Item 1.01 Entry into a Material Definitive
Agreement.
Entry into Warrant Exercise Agreement
On October 7, 2020, Applied DNA Sciences,
Inc. (the “Company” or “Applied DNA”) entered into Warrant Exercise Agreements (each, a
“Warrant Exercise Agreement”) with Dillon Hill Capital, LLC and its affiliate, Dillon Hill Investment Company
LLC (together, the “Investors”), whereby 318,000 warrants with an exercise price of $5.25 per share (the “2019
Warrants”) of the Company’s common stock, par value $0.001 per share, (the “Common Stock”)
were exercised. The 2019 Warrants were issued as part of the Company’s November 15, 2019 underwritten public offering. The
terms of the 2019 Warrants are more fully described in the Company’s Current Report on Form 8-K, filed with the U.S. Securities
and Exchange Commission (the “Commission”) on November 14, 2019. The gross proceeds to the Company from
this partial exercise of the 2019 Warrants is $1,669,500. Approximately 661,000 2019 Warrants remain outstanding as of October
12, 2020.
In consideration of this partial exercise
of the 2019 Warrants and of the consent to repayment of the Notes, as described below, the Company agreed to issue, in addition
to the 318,000 shares of Common Stock issued upon exercise of the 2019 Warrants (the “Warrant Shares”), 159,000
replacement warrants (the “Replacement Warrants”) to the Investors, which is an amount equal to one-half the
amount of the 2019 Warrants exercised pursuant to the Warrant Exercise Agreements. The Replacement Warrants have an exercise price
of $7.54, the closing price on The Nasdaq Capital Market of the Company’s Common Stock on October 7, 2020. In addition, until
January 5, 2021, if the Investors exercise additional 2019 Warrants, the Company will issue to the applicable Investor additional
Replacement Warrants in an amount equal to one-half the amount of such exercised 2019 Warrants with each such Replacement Warrant
having an exercise price equal to the closing price on The Nasdaq Capital Market of the Company’s Common Stock on such date
that the related 2019 Warrants are exercised.
Pursuant to the form of Replacement Warrant,
filed herewith as Exhibit 10.3, each Replacement Warrant will be exercisable beginning on the date of issuance thereof and ending
on the five year anniversary of such date. The exercise price and number of shares of Common Stock issuable upon exercise of the
Replacement Warrants will be subject to adjustment in the event of any stock dividend, split, recapitalization, reorganization
or similar transaction, as described in the Replacement Warrant. Subject to limited exceptions, a holder of a Replacement Warrant
will not have the right to exercise any portion of its Replacement Warrant if the holder, together with its affiliates, would beneficially
own in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise (the
“Beneficial Ownership Limitation”); provided that upon 61 days’ prior notice to the Company, the holder
may elect to increase or decrease the Beneficial Ownership Limitation, although in no event may the Beneficial Ownership Limitation
exceed 9.99%. Each Replacement Warrant includes an adjustment provision that, subject to certain exceptions, reduces its exercise
price if the Company issues Common Stock or Common Stock equivalents at a price lower than the then-current exercise price of such
Replacement Warrant, subject to a minimum exercise price of 21% of such Replacement Warrant’s initial exercise price per
share. Under certain limited circumstances, including that the daily volume weighted average price of the Common Stock for each
of 20 consecutive trading days has exceeded three times the exercise price of such Replacement Warrant, the Company may call for
cancellation of all or any portion of such Replacement Warrant for which a notice of exercise has not yet been delivered for consideration
equal to $0.001 per Warrant Share.
The Replacement Warrants will not be registered
nor listed on any exchange but are the subject of registration rights agreements (each, a “Registration Rights Agreement”),
entered into with each Investor concurrently with the respective Warrant Exercise Agreement, pursuant to which the Company agrees
to file a registration statement by January 20, 2021 with respect to the Common Stock underlying the Replacement Warrants. If at
the time of exercise of the Replacement Warrants there is no effective registration statement registering, or the prospectus contained
therein is not available for the issuance of the Warrant Shares to the applicable Investor, then such Replacement Warrant may also
be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Investor will be entitled
to receive a number of Warrant Shares as determined by the terms of the Replacement Warrant.
The private placement of the Replacement
Warrants was completed in reliance upon the exemption from registration provided for by Section 4(a)(2) of the Securities Act
of 1933, as amended (the “Securities Act”) and by Rule 506 of Regulation D promulgated under the Securities
Act. Each Investor represented to the Company in its Warrant Exercise Agreement that it is an “accredited investor”
as that term is defined in Rule 501 of Regulation D.
Entry into Letter Agreement
As previously disclosed in the Company’s
Current Report on Form 8-K, filed with the Commission on July 17, 2019, the Company entered into a Securities Purchase Agreement,
dated July 16, 2019, (the “Purchase Agreement”) pursuant to which the Company issued to Dillon Hill Capital,
LLC (the “Noteholder”) certain secured convertible notes (the “Notes”) bearing interest at
a rate of 6% per annum, due and payable in full on November 28, 2021 and secured by a lien on substantially all assets of the Company,
in favor of Delaware Trust Company, as Collateral Agent pursuant to security agreements dated as of October 19, 2018, as amended
(the “Security Agreements”). The Notes were the only obligation secured by the Security Agreements. As stated
in the foregoing description of the Warrant Exercise Agreements, the Noteholder is an Investor and is affiliated with the other
Investor.
On October 9, 2020, the Company entered
into a letter agreement (the “Letter Agreement”) with the Noteholder as sole holder of the Notes for the repayment
in full of the Notes, in an aggregate amount of $1,665,581 (the “Payoff Amount”), representing the outstanding
principal amount of the Notes plus accrued but unpaid interest through the scheduled maturity of the Notes. The Company paid the
Payoff Amount to the Noteholder on October 9, 2020. Pursuant to the Letter Agreement, the Noteholder and the Collateral Agent agree
that, upon the Noteholder’s receipt of the Payoff Amount, the Notes and any other related documents and instruments will
automatically terminate. Moreover, all of the obligations and liabilities of the Company and its affiliates under the Notes, the
Purchase Agreement, and the Security Agreements, and any other related documents and instruments, will be automatically satisfied
in full, and all related liens, mortgages or other security interests will be automatically released.
General
The foregoing summaries of the Warrant Exercise Agreements,
the form of Replacement Warrant, the Registration Rights Agreements, and the Letter Agreement are not complete summaries of the
terms of such documents and are subject to and qualified in their entirety by reference to the full text of such documents, which
are filed as Exhibits 10.1 through 10.6 to this Current Report on Form 8-K and are incorporated herein by reference.
This Current Report on Form 8-K contains statements which may
be “forward-looking” in nature within the meaning of Section 27A of the Securities Act, Section 21E of the Securities
Exchange Act of 1934, as amended, (the “Exchange Act”) and the Private Securities Litigation Reform Act of 1995.
Forward-looking statements describe Applied DNA’s future plans, projections, strategies and expectations, and are based on
assumptions and involve a number of risks and uncertainties, many of which are beyond the control of Applied DNA. Actual results
could differ materially from those projected due to the Company’s history of net losses, limited financial resources, potential
dilution to holders of the Common Stock caused by exercise of the Replacement Warrants, limited market acceptance, the uncertainties
inherent in research and development, future clinical data and analysis, including whether any of Applied DNA’s or its partners’
diagnostic or vaccine candidates will advance further in the preclinical research or clinical trial process, including receiving
clearance from the U.S. Food and Drug Administration (“FDA”) or equivalent foreign regulatory agencies to conduct
clinical trials and whether and when, if at all, they will receive final approval from the U.S. FDA or equivalent foreign regulatory
agencies, the unknown outcome of any applications or requests to U.S. FDA, equivalent foreign regulatory agencies and/or the New
York State Department of Health, the unknown limited duration of any Emergency Use Authorization approval from U.S. FDA, disruptions
in the supply of raw materials and supplies, and various other factors detailed from time to time in Applied DNA’s reports
and filings with the Commission, including its Annual Report on Form 10-K filed on December 12, 2019, as amended on December 16,
2019 and on January 27, 2020, its subsequent quarterly reports on Form 10-Q filed on February 6, 2020, May 14, 2020 and August
6, 2020, and other reports it files with the Commission, which are available at www.sec.gov. Applied DNA undertakes no obligation
to update publicly any forward-looking statements to reflect new information, events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events, unless otherwise required by law.