Boardroom
Applied DNA Sciences

In The Boardroom With...

Dr. James A. Hayward
President
Applied DNA Sciences, Inc.
www.adnas.com
OTC Bulletin Board:APDN


SecurityStockWatch.com: Please give us an overview of your background and a brief company history.

James Hayward: I have over 20 years of experience in the biotechnology, pharmaceutical, life sciences and consumer products industries. I was one of the founding principals and research director of Europe’s first liposome company, Biocompatibles Ltd. From 1984 to 1989, I was responsible for product development at the Estee Lauder Companies. Between 1990 and July 2004, I was the Chairman, President and CEO of the Collaborative Group, Ltd., a provider of products and services to the biotechnology, pharmaceutical and consumer product industries based in Stony Brook, New York. This business was successfully sold in 2004. Since 2000, I have been a General Partner of Double D Venture Fund, a venture capital firm based in New York, New York. I received my doctorate in molecular biology and biophysics from SUNY at Stony Brook in 1983 and I received an honorary Doctor of Science from Stony Brook in 2000. I also serve on the boards of the Stony Brook Foundation, the Research Foundation of the State of New York, Long Island Life Science Initiative and the Ward Melville Heritage Foundation. I have been CEO of Applied DNA Sciences, Inc. since March 2006, and prior to that I was acting CEO since November 2005.

About Applied DNA Sciences, Inc.
Applied DNA Sciences (APDN) provides customized botanical DNA encryption, embedment and authentication solutions that are designed to help protect companies, governments and consumers from counterfeiting, fraud, piracy and product diversion. Utilizing our proprietary overt-DNA and covert-DNA embedded technologies, APDN provides the definitive forensic proof of authentication and validation to help protect revenues, brands and consumer confidence. Secure and cost-effective, APDN’s SigNature™ Program provides ready-to-use DNA encryption and authentication solutions that will complement barcodes, watermarks, holograms, RFIDs and many other security applications. APDN also provides customized safeguards to meet heightened security requirements for government programs and anti-counterfeit measures worldwide. To date, APDN has successfully marked over 1 billion DVD’s, artwork, alcoholic beverages, luxury and personal care goods, through our Asian licensee.

SecurityStockWatch.com: Please give us an overview of Applied DNA Sciences solutions in the authentication market.

James Hayward: With respect to anti-piracy technologies, there has always been the belief that eventually someone somewhere will be clever and devious enough to defeat any security system. Applied DNA Sciences has introduced an innovative, anti-piracy solution that actually defeats the thieves. This is because APDN’s SigNature platform implements a technology that cannot be copied or violated.
It is based on DNA, the genetic “blueprint” that enables every living thing in the biological universe to reproduce itself. The DNA, in this case from plants, has been modified, not for its biological relevance, but for its information content alone, and has been rendered biologically non-functional. While it is inherently unique and dense with information, it requires only minute quantities of DNA to be placed on any product to mark and authenticate it. The DNA information is scrambled so that only APDN and its reader devices can decipher it. This is best explained by analogy. Imagine that the DNA Marker contains roughly a gigabyte of information or the amount of information contained in the Sunday New York Times. We can take the Sunday New York Times as the original plant genome and cut up the newspaper into its individual words, or bits and reassemble the words to represent essentially a nonsense story because we do not need the DNA to code for anything biological. We need it to simply contain information content. We rearrange the words and insure that it is not biological by comparing it with an internet resource, which is the genome bank. Once we verify that it is not biological, we will use that reassembled plant DNA, which we now call a chimer as the marker, and will assign that marker to an individual customer

The SigNature Program first involves the design and manufacture of a highly customized and encrypted botanical DNA marker as described above. This Signature DNA Marker is then encapsulated and stabilized so that it is resistant to heat, organic solvents, chemicals and most importantly ultraviolet or UV radiation. Once it has been encapsulated, the Signature DNA Embedment system can be used to embed the SigNature DNA Marker directly onto products or other items or into special inks, threads and other media which in turn can be incorporated into products. Because the portion of DNA in a SigNature DNA Marker used to identify the marker is so minute, it cannot be detected unless it is replicated billions of times over, or amplified. This amplification can only be achieved by applying matching strands of DNA or a primer, and PCR techniques to the SigNature DNA Marker. As a result, the effort required to find, amplify, select and clone the relevant DNA in a SigNature DNA Marker would involve such enormous effort and expense that SigNature DNA Markers are virtually impossible to copy without our proprietary systems.

Our SigNature solution is as broadly applicable, convenient and inexpensive as other existing authentication systems while highly resistant to reverse engineering or replication. Our system can either be applied independently or can supplement other systems in order to allow for a forensic level of authentication of the sources of a broad range of items including financial instruments, identity cards and official documents.

The beauty of our platform is that no equipment is required on the part of our customers. These are methods that require no retooling; they are seamlessly integrated with existing manufacturing protocols. Moreover, our platform is one that can be easily integrated with the security platforms that are existent already. For example, including DNA in a barcode is as simple as printing the barcode and having DNA included in the ink. Including DNA in a hologram is just as simple, or in an optical strip or any of the various security devices. There is no serious investment. In almost all instances, the per unit costs for marking products with DNA are not only very competitive with other anti-counterfeiting modes such as holograms, but much more effective and easier to use. We provide customers with the ability to do DNA spot tests to quickly and easily validate their product authenticity in the supply chain. We also provide efficient laboratory forensic DNA identity services should customers decide to prosecute counterfeiters.

SecurityStockWatch.com: What is your perspective on the market drivers in these markets at this time?

James Hayward: Governments worldwide are increasingly faced with the problem of counterfeit currency, official documents and identity and security cards as well as terrorism and other security threats. Governments must also enforce the various anti-counterfeiting and anti-piracy regimes of their respective jurisdictions which becomes increasingly difficult with the continued expansion of global trade. There are ever tightening requirements for national security, as well as the proliferation of brand and identity theft. Document fraud has surged in recent years and at the same time fraud schemes have become more sophisticated thanks to advancing technologies in digital duplication and scanning combined with increasingly sophisticated design software. In the past, the tools of the counterfeit document trade were typewriters and pieces of plastic. Today’s document forgers use computer software and high resolution digital scanners to ply their trade. Criminal organizations are also using the Internet to market and distribute fake documents and immigration benefits to customers. Because of the potential for high profits, investigators are increasingly finding large scale criminal organizations involved in these schemes. As we are all aware, document security has been heightened as a result of the events of September 11, 2001 where vital documents such as drivers licenses were forged for identity purposes and cross border travel. The Department of Homeland Security has been charged with establishing standards that will strengthen and guide the states definitions of anti-counterfeiting measures for vital records. This will apply to documents such as drivers licenses, birth certificates and identification cards.

SecurityStockWatch.com: Are there one or two success stories you’d like to mention regarding the SigNature Program?

James Hayward: The Chinese Ministry of Culture asked our Asian partner, Biowell in Taipei, Taiwan, to mark over 600 million DVDs with DNA. And, there were 11 other security technologies included in the DVDs—including fluorescent ink, holograms, microdots, interference lines, micro printing, laser reflectants, and more—for a total of 12 security platforms all there to protect each DVD.
One year later, 11 of the 12 security modes had been defeated by counterfeiters, and only one platform survived. Ours was the last measure standing because the DNA is virtually impossible to beat. Hackers can’t break into this. For them to do so would take an investment similar to the investment required by the Human Genome project to detect and copy our DNA. As a result, in 2005, the Chinese Government selected this technology as the official standard for their anti-counterfeit program to protect multimedia products.

Recently, APDN’s technology was adopted by Rhodia, a multi national specialty chemicals company who is concerned about counterfeiting in its products. Through Biowell, Rhodia is utilizing our technology to overtly mark its Jaguar products with DNA, which allows quick determination of product authenticity. This program was implemented to insure protection of cosmetic ingredients in the Jaguar brand, to protect both the consumer and Rhodia from counterfeiting and piracy.

SecurityStockWatch.com: What resources such as “White Papers’ are available for end-users on www.adnas.com.

James Hayward: On our website, there is an in depth description of our SigNature Program, how it works and the different vertical markets we are currently targeting. There are links to related websites and groups we are affiliated with and also links to publications where APDN has been cited. (We are working on developing white papers but none are available at this time.)

SecurityStockWatch.com: We understand that you will be speaking at the I-Pira Future of Secure Documents Conference. May we have an overview of the key subjects you’ll be addressing?

James Hayward: I will be talking about the current issues facing the secure documents industry and how DNA Markers, such as those found in our SigNature program can help to protect documents and provide an added layer of security. Counterfeiting of documents is a significant and growing problem which affects both global security and global finance. Each year, U.S. companies lose more than $660 billion to fraud with counterfeiting and document fraud making up more than two-thirds of that (Association of Certified Fraud Examiners). And fraud continues to grow as advancements in technology make it easier to commit. Commercial checks, birth certificates, identification cards, licenses , motor vehicle titles, prescriptions, college transcripts, tickets and passes for events – any document of value is at risk. With law enforcement focused on violent crime and homeland security, there are few government resources to address the problem. The challenge of reducing fraud and its associated losses falls upon the organization that owns the item. All one has to do is scan the headlines to see the effects of this everyday around the world. Marking documents with SigNature DNA Markers offers a forensic level of authentication which, combined with other security measures, has the potential to significantly deter counterfeiting throughout the world.

SecurityStockWatch.com: Are there any other subjects you’d like to discuss?

James Hayward: The pharmaceutical industry also faces major problems relative to counterfeit, diluted or falsely labeled drugs that make their way through healthcare systems worldwide. Pharmaceutical counterfeiting and piracy impact the health and well being of consumers globally. Incidents involving counterfeit drugs have spiked in recent years with estimates of 10 percent of all prescription drugs believed to be counterfeit. These figures are higher in other parts of the world and for drugs ordered over the internet. The pharmaceutical industry loses an estimated $32 billion per year to counterfeiting globally. The Center for Medicine in the Public Interest estimates that counterfeit drug commerce will grow 13% annually through 2010 nearly twice the rate of legitimate pharmaceuticals. They further predict that counterfeit drug sales will reach $75 billion globally in 2010. The World Health Organization estimates that the prevalence of counterfeit pharmaceuticals ranges from less than 1% in developed countries to over 30% in developing countries and over 50% from illicit websites. Columbia University’s National Center on Addiction and Substance Abuse reports that only 11% of internet pharmacies are legitimate. Again, the headlines are full of horror stories as a result of individuals taking counterfeit drugs. As with counterfeit documents, the counterfeiters rely on sophisticated criminal networks to infiltrate legitimate supply chains. These criminals have no regard for health, safety or human life and will stop at nothing to make a quick buck at someone else’s expense. APDN regards the protection of consumer health and safety via authentication with SigNature DNA Markers as a top priority of the company.