Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

- Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q (including but not limited to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations") contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are intended to qualify for the "safe harbor" created by those sections. In addition, we may make forward-looking statements in other documents filed with or furnished to the Securities and Exchange Commission ("SEC"), and our management and other representatives may make forward-looking statements orally or in writing to analysts, investors, representatives of the media and others. These statements relate to future events or to our future operating or financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

Forward-looking statements can generally be identified by the fact that they do not relate strictly to historical or current facts and include, but are not limited to, statements using terminology such as "can", "may", "could", "should", "assume", "focus", "forecasts", "believe", "designed to", "will", "expect", "plan", "anticipate", "estimate", "potential", "position", "predicts", "strategy", "guidance", "intend", "budget", "seek", "project" or "continue", or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. You should read statements that contain these words carefully because they:

We believe it is important to communicate our expectations. However, forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry and are subject to known and unknown risks, uncertainties and other factors. Accordingly, our actual results and the timing of certain events may differ materially from those expressed or implied in such forward-looking statements due to a variety of factors and risks, including, but not limited to, those set forth in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report, those set forth from time to time in our other filings with the SEC, including our Annual Report on Form 10-K, for the fiscal year ended September 30, 2025, and the following factors and risks:

Any or all of our forward-looking statements may turn out to be wrong. They may be affected by inaccurate assumptions that we might make or by known or unknown risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in our forward-looking statements. Among the factors that could affect future results are:

All forward-looking statements and risk factors included in this Quarterly Report are made as of the date hereof, based on information available to us as of such date, and we assume no obligations to update any forward-looking statement or risk factor, unless we are required to do so by law. If we do update one or more forward-looking statements, no inference should be drawn that we will make updates with respect to other forward-looking statements or that we will make any further updates to those forward-looking statements at any future time.

Forward-looking statements may include our plans and objectives for future operations, including plans and objectives relating to the success of our BNB Strategy and our products and our future economic performance, projections, business strategy and timing and likelihood of success. Assumptions relating to the forward-looking statements included in this Quarterly Report involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, demand for our products and services, and the time and money required to successfully complete development and commercialization of our technologies, all of which are difficult or impossible to predict accurately and many of which are beyond our control.

Any of the assumptions underlying the forward-looking statements contained in this Quarterly Report could prove inaccurate and, therefore, we cannot assure you that any of the results or events contemplated in any of such forward-looking statements will be realized. Based on the significant uncertainties inherent in these forward-looking statements, the inclusion of any such statement should not be

regarded as a representation or as a guarantee by us that our objectives or plans will be achieved, and we caution you against relying on any of the forward looking statements contained herein.

Our trademarks currently used in the United States include Applied DNA Sciences®, LinearDNA™ and LineaIVT™. We do not intend our use or display of other companies' trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. All trademarks, service marks and trade names included or incorporated by reference in this Quarterly Report on Form 10 - Q are the property of the respective owners.

Introduction

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.

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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.

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BNB Strategy

We launched our DAT strategy in October 2025 with the closing of the Private Placement wherein we received $26.8 million gross proceeds in cash and cryptocurrency assets with the potential for up to an additional $30.8 million in cash gross proceeds in future investment from warrant exercises. 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 framework necessary to implement its BNB Strategy.

We believe our BNB Strategy can produce potential yield via the implementation of one or more of the below strategies:

In addition, the Company currently holds units of OBNB Trust Units. The Company plans to pursue opportunities to sell the OBNB Trust Units for cash to purchase additional BNB that will be used to further our BNB Strategy. Alternatively, the Company seeks to access the OBNB Trust Units' underlying BNB assets in coordination with the administrator of the OBNB Osprey BNB Chain Trust and if successful, use the redeemed BNB assets to further its BNB Strategy.

On October 6, 2025, the Company's Board of directors authorized, and its officers implemented, a restructuring plan pursuant to which the Company reduced overall operating expenses to focus resources on its BNB Strategy. The restructuring plan includes a reduction of the Company's workforce by sixteen (16) employees, or approximately 60%. We incurred aggregate pre-tax charges 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 December 31, 2025 and associated charges of approximately $1.2 million were recorded in the quarter ended December 31, 2025 and approximately $138,000 is expected to be incurred during second quarter of fiscal 2026.

LineaRx Business Strategy

Through LineaRx our 98% owned subsidiary, we are developing and commercializing our LineaDNA and Linea IVT platforms for the manufacture of synthetic DNA and associated enzymes for use in the production of nucleic acid-based therapeutics (the "Therapeutic DNA Production Services").

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 messenger RNA ("mRNA") and deoxyribonucleic acid ("DNA")-based vaccines, as well as in vitro diagnostic ("IVD") applications.

We have developed three distinct and complementary technology solutions:

Our business strategy is to continue advancing our nucleic acid production solutions to support the potential future sale and/or licensing of our LineaRx business and/or its technology solutions to a third-party.

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Comparison of Results of Operations for the Three -Months Ended December 31, 2025 and 2024

Revenues

Product revenues

For the three-months ended December 31, 2025 and 2024, we generated $555,093 and $495,847 in revenues from product sales, respectively. Product revenue increased by $59,246 or 12% for the three-months ended December 31, 2025 as compared to the three-months ended December 31, 2024. The increase in product revenues was due to an increase of approximately $362,000 in sales to a large-scale DNA manufacturing customer and the timing of related orders within our Therapeutic DNA Production Services segment. This increase was offset by a net decrease in our DNA Tagging and Security Products and Services segment of approximately $295,000 year over year in cotton DNA tagging revenue.

Service Revenues

For the three-months ended December 31, 2025 and 2024, we generated $10,301 and $374,444 in revenues from sales of services, respectively. The decrease in service revenues of $364,143 or 97% for the three-months ended December 31, 2025, as compared to the same period in the prior fiscal year is attributable to a decrease of $302,000 within our DNA Tagging and Security Products and Services segment due to a decrease in our textile isotopic testing services as we stopped providing these services during the prior fiscal year. This decrease was also attributable to a decrease of $58,000 within our Therapeutic DNA Production Services segment due to decreased research and development projects.

Cost and Expenses

Gross Profit

Gross profit for the three-months ended December 31, 2025, decreased by $290,882 or 48% to $315,357 from $606,239 for the three-months ended December 31, 2024. The gross profit percentage was 56% and 70% for the three-months ended December 31, 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 quarter ended December 31, 2025 as compared to prior fiscal year period.

Selling, General and Administrative

Selling, general and administrative expenses for the three-months ended December 31, 2025 increased by $10,779,233 or 420% to $13,348,510 as compared to $2,569,277 for the three-months ended December 31, 2024. The increase is primarily attributable to an increase in consulting expense of approximately $9,420,195. The increase in consulting expense relates to our Digital Asset Treasury segment. We issued warrants to our strategic consultants with a fair value of approximately $8,826,000 that was recorded to consulting expense for the three-months ended December 31, 2025 and represents a one-time charge. We also incurred consulting expenses under these contracts of approximately $1,132,200 entered into during the switch to a digital asset strategy. The increase was also the result of an increase in payroll of approximately $798,000 relating to officer and employee bonuses of $496,000 as well as one time severance payments to the former CEO of $340,000. There was also an increase in stock-based compensation expense of approximately $605,000 during the three-months ended December 31, 2025, which primarily relates to officer, board and employee grants.

Loss from fair value measurement of digital assets

Loss from fair value measurement of digital assets for the three-months ended December 31, 2025 was $1,732,557 and relates to the change in fair value for the BNB units held as of December 31, 2025

Loss from fair value measurement of investment in digital asset trust

Loss from fair value measurement of investment in digital asset trust for the three-months ended December 31, 2025 was $3,484,009 and relates to the change in fair value for the OBNB Trust Units held as of December 31, 2025.

Research and Development

Research and development expenses decreased to $458,562 for the three-months ended December 31, 2025 from $1,015,010 for the three-months ended December 31, 2024, a decrease of $556,448 or 55%. This decrease is primarily due to a decrease of approximately $375,000 for the development of an enzyme for use in our Therapeutic DNA Production Services segment during the prior fiscal year period. Additional decreases include decreases in laboratory supplies of $33,000, service contracts of $38,000 as well as payroll expense of approximately $58,000.

Interest income

Interest income for the three-months ended December 31, 2025 decreased $59,156 or 87% to $9,143 as compared to $68,299 in the three-months ended December 31, 2024 due to interest earned on our money market accounts.

Unrealized gain on change in fair value of warrants classified as a liability

Unrealized gain on change in fair value of warrants classified as a liability for the three-months ended December 31, 2025 and 2024 was $370 and $244,000, respectively, which relates to the change in fair value of the warrants that are classified as a liability.

Other income (expense), net

Other income (expense), net for the three-months ended December 31, 2025 and 2024, was income of $92,586 and expense of $20,152, respectively. This increase is attributable to the sale of our textile library related to our former isotope business, as well as the sale of equipment during the three-months ended December 31, 2025.

Loss from operations

Loss from operations increased $15,730,233, or 528% to $18,708,281 for the three-months ended December 31, 2025 compared to $2,978,048 for the three-months ended December 31, 2024 due to the factors noted above.

Liquidity and Capital Resources

Our liquidity needs consist of our working capital requirements and building our BNB Strategy. As of December 31, 2025, we had working capital of $2,905,088. For the three-months ended December 31, 2025, we used cash in operating activities of $5,545,124 consisting primarily of our loss of $18,606,182 net with non-cash adjustments of $48,798 in depreciation and amortization charges, $370 in unrealized gain on change in fair value of warrants classified as a liability, $1,732,557 in loss from fair value measurement of digital asset, $3,484,009 in loss from fair value measurement of investment in digital asset trust, $8,826,154 for warrants issued to consultants, and $633,120 in stock-based compensation expense. Additionally, we had a net increase in operating assets of $1,346,324 and a net decrease in operating liabilities of $316,886. At December 31, 2025, we had cash and cash equivalents of $2,450,536.

We have recurring net losses which have resulted in an accumulated deficit of $397,786,765 as of December 31, 2025. We incurred a net loss of $18,606,182 and generated negative operating cash flow of $5,545,124 for the three-months ended December 31, 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 G to the accompanying condensed 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 the three-months ended December 31, 2025 and is actively implementing its BNB strategy.

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 quarterly report. Our digital asset, as well as our investment in digital asset trust are considered longer-term investments and we do not believe we will need to sell and or our Digital asset treasury within the next twelve months to meet our working capital requirements, although we may from time to time sell or engage in other transactions with respect to our Digital asset treasury as part of our treasury management operations.

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:

Critical Accounting Estimates

The preparation of the financial statements in conformity with 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.

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.

Digital Assets

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In December 2023, the FASB issued ASU 2023-08, Digital Assets, which provides guidance on the recognition, measurement, presentation, and disclosure of digital assets through the creation of ASC 350-60 - Intangibles - Goodwill and Other - Crypto Assets. ASU 2023-08 became effective for all entities for fiscal years beginning after December 15, 2024. The Company accounts for its digital assets, including BNB tokens, in accordance with ASC 350 - Intangibles - Goodwill and Other. The Company has determined its digital assets meet the scoping criteria of ASC 350-60, which requires eligible crypto assets to be measured at fair value, with changes in fair value recognized in net income. Fair value is determined in accordance with ASC 820 - Fair Value Measurement, using quoted prices in active markets. The Company has designated a principal market based on the market that the Company has access to and has the greatest volume and level of activity of BNB for determining the fair value of BNB tokens.

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The Company deposits certain digital assets with a third-party exchange to facilitate trading activities. Assets held on this exchange are maintained in accounts under the Company's exclusive control. The activity from remeasurement of digital assets at fair value is reflected in the condensed consolidated statements of operations within gain/loss from fair value measurement of digital assets. Realized gains and losses from the derecognition of digital assets would be included in the realized gain/loss on digital assets in the condensed consolidated statements of operations. Although the Company has not disposed of any digital assets during the reporting period, in the event there are disposals in the future, the Company will use the specific identification method to calculate the realized gains/losses on digital assets.

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Sales and purchases of digital assets are reflected as cash flows from investing activities in the condensed consolidated statements of cash flows. Digital assets purchased using USDC are refelected as non-cash investing activites in the condensed consolidated statements of cash flows.

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Investment in Digital Asset Trust

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The Company currently holds units of OBNB Osprey BNB Chain Trust (the "OBNB Trust Units"), as detailed more in Note G. The OBNB Trust Units are publicly traded and have readily determinable fair value as defined in ASC 321-10-20. Accordingly, the Company measures the OBNB Trust Units at fair value with changes in fair value recognized in earning in the period of change.

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Off-Balance Sheet Arrangements

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As requirement of our prior lease agreement for our former corporate headquarters entered into during January 2023, in lieu of security deposit, we provided a standby letter of credit of $750,000. The letter of credit is effective through March 2026.

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Inflation

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The effect of inflation on our revenue and operating results was not significant.

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