October Warrant is exercisable immediately prior to such event. Notwithstanding the foregoing, in the event of a fundamental transaction, the holders of the October Warrants have the right to require the Company or a successor entity to purchase the October Warrants for cash in the amount of the Black Scholes Value (as defined in the October Warrants) of the unexercised portion of the October Warrants concurrently with or within 30 days following the consummation of a fundamental transaction. However, in the event of a fundamental transaction which is not in the Company's control or in which the consideration payable consists of equity securities of a successor entity that is quoted or listed on a nationally recognized securities exchange, the holders of the October Warrants will only be entitled to receive from the Company or its successor entity, as of the date of consummation of such fundamental transaction the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of the October Warrants that is being offered and paid to the holders of common stock in connection with the fundamental transaction, whether that consideration is in the form of cash, stock or any combination of cash and stock, or whether the holders of common stock are given the choice to receive alternative forms of consideration in connection with the fundamental transaction.
Amendment to Series A Warrants
On October 30, 2024, the Company entered into amendments (the "Warrant Amendments") with certain holders of an aggregate of 12,205 Series A Warrants issued in a transaction which closed in May 2024 (the "May 2024 Series A Warrants"). The Warrant Amendments amended the May 2024 Series A Warrants to revise the Price Reset Mechanism of the May 2024 Series A Warrants, which, subject to certain exceptions, provided for an adjustment to the exercise price and number of shares underlying the May 2024 Series A Warrants upon the Company's issuance of common stock or common stock equivalents at a price per share that is less than the exercise price of the May 2024 Series A Warrants. The Warrant Amendments amended the Price Reset Mechanism such that the Floor Price (as defined in the May 2024 Series A Warrants) will not be lower than $150.00. In addition, the Warrant Amendments revised the definition of "Material Subsidiary" in Section 3(d) of the May 2024 Series A Warrants to clarify that Applied DNA Clinical Labs LLC is not a Material Subsidiary.
In connection with the October Registered Direct Offering, the Price Reset Mechanism in the May 2024 Series A Warrants was triggered, which resulted in the number of shares of common stock issuable upon exercise of the May 2024 Series A Warrants increasing from 12,308 to 122,521. The exercise price of the May 2024 Series A Warrants was adjusted from $1,492.50 per share to $150.00 per share with respect to the May 2024 Series A Warrants amended by the Warrant Amendment and to $141.75 with respect to the May 2024 Series A Warrants not amended by the Warrant Amendment. As a result of the March 2025 Reverse Stock Split, the exercise Price Reset Mechanism was triggered for the May 2024 Series A Warrants, which resulted in the number of shares of common stock issuable upon exercise of the May 2024 Series A Warrants increasing from 117,663 to 655,676. The exercise price of the May 2024 Series A Warrants was adjusted from $150.00 per share for the amended May 2024 Series A Warrants and $141.75 per share for the May 2024 Series A Warrants that were not amended to $26.91 per share for all of the May 2024 Series A warrants.
As a result of the June 2025 Reverse Stock Split, the exercise Price Reset Mechanism was triggered for the May 2024 Series A Warrants, which resulted in the number of shares of common stock issuable upon exercise of the May 2024 Series A Warrants increasing from 626,555 to 3,286,016. The exercise price of the May 2024 Series A Warrants was adjusted from $26.91 per share to $5.13 per share.
May 2024 Series B Warrants Price and Share Adjustment
As a result of the March 2025 Reverse Stock Split, the exercise Price Reset Mechanism was triggered for the May 2024 Series B Warrants, which resulted in the number of shares of common stock issuable upon exercise of the May 2024 Series B Warrants increasing from 3,009 to 163,019. The exercise price of the May 2024 Series B Warrants was adjusted from $1,492.50 per share to $26.91 per share.
As a result of the June 2025 Reverse Stock Split, the exercise Price Reset Mechanism was triggered for the May 2024 Series B Warrants, which resulted in the number of shares of common stock issuable upon exercise of the May 2024 Series B Warrants, increasing from 54,558 to 286,123. The exercise price of the May 2024 Series B Warrants was adjusted from $26.91 per share to $5.13 per share. As of September 30, 2025 the remaining Series B Warrants expired.
Waiver of Standstill in Placement Agency Agreement
As disclosed below, the Company closed the May 2024 Offering of Common Stock and warrants, including the May 2024 Series Warrants, with Craig-Hallum and Laidlaw as placement agents. As part of the May 2024 Offering, the Company entered into the May 2024 Placement Agency Agreement. The May 2024 Placement Agency Agreement contains a negative covenant which restricts the Company's ability to enter into certain equity sales of its securities for a period of time after the closing of the May 2024 Offering without the prior consent of Craig-Hallum (the "Negative Covenant").
On October 29, 2024, in connection with entering into the October 2024 Offering, the Company and Craig-Hallum entered into a waiver of the Negative Covenant, which permitted the Company to proceed with the October 2024 Offering.
Reverse Stock Splits
March 2025 Reverse Split
On September 30, 2024, the Company held its annual shareholders' meeting where its stockholders approved a proposal to grant the Company's Board of Directors discretionary authority for twelve months to amend the Company's Certificate of Incorporation to authorize a reverse stock split in the range from one-for-five to one-for-fifty. The Company's Board of Directors determined on March 3, 2025, that the split ratio would be one-for-fifty shares.
The March 2025 Reverse Split was effected as of 12:01 a.m. Eastern Time on March 14, 2025 and combined each fifty shares of the Company's outstanding common stock into one share of common stock, without any change in the par value per share.
June 2025 Reverse Split
On May 22, 2025, the Company held its annual shareholders' meeting where its stockholders approved a proposal to grant the Company's Board of Directors discretionary authority for twelve months to amend the Company's Certificate of Incorporation to authorize a reverse stock split in the range from one-for-five to one-for-fifty. The Company's Board of Directors determined on May 27, 2025 that the split ratio would be one-for-fifteen shares.
The June 2025 Reverse Split was effected as of 12:01 a.m. Eastern Time on June 2, 2025 and combined each fifteen shares of the Company's outstanding common stock into one share of common stock, without any change in the par value per share.
Moreover, each of the 2025 Reverse Splits correspondingly adjusted: (i) the per share exercise price and the number of shares issuable upon the exercise of all outstanding options; and (ii) the number of shares underlying any of our outstanding warrants by adjusting the conversion ratio for each instrument and increasing the applicable exercise price or conversion price in accordance with the terms of each instrument and based on the reverse stock split ratio. No fractional shares were issued in connection with the 2025 Reverse Splits. Any fractional shares resulting from the 2025 Reverse Splits were rounded up to the nearest whole share. In addition, each of the 2025 Reverse Splits triggered an exercise price reset mechanism ("Price Reset Mechanism") contained in certain warrants which resulted in the number of shares and exercise price of such warrants being further adjusted, as described in more detail above.
Product Research and Development
We anticipate spending approximately $700,000 for product research and development activities during the next twelve months. We plan to focus these activities on the further development and commercialization of our Therapeutic DNA Production services, including without limitation, research and development activities relating to our LineaDNA platform.
Off-Balance Sheet Arrangements
As a requirement of our lease agreement for our corporate headquarters entered into during January, 2023, in lieu of a security deposit, we provided a standby letter of credit of $750,000. The letter of credit is effective through January 2026.
Inflation
The effect of inflation on our revenue and operating results was not significant during the fiscal years ended September 30, 2025 and 2024.