Debbie Bailey - Director of IR James Hayward - Chairman and CEO Beth Jantzen - CFO.

Josh Seide - Maxim Group Jeff Kessler - Imperial Capital Greg Peters - Morgan Stanley.

Good afternoon, and welcome to the Applied DNA Fiscal Fourth Quarter and Year-End 2016 Earnings Conference Call. All participants will be in listen-only mode [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions [Operator Instructions]. Please note this event is being recorded.

I would now like to turn the conference over to Debbie Bailey, Director of Investor Relations. Please go ahead..

Thank you, Operator. Good afternoon everyone, and thank you for joining us for our fiscal 2016 fourth quarter and year-end results conference call. A copy of the Company’s earnings press release and the accompanying PowerPoint presentation to this call are available for download on the Investor Relations section of the Applied DNA Web site.

With me on the call today are Dr. James Hayward, Chairman and CEO, and Beth Jantzen, Chief Financial Officer.

As a reminder, please note that some of the information you will hear today during our discussion 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 2016. Applied DNA Sciences assumes no obligation to update any forward-looking statements or information. Before starting the call, I want to inform you Dr.

Hayward will present this Thursday at 9 AM Eastern Term at Imperial Capital's Annual Security Investor Conference. The presentation will be webcast live. To view the webcast, find the link under the events and presentations section of the investor page on our Web site. Dr. Hayward will also meet with institutional investors at the conference.

If you would like to schedule a meeting, please contact your Imperial Capital salesperson. Further, he will attend the Source Capital 2017 Disruptive Growth and Healthcare Conference in February in New York City. Additional Source Capital Conference details will be posted to our investor page soon.

Now, it is my pleasure to introduce Beth Jantzen, our first speaker..

Thank you, Debbie. Good afternoon everyone. Let me take a few minutes to discuss the results of our fourth fiscal year and the full year, which ended on September 30, 2016. After which time, Dr. James Hayward, our President and CEO, will update you on the Company's activities and strategies.

As noted in the prior quarter's call, we started reporting inventory and cost of revenues on our financials. And to add further clarity in this 10-K, we have broken out revenues by product and service. Service revenues include our pilot projects and any research and/or development contracts, as well as authentication and cyber typing services.

Cost of revenues relate only to product revenues. Cost for service revenues are reflected in R&D and SG&A expenses.

Starting with the statement of operations, total revenues for the quarter were $1.64 million, a 59% decrease compared with $4 million reported in the fourth quarter of fiscal 2015 and a 151% increase as compared to $653,000 reported in the third quarter of fiscal 2016.

The year-over-year decrease in revenues was comprised of a decrease in product revenues of $1.6 million or 54%, and a decline in service revenues of 73% or approximately $700,000.

The decrease in product revenues was primarily from a decrease in revenues related to sales to the textile industry for protecting cotton supply chain and the decrease in service revenues mainly related to reduced revenues from the two non-recurring government contract awards; the rapid innovation fund or RIF project and the SBIR Phase 2 contracts, which were completed during August and July of 2016 respectively.

As you have seen with our recent announcement that Action-Pack is now a reseller for Applied DNA; we're beginning to move into the commercialization phase that was the goal of the RIF contract; and we are making similar progress following the end of the SBIR contract.

The increase in revenues for the fourth quarter of fiscal 2016, as compared to the prior fiscal quarter, is a result of shipments of DNA concentrate to Ted Cotton.

The higher cost of revenues during the three months ended September 30, 2016, as compared to the same period in the prior fiscal year, is primarily due to the deployment of cotton DNA Transfer Systems into the fields, as well as an increase in the shipment of DNA concentrate to the textiles industry.

Operating expenses were $3.6 million for the quarter ended September 30, 2016, a decrease of $609,000 or 14% from $4.2 million for the same period in the prior fiscal year. This decrease is primarily attributable to a decrease in R&D expenses of approximately $158,000 or 16% and a decrease in SG&A of $453,000 or 15%.

The decrease in R&D spending was mainly due to lower development cost incurred in relation to the two government contract awards, offset by cost related to the Cooperative Research and Development Agreement, or CRADA, with the U.S. Department of Agriculture for enhanced genotyping.

The decrease in SG&A expenses from $3.1 million in the fourth fiscal quarter of 2015 to $2.6 million in the fourth quarter of fiscal 2016 was due to a decrease in stock-based compression expense, primarily associated with stock option modifications during the fourth quarter of the prior fiscal year, resulting from the extension of certain stock option as well as reduced legal costs.

For the fourth fiscal quarter of 2016, excluding non-cash expenses, adjusted EBITDA was a negative $1.7 million compared to a positive $213,000 for the same quarter last year, and a negative $2.6 million in the prior fiscal quarter. The decline year-over-year is mainly due to the decrease in revenue.

As you know, these non-cash items have no impacts on our liquidity. Now, let me spend a few minutes going over the results for the full fiscal year.

For fiscal 2016, we reported product revenue of $2.5 million and service revenues of $1.7 million for total revenue of $4.2 million, which represents a decrease of 54% from the same period last fiscal year of $9 million.

The decrease in revenues is attributable to a decrease in the textile industry for protecting the cotton supply chain of approximately $2.7 million and two government contract awards of approximately $1.8 million that, as I mentioned earlier, were completed during the fourth quarter of fiscal 2016.

Cost of revenues for the fiscal year was $747,000 versus $384,000 for the fiscal year 2015. The increase in cost of revenues is attributable to deployment of cotton DNA Transfer Systems into the field and increased DNAnet sales this year. New DNA Transfer Systems will be required only for new gins in the coming year.

For fiscal 2016, operating expenses decreased slightly as compared to the same period in the prior fiscal year from $16.5 million to $15.6 million due mainly to a decrease in SG&A expenses of $2.2 million or 16%, offset by increases in R&D and depreciation and amortization expenses of $1.1 million and $216,000, respectively.

The decrease in SG&A expenses for the year was primarily the results of a decrease in stock-based compensation expenses associated with grants to employees during the fiscal 2016, having a four year investing period, while similar grants to employees during the fiscal year 2015 invested immediately in lieu of cash bonuses being awarded to employees as well as from stock option modifications during the prior fiscal year.

The increase in R&D expenses is primarily due to development cost incurred with the government contracts and CRADA as discussed above. On a yearly basis, adjusted EBITDA was a negative $9.2 million compared to a negative $3.2 million for the same period last year. Turning to the balance sheet.

Cash and cash equivalents totaled $4.5 million at September 30th compared to $7.1 million at June 30, 2016. The decreased cash balance is primarily a result of cash used to fund operations.

As discussed during prior quarterly calls, our cotton contracts include extended payment terms that will result in a longer collection period and slower cash inflows.

As a result, our total accounts receivable for cotton customers as of September 30, 2016 was approximately $7.2 million, of which $1.5 million is included in long-term accounts receivable. Also, $2.3 million for shipments of DNA concentrate during fiscal 2016 was included in deferred revenue as of September 30, 2016.

The majority of these shipments are expected to be recognized as revenue during fiscal 2017. As of September 30, 2016, our average monthly cash burn rate for fiscal 2016 was approximately $890,000 compared to approximately $746,000 in the prior fiscal year.

The increased burn rate for fiscal 2016 compared to fiscal 2017 that due to decreased cash receipts, primarily as a result of the extended payment terms for our cotton customers discussed above and the decreased revenue from the SBIR and RIF government contracts.

We completed a $5 million private placement on November 7, 2016 for which we filed the F-3 this afternoon. As of November 30th, our cash position is approximately $7.8 million.

This capital raise not only strengthen our balance sheet but also gives us the financial flexibility to execute on our fiscal 2017 goals, which Jim will go into in greater detail in a moment.

We continue to closely monitor our spending and intend to remain disciplined and continue to strategically manage costs in line with our current and near future market opportunities. We estimate that our cash and cash equivalents, along with the collection of our current receivables, are sufficient to fund operations for the next twelve months.

In summary, fiscal 2016 was a year of learning and transformation. We now have a much better understanding of the cotton demand going forward and believe that fiscal 2017 will be a savior year for the Company. Thank you for joining us today, and I would now like to turn it over to Jim for his comments..

Okay. Well, thank you very much, Beth. And thank you everyone for joining our call this afternoon. Coming off a strong revenue performance in fiscal 2015 that was driven by growth in our textile and government military verticals, we expected business momentum to carry through into fiscal 2016.

We did expect our momentum would be underpinned by growing market awareness, so the value proposition of our technology demonstrated by securing and purifying the global cotton supply chain and extending product development under government agencies to commercial deployments.

The year did not unfold as fast as expected across both of these verticals, for reasons I’ve discussed in prior calls. While disappointed in our financial performance, operationally and strategically, we are much better positioned today than we were a year ago. Let me give you some examples of the progress we achieved in fiscal 2016.

In that year, we took steps to expand our penetration in supply chain verticals where we have the unique competitive position; quite distant from our competitors, while building our recurring run-rate business. This two pronged strategy leverages existing technology platforms to penetrate like markets.

It uses government funded projects to penetrate industrial supply chains and increases off the shelf products to efficiently grow distribution channels. Let me take a few minutes to illustrate the highlights of our strategy.

In cotton, the world changed one month after quarter end on August 19th when Target boldly exposed the mislabeling of Egyptian cotton.

In the last three and half months, that trigger event combined with our steady advertising, PR, event participation and direct marketing, resulted in us being invited to speak on numerous industry panels and gain audiences with CEO’s of industry leaders; Thomson Reuters, Bloomberg Businessweek, Women's Wear Daily and others, have featured our Company, all of which may be found on our Web site.

Women's Wear Daily, which the apparel industry considers to be is viable, featured an article in its November issue entitled, it’s in the DNA, testing for cotton and other fabrics has a new sure-fire method, while we garnered no such national attention last year.

We believe we’re still in the early stages of growing industry and consumer awareness for mislabeled product news for textiles. To accelerate demand, we’ve continued to highlight other compliance and geo-political issues with cotton. Our 2009 and 2013 market surveys have shown broad mislabeling in pima cotton.

Our experience visiting nodes within this supply chain has shown the presence of forced labor product conflict cotton into what were expected to be pristine cotton supply chains.

As a result, we see demand being generated by broader product claims for our SigNature T platform, including organic cotton, sustainably harvested cotton, conflict free cotton and cotton grown in America. Our cotton channel partners are helping to drive adoption of SigNature T DNA in the U.S. and abroad. Louis Dreyfus is the leading originator of U.S.

cotton production, one of the largest in the world, and I think is one of the largest vertically integrated home textile manufactures.

As brands and retailers move to ensure compliance with textile labeling requirements and adhere to responsible sourcing initiatives, cotton merchants are meeting these requirements with DNA tagged cotton and cotton products that their customers can verify for quality and purity at all stages of the supply China.

It is this pull-through of demand by the end customer the brands and retailers that is driving orders for SigNature T. As a result of the maturation in our cotton business, pilot projects are no longer required, giving us speed to market. Our ability to detect cheating and purify supply chains is indisputable.

Our focus in fiscal 2017 is to further build awareness and draw demand pull-through from brands and retailers to generate greater order flow. On the negative side, we learned that our disruptive technology causes, brands and retailers to undertake an inventory replacement transition.

While the first product may land on retail shelves within 18 months of the cotton harvest and tagging, it may take 24 months or so for a full replacement with maximum marketing and promotion. For example, for products tagged in winter 2015, the first new products were in stores by spring 2016.

It is this reason for our large accounts receivable and deferred revenue as Beth just described. Now we are now in our third cotton ginning season of SigNature T tagging that’s grown from 5 million pounds of tagged cotton fiber to over 100 million pounds, driving thousands of sample authentications each year.

The absolute growth and demand for DNA cotton is clear. Our combined efforts drove an increase total usage of tagged U.S. cotton in fiscal 2016, as well as the use of 2015’s remaining tagged inventory. When combined with the new order received, we expect the three-fold increase in production of tagged cotton between 2015 and 2016 ginning seasons.

Now, I’m very pleased to announce today, for the first time, through an existing partner who is working with a specific large U.S. retailer that we have agreed to provide supply chain security with our products and services for a multi-year extended period.

The relationship covers and especially long-term and require substantial qualities of our products and services. This is exactly the kind of business we have been pursuing, which will help us provide future guidance for our performance to investors.

Guaranteed minimum quantities in exchange for well-defined exclusive rights will contribute to our long-term stability and growth plans. For commercial reasons, our allies and retailers do not want to reveal their identities until the launch is well underway. We capitalized on growing demand and broaden our business base in cotton.

We expanded our tagging program to encompass four varietals of American cotton, up from just two a year ago. We also introduced the new generation of fully automated DNA Transfer Systems designed to handle greater volumes of Signature T tagging than the prior generation.

These systems are Internet connected for remote monitoring and support, and provide the origin for track and trace of cotton through the supply chain -- with our digital DNA cloud-based platforms. Six DNA Transfer Systems have been installed. We believe these systems will enable us to expand signature T tagging to international markets.

Now, with regard to the synthetics markets, to put it into perspective, it is at least three-times and perhaps six times larger than cotton in terms of total addressable market. Synthetic fiber comprises 60% of the global textile industry.

Our synthetic textile supply chain business is an efficient expansion, leveraging our cotton expertise and technology demonstrated with borealis and plastics and with SAS Industries’ silicone gaskets under the RIF government contract. In synthetics, we're a few steps behind cotton's trajectory, given our more recent entry into the market.

But we believe it will unfold in a very similar fashion. Our partnership with Techmer is founded on the shared belief that our collaboration will provide industrial synthetic fiber manufacturers and some consumer brands with increased protection against counterfeiting.

As you are aware, we secured our first joint customer with Techmer earlier this year with the tagging of 5 million pounds for Palmetto synthetic yarns for apparel, automotive and industrial applications. As with our cotton vertical, our growth in synthetics is predicated on educating the marketplace and channel partners.

This year we have worked closely with Techmer to train their dedicated sales force on our Signature T DNA system. Techmer strongly promotes us in sales calls to existing and perspective customers. We shared a booth with Techmer at the IDA 16 Show in Boston, as well the K Show in Germany that generated many leads within the industry.

We will efficiently leverage our platform and expertise by actively pursuing the application of Signature T for other manmade fiber sectors as well, including specialty coatings and colorants that have been widely known for ingredient substitution. Now, turning to our government and military vertical.

We've made a great deal of progress to further expand our penetration of this market opportunity, and to leverage its investments for expansion to industrial markets. We have a three year blanket purchase agreement for $2.5 million with an unnamed agency with whom we’ve worked previously.

This award speaks to the relationship established, and continued interest in the comprehensive solutions sets and innovation that Applied DNA can provide under a collaborative partnership. Our program has become synonymous with the ability to manage secure risks, whether in the supply chain or for critical assets.

In mid-November, we announced a new Indefinite Delivery Purchase Order contract with DLA. This contract will ensure uninterrupted support of the current DNA program for the FSC 5962 microcircuits in place since December 2014, uninterrupted at the product test center located at the agencies Land and Maritime facility in Columbus, Ohio.

This contract also includes use of the digitalDNA customer portal developed for use by DLA to capture data related to semiconductors and the automated marking methods we developed related to the SBIR contract. The period of performance is one year within an additional one year option period.

We are especially proud of this contract as it represents our longer standing relationship with our cornerstone customer DLA with whom we worked indirectly and direct since 2010. This underscores our collaborated partnership with our government customers based on proven solutions trust and above all integrity.

We demonstrated the capability to market authenticate a much broader array of components with the work recently completed under our SBIR and RIF contracts. In essence, we can now mark at volume and at the point of manufacture, the work completed on these six federal supply groups has strengthened our core capabilities to offer supply chain solutions.

We are now focusing on taking the results of the two years of work performed under the SBIR and RIF to industry for adoption in aero, defense, industrial and consumer markets, beginning with the industry partners who participated in those funded trails such as SAF, high rail group and others that we can't disclose.

Once that happens, DNA marks commodities could be produced to be available to DLA to procure validate and authenticate as part of a comprehensive program. An example of this transition to commercial business in government and militaries, the distribution partnership we have with Action-Pak announced subsequent to the close of the fiscal year.

Action-Pak which is an FDA registered supplier to Fortune 500 companies in many industries will resell our DNA-based validation and authentication solutions to its military and commercial customers.

We believe this relationship and application will serve to demonstrate an easy-to-achieve value proposition of our technology to accelerate market penetration. Now for Slide 13 is on image of the tablet becoming the barcode, and it's relevant in both pharma and personal care.

I’ll briefly touch upon our decision to replicate the model in two other bulk processing supply chain that shares similar platforms. Our pharmaceutical vertical presents a large untapped opportunity with the addition of Bob Miglani to our teams six months ago. We have made considerable progress.

We haven't matched how our DNA tags can be integrated into the large and complex supply chains for the pharmaceutical industry both in the dosage and in the packaging. In a very short time, we've identified one of the key industry players in this supply chain and are moving toward fruitful concept to integrate R tags seamlessly into the market.

The U.S. Federal Government Drug Supply Chain Security Act and related mandates in place globally also serve this catalyst for the adoption of our technology by companies that are moving to implement serialization of packaging.

We've already demonstrated to several companies how our technology could aid in their efforts to secure serialization and with our partner Nissha in Japan we're in the midst of a pilot project with the pharmaceutical company. In parallel, we're opening up the same discussions in the highly related market of personal care.

Recent articles on fake alloy, fake oils and other ingredients combined with a strong chorus of support for sustainability and ethical sourcing from our millennial generation demonstrate the problem.

We're in early discussion with several companies to define the marking and authentication entry points within the supply chain and to articulate our value proposition. Now, earlier in the discussion, I pointed out that we've a two-pronged strategy to our business model.

I've covered the supply chain and now I'd like to say a few words about building our recurring channel oriented business with off-the-shelf products. The primary revenue generated here are asset marking and cash and valuables in transit or CVIT. Our asset marking is on a strong upward trajectory.

On prior conference calls, you've heard me discuss the growing business momentum of our security asset marking solutions in the Nordic region covered by our distributor safe solutions.

We call that a certain brand of luxury cars imported into Scandinavia are marked with smartDNA which is our local brand name by importers and at dealerships partially underwritten by and large Scandinavian insurance company IF.

We've worked to educate the Scandinavian market and has completed extensive pilots that produce results of 80% reduction of vehicles protected by smartDNA and has led to all imports barring the applied DNA solution.

The luxury manufacturer has more than doubled their annual consumption of our smartDNA marking kits over the past year and is expanding to a second country now.

Another auto brand will shortly be promoted by IF Insurance in a mass amount to 1 million customers urging them to adopt our smartDNA program as an effective value-added deterrent and tracing mechanism to protect their cars.

As the matter of fact as you can see on the slide, a recent Chop Shop buff identified parts and their origin that otherwise would never have occurred justifying insurance program value, development such as these advance our goal of securing an insurance company that will underwrite adoptions of smartDNA across its entire automotive portfolio.

With the addition of the second brand our footprint in this market is expanding. So now in conclusion, demand for our solutions is growing and we’re nurturing that demand with our technology and growth strategy to assure long-term success.

Our business fundamentals today as evidenced by the greater number of partnerships, more technology and more market awareness are stronger than they were at this point last year. Our commitment to execute on our all of our opportunities has never waived, nor has our commitment to driving additional shareholder value ever been greater.

This concludes my prepared remarks.

Operator, can you please open the call?.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Brian Kinstlinger with Maxim Group. Please go ahead..

This is actually Josh Seide for Brian. Thanks for taking the question. Can you give us a sense of the possible top line contribution from the multiyear agreement, you mentioned in your remarks to secure the supply chain for the large U.S.

retailer?.

Well I can tell you, we are quite excited about it and that’s about as much sense as I can give you, I’m afraid, because the terms and relationship we have that new extension prevent us from reveling any details until they are ready to tell the market in general..

Understood and can you comment a bit on the overall demand from these big box retailers following the news of fake Egyptian cotton being delivered in the target supply chain and then maybe when you expect that demand to be reflected in APDN's top line?.

As you can image, it calls quite enough to our across all the big box stores, many of them have seen class action suites, and there are some in the cotton industries that debate the future of Egyptian cotton.

Yet, when you go to many stores, you will find Egyptian cotton products still on their shelf, and so retailers have a real motivation to find out whether or not there Egyptian products are real. And if need be to replace those products with alternative products to genuine in qualities are without question.

And we really are amongst the only companies that could provide that kind of service, that kind of guarantee.

So, yes, you’re exactly right, we’ve been contacted by many big box retailers in the industry by brands and even by the vendors, the spinners, the weavers themselves who want to be sure that they are well differentiated from their less ethical competitors..

Okay.

And can you talk a bit about the companies target market within the varieties of cotton? Is there greatest potential in Upland Delta or some other variety at this point? And can you give us kind of an updated breakdown of the market Upland and Pima cotton overall?.

Sure. If you look at just to start with Pima, it's simplest. The total addressable market is £300 million produced in United States per year. We have already a significant share of that market. By comparison, the Upland cotton market from United States is £7 billion much, much larger attempt.

And there are users who use incredible amounts of that cotton manufactures of blue jeans and manufactures at very large scale that distribute cotton products. So our strategy is evolving, we are still committed to Pima.

But we’re also working very hard to develop all of the Upland categories, all the ones you mentioned as well as claims for Upland product such as a simple one especially after this election that is coming from America or cotton that has been grown sustainability for cotton that is organic in nature.

There is a large strong suspension that much of the trading in organic cotton is in fact flagged by substitution as well. .

Next question comes from Jeff Kessler with Imperial Capital. Please go ahead. .

Can you give us some idea of both the operational, let’s call logistical as like to say formats you’re putting as well as your financial reporting that will be able to generate a better forward view for you, a better reaction to what's number one what’s going to be recurring, what’s going to be onetime sales that generate recurring and what's just going to onetime sales by itself.

So that going forward, you’ll be able to better predict the volumes that you are selling relative to the financial remuneration from those bottoms that you’re selling?.

And are you speaking only to the issue of cotton, Jeff?.

Well, it seems that the biggest lumpiness right now has been in cotton for this year?.

Okay. First of all, we have with the acquisition of Vandalia, we improved our manufacturing capacity. And so we’re able to manufacture DNA adequate to meet very massive supplies both of cotton commodities and of related committees that might be of an even larger scale.

For example things like fertilizer, which you measure in many tens of billions or hundreds of billions of pounds. Secondly, we’ve instituted these remote computer controlled, PLC-controlled DNA transfer systems that carry with them a seasoned payload of DNA adequate to mark the full production of the line they service.

They're capable of monitoring the throughput through the gin or for that matter through a wool production or a similar natural fiber, and maintain a constant level of DNA marking and simultaneously report the data back to us in real time.

So, that we can see exactly what is the consumption of fiber, how does that compare to the consumption of DNA to ensure that we're maintaining a constant DNA per fiber marking ratio and get an idea of production as it varies from location to location.

So to a large degree the lumpiness in our very first year of cotton production has been removed in that regard.

The other lumpiness comes of course from seasonality, but by expanding our business into places like Australia or perhaps India we will average out the lumpiness from each of those geographic sectors and see a more constant demand instead of the extreme lumpiness that comes from serving only the United States when production starts in October ginning starts in October and runs through the end of January or February.

So I think we're gradually seeing in our first year 2015 of full sized commercial production of course that hurt us. But we expect that in the coming years that will be less and less of a lump as you put it..

Okay, and on the military side, is there a given the new contract in the one year and the one year proof end of with one year possible extension.

Are there other -- are there other categories because you are, you've expanded the category now but are there further category expansions that are available if you comply on this current contract?.

Yes, so compliance on the current contract is quite frankly without question, we've developed a system that allow us to merge semiconductors in the 5962 category at high speed and at the speed at which they're produced.

The same is true for another class of semiconductor which is much-much smaller can be even the size of grain of rice and that’s FSC 5961.

What's so exciting about the completion of the two contracts that we've completed this last year in 2016 is that those contracts open up seven or six rather federal supply groups which together contain 66 federal supply classes. That would take us from right now we have a TAM of about a 100,000 units a year for the 5962 semiconductors.

For the total of 66 new federal supply classes which we proved we can mark in production and for which we just need to continue to bring in commercial partners than we're doing so in real time, the TAM for that is a 146 million more components transactions.

Of course, we will never get all that and we will never get at the price we had currently paid for 5962, but it's definitely a wonderful opportunity for us to grow and help our nation at the same time..

Okay.

And talking about what I just gone through the more consistent ability to monitor your cotton intake versus the supply chain, and the completion of the two contracts for 2016 going into this new contract, are you able to better judge where 2017 is going to be?.

Yes, I think so. Certainly, with the relationship I announced today with retailer, we are coming closer to the goal we wanted to achieve for many years now. And that is the capacity to provide better guidance to our shareholders. So, this announcement just claim today and it will have its impact on us steadily over the course of this year.

We should be able to provide a better and better glimpse of our future as time goes by.

Adding to that the fact that our business in general will be expanding as we enter other categories, the reliability of our forecast should get stronger and stronger, our sale cycle is getting shorter and that gets us closer to the sales and so we can see it coming a little more readily than when we were dealing with two year sales cycles for most products..

The next question comes from Greg Peters with Morgan Stanley. Please go ahead..

One, I just wanted to comment that the Action-Pak, I am excited about that to have a third party who's bottom line is only impacted when they sell your product, so more of those are familiar.

Had a question in terms of what I would call push-pull, in the early days you basically were sending sales people or scientists/sales people or out to market to sell your product, to sell the idea of breaking into a market that’s sort of thing.

In the first year or may have been a 100% or 95% of you going out, and as time has evolved, I am sure it's turnaround as you said earlier that you have now because of the Egyptian cotton scandal, you have now got all sorts of businesses calling you.

What would you say over the last year that more or less ratio has been? I mean how much of it has been out down work, marketing, selling? And how much is actually just opening up the doors sitting by the phone and listening into a ring as people are calling in?.

Well, Greg, we will never stop beating the pavement and looking for sales and the categories of business we serve happen to be one that are so frequently in the newspaper and in the trade magazines for counterfeit or product that's been taken off its intended supply chain, that we've never really had a shortage of opportunity.

But we'll continue to dig those up, but at the same time we learned a tremendous lesson in the course of the last two years and that our business goes much faster with a little less pushing and a lot more pulling.

And so the pulling can come from for example a large box retailer who then insists that our technology be included in the central basis of the relationship between the vendor and the retailer. And we're seeing that happen more-and-more, certainly happening in textiles, but it will be happening in all matter of commodities.

That is what we expect the pharmaceutical industry to run as, as well as the personal care industry that these were all industries that have to source raw materials and their problem often is in the substitution that takes place in those raw materials.

So, by Applied DNA entering those supply chains at the very top of that supply chain, so that we mark the raw material or qualify the raw material, at its earlier stage, we can assure the retailer, the brand owner, that by the product, time the product reaches them, we have verified the purity, the certainty of that product at every single stage along the supply chain, very often that's five, six or seven nodes.

And so we expect that the pulling impact will have a lot more impact on rapidly closing deals and that the pushing impact will have a longer sales cycle, but is always the way of developing some classical sales..

This concludes our question-and-answer session and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect..