Small Cap Network Blog

I know we just recently ended our coverage of small cap company Applied DNA (APDN), but I told you I’d keep up to date on anything important. Well, this is important (at least according to some of your questions)…CEO James Hayward is putting another $500K of his own money into the war chest. That’s a pretty big cash infusion for a company like Applied DNA.

It wasn’t his first big investment in his own company. He put in $800K about a year ago.

The cash will come in handy now too. Applied DNA had been running a little lean, according to some of the more recent 10Q’s. Though they are bearing revenue - and winding down a lot of the R&D stuff - the company is still in that critical stage between ’start up’ and being ’self sustaining’. This money may well get them over the proverbial hump while they solidify a couple more big projects.

And on a side note, it’s always good to see a CEO putting his money where his mouth is. Let’s just hope this is the last time it has to happen - you can’t stay on life support indefinitely.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

Though our coverage has officially ended for micro cap stock Applied DNA Sciences (APDN), we know a lot of you are still interested, and perhaps even owners. So, we’ll keep tabs on it for a while longer before taking it off the radar. For instance, we wanted to let those of you who are shareholders know the annual stockholder’s meeting has been rescheduled to take place in December.

The Applied DNA shareholder meeting will take place on December 16th at 11:00 am. The location is the Charles Wang Center in Stony Brook, New York.

Don’t read too much into our eventual discard of Applied DNA. We liked the concept when we first found the company, and we still think there’s a market for what they do. Between their slow growth pace and an unfriendly market though, we have to move on to bigger and better things sometime.

As for what you should do with any APDN, that’s up to your time frame and expectation for the company. However, based on our observations over the last year or so, we think it should be viewed as a long-term holding, if anything.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

Yes, you read the headline right - the newest breakthrough in intimate apparel technology is embedding skin care products directly into the fabric used to make the undergarments. Sounds crazy I know, but it might just be crazy enough to work. The intimate apparel market was worth $10 billion in the U.S. alone last year, and I’m sure it was proportionally bigger when adding in overseas markets. Even carving out a tiny segment of that market could be a multi-million dollar opportunity….even with something as novel as lotion-laced underwear.

What’s it got to do with small cap stocks? One of our following - Applied DNA (APDN) - is at the heart of the breakthrough. Remember the Dermal RX line of products they were working on? The venture we all knew a little about, but nobody knew much about? I think today’s news is the culmination of much of that work.

Here’s the deal - one of the Dermal RX products is designed to lock in moisture in the covered areas of the body, which in turn will preserve the appearance and health of the contacted skin. It’s called HydroSeal, and while it offers the same benefit that a lotion might, it’s much more permanent than that. HydroSeal can be embedded into the fibers used to make intimate apparel, so each time that garment is used it provides skin care to the person wearing it.

The product is being test-marketed right now. However, I can see it catching on well enough to establish a permanent space in the industry’s product mix.

I don’t know which brand of intimate apparel is co-venturing with Applied DNA on this deal. However, I’m guessing that’s a ’secret’ to be told later. Like I said though, it’s just a guess.

Will this get the stock moving? Probably not right away. The market’s got bigger things to worry about anyway, and there’s no immediate benefit to Applied DNA’s bottom line. It’s just another revenue stream for the company to cultivate. However, that’s been the case all along…the APDN story is about quality growth over five years, not overnight growth.

On that note, I do think the concept could be marketable beyond underwear. Healthcare, sports, and who knows what other venues may eventually see value in fabric that does something else as well.

Anyway, if any of you come across what appears to be HydroSeal-laden intimate apparel, please report back. I think we’d all like to learn more about how it’s being introduced to the consumer. The test market was simply described as ‘major metropolitan areas’, if you were planning on keeping an eye out for it.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

Thanks for all your comments and questions regarding this morning’s announcement that Applied DNA (APDN) was entering the anti-counterfeit wine arena. We agree - it’s a big deal, and could really boost the top and bottom line. It did raise a good question though…one we think is worth answering publicly. Richard writes…

You are missing one very important point in your evaluation of this company and product or service. When they find counterfeit product for their client will it be admissible in a court of law? What good does it do if a customer buys Applied DNA’s service and can’t protect a found counterfeit in court? Tell me law enforcement will accept the scientific findings of APDN and I will tell you that APDN is a rocket ship. Otherwise finding fraud with an methodology not accepted by a court means nothing.

Hi Richard. You are correct - all their ability is irrelevant without proper forensic-level testing. However, Applied DNA’s technology is indeed forensic-caliber, and therefore admissible in a court case.

We’ve touched on that a couple of times, though not recently….

http://www.smallcapnetwork.com/Applied-DNA-APDN-Enters-Into-Tentative-Agreement-with-Smiths-Detection-Biomatrix-BMSN-Submits-Documentation-for-Approval/af/archive/20080505-1/

http://www.smallcapnetwork.com/Hot-Penny-Stock-Applied-DNA-APDN-on-the-Verge-of-a-Breakout-Spicy-Pickle-SPKL-Announces-10-Stores-in-Houston/af/archive/20080204-1/

However, there’s also some discussion of this on their web site….
http://www.adnas.com/signature/dna_authentication

Also, the full details of their forensic capabilities can be studied in this recent SEC filing…
http://sec.edgar-online.com/2008/07/22/0001188112-08-002206/Section18.asp

In short, everything that has to do with SignatureDNA is court-admissible. Also, the testing of the wines’ grapes origins is forensic-friendly. It’s not based on SignatureDNA, but it can identify particular strands of DNA at a level detailed enough to achieve the same specificity as SignatureDNA, identifying a plant’s geographical origin.

In other words, everything we’ve looked at so far from Applied DNA will hold up in a court case.

One point to clarify though…the forensics test that a court case would require isn’t the field test, which only requires a hand-held scanner. If the quick, hand-held scan turns up something its user thinks is worth testing forensically, the label is then taken to a lab where proper forensic testing is done.

Hope that helps.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

It ain’t millions and millions yet, but I have to give credit where credit is due - Applied DNA (APDN) just posted their third quarter numbers. We saw their fourth straight increase in sales. They pulled in revenue of $252K. There were no revenues at all for the same quarter a year earlier, since - as you probably know - the company really didn’t get a revenue-bearing product to the market until about a year ago.

My take? It’s proof of life. I’d love to have more (who wouldn’t?), but considering they literally started from scratch not too long ago, I give their progress-to-date a thumbs up.

It’s also worth noting gross margins remained high. Their cost of sales was only $50K last quarter, leading to a gross profit of $202K. Again I’d rather have net profits, but with a positive gross margin we can at least assume more volume will eventually mean profitability.

It’s also worth noting the majority of the expenses booked in this most recent quarter were related to professional fees and the reorganization of its capitalization…converting notes to equity. I’m not one of those people who disregards the bottom line when those kinds of things are booked; a loss is a loss. Again though, it points back to viability…those things won’t last forever.

What didn’t get said in the 10-Q may be even more important. In talking to the people at the company, I learned a big chunk of Q3’s sales were from repeat customers. That’s encouraging, in that it tells me getting this product out the door isn’t going to be a constant battle. The more new customers they add each quarter, the more customers they’ll have coming back with orders in hand, leaving their rain-makers to cultivate more business.

Here’s the 10-Q for Applied DNA. There’s no press release…at least not yet. However, I suspect there will be one tomorrow. I’m going to be publishing an edition tomorrow (Friday) afternoon anyway, so look for some more thoughts on Applied DNA then - maybe with more details from a news release. I just wanted to get you the news as soon as possible.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

Just an FYI - Applied DNA (APDN) is going to reschedule their annual shareholder’s meeting. It was going to take place on September 16th in Stony Brook, New York. The company has postponed the event though, and will release a new meeting time and location in the near future.

The September 16th meeting was for shareholders on record as of July 15th. That record date, however, will not apply for the rescheduled meeting; a new date of record will also be announced soon.

After peaking at 22 cents in early February, Applied DNA (APDN) hasn’t been quite as impressive as the run from 9 cents to that 22 cent high (a 144% differential). However, we can say this much…we’re seeing the stock hold its ground. The 17 cent mark seems to be the line in the sand; that’s where the 38.2% Fibonacci retracement line is, as well as most of the recent lows. We’ve not closed under 17 cents since reaching 22 cents. As long as that level holds up as support, I’ll be satisfied.

As far as a ceiling goes, I’m buying into any break past 22 cents. I’m still a short-term seller (ok, profit-taker) at last year’s high of 27 cents.

The one thing I added to this chart is the 3×4 DMA (displaced moving average). It’s at 18.6 cents right now, and seems to be drawing APDN higher. This DMA has has had pretty good luck with halting any pullbacks, while prodding some decent rallies. That alone won’t be enough to get shares past 22 cents from here, but it could start the process.

We’ll look at this chart again when there’s more to look at.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

Like I said in Saturday’s edition, small cap company Applied DNA (APDN) submitted their official quarterly 10Q earnings report to the SEC (I found it on EDGAR), but didn’t publish a press release to go along with it. My guess was they didn’t want even bother trying to get anybody’s attention going into a long weekend. Instead, they were opting to wait until trading started again this week before making a statement.

In a nutshell, that’s basically the way it happened. They issued a press release this morning to confirm what our readers already knew - Applied DNA generated $123K in sales last year. No earnings, but no surprises.

They also wrapped up some recent highlights. To see the press release, just click here.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

You don’t need me to tell you media attention can be bought. That’s what press releases are for, and they’re just one of many ways to get your company into the limelight for a few moments. However, it seems like the highest quality and most meaningful attention any company could ask for is the kind that’s free - when you’re part of ‘organic’ news. That’s why I feel Newsday.com’s discussion of Applied DNA (APDN) today is just huge…an unbiased source took a long, credible look at the young, anti-counterfeit company.

There was nothing in the article we didn’t already know. Newsday basically told the same story we have been telling for a while, focusing on the Supima cotton venture. The reason the article is so exciting, however, is that the company is being put in front of a whole new audience that may not have heard of it otherwise. (Believe it or not, not everybody reads the Small Cap Network newsletter or scours the web for small cap news.)

Newsday is one of the biggest regional newspapers in the country, centered right in the heart of it all - New York. It’s a big audience, with a lot of investment-savvy players. I suspect that’s why APDN shares are moving again today, even after a huge run over the last couple of weeks. Like I said, it’s the kind of publicity you couldn’t pay for if you wanted to.

Here’s a link to the article on Newsday.com. The chart below speaks for itself.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

Not a big deal, but on Monday when I said Applied DNA’s (APDN) marker kit being was incorporated into cash transit boxes, I goofed. The DNA marker is still being incorporated into the boxes, as described. And, like the current dye system, if anybody tampers with the boxes, the sealed DNA-laden liquid explodes all over the cash, essentially ‘marking’ the bills.

Where I goofed was in saying the test would be performed by a pen-like marker. As it turns out, a hand-held scanner (the same one we discussed back on January 22nd) will determine whether or not DNA is present.

The scanner’s use instead of the pen makes not one iota’s worth of difference as far as the features/benefits are concerned. The technology can still pinpoint the rightful owner of the cash, and even determine which cash box it was in. The idea is still just as attractive to cash-in-transit companies as well as insurance companies. The only difference is a trigger pull instead of a pen stroke.

Like I said, not even worth batting an eye. I just want to get it in writing in case anybody intimately familiar with the technology was wondering if something had changed.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

I know we haven’t heard much in the way of news in the last few days from small cap company Applied DNA (APDN). However, the way the chart is perking up, I have to wonder if we will in the near future. (Stock charts are usually more predictive than reactive.) If my gut is telling my head the right thing - and by applying a little technical analysis - I suspect APDN shares could become a hot small cap stock real soon.

First of all, this is more lesson-oriented than bullish opinion. Even if Applied DNA doesn’t break out (and up), you may want to put this observation in your mental filing cabinet. That said…

There are two things I really like here, and a third thing I could like soon - conditionally.

1. The buying volume is starting to grow. Tuesday’s 370,000 shares is the biggest accumulation day we’ve seen in a while, and we’re starting to see quite a few of them. With the exception of January 23rd, distribution (selling) days are very mild.
2. APDN is above all of its moving averages…again. I know this is a painfully simple tool, but it’s also something that can’t be misinterpreted. If you like momentum, moving averages tell you everything you need to know. (If you’re a bottom fisher, they tell you nothing.)
3. The aspect I almost like? APDN is on the verge of new multi-week highs. Technically that level is 17 cents, though 16 cents is significant too. A move to 18 cents I would consider a victory, but also a great breakout move. Yes, that means trade-worthy - at least in my opinion.

Of course, I also have the advantage of knowing what’s going on off the charts. If you feel like the good news has been pouring freely from Applied DNA lately, it’s because it has…much more so than the latter part of last year.

An improving small cap chart supported by the underlying company’s real progress? Can it really be that simple? (Yes, it can. The fundamentals tell you ‘which’, while the charts tell you ‘when’.)

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

I think there are two basic kinds of small cap companies in the world….the ones that make a plan and achieve it, and the ones that don’t. More importantly, the small companies that can execute a well-thought-out plan tend to have better performing stocks, which is why I’m once again excited about Applied DNA’s (APDN) potential.

The news should come as no surprise. We first mentioned a new revenue path was being paved back in the November 8th edition ‘APDN’s Serendipity’. It was then the company announced that the process used to create the ingredients needed to make their anti-counterfeit DNA could also be used to produce the fermentation ingredient used in many skin-care products….a $50 billion industry.

At the time, Applied DNA had only provided samples to potential customers. That all changed today though; Applied DNA has officially shipped their first commercial order for DermalRX (meaning they got paid for it).

Though one order isn’t like winning the lottery, I do think it’s a big sign of viability - consumer products makers want the stuff. I have to think many other manufacturers who’ve been test-driving DermalRX will be on the bandwagon soon…with dollars in hand.

Just as a reminder, the nice part about adding this product to the company’s catalog was immediate revenue, which could be used to support the longer-term revenue goals of their anti-counterfeit product ‘Signature DNA’. In other words, they’ve diversified.

There’s no official word on the size of the order, though I’m not sure that really matters - all I wanted to see was DermalRX’s viability. Since it’s now ‘on the radar’, I’m looking forward to seeing Applied DNA carving out a piece of the $50 billion skin-care pie.  

Here’s the press release.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

Our micro cap stock pick Applied DNA Sciences (APDN) did indeed get off to a good start, opening at 15 cents today, leaving behind a gap from Friday’s high of 12 cents. The gap ended up acting as a vacuum, pulling shares to as low as 14 cents. But, that would be the extent of any pullback. Since then, APDN has marched up to the current level of 16 cents after reaching as high as 17 cents.

Fortunately, anybody who wanted in at a pretty good price was able to get in. I know some of you got the opening price of 15 cents, and others of you even got in at my recommended limit of 14 cents.

If for some reason you still didn’t jump in (but wanted to), I don’t know that I’d wait at this point. The bears had a chance to pull this one down, and couldn’t do it. The result of the bearish attempt was a recovery that probably just incited more buying. Volume is huge today as well, which also draws attention. Yet, the buy-in has been methodical and well-paced.

Point being, I don’t necessarily see APDN getting reeled in now. If it had opened at 22 cents, yeah, I can see it happening. But now, all I see is a ‘bottom up’ foundation being laid (where the stock moves from low to high levels). I think the risk of missing out on more upside follow-through is now greater than the risk of a pullback. If you’re interested, I believe you should just go ahead and do it here. 

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

OK fans, we’re just a few minutes away from seeing Applied DNA Inc. (APDN) begin trading following the launch of our profile. Will this small/micro cap stock end up being a hot potato right out of the gate, or will the buying spree at least be civil? As with any micro cap stock, I suggest staying cool until it becomes clear how this stock pick will behave immediately after we suggest it. Here are a few things I would do…

1) As with Enigma (ENGM) and Spicy Pickle (SPKL), you probably want to use a limit…at least early on. I think 14 cents would give you plenty of opportunity to get in at what’s still a decent price.

2) If APDN opens above - and stays above - 14 cents by the latter portion of the session, maybe then you start migrating in at market prices. Or better still, just wait. If shares are just ridiculously high, I’m guessing they’ll get reeled in temporarily later in the week. If they still don’t then, then odds are that APDN is above 14 to stay, and it’s likely safe to step in even at what seems like an elevated level.

I’ll update the blog if anything interesting develops as the day moves on.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.