Applied DNA Sciences, Inc. (OTCBB: APDN), a provider of DNA-based
anti-counterfeiting and security solutions has been named by DoD
Defense Logistics Agency (DLA), as the provider of authentication
services for microcircuits supplied by defense contractors. On
August 3, 2012, DLA posted notice on its DLA Internet Bid Board
System (DIBBS) that it will require the use of SigNature® DNA
marking on microcircuits.
DLA stated:
"DLA is implementing new requirements for deoxyribonucleic acid
(DNA) authentication marking on items falling within Federal Supply
Class (FSC) 5962, Electronic Microcircuits, which have been
determined to be at high risk for counterfeiting. A new clause at
Defense Logistics Acquisition Directive (DLAD) 52.211-9074,
Deoxyribonucleic Acid (DNA) Marking on High Risk Items, will be
included in new solicitations and contracts for FSC 5962 items when
the item description states that the item requires DNA marking. The
clause requires contractors to provide items that have been marked
with botanically-generated DNA produced by Applied DNA Sciences or
its authorized licensees, if any."
The number of companies directly affected by the DLA directive
is in the hundreds, and includes many of the largest microcircuit
manufacturers in the world. APDN reported immediate inquiries from
numerous impacted companies.
SigNature DNA uses uncopyable plant-based DNA to mark items,
which can then be authenticated throughout the supply chain to
assure originality. In effect, the DNA marks provide a traveling,
high-tech proof of authenticity.
Applied DNA Sciences' SigNature DNA marking and authentication
have been tested at full commercial scale in an eighteen-month
project supported by DLA and managed by the not-for-profit
consultancy LMI, with uniformly successful results. As part of the
project, DLA tasked an independent laboratory to defeat the
technology. SigNature DNA was not defeated.
"Finding counterfeits in supply chains is a daunting challenge.
DLA is taking a leadership role by mandating a positive way to
assure authenticity using SigNature DNA. Warfighter support is
DLA's top priority." Janice Meraglia, Vice President of Government
and Military Programs at APDN praised the Agency's efforts to
eliminate counterfeit microelectronics from military supply
chains.
APDN will sell SigNature DNA marks to chip manufacturers, while
for distributors the company will sell a source-verification
marking program, to establish traceability from the moment of
marking. The company also plans to provide DNA marking services
directly to those manufacturers who want immediate implementation
before establishing marking capability at their own facilities.
Once SigNature DNA-marked, the microchips may be authenticated as
originals at any stage along the military supply chain, if a
participating company has purchased an authentication program from
APDN.
Defense contractors are urged to contact Applied DNA Sciences
immediately to begin their own SigNature DNA marking program. A
dedicated email address militarymark@adnas.com is available to
support this effort. By phone, enquiries are welcome at a dedicated
telephone line: 631.444.6370.
The SigNature DNA marking initiative by DLA comes at a critical
juncture for the electronics industry, which is facing a new
federal law that would strictly enforce new anti-counterfeiting
measures by defense contractors. The legal wording of the
anti-counterfeiting initiative is found in Section 818 of the
National Defense Authorization Act for Fiscal Year 2012 (FY'12
NDAA). While the DLA mandate is not directly connected to the new
measures called for by Section 818, it applies in an environment
where defense contractors are being strongly urged in various ways
to adopt new processes and technologies to combat fakes sneaking
into military equipment.
Section 818 of FY'12 NDAA is due to reach an important milestone
at the end of September. At that time the law directs that the
Defense Federal Acquisition Regulation Supplement (DFARS), which
governs all transactions with DoD, is due to be revised to include
the anti-counterfeiting provisions. This highly anticipated
milestone has been characterized in a public open letter from the
Council of Defense and Space Industry Associations as a law that
will "fundamentally change the nature of the existing global supply
chain for the defense industrial base."(1)
The DoD Office of the Director, Cost Assessment and Program
Evaluation last year projected the value of all semiconductors sold
to DoD in fiscal year 2011 to be $3.1 billion. The figure for
fiscal year 2012 is projected to be $2.84 billion.(2) These figures
include both microchips sold stand-alone ("direct sales") for spare
parts or prototyping, and also microchips that are embedded in more
complex electronic parts sold to the military ("indirect sales").
Indirect sales may range from amplifiers, to computers to aircraft
and missile guidance systems.
The market value of semiconductors, both military and commercial
in all countries in fiscal year 2011 has been estimated at $302
billion by Gartner.(3)
The DLA mandate for SigNature DNA will be implemented in a
staged fashion, to ensure a smooth transition for the industry
providers of microcircuits falling into FSC 5962, as noted by DLA.
In the first stage, already accomplished and consistent with the
mandate, SigNature DNA is on the microchips produced in the DLA's
Generalized Emulation of Microcircuits (GEM) program.
The penetration of counterfeit electronics into the military has
become a recognized national security crisis. In a Senate Armed
Services Committee hearing last November, co-chaired by Senator
Carl Levin (D-Mich) and Senator John McCain (R-Ariz), 1,800
separate "counterfeit incidents" in the military were identified.
Each incident can involve thousands of parts. The Committee
identified more than a million counterfeit parts in all.
In the military, load-bearing parts like ball-bearings, and
other critical parts such as o-rings and brake shoes, are widely
counterfeited and create much risk. In the commercial sector, fake
medical and automotive parts are common, creating a comparable
threat. Applied DNA believes that the risk in these areas can also
be strongly mitigated by the use of SigNature DNA.
Dr. James A. Hayward, CEO of APDN, stated: "We commend the
foresight of DLA command. This is an overdue, industry-changing
moment that will protect our warfighters. APDN is fully prepared to
meet this challenge."
About APDN APDN is a provider of
botanical-DNA based security and authentication solutions that can
help protect products, brands and intellectual property of
companies, governments and consumers from theft, counterfeiting,
fraud and diversion. SigNature® DNA and smartDNA™, our principal
anti-counterfeiting and product authentication solutions that
essentially cannot be copied, provide a forensic chain of evidence
and can be used to prosecute perpetrators.
The statements made by Applied DNA Sciences, Inc. (APDN) may be
forward-looking in nature. Forward-looking statements describe
APDN'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 APDN. Actual
results could differ materially from those projected due to our
short operating history, limited financial resources, limited
market acceptance, market competition and various other factors
detailed from time to time in APDN's SEC reports and filings,
including our Annual Report on Form 10-K, filed on December 8, 2011
and our subsequent quarterly reports on Form 10-Q. APDN undertakes
no obligation to update publicly any forward-looking statements to
reflect new information, events or circumstances after the date
hereof to reflect the occurrence of unanticipated events.
(1) Council of Defense and Space Industry
Association (CODSIA), Open Letter, "Subject: Implementation of
Section 818, Detection and Avoidance of Counterfeit Electronic
Parts, National Defense Authorization Act (NDAA) for Fiscal Year
2012, To: Mr. Richard T. Ginman, Director, Defense Procurement and
Acquisition Policy, and Mr. Alan F. Estevez, Assistant Secretary
for Logistics and Materiel Readiness (OUSD (AT&L))" February
21, 2012. Link
(2) Office of the Director, Cost Assessment and
Program Evaluation, Projected Defense Purchases of
Semiconductors, 2009-2012," March, 2011, U.S. Defense Purchases: An
Introduction to IDEPPS, 2011, P. 4,5
(3) Gartner, "Gartner Says Apple Became the Top Semiconductor
Customer in 2011," gartner.com, January 24, 2012. Link
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PROGRAM CONTACT: Janice Meraglia 631-444-6370 MEDIA CONTACT:
Mitchell Miller 646-543-3373 fax: 631-444-8848 INVESTOR CONTACT:
Debbie Bailey 631-444-8090 fax: 631-444-8848 FCMN Contact Email
Contact Web site: http://www.adnas.com Twitter: @APDN,
@APDNInvestor
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