UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                  FORM 10QSB/A
                                 Amendment No. 2


             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                For the Quarterly period ended December 31, 2004

                        Commissions file number 002-90519

                           APPLIED DNA SCIENCES, INC.
             (Exact name of registrant as specified in its charter)

                   Nevada                               59-2262718
        --------------------------------        --------------------------
      (State or other jurisdiction of                (I.R.S. Employer
       incorporation or organization)             Identification Number)

 25 Health Sciences Drive, Suite 113, Stony Brook, New York            11790
---------------------------------------------------------------    -------------
          (Address of Principal Executive Offices)                  (Zip Code)

                  (631) 444-6862
  (Registrant's telephone number, including area code)



Indicate by check mark whether the registrant (1) filed all reports  required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the last 12 months (or for such shorter  period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.

                                 Yes [X] No [_]

The number of shares of Common Stock,  $0.50 par value,  outstanding on February
8, 2005, was 47,280,993 shares.

Transitional Small Business Disclosure Format (check one):

                                 Yes [_] No [X]


<PAGE>


                                EXPLANATORY NOTE

This  Amendment  No. 2 to Form 10-QSB/A  ("Amendment  No. 2") amends the amended
Quarterly Report of Applied DNA Sciences,  Inc. (the "Company") on Form 10-QSB/A
for the quarter  ended  December  31,  2004,  as filed with the  Securities  and
Exchange Commission on February 15, 2005 (the "Original Filing"). This Amendment
No. 2 is being filed for the purpose of correcting  errors in accounting for and
disclosing the issuance by the Company of common stock, warrants and options for
services and in exchange for previously incurred debt


We have not  updated  the  information  contained  herein for  events  occurring
subsequent to February 15, 2005, the filing date of the Original Filing.

                            APPLIED DNA SCIENCES, INC


                    Quarterly Report on Form 10-QSB/A for the
                    Quarterly Period Ending December 31, 2004

                                Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

 Condensed Consolidated Balance Sheet:
 December 31, 2004 (Unaudited)                                               3

 Condensed Consolidated Statements of Losses:
 Three Months Ended December 31, 2004 and 2003 (Unaudited) and
 the Period from September 16, 2002 (Date of Inception) Through
 December 31, 2004 (Unaudited)                                               4

 Condensed Consolidated Statement of Stockholder's Equity:
 For the Period from September 16, 2002 (Date of Inception)
 Through December 31, 2004 (Unaudited)                                       5

 Condensed Consolidated Statements of Cash Flows:
 Three Months Ended December 31, 2004 and 2003 (Unaudited) and
 the Period from September 16, 2002 (Date of Inception)
 Through December 31, 2004 (Unaudited)                                      14

 Notes to Unaudited Condensed Consolidated Financial Information:
 December 31, 2004                                                         16-30

 Item 2. Management Discussion and Analysis                                 31

 Item 3. Controls and Procedures                                            43


<PAGE>


Part II. OTHER INFORMATION

Item 1. Legal Proceedings                                                   43

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds         43

Item 3. Defaults Upon Senior Securities                                     44

Item 4. Submission of Matters to a Vote of Security Holders                 45

 Item 5. Other Information                                                  45

 Item 6. Exhibits                                                           45


Signatures                                                                  46

                                       2


<PAGE>


                          Part I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                    RESTATED
                                   (Unaudited)

<TABLE>
<CAPTION>
                                ASSETS
                                                                             December 31, 2004
                                                                            ------------------------
 <S>                                                                    <C>
 Current assets:

 Cash and Equivalents                                                   $                    62,665
                                                                        ----------------------------
 Total Current Assets                                                                        62,665

 Property and Equipment - Net                                                                27,751
 Deposits                                                                                    47,585
 Patent Filing - Net                                                                         28,131
 Restricted Cash                                                                          1,065,318
                                                                        ----------------------------
 Total Assets                                                           $                 1,231,450
                                                                        ============================

          LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

 Current Liabilities:
 Accounts Payable and Accrued Liabilities                               $                 2,973,686
 Accrued Liabilities Due Related Parties (Note C)                                           168,857
 Convertible Notes Payable (Note D)                                                       3,140,000
 Due to Related Parties (Note C)                                                             61,943
 Notes Payable-related parties (Note C)                                                   1,125,000
                                                                        ----------------------------
 Total Current Liabilities                                                                7,469,486

 Commitments and contingencies (Note F)

 Deficiency in Stockholders' Equity:
 Preferred Stock, par value $.0001 per share; 10,000,000 shares
authorized; 60,000 issued and outstanding                                                         6
 Common Stock, par value $.50 per share; 100,000,000 shares
authorized; 32,121,454 shares
 issued and outstanding                                                                  16,060,727
 Common Stock Subscription                                                                (755,000)
 Additional Paid-In-Capital                                                               8,218,548
 Deficit Accumulated During Development Stage                                          (29,762,317)
                                                                        ----------------------------
 Total Deficiency in Stockholders' Equity                                               (6,238,036)
                                                                        ----------------------------
 Total Liabilities and Deficiency in Stockholders' Equity               $                 1,231,450
                                                                        ============================
</TABLE>

     See accompanying notes to unaudited consolidated financial statements

                                       3


<PAGE>



                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                    September 16, 2002,
                                            For The Three Months Ended December 31  (Date of Inception)
                                                                                          through
                                                    2004                2003         December 31, 2004
                                                  RESTATED                                RESTATED
<S>                                         <C>                  <C>               <C>
Operating expenses:
Selling, general and administrative         $         5,375,068  $      7,407,750  $        26,435,140
Depreciation and amortization                             4,721               351                7,882
                                                         ------              ----                -----
Total operating expenses                              5,379,789         7,408,101           26,443,022
                                                     ----------        ----------           ----------
Loss from operations                                (5,379,789)       (7,408,101)         (26,443,022)

Other Income (expense)                                      315               685               26,700
Interest (expense)                                  (1,567,809)         (135,074)          (3,345,995)
Income (taxes) benefit                                       --                --                   --
                                                    -----------       -----------         ------------
Net loss                                    $       (6,947,283)  $    (7,542,490)  $      (29,762,317)
                                                   ============       ===========         ============

Loss per common share
(basic and assuming dilution)               $            (0.37)  $         (0.41)  $            (1.57)
                                                         ======            ======               ======


Weighted average shares outstanding                  18,972,160        18,503,162           18,972,160
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       4


<PAGE>


                         APPLIED DNA SCIENCES, INC
                      (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004
                                RESTATED
                               (Unaudited)

<TABLE>
<CAPTION>
                                                                                                               Deficit
                                                                         Additional                          Accumulated
                                        Preferred               Common     Paid in     Common       Stock       During
                              Preferred   Shares    Common      Stock      Capital     Stock    Subscription Development
                                Shares    Amount    Shares      Amount     Amount    Subscribed  Receivable     Stage      Total
                              --------- --------- ---------- ----------- ----------- ---------- ------------ ----------- ----------
<S>                                 <C> <C>       <C>        <C>         <C>         <C>        <C>          <C>          <C>
Issuance of common stock
to Founders in exchange
for services on September
16, 2002 at $.01 per share          -         -      100,000 $       10  $       990 $      -   $        -   $       -    $   1,000

Net Loss                            -         -         -           -           -           -            -       (11,612)  (11,612)
                              --------- --------- ---------- ----------- ----------- ---------- ------------ -----------  ---------

Balance at September 30, 2002       -   $     -      100,000 $       10  $       990 $      -   $        -   $   (11,612) $(10,612)
                              ========= ========= ========== =========== =========== ========== ============ ===========  =========
Issuance of common stock in
connection with merger with
Prohealth Medical Technologies,
 Inc on October 1, 2002             -         -   10,178,352       1,015        -           -            -           -       1,015

Cancellation of Common stock
in connection with merger with
Prohealth Medical
Technologies, Inc on October
21, 2002                            -         -     (100,000)        (10)     (1,000)       -            -           -      (1,010)

Issuance of common stock in
exchange for services in
October 2002 at $ 0.65 per
share                               -         -      602,000          60      39,070        -            -           -      39,130

Issuance of common stock in
exchange for subscription in
November and December 2002
at $ 0.065 per share                -         -      876,000          88      56,852        -        (56,940)        -         -

Cancellation of  common stock
in January 2003 previously
issued  in exchange for
consulting services                 -         -     (836,000)        (84)    (54,264)       -         54,340         -          (8)

Issuance of common stock in
exchange for licensing services
valued at $ 0.065 per share in
January 2003                        -         -    1,500,000         150      97,350        -            -           -      97,500

Issuance of common stock in
exchange for consulting
services valued at $ 0.13 per
share in January  2003              -         -      586,250          58      76,155        -            -           -      76,213

Issuance of common stock in
exchange for consulting
services at $ 0.065 per share
in February 2003                    -         -        9,000           1         584        -            -           -         585

Issuance of common stock to
Founders in exchange for
services valued at $0.0001  per
share in March 2003                 -         -   10,140,000       1,014        -           -            -           -       1,014

Issuance of  common stock in
exchange for consulting
services valued at $2.50 per
share in March 2003                 -         -       91,060          10     230,624        -            -           -     230,634
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       5


<PAGE>


                          APPLIED DNA SCIENCES, INC
                       (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004
                                RESTATED
                               (Unaudited)
                               (Continued)

<TABLE>
<CAPTION>
                                                                                                               Deficit
                                                                         Additional                          Accumulated
                                        Preferred              Common      Paid in     Common       Stock       During
                              Preferred   Shares    Common      Stock      Capital     Stock    Subscription Development
                                Shares    Amount    Shares     Amount       Amount   Subscribed  Receivable     Stage       Total
                              --------- --------- ---------- ----------- ----------- ---------- ------------ ----------- ----------
<S>                                 <C>       <C> <C>               <C>      <C>         <C>             <C>         <C>   <C>
Issuance of common stock in
exchange for consulting services
valued at  $ 0.065 per share in
March 2003                          -         -        6,000           1         389        -            -           -         390

Common stock subscribed in
exchange for cash at $1 per
share in March 2003                 -         -         -           -         18,000        -            -           -      18,000

Common stock issued in
exchange for consulting
services at $ 0.065 per
share on April 1, 2003              -         -      860,000          86      55,814        -            -           -      55,900

Common stock issued in
exchange for cash at $ 1.00 per
share on April 9, 2003              -         -       18,000           2        -           -            -           -           2

Common stock issued in
exchange for consulting services
at $ 0.065 per share on April 9,
2003                                -         -        9,000           1         584        -            -           -         585

Common stock issued in
exchange for consulting services
at $ 2.50 per share on April 23,
2003                                -         -        5,000           1      12,499        -            -           -      12,500

Common stock issued in
exchange for consulting services
at $ 2.50 per share, on June 12,
2003                                -         -       10,000           1      24,999        -            -           -      25,000

Common stock issued in
exchange for cash at $ 1.00 per
share on June 17, 2003              -         -       50,000           5      49,995        -            -           -      50,000

Common stock subscribed in
exchange for cash at $ 2.50 per
share pursuant to private
placement on June 27, 2003          -         -         -           -           -        24,000          -           -      24,000

Common stock retired in
exchange for note payable
at $0.0118 per share,
on June 30, 2003                    -         -   (7,500,000)       (750)        750        -            -           -          -

Common stock issued in
exchange for consulting services
at $0.065 per share, on June 30,
2003                                -         -      270,000          27      17,523        -            -           -      17,550

Common stock  subscribed in
exchange for cash at $ 1.00 per
share pursuant to private
placement on June 30, 2003          -         -         -           -           -        10,000          -           -      10,000

Common stock  subscribed in
exchange for cash at $ 2.50 per
share pursuant to private
placement on June 30, 2003          -         -         -           -           -        24,000          -           -      24,000

Common stock issued in
exchange for consulting services
at approximately $2.01 per
share, July 2003                    -         -      213,060          21     428,798        -            -           -     428,819

</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       6


<PAGE>


                          APPLIED DNA SCIENCES, INC
                       (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004
                                RESTATED
                               (Unaudited)
                               (Continued)

<TABLE>
<CAPTION>
                                                                                                               Deficit
                                                                         Additional                          Accumulated
                                        Preferred              Common      Paid in     Common       Stock       During
                              Preferred   Shares    Common      Stock      Capital      Stock   Subscription Development
                                Shares    Amount    Shares     Amount      Amount    Subscribed  Receivable     Stage       Total
                              --------- --------- ---------- ----------- ----------- ---------- ------------ ----------- ----------
<S>                                 <C> <C>       <C>        <C>         <C>         <C>        <C>          <C>         <C>
Common stock canceled in July
2003, previously issued for
services rendered  at $2.50 per
share                               -         -      (24,000)         (2)    (59,998)       -            -           -      (60,000)

Common stock issued in
exchange for options exercised
at $1.00 in July 2003               -         -       20,000           2      19,998        -            -           -       20,000

Common stock issued in
exchange for exercised of
options previously subscribed at
$1.00 in July 2003                  -         -       10,000           1       9,999    (10,000)         -           -           -

Common stock issued in
exchange for consulting services
at approximately $2.38 per
share, August 2003                  -         -      172,500          17     410,915        -            -           -      410,932

Common stock issued in
exchange for options exercised
at $1.00 in August 2003             -         -       29,000           3      28,997        -            -           -       29,000

Common stock issued in
exchange for consulting services
at approximately $2.42 per
share, September 2003               -         -      395,260          40     952,957        -            -           -      952,997

Common stock issued in
exchange  for cash at $2.50 per
share-subscription
payable-September 2003              -         -       19,200          2       47,998    (48,000)         -           -           -

Common stock issued in
exchange for cash at $2.50 per
share pursuant to private
placement September 2003            -         -        6,400           1      15,999        -            -           -       16,000

Common stock issued in
exchange for options exercised
at $1.00 in  September 2003         -         -       95,000          10      94,991        -            -           -       95,001

Common stock subscription
receivable reclassification
adjustment                          -         -         -           -           -           -          2,600         -        2,600

Common Stock subscribed to
at $2.50 per share in September
2003                                -         -         -           -           -       300,000          -           -      300,000

Net Loss for the year
ended September 30, 2003            -         -         -           -           -           -            -   (3,445,164) (3,445,164)
                              --------- --------- ---------- ----------- ----------- ---------- ------------ -----------  ----------

Balance at September 30, 2003       -   $     -   17,811,082 $     1,781 $ 2,577,568 $  300,000 $        -   $(3,456,776) $(577,427)
                              ========= ========= ========== =========== =========== ========== ============ ===========  ==========

</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements


                                       7


<PAGE>


                          APPLIED DNA SCIENCES, INC
                       (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004
                                RESTATED
                               (Unaudited)
                               (Continued)

<TABLE>
<CAPTION>
                                                                                                               Deficit
                                                                         Additional                          Accumulated
                                        Preferred              Common      Paid in     Common       Stock       During
                              Preferred   Shares    Common      Stock      Capital      Stock   Subscription Development
                                Shares    Amount    Shares     Amount      Amount    Subscribed  Receivable     Stage      Total
                              --------- --------- ---------- ----------- ----------- ---------- ------------ ----------- ----------
<S>                              <C>          <C>  <C>        <C>        <C>           <C>               <C>         <C> <C>
Preferred shares issues in
exchange for services at $25.00
per share, October 2003          15,000        15       -           -           -           -            -           -          15

Common stock issued in
exchange for consulting services
at approximately $2.85 per
share, October 2003                 -         -      287,439          29     820,389        -            -           -     820,418

Common stock issued in
exchange  for cash at $2.50 per
share-subscription
payable-October 2003                -         -      120,000          12     299,988   (300,000)         -           -          -

Common stock canceled in
October 2003, previously issued
for services rendered  at $2.50
per share                           -         -     (100,000)        (10)   (249,990)       -            -           -    (250,000)

Common stock issued in
exchange for consulting services
at approximately $3 per share,
November 2003                       -         -      100,000          10     299,990        -            -           -     300,000

Common stock subscribed in
exchange for cash at $2.50 per
share pursuant to private
placement, November, 2003           -         -      100,000          10     249,990        -            -           -     250,000

Common stock subscribed in
exchange for cash at $2.50 per
share pursuant to private
placement, December, 2003           -         -        6,400           1      15,999        -            -           -      16,000

Common stock issued in
exchange for consulting services
at approximately $2.59   per
share, December 2003                -         -    2,125,500         213   5,504,737        -            -           -   5,504,950

Common Stock subscribed to
at $2.50 per share in Dec 2003

                                    -         -         -           -           -       104,000          -           -     104,000

Beneficial conversion feature
relating to notes payable           -         -         -           -      1,168,474        -            -           -   1,168,474

Beneficial conversion feature
relating to warrants                -         -         -           -        206,526        -            -           -     206,526

Adjust common stock par value
from $0.0001 to $0.50 per share,
per amendment of articles dated
Dec 2003                            -         -         -     10,223,166 (10,223,166)       -            -           -          -

Common Stock issued pursuant
to subscription at $2.50 share in
Jan 2004                            -         -       41,600      20,800      83,200   (104,000)         -           -          -

Common stock issued in
exchange for consulting services
at $2.95 per share, Jan 2004        -         -       13,040       6,520      31,948        -            -           -      38,468

Common stock issued in
exchange for consulting services
at $2.60 per share, Jan 2004        -         -      123,000      61,500     258,300        -            -           -     319,800
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       8


<PAGE>


                          APPLIED DNA SCIENCES, INC
                       (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004
                                RESTATED
                               (Unaudited)
                               (Continued)

<TABLE>
<CAPTION>
                                                                                                               Deficit
                                                                         Additional                          Accumulated
                                        Preferred              Common      Paid in     Common       Stock       During
                              Preferred   Shares    Common      Stock      Capital      Stock   Subscription Development
                                Shares    Amount    Shares     Amount      Amount    Subscribed  Receivable     Stage      Total
                              --------- --------- ---------- ----------- ----------- ---------- ------------ ----------- ----------
<S>                              <C>          <C>    <C>         <C>         <C>            <C>       <C>        <C>       <C>
Common stock issued in
exchange for consulting services
at $3.05 per share, Jan 2004        -         -        1,000         500       2,550        -            -           -       3,050

Common stock issued in
exchange for employee services
at $3.07 per share, Feb 2004        -         -        6,283       3,142      16,147        -            -           -      19,289

Common stock issued in
exchange for consulting services
at $3.04 per share, Mar 2004        -         -       44,740      22,370     113,640        -            -           -     136,010

Common Stock issued for
options exercised at $1.00 per
share in Mar 2004                   -         -       55,000      27,500      27,500        -            -           -      55,000

Common stock issued in
exchange for employee services
at $3.00 per share, Mar 2004        -         -        5,443       2,722      13,623        -            -           -      16,345

Common stock issued in
exchange for employee services
at $3.15 per share, Mar 2004        -         -        5,769       2,885      15,292        -            -           -      18,177

Preferred shared converted to
common shares for consulting
services at $3.00 per share,
Mar 2004                         (5,000)      (5)    125,000      62,500     312,500        -            -           -     374,995

Common stock issued in
exchange for employee services
at $3.03 per share, Mar 2004        -         -        8,806       4,400      22,238        -            -           -      26,638

Common Stock issued pursuant
to subscription at $2.50 per
share in Mar. 2004                  -         -       22,500      11,250      (9,000)       -            -           -       2,250

Beneficial Conversion Feature
relating to Notes Payable                               -           -        122,362        -           -           -      122,362

Beneficial Conversion Feature       -         -
relating to Warrants                                    -           -        177,638        -            -           -     177,638

Common stock issued in
exchange for consulting services
at $2.58 per share, Apr 2004        -         -        9,860       4,930      20,511        -            -           -      25,441

Common stock issued in
exchange for consulting services
at $2.35 per share, Apr 2004        -         -       11,712       5,856      21,667        -            -           -      27,523

Common stock issued in
exchange for consulting services
at $1.50 per share, Apr 2004        -         -      367,500     183,750     367,500        -            -           -     551,250

Common stock returned to
treasury at $0.065 per share,
April 2004                          -         -      (50,000)    (25,000)     21,750        -            -           -      (3,250)

Preferred stock converted to
common stock for consulting
services at $1.01 per share in
May 2004                         (4,000)      (4)    100,000      50,000      51,250        -            -           -     101,246

Common stock issued per
subscription May 2004               -         -       10,000       5,000      (4,000)       -         (1,000)        -          -

</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       9


<PAGE>


                          APPLIED DNA SCIENCES, INC
                       (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004
                                RESTATED
                               (Unaudited)
                               (Continued)

<TABLE>
<CAPTION>
                                                                                                               Deficit
                                                                         Additional                          Accumulated
                                        Preferred              Common      Paid in     Common       Stock       During
                              Preferred   Shares    Common      Stock      Capital      Stock   Subscription Development
                                Shares    Amount    Shares     Amount      Amount    Subscribed  Receivable     Stage       Total
                              --------- --------- ---------- ----------- ----------- ---------- ------------ ----------- ----------
<S>                              <C>          <C>  <C>           <C>         <C>            <C>          <C>         <C>   <C>
Common stock issued in
exchange for consulting
services at $0.86 per
share in May 2004                   -         -      137,000      68,500      50,730        -            -           -     119,230

Common stock issued in
exchange for consulting
services at $1.15 per
share in May 2004                   -         -       26,380      13,190      17,147        -            -           -      30,337

Common stock returned to
treasury at $0.065 per
share, Jun 2004                     -         -       (5,000)     (2,500)     2,175         -            -           -        (325)

Common stock issued in
exchange for consulting
services at $0.67 per
share in June 2004                  -         -      270,500     135,250      45,310        -            -           -     180,560

Common stock issued in
exchange for consulting services
at $0.89 per share in June 2004     -         -        8,000       4,000       3,120        -            -           -       7,120

Common stock issued in
exchange for consulting services
at $0.65 per share in June 2004     -         -       50,000      25,000       7,250        -            -           -      32,250

Common stock issued pursuant
to private placement at $1.00
per share in June 2004              -         -      250,000     125,000     125,000        -            -           -     250,000

Common stock issued in
exchange for consulting services
at $0.54 per share in July 2004     -         -      100,000      50,000       4,000        -            -           -      54,000

Common stock issued in
exchange for consulting services
at $0.72 per share in July 2004     -         -        5,000       2,500       1,100        -            -           -       3,600

Common stock issued in
exchange for consulting services
at $0.47 per share in July 2004     -         -      100,000      50,000      (2,749)       -            -           -      47,251

Common stock issued in
exchange for consulting
services at $0.39 per
share in August 2004                -         -      100,000      50,000     (11,000)       -            -           -      39,000

Preferred stock converted
to common stock for
consulting services at
$0.39 per share in August 2004   (2,000)      (2)     50,000      25,000      (5,500)       -            -           -      19,498

Common stock issued in
exchange for consulting
services at $0.50 per
share in August 2004                -         -      100,000      50,000         250        -            -           -      50,250

Common stock issued in
exchange for consulting
services at $0.56 per
share in August 2004                -         -      200,000     100,000      12,500        -            -           -     112,500

Common stock issued in
exchange for consulting
services at $0.41 per
share in August 2004                -         -       92,500      46,250      (8,605)       -            -           -      37,645

Common stock issued in
exchange for consulting
services at $0.52 per
share in September 2004             -         -    1,000,000     500,000      17,500        -            -           -     517,500
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       10


<PAGE>


                          APPLIED DNA SCIENCES, INC
                       (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004
                                RESTATED
                               (Unaudited)
                               (Continued)

<TABLE>
<CAPTION>
                                                                                                               Deficit
                                                                         Additional                          Accumulated
                                        Preferred              Common      Paid in     Common       Stock       During
                              Preferred   Shares    Common      Stock      Capital      Stock   Subscription Development
                                Shares    Amount    Shares     Amount      Amount    Subscribed  Receivable     Stage      Total
                              --------- --------- ---------- ----------- ----------- ---------- ------------ ----------- ----------
<S>                              <C>    <C>       <C>        <C>         <C>         <C>        <C>       <C>           <C>
Common stock issued in
exchange for consulting
services at $0.46 per
share in September 2004             -         -        5,000       2,500        (212)       -          -           -          2,288

Common stock issued pursuant
to subscription at  $0.50 per
share in September 2004             -         -       40,000      20,000        -           -          -           -         20,000

Preferred shares converted to
common stock for consulting
services at $0.41 per share in
September 2004                   (4,000)      (4)    100,000      50,000       4,000        -          -           -         53,996

Preferred shares issued in
exchange for service at $25 per
share in September 2004          60,000        6        -           -      1,499,994        -          -           -      1,500,000

Fair value of 2,841,000 warrants
issued to non-employees and
consultants for services rendered
at approximately $.71 per warrant
in September 2004                   -         -         -           -      2,019,862        -          -           -      2,019,862


Net Loss                            -         -         -           -           -           -          -   (19,358,258) (19,358,258)
                              --------- --------- ---------- ----------- ----------- ---------- --------  ------------  -----------
Balance at September 30, 2004    60,000 $      6  23,981,054 $11,990,527 $ 6,118,993 $      -   $ (1,000) $(22,815,034) $(4,706,508)
                              ========= ========= ========== =========== =========== ========== ========  ============  ===========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       11


<PAGE>


                          APPLIED DNA SCIENCES, INC
                       (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
 FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004
                                RESTATED
                               (Unaudited)
                               (Continued)

<TABLE>
<CAPTION>
                                                                                                               Deficit
                                                                         Additional                          Accumulated
                                        Preferred               Common     Paid in     Common       Stock       During
                              Preferred   Shares    Common       Stock     Capital      Stock   Subscription Development
                                Shares    Amount    Shares      Amount     Amount    Subscribed  Receivable     Stage      Total
                              --------- --------- ---------- ----------- ----------- ---------- ------------ ----------- ----------
<S>                                <C>       <C>  <C>           <C>         <C>        <C>               <C>         <C>  <C>
Common stock issued in
exchange for consulting services
at $0.68 per share in October
2004                                -         -      200,000     100,000      36,000        -            -           -     136,000

Common stock returned
to treasury at $0.60
per share, Oct 2004                 -         -   (1,069,600)   (534,800)   (107,297)       -            -           -    (642,097)

Common stock issued in
exchange for consulting services
at $0.60 per share in Oct 2004      -         -       82,500      41,250       8,250        -            -           -      49,500

Common Stock issued pursuant
to subscription at $0.60 share in
October 2004                        -         -      500,000     250,000      50,000   (300,000)         -           -          -

Common stock issued in
exchange for consulting services
at $0.50 per share in October 2004  -         -      532,500     266,250        -           -            -           -     266,250

Common Stock issued in
exchange for debt at $0.50 share
in October 2004                     -         -      500,000     250,000        -           -            -           -     250,000

Common Stock issued pursuant
to subscription at $0.45 share in
October 2004                        -         -    1,000,000     500,000     (50,000)  (450,000)         -           -          -

Common stock issued in
exchange for consulting services
at $0.45 per share in October 2004  -         -      315,000     157,500     (15,750)       -            -           -     141,750

Common Stock issued in
exchange for consulting
services at $0.47 share
in November 2004                    -         -      100,000      50,000      (3,000)       -            -           -      47,000

Common Stock issued in
exchange for consulting
services at $0.80 share
in November 2004                    -         -      300,000     150,000      90,000        -            -           -     240,000

Common Stock issued in
exchange for consulting
services at $1.44 share
in November 2004                    -         -      115,000      57,500     108,100        -            -           -     165,600

Common Stock issued in
exchange for employee
services at $1.44 share
in November 2004                    -         -        5,000       2,500       4,700        -            -           -       7,200

</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       12


<PAGE>


                          APPLIED DNA SCIENCES, INC
                       (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004
                                RESTATED
                               (Unaudited)
                               (Continued)

<TABLE>
<CAPTION>
                                                                                                               Deficit
                                                                         Additional                          Accumulated
                                        Preferred               Common     Paid in     Common       Stock       During
                              Preferred   Shares    Common       Stock     Capital      Stock   Subscription Development
                                Shares    Amount    Shares      Amount     Amount    Subscribed  Receivable     Stage      Total
                              --------- --------- ---------- ----------- ----------- ---------- ------------ ----------- ----------
<S>                              <C>        <C>  <C>         <C>        <C>         <C>        <C>          <C>          <C>
Warrants exercised
at $0.60 per share
in November 2004                    -         -      60,000      30,000      6,000     (4,000)         -            -        32,000

Beneficial Conversion discount
relating to Notes Payable           -         -         -           -    1,465,000        -            -            -     1,465,000

Common stock issued at $0.016
per share in exchange for note
payable in December 2004            -         -   5,500,000   2,750,000 (2,661,500)       -            -            -        88,500

Fair value of 6,063,500 warrants
issued to non employees and
consultants for services rendered
at $.52 per warrant in
October and December 2004           -         -         -           -    3,169,052        -            -            -     3,169,052

Net Loss                            -         -         -           -           -         -            -     (6,947,283) (6,947,283)
                              --------- -------  ----------  ---------- ----------  ---------  -----------  -----------  ----------
Balance at December 31, 2004     60,000       6  32,121,454  16,060,727  8,218,548   (755,000)         -    (29,762,317) (6,238,036)
                              ========= ======== ==========  ========== ==========  =========  ===========  ===========  ==========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       13


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                 For the Period
                                                                                                               September 16, 2002

                                                                                 For the Three Months Ended   (Date of Inception)
                                                                                 December 31,   December 31,  through December 31
                                                                                     2004           2003              2004
                                                                               -----------------------------------------------------
                                                                                   RESTATED                         RESTATED
<S>                                                                             <C>               <C>             <C>
Cash Flows (used in) operating activities:

Net loss                                                                         $ (6,947,283)    $(7,542,490)    $(29,762,317)

Adjustments  to reconcile  net loss to net cash  provided by (used in)
operating activities:

Depreciation and amortization                                                           4,721             351            7,882

Organizational expenses                                                                    --              --           88,500

Preferred shares issued in exchange for services                                           --              --        1,500,000

Fair value of  warrants issued to non-employees and consultants
in exchange for services                                                            3,169,052              --        5,188,914

Amortization of beneficial conversion feature                                       1,515,000         133,273        3,140,000

Common stock issued in exchange for  services                                       1,174,300       6,625,368       13,572,032

Common stock canceled--previously issued for services rendered                       (642,605)       (282,000)        (928,180)

Increase (decrease)  in assets and liabilities:

Restricted cash                                                                    (1,065,318)             --       (1,079,208)

Security Deposits                                                                     (24,026)        (23,559)         (47,585)

Due  related parties, net                                                               1,523                          154,219

Accounts payable and accrued liabilities                                            1,203,816         (61,589)       2,959,525
                                                                                 ------------     -----------     ------------
Net cash (used in) operating activities                                            (1,610,820)     (1,150,646)      (5,206,218)


Cash flows from investing activities:


Acquisition of property and equipment                                                      --         (29,507)         (29,507)

Payment of  patent filing fees                                                         (4,347)             --          (25,698)
                                                                                 ------------              --     ------------
Net cash (used in) investing activities                                                (4,347)        (29,507)         (55,205)


Cash flows from financing activities:

Proceeds from sale of common stock, net of cost                                            --         266,000          432,000

Proceeds from  subscription of common stock                                           250,000         104,000          375,000

Proceeds from exercise  of options and warrants                                        36,000          32,000          277,000

Repayment of related party advances, net                                                               34,004

Net advances from shareholders                                                             --                          100,088

Proceeds from loans                                                                 1,390,000       1,175,030        4,140,000
                                                                                 ------------     -----------     ------------
Net cash provided by financing activities                                           1,676,000       1,611,034        5,324,088
                                                                                 ------------     -----------     ------------
Increase (decrease) in cash and cash equivalents                                       60,833         430,881           62,665

Cash and cash equivalents, beginning of  period                                         1,832         193,471               --
                                                                                 ------------     -----------     ------------
Cash and cash equivalents, end of period                                         $     62,665     $   624,352     $     62,665
                                                                                 ============     ===========     ============
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       14


<PAGE>


<TABLE>
<CAPTION>
                                                                                                                 For the Period
                                                                                                               September 16, 2002

                                                                                 For the Three Months Ended   (Date of Inception)
                                                                                 December 31,   December 31,  through December 31
                                                                                     2004           2003              2004
                                                                               -----------------------------------------------------
                                                                                   RESTATED                         RESTATED
<S>                                                                              <C>              <C>             <C>
Supplemental Information:

Cash paid during the period for interest                                                   --              --               --

Cash paid during the year for taxes                                                        --              --               --


Non--cash disclosures:

Common stock issued for services                                                    1,174,300       6,625,368       13,573,032

Common stock issued in exchange for previously incurred debt                               --              --

Fair value of  warrants issued to non-employees and consultants
in exchange for services                                                            3,169,052              --        5,188,914

Amortization of beneficial conversion feature attributed to
convertible notes                                                                   1,465,000       1,375,000        3,140,000


Common stock canceled--previously issued for services rendered                      (642,605)        (282,000)        (928,180)

Preferred shares issued in exchange for services                                           --                        1,500,000


Acquisition:

Common stock retained                                                                                      --            1,015

Assets acquired                                                                                            --             (135)
                                                                                                                  ------------
Total consideration paid                                                                                   --              880
                                                                                                                  ============
Organization expenses-- note  issued in exchange of  shares retired                    88,500              --           88,500
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       15


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES

General

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB,  and therefore,  do
not include all the information  necessary for a fair  presentation of financial
position,  results of  operations  and cash flows in conformity  with  generally
accepted accounting principles.

In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results for the three month  period  ended  December 31, 2004 are not
necessarily  indicative  of the results  that may be expected for the year ended
September 30, 2005. The unaudited condensed  consolidated  financial  statements
should be read in conjunction with September 30, 2004 financial statements.

Business and Basis of Presentation

On  September  16,  2002,  Applied  DNA  Sciences,   Inc.  (the  "Company")  was
incorporated  under  the laws of the  State of  Nevada.  The  Company  is in the
development stage, as defined by Statement of Financial Accounting Standards No.
7 ("SFAS No. 7") and its efforts have been principally devoted to developing DNA
embedded  biotechnology  security  solutions in the United States.  To date, the
Company has generated  nominal  sales  revenues,  has incurred  expenses and has
sustained  losses.  Consequently,  its  operations  are subject to all the risks
inherent in the establishment of a new business enterprise.  For the period from
inception  through  December 31,  2004,  the Company has  accumulated  losses of
$29,762,317.

The consolidated  financial  statements include the accounts of the Company, and
its wholly-owned  subsidiary  ProHealth Medical  Technologies,  Inc. Significant
inter-company transactions have been eliminated in consolidation.

Reclassification

Certain prior period amounts have been reclassified for comparative purposes.

Property and Equipment

Property and equipment are stated at cost and  depreciated  over their estimated
useful  lives of 3 to 5 years using the straight  line  method.  At December 31,
2004 property and equipment consist of:

<TABLE>
<S>                             <C>
Furniture                       $    29,507
Accumulated  depreciation           (1,756)
                                    -------

Net                             $    27,751
</TABLE>

                                       16


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

Advertising

The Company  follows a policy of charging the costs of advertising to expense as
incurred.  For the three  months ended  December 31, 2004 and 2003,  the Company
incurred $4,490 and $0 respectively.

Intangible Assets

Intangible  assets  are  amortized  using the  straight-line  method  over their
estimated  period  of  benefit,  ranging  from  one to ten  years.  The  Company
periodically  evaluates the  recoverability  of intangible assets and takes into
account events or circumstances  that warrant revised  estimates of useful lives
or that indicate that impairment exists. All of the Company's  intangible assets
are subject to amortization..

At December 31, 2004, intangible assets consist of the following:

<TABLE>
             <S>                                         <C>
             Intangible assets                           $34,257
             Accumulated amortization                    (6,126)
                                                         -------
                                                         $28,131
</TABLE>

Restricted Cash

Per the terms of the Promissory Note Payable  agreement dated December 20, 2004,
all  proceeds  received  from note holders  remain in escrow  subject to (i) the
filing of a Definitive  Information  Statement  that  increases  the  authorized
common  stock of the Company  and  reduces par value,  and (ii) the closing of a
Private Placement for $1,000,000 or more and in the event of such occurrence the
Note will automatically  without notice to the note holder,  convert into common
stock of the  Company at any time at $0.50 per share for a period of three years
and callable at $1.25 per share after the underlying stock is registered if said
stock trades at above $1.25 per share for 10 days - See Note   .

Stock Based Compensation

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No.  123,  "Accounting  for  Stock-Based  Compensation,"  to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee  compensation.  In addition,  this
statement  amends  the  disclosure  requirements  of  SFAS  No.  123 to  require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported  results.  The Company has chosen to continue to account
for stock-based  compensation using the intrinsic value method prescribed in APB
Opinion No. 25 and related  interpretations.  Accordingly,  compensation expense
for stock options is measured as the excess, if any, of the fair market value of
the  Company's  stock at the date of the grant  over the  exercise  price of the
related option. The Company has adopted the annual disclosure provisions of SFAS
No. 148 in its financial  reports for the year ended  September 30, 2003 and for
the subsequent periods.

                                       17


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

Had compensation  costs for the Company's stock options been determined based on
the fair value at the grant dates for the  awards,  the  Company's  net loss and
losses  per share  would  have been as  follows  (transactions  involving  stock
options issued to employees and Black-Scholes model assumptions are presented in
Note C):

<TABLE>
<CAPTION>
                                                                                                   For the Period
                                                                                                    September 16,
                                                                                                    2002 (Date of
                                                         For The Three        For The Three          Inception)
                                                         Months ended          Months ended            through
                                                         December 31,          December 31,         December 31,
                                                             2004                  2003                 2004
                                                             ----                  ----                 ----
<S>                                                  <C>                 <C>                 <C>
Net loss - as reported                               $     (6,947,283)   $     (7,542,490)   $     (29,762,317)
Add: Total stock based employee
compensation expense as reported under
intrinsic value method (APB. No. 25)                                 -                   -                    -

Deduct: Total stock based employee
compensation expense as reported under
fair value based method (SFAS No. 123)                               -                   -                    -
                                                     ===========================================================
Net loss - Pro Forma                                 $     (6,947,283)   $     (7,542,490)   $     (29,762,317)
                                                     ===========================================================

Net loss attributable to common
stockholders - Pro forma                             $     (6,947,283)   $     (7,542,490)   $     (29,762,317)
                                                     ===========================================================
per share - as reported                              $          (0.37)   $          (0.41)   $           (1.57)
                                                     ===========================================================
Basic (and assuming dilution) loss
per share - Pro forma                                $          (0.22)   $          (0.41)   $           (1.57)
                                                     ===========================================================
</TABLE>

On December 16, 2004,  the Financial  Accounting  Standards  Board (FASB) issued
FASB  Statement  No.  123R  (revised  2004),  "Share-Based  Payment"  which is a
revision of FASB Statement No. 123,  "Accounting for Stock-Based  Compensation".
Statement 123R  supersedes APB opinion No. 25,  "Accounting  for Stock Issued to
Employees",  and amends  FASB  Statement  No.  95,  "Statement  of Cash  Flows".
Generally,  the approach in Statement 123R is similar to the approach  described
in Statement 123. However,  Statement 123R requires all share-based  payments to
employees,  including grants of employee stock options,  to be recognized in the
income statement based on their fair values.  Pro-forma  disclosure is no longer
an  alternative.  On April 14, 2005,  the SEC amended the effective  date of the
provisions of this  statement.  The effect of this  amendment by the SEC is that
the Company will have to comply with Statement 123R and use the Fair Value based
method of accounting no later than the first quarter of 2006. Management has not
determined   the  impact  that  this   statement  will  have  on  the  Company's
consolidated financial statements.

                                       18


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE B - MERGER

On  October  21,  2002,   the  Company   completed  a  Plan  and   Agreement  of
Reorganization   ("Merger")   with   ProHealth   Medical   Technologies,    Inc.
("ProHealth")  an  inactive  publicly   registered  shell  corporation  with  no
significant assets or operations.  For accounting purposes, the Company shall be
the surviving entity. The transaction is accounted for using the purchase method
of  accounting.  The total  purchase  price and carrying value of the net assets
acquired was $880.  From November  1988 until the date of the Merger,  ProHealth
was an inactive entity with no significant asset and liabilities.

Effective with the Merger, all previously  outstanding  common stock,  preferred
stock,  options and warrants owned by the Company's  shareholders were exchanged
for an aggregate of 10,178,352  shares of ProHealth  common stock.  The value of
the stock that was issued was the  historical  cost of the the  ProHealth's  net
tangible  assets,  which did not differ  materially  from their fair  value.  In
accordance with SFAS No. 141, the Company is the acquiring entity.

Effective with the Merger,  ProHealth  changed its name to Applied DNA Sciences,
Inc.

The total  purchase  price and  carrying  value of the net  assets  acquired  of
ProHealth was $1. The net assets acquired were as follows:

<TABLE>
       <S>                                                           <C>
       Common stock retained by ProHealth shareholders:              $1,015
       Assets acquired:                                                (135)
                                                                     -------
       Total consideration:                                          $  880
</TABLE>

In accordance with SOP 98-5, the Company expensed $880 as organization costs.

NOTE C - RELATED PARTY TRANSACTIONS

At December 31, 2004, notes payable are as follows:

<TABLE>
<CAPTION>
                                                                                                    December 31,
                                                                                                        2004
                                                                                                     (Unaudited)
              <S>                                                                                   <C>
              Note payable,  unsecured,  related party,  payable from August 1, 2005, right to
              convert to restricted stock in lieu of cash, rate of interest 4%, 160,000 shares
              prior to October 31, 2005 or 180,000 shares after that date.                                 425,000

              Note Payable  to ex-president, in September, 2004; unsecured and non-interest
              bearing ;payable on demand                                                                   600,000

              Note payable, ex-officer of the Company; unsecured and non-interest bearing ;
              due $100,000 upon first funding. 20% rate of interest, or 100,000 shares at
              par value of $0.50                                                                           100,000
                                                                                                        ----------
                                                                                                         1,125,000
              Less; current portion                                                                      1,125,000
                                                                                                        ----------
              Note Payable - long-term                                                                  $      -0-
                                                                                                        ==========
</TABLE>

                                       19


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)


NOTE C - RELATED PARTY TRANSACTIONS (continued)

Included  in  current  liabilities  is  $61,943  at  December  31,  2004,  which
represents  advances from the stockholders of the Company.  No formal agreements
or repayment  terms exist.  Additionally,  the Company owed $168,857 at December
31, 2004 to stockholders and other related parties for unreimbursed expenses and
advances. The amounts are included in accrued liabilities.

The  Company  leases  office  space under a sub lease  agreement  with an entity
controlled by a significant former shareholder of the Company.

NOTE D - PRIVATE PLACEMENT OF CONVERTIBLE NOTES

$ 1,675,000 Convertible Notes

Convertible notes payable ("Bridge Unit Offering") in quarterly  installments of
interest only at 10% per annum,  secured by all assets of the Company and due on
the  earlier  of the 9 month  anniversary  date of the  initial  closing  of the
offering or the  completion of any equity  financing of $3,000,000 or more;  the
Company,  at its sole  discretion  may  prepay  principal  at any  time  without
penalty. The Notes were initially convertible into shares of our common stock at
a price of $2.50 per  share.Subsequent to the date of the financial  statements,
the Bridge Unit Offering Notes unpaid  principal and accrued and unpaid interest
were  converted  to an aggregate of  4,988,051  shares of the  Company's  common
shares at a price equal to approximately $. 33 per share (see Note H).

As  additional  consideration  for the purchase of the  Convertible  Notes,  the
Company  granted to the holders  warrants  entitling  it to  purchase  1,602,500
common  shares of the  Company's  common  stock at the price of $ .60 per share.
These warrants were issued in October, 2003 and lapse if unexercised by October,
2008.  A  registration  rights  agreement  was  executed  in  December  2004 and
consummated  in February,  2005  requiring the Company to register the shares of
its common stock  underlying the Convertible  Notes and warrants so as to permit
the public resale thereof.  The Registration  Rights Agreement  provided for the
payment  of  liquidated  damages  of  3.5%  of the  aggregate  Convertible  Note
financing per month if the stipulated registration deadlines were not met.

In  accordance  with  Emerging  Issues  Task Force Issue  98-5,  Accounting  for
Convertible  Securities  with a Beneficial  Conversion  Features or Contingently
Adjustable  Conversion Ratios ("EITF 98-5"),  the Company recognized an imbedded
beneficial  conversion  feature  present in the Convertible  Notes.  The Company
allocated a portion of the proceeds equal to the intrinsic value of that feature
to additional paid-in capital.  The Company recognized and measured an aggregate
of  $1,675,000 of the  proceeds,  which is equal to the  intrinsic  value of the
imbedded  beneficial  conversion  feature,  to additional  paid-in capital and a
discount  against  the  Convertible  Notes.  Since the  Convertible  Notes  were
converted to the  Company's  common stock,  the debt discount  attributed to the
beneficial  conversion feature of $ 1,675,000 was charged to interest expense in
its entirety during the year ended September 30, 2004.

$ 1,465,000 Convertible Notes

Beginning in December, 2004, the Company sold a 10% convertible debenture in the
aggregate  amount of $ 1,465,000 in a private  placement and exempt offerings to
sophisticated investors, net of costs and fees ("Convertible Notes").

The  Convertible  Note's terms called for the debt to  automatically  convert at
$.50 per share upon the filing a of a registration statement with the Securities
and Exchange Commission.

                                       20


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE D - PRIVATE PLACEMENT OF CONVERTIBLE NOTES (continued)

The  Company  filed the  registration  statement  on  February  15, 2005 and the
Convertible  Notes were  converted to an  aggregate  of 2,930,000  shares of the
Company's common stock.

As  additional  consideration  for the purchase of the  Convertible  Notes,  the
Company  granted to the holders  warrants  entitling  it to  purchase  2,930,000
common  shares of the  Company's  common  stock at the price of $ .75 per share.
These  warrants  were  issued  in  February,  2005 and lapse if  unexercised  by
February,  2010. A registration  rights  agreement was executed in December 2004
and  consummated in February,  2005 requiring the Company to register the shares
of its common  stock  underlying  the  Convertible  Notes and  warrants so as to
permit the public resale thereof. The Registration Rights Agreement provided for
the payment of  liquidated  damages of 3.5% of the  aggregate  Convertible  Note
financing per month if the stipulated  registration  deadlines were not met. The
liquidated  damages,  which  approximate  $51,275 per month, may be paid, at the
Company's option, in cash or unregistered shares of the Company's common stock.

In  accordance  with  Emerging  Issues  Task Force Issue  98-5,  Accounting  for
Convertible  Securities  with a Beneficial  Conversion  Features or Contingently
Adjustable  Conversion Ratios ("EITF 98-5"),  the Company recognized an imbedded
beneficial  conversion  feature  present in the Convertible  Notes.  The Company
allocated a portion of the proceeds equal to the intrinsic value of that feature
to additional paid-in capital.  The Company recognized and measured an aggregate
of  $1,465,000 of the  proceeds,  which is equal to the  intrinsic  value of the
imbedded  beneficial  conversion  feature,  to additional  paid-in capital and a
discount against the Convertible  Notes.  Since the holders of Convertible Notes
advised  the Company  they were  converting  to the  Company's  common  stock in
December 2004, the debt discount attributed to the beneficial conversion feature
of $1,465,000 was charged to interest  expense in its entirety  during the three
months ended December 31, 2004.

NOTE E - CAPITAL STOCK

The Company is authorized to issue  10,000,000  shares of preferred stock with a
$.001 par value per share. The Company is authorized to issue 250,000,000 shares
of  common  stock,  with a  $0.001  par  value  per  share  as the  result  of a
shareholder  meeting  conducted on February 14, 2005.  Prior to the February 14,
2005 share increase and par value change, the Company had 100,000,000 authorized
shares  with a par  value of $0.50.  In  February  2005,  the  Company  passed a
resolution  authorizing change in the par value per common shares from $0.50 per
share to $0.001 per share.

During the period  September 16, 2002 through  September  30, 2003,  the Company
issued 100,000 shares of common stock in exchange for  reimbursement of services
provided by the founders of the Company. The Company valued the shares issued at
approximately  $1,000,  which represents the fair value of the services received
which did not differ materially from the value of the stock issued.

In  October,  2002,  the Company  issued  10,178,352  shares of common  stock in
exchange for the previously  issued 100,000 shares to the Company's  founders in
connection with the merger with Prohealth Medical Technologies, Inc.

In October,  2002 the Company  canceled 100,000 shares of common stock issued to
the Company's founders.

During the fiscal year ended  September 30, 2003, the Company  issued  2,369,130
shares of common stock,  net of  cancellation  of 860,000 shares in exchange for
consulting services. The Company valued the shares issued at $2,191,227,  net of
cancellation  of  $60,008,  which  represents  the fair  value  of the  services
received which did not differ materially from the value of the stock issued.

In November  2003, the Company issued 876,000 shares of common stock in exchange
for subscription at approximately $ 0.065 per share.

                                       21


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE E - CAPITAL STOCK (continued)

In January 2003, the Company issued 1,500,000 shares of common stock in exchange
for a licensing  agreement (see Note H). The Company valued the shares issued at
approximately $ .065 per share,  which  represents the fair value of the license
received which did not differ materially from the value of the stock issued. The
Company charged the cost of the license to operations.

In March 2003, the Company issued 10,140,000 shares of common stock to Company's
founders in exchange for services. In accordance with EITF 96-18 the measurement
date to determine fair value was in September 2002. This was the date at which a
commitment for  performance  by the counter party to earn the equity  instrument
was reached.  The Company valued the shares issued at approximately  $0.0001 per
share,  which  presents  the fair value of the services  received  which did not
differ materially from the value of the stock issued.

In connection with the Company's acquisition of ProHealth, the controlling owner
of ProHealth  granted the Company an option to acquire up to 8,500,000 shares of
the  Company's  common stock in exchange  for $100,000  (see Note B). The option
expires on December 10, 2004. On June 30, 2003, the Company exercised its option
and acquired  7,500,000  common  shares under this  agreement in exchange for an
$88,500 convertible promissory note payable to the former controlling owner. The
Company  has an option  through  December  10,  2004 to  acquire  the  remaining
1,000,000 shares from the former  controlling owner in exchange for $11,500.  On
June 30, 2003, the Company retired the 7,500,000 shares common acquired pursuant
to the option agreement.

In September  2003,  the Company  issued  19,200 shares of common stock for cash
previously subscribed at $2.50 per share.

During the fiscal year ended  September  30, 2003,  the Company  issued  154,000
shares of common stock in exchange for previously issued options to purchase the
Company's common stock at $1.00 per share.

During the fiscal year ended  September  30,  2003,  the Company  issued  74,400
shares of common stock in exchange for cash at approximately $0.89 per share.

In October 2003, the Company issued 15,000 shares of convertible preferred stock
in exchange for  services.  The Company  valued the shares issued at the $15 par
value and recorded the value for services  when the shares were  converted  into
common shares as identified below.

During the fiscal year ended  September 30, 2004, the Company  issued  5,123,171
shares of common stock,  net of cancellation of 155,000 shares,  in exchange for
consulting services. The Company valued the shares issued at $8,787,315,  net of
cancellation  of  $408,575,  which  represents  the fair  value of the  services
received which did not differ materially from the value of the stock issued

During the fiscal year ended  September  30, 2004,  the Company  issued  340,500
shares of common stock for shares previously  subscribed at approximately  $2.04
per share.

In March 2004, the Company  issued 55,000 of common stock for options  exercised
at $1.00 per share.

During the fiscal year ended  September 30 2004,  the Company  converted  15,000
preferred  shares  into  375,000  shares of  common  stock at $1.47 per share in
exchange for employee services valued at $549,750.

                                       22


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE E - CAPITAL STOCK (continued)

In June 2004, the Company sold 250,000 shares of common stock at $1.00 per share
for total proceeds of $250,000 pursuant to private placement.

In September  2004, the Company issued 60,000  convertible  preferred  shares at
$25.00, in exchange for consulting services valued at $1,500,000.

In October 2004,  the Company  issued 200,000 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.68 per share for a total of $136,000,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In October  2004,  shareholders  returned  1,069,600  shares to treasury  issued
earlier in exchange for services valued at $642,098.

In October  2004,  the Company  issued 82,500 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.60 per share for a total of $49,500,  which  represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In October 2004, the Company sold 500,000 shares of common stock  subscribed for
cash at $0.60 per share pursuant to private placement.

In October 2004,  the Company  issued 532,500 shares of common stock to existing
noteholders in exchange for advisory  services.  . The Company valued the shares
issued at approximately $0.50 per share and charged $266,250 to operations.

In October 2004, the Company sold 500,000 shares of common stock  subscribed for
cash at $0.50 per share pursuant to private placement.

In October 2004,  the Company sold 1,000,000  shares of common stock  subscribed
for cash at $0.45 per share pursuant to private placement.

In October 2004,  the Company  issued 315,000 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.45 per share for a total of $141,750,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In November  2004, the Company issued 100,000 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.47 per share for a total of $47,000,  which  represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In November  2004, the Company issued 300,000 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.80 per share for a total of $240,000,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In November  2004, the Company issued 115,000 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$1.44 per share for a total of $165,600,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In November  2004,  the Company  issued 5,000 shares of common stock in exchange
for employee  services.  The Company  valued the shares issued at  approximately
$1.44 per share for a total of $7,200,  which  represents  the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

                                       23


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE E - CAPITAL STOCK (continued)

In November  2004,  the Company issued 60,000 shares of common stock in exchange
for employee  services.  The Company  valued the shares issued at  approximately
$0.60 per share for a total of $36,000,  which  represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In December 2004,  the Company  issued net 5,500,000  shares of common stock for
default  as per terms of notes  payable  for  $88,500.  Out of total,  3,500,000
shares were  retained in escrow on behalf of another  party for future  deferred
compensation.


NOTE F - STOCK OPTIONS AND WARRANTS

Warrants

The  following  table  summarizes  the changes in warrants  outstanding  and the
related  prices  for  the  shares  of  the  Company's  common  stock  issued  to
non-employees  of the  Company.  These  warrants  were  granted  in lieu of cash
compensation for services performed or financing expenses in connection with the
sale of the Company's common stock.

<TABLE>
<CAPTION>
                                             Warrants Outstanding                                             Exercisable
                                                   Remaining              Weighted           Weighted          Weighted
                             Number               Contractual              Average           Average            Average
         Exercise                                                         Exercise
         Prices            Outstanding           Life (Years)              Price           Exercisable      Exercise Price
     ================    ===============    =======================    ===============    ==============   =================
          <S>                <C>                     <C>                   <C>               <C>                <C>
          $0.10                 105,464              4.54                  $0.10                335,000         $0.10
          $0.20                   5,000              3.85                  $0.20                  5,000         $0.20
          $0.50                  50,000              4.77                  $0.50                 50,000         $0.50
          $0.60               9,223,750              4.30                  $0.60              9,223,750         $0.60
          $0.70                 750,000              2.58                  $0.70                750,000         $0.70
          $1.00                 100,000              0.79                  $1.00                100,000         $1.00
                             10,234,214                                                      10,234,214
                         ===============                                                  ==============
</TABLE>

Transactions involving warrants are summarized as follows:

<TABLE>
<CAPTION>
                                                             Number of Shares         Weighted Average
                                                                                       Price Per Share
                    <S>                                       <C>                   <C>
                    Outstanding at September 30, 2004            4,870,253          $             0.63
                    Granted                                      6,063,500                        0.68
                    Exercised                                      (60,000)                        060
                    Canceled or expired                           (639,539)                       0.29
                                                             -------------          ------------------
                    Outstanding at December 31, 2004            10,234,214          $             0.66
                                                             ==============        ===================
</TABLE>

                                       24


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE F - STOCK OPTIONS AND WARRANTS (continued)

During the three months ended December 31, 2004, the Company  granted  6,063,500
warrants to non-employees in exchange for services and financing expenses.

The  estimated  fair  value  of  the   compensatory   warrants  granted  to  the
non-employeeswas  determined  using  the  Black-Scholes  pricing  model  and the
following  assumptions:  contractual  term of 2 to 5 years, a risk free interest
rate of 2.47 to 3.53%,  a dividend  yield of 0% and  volatility of from 65.7% to
148.7%.  The  amount of the  expense  charged  to  operations  for  compensatory
warrants granted in exchange for services and financing  expenses was $3,169,052
for the three months ended December 31, 2004.



NOTEG- COMMITMENTS AND CONTINGENCIES

Licensing Agreements

In October,  2002,  the Company  entered into an exclusive  Licensing  Agreement
("License")  with Biowell  Technology,  Inc., a company formed under the laws of
Taiwan,  Republic of Taiwan.  The initial  term of the License  expires in 2007,
with renewal options under certain terms and conditions.  The License grants the
Company  exclusive use of certain  patented DNA technology along with the rights
to future  technology in exchange for an initial payment of 1,500,000  shares of
the Company's  restricted common stock (See Note E). The Company is obligated to
order a minimum  purchase  orders or make future certain  minimum annual royalty
payments as follows:

<TABLE>
<CAPTION>
                              Minimum purchase     Alternative Minimum Royalty
   Year ended October 8,           orders                    Payable
          <S>                  <C>                      <C>
           2005                   360,000                      -
           2006                   432,000                      -
           2007                   518,000                      -
</TABLE>

                                       25


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)


NOTE G- COMMITMENTS AND CONTINGENCIES (continued)

Consulting Agreements

On August 6, 2004 the Company  retained  Giuliani  Partners,  on a non-exclusive
basis,  to  provide  advice  and  assistance  to the  Company  regarding  issues
associated with Applied DNA's proprietary DNA embedded security. The term of the
engagement is one year from the effective  date with automatic one year renewals
unless either party  expresses an intention not to renew within 60 days prior to
the expiration of the Agreement

As  compensation  for GP's  performance,  the Company  will pay GP an  aggregate
advisory fee of $2,000,000 payable in increments over the term and renewal term.
Two  payments of $500,000  each were made by the Company in  September  2004 and
January 2005.  Thereafter,  eight  payments of $125,000 are due monthly over the
period February through September 2005.  Additionally,  the Company will issue a
net-exercisable  warrant to purchase  shares of common stock of the Company at a
later  date.  Fees were  placed  in escrow  during  GP's  completion  of its due
diligence review.

Franchising and Distribution Agreements

The  Company  has  entered  into  a  Distribution   and  Franchising   Agreement
("Franchise  Agreement")  in  July  2003.  Under  the  terms  of  the  Franchise
Agreement,  the  franchisee is obligated to pay the Company  $3,000,000  payable
$25,000 upon execution of the Franchise  Agreement and the balance  payable over
five (5) years  with  interest  accruing  at 8% per  annum.  Payments  under the
Franchise  Agreement are subject to franchisee's  net profits,  as defined under
the Franchise Agreement.

Note Payable Settlement

In  October  2004,  the  Company  defaulted  on a note held by a former  Company
officer  and  director to the amount of $88,500  (See Note E) and in  accordance
with the default, the noteholder had the right to demand his outstanding note be
converted  back into  7,500,000  shares.  The Company  subsequently  settled the
matter  for  5,500,000  shares  with  3,500,000  shares  retained  in escrow for
negotiations on behalf of another party for future compensation.

Litigation

Ex-officer was named as a defendant in a lawsuit  brought by an outside party in
the United States District Court for the Central District of California,  and in
that action,  Applied DNA was named as a "nominal  defendant".  The plaintiff is
alleging that the ex-officer violated the short swing rule. The Company believes
it has meritorious defenses and will prevail in this matter.

Operating Lease Commitments

The  Company  leases  office  space  under a  operating  lease  in Los  Angeles,
California  of its  corporate  use from an entity  controlled  by a  significant
former  shareholder  expiring in November 2006. The total lease rental  expenses
for the three months ended December 31, 2004 as $47,194.

Commitments for minimum rentals under the non-cancelable  lease at September 30,
2004 were as follows:

<TABLE>
<CAPTION>
Year ended September 30,
   <S>                       <C>
     2005                      $139,308
     2006                       143,977
     2007                        12,031
                               $295,316
</TABLE>

                                       26


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)


NOTE G- COMMITMENTS AND CONTINGENCIES (continued)

Employment and Consulting Agreements

The Company has employment  agreements  with the Company's  officers and certain
employees.  These  employment  agreements  provide  for  salaries  and  benefits
including  stock options and extend up to seven years. In addition to salary and
benefit  provisions,  the  agreements  include  defined  commitments  should the
employer terminate the employee with or without cause.

The Company has a consulting  agreement  with an entity  controlled  by a former
significant  shareholder of the Company.  The consulting  agreement provides for
compensation  and certain  benefits  including  stock  options and extends up to
seven years. In addition to compensation and benefit provisions,  the agreements
include defined commitments should the employer terminate the consultant with or
without cause.

NOTE H - SUBSEQUENT EVENTS

In  January  2005,  the  Company  arranged a  $5,970,000  private  placement  of
11,940,000  shares of common  stock at $0.50 per  share  along  with  11,940,000
attached warrants with an exercise price of $0.75 that expires in 5 years.

In January  2005,  the Company  entered  into a stock  purchase  agreement  with
Biowell Technology Inc., a Taiwan corporation ("Biowell") whereby a to-be-formed
wholly  owned  subsidiary  of the Company  would  acquire a company to be formed
which would own all of the  intellectual  property  of Biowell in  exchange  for
36,000,000 shares of the Company's common stock to be issued to the shareholders
of Biowell.  The Acquisition Shares represent 50% of the total shares issued and
outstanding  on a  fully  diluted  basis  on the  date of the  execution  of the
Agreement.

In  February  2005,  the Company in a private  placement  sold an  aggregate  of
$1,391,000 in secured convertible  promissory notes and 2,782,000 warrants.  The
notes bear interest at 10% per annum,  mature one year from the date of issuance
and are  convertible  into  shares of common  stock of the Company at a price of
$0.50 per share  (i) at the  holder's  option;  or (ii)  automatically  upon the
Company's filing of a registration  statement  registering the shares underlying
the notes and warrants.

During  January and  February,  2005,  the Company  issued to the holders of the
$1,675,000  Convertible Notes an aggregate of 4,988,051 shares of its restricted
common stock in exchange for debt (see Note D).

NOTE J - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS

The  accompanying  financial  statements for the three months ended December 31,
2004 has been  restated to correct  dating  errors  with the  issuance of common
stock for consulting services and conversion of convertible debentures.

Accordingly,  the Company has restated their financial  statements as of and for
the three  months  ended  December  31, 2004 by  disclosing  the effect of these
errors in this amended Form 10-QSB.

The  result of the  December  31,  2004  Condensed  Consolidated  Balance  Sheet
restatement is to:
-   Properly reflect the conversion of convertible debentures based on stock
    issuance date.
-   Properly reflect stock issuance for services rendered in the period of
    actual stock issuance.
-   Properly record warrants issued to non employees and consultants

The changes in reported amounts are summarized in the following  reconciliations
of the Company's  restatement of the Condensed  Consolidated Balance Sheet as of
December 31, 2004.

                                       27


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE G - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS (continued)

<TABLE>
<CAPTION>
                                                                          December 31, 2004
                                                                  (As Restated)       (As Reported)
   <S>                                                           <C>                   <C>
   ASSETS                                                        $   1,231,450         $  1,231,450

   LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

    Total Current Liabilities                                        7,469,486            6,004,486

    Deficiency in Stockholders' Equity:
    Preferred Stock                                                          6                    6
    Common Stock                                                    16,060,727           20,424,120
    Common Stock Subscription                                         (755,000)            (880,000)
    Additional Paid-In-Capital                                       8,218,548           10,863,008
    Deficit Accumulated During Development Stage                   (29,762,317)         (35,180,170)
    Total Deficiency in Stockholders' Equity                        (6,238,036)          (4,773,036)
                                                                 -------------         ------------
    Total Liabilities and Deficiency in Stockholders'
   Equity                                                        $   1,231,450         $  1,231,450
</TABLE>

For both the three months ended as well as the period September 16, 2002 through
December 31. 2004,  the result of the December 31, 2004  Condensed  Consolidated
Income   Statement   restatement  is  to:
-   Decrease Selling, General and Administrative for compensation expense by
    $5,417,853.

The changes in reported amounts are summarized in the following  reconciliations
of the Company's  restatement of the Condensed  Consolidated Income Statement as
of March 31, 2005.

                                       28


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE G - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS (continued)

<TABLE>
<CAPTION>

                                                                                                 For the Period September 16, 2002
                                                              For the Three Months Ended       (Date of Inception) Through December
                                                                  December 31, 2004                          31, 2004
                                                             (As Restated)     (As Reported)      (As Restated)       (As Reported)
<S>                                                          <C>               <C>                <C>                 <C>

Operating Expenses:
Selling general and
administrative                                               $  5,375,068        10,792,921       $ 26,435,140        $ 31,852,994
Depreciation and
amortization                                                        4,721             4,721              7,882               7,882

Total Operating Expenses                                        5,379,789        10,797,642         26,443,022          31,860,876
Operating Loss                                                 (5,379,789)      (10,797,642)       (26,443,022)        (31,860,876)

Other income (expense)                                                315               315             26,700              26,700

Interest income
(expense)                                                      (1,567,809)       (1,567,809)        (3,345,995)         (3,345,995)

Net Income (Loss)                                            $ (6,947,283)      (12,365,136)      $(29,762,317)       $(35,180,171)
Gain (Loss) per common
share                                                        $      (0.37)            (0.45)      $      (1.57)       $      (1.28)
(basic and assuming
dilution)
Weighted average
shares outstanding                                             18,972,160        27,402,160         18,972,160          27,402,160
</TABLE>

The result of the Condensed Consolidated Cash Flow restatement is to:
-     Decrease loss for the three months December 31, 2004 by $5,417,853  within
      operating  activities  as a result  of the  correction  in dating of stock
      issuance for services.

The changes in reported amounts are summarized in the following  reconciliations
of the Company's  restatement  of the Condensed  Consolidated  Statement of Cash
Flows for the periods ended December 31, 2004.

Consistent with the original summary presentation, following is a reconciliation
of the Company's  restatement  of the Condensed  Consolidated  Statement of Cash
Flows  for  the  periods  ended  December  31,  2004.  See  the  full  Condensed
Consolidated Statement of Cash Flows for the periods ended December 31, 2004 for
additional details.

                                       29


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                DECEMBER 31, 2004
                                   (Unaudited)

NOTE G - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS (continued)

<TABLE>
<CAPTION>

                                                                                                 For the Period September 16, 2002
                                                         For the Three Months Ended December        (Date of Inception) Through
                                                                       31, 2004                          December 31, 2004
                                                             (As Restated)       (As Reported)    (As Restated)       (As Reported)
<S>                                                          <C>               <C>                <C>                 <C>
Cash Flows from operating
activities:

Net loss                                                     $ (6,947,283)     $(12,365,136)      $(29,762,317)       $(35,180,170)
Summary of adjustments to
reconcile net loss to net cash
(used in) operating activities:
Other operating activities - see
Cash Flow statement for full
details                                                         5,336,463        10,754,316         24,556,099          29,973,952
Net cash (used in) operating
activities                                                     (1,610,820)       (1,586,794)        (5,206,218)         (5,158,633)

Cash flows from investing
activities:
- see Cash Flow statement for
full details                                                       (4,347)          (28,373)           (55,205)           (102,790)
Net cash (used in) investing
activities                                                         (4,347)          (28,373)           (55,205)            102,790)

Cash flows from financing
activities:
- see Cash Flow statement for
full details                                                      286,000           286,000          3,959,088           1,184,088
Proceeds from loans                                             1,390,000         1,390,000          4,140,000           4,140,000
Net cash provided by financing
activities:                                                     1,676,000         1,676,000          5,324,088           5,324,088
Increase (decrease) in cash and
cash equivalents                                                   60,833            60,833             62,665              62,665
Cash and cash
equivalents-beginning of period                                     1,832             1,832                  -                   -
Cash and cash equivalents-end of
period                                                       $     62,665      $     62,665       $     62,665        $     62,665
</TABLE>

                                       30


<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

FORWARD-LOOKING STATEMENTS

The  following   discussion  should be read in  conjunction  with the  Company's
Consolidated  Financial Statements and Notes thereto,  included elsewhere within
this report. The quarterly report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended,  including  statements using
terminology such as "can", "may", "believe",  "designated to", "will", "expect",
"plan",  "anticipate",  "estimate",  "potential" or "continue",  or the negative
thereof or other comparable terminology regarding beliefs,  plans,  expectations
or intentions regarding the future. Forward looking statements involve risks and
uncertainties and actual results could differ materially from those discussed in
forward-looking  statements.  All forward  looking  statements  and risk factors
included in this document are made as of the date hereof,  based on  information
available  to the Company as of the date  thereof,  and the  Company  assumes no
obligations to update any forward-looking  statement or risk factor,  unless the
Company is required to do so by law.

Plan of Operation

Liquidity and Capital Resources

As  of December 31, 2004, we had a deficiency in working  capital of $7,406,821.
For the three  months  ended  December  31,  2004,  we generated a net cash flow
deficit from operating activities of $1,610,820, consisting primarily of year to
date losses of $6,947,283, $531,695 in net stock issued for consulting services,
$1,515,000 for beneficial  conversion of convertible notes payable and warrants,
$3,169,052 for warrants issued to non employees and consultants as well as a net
increase in current liabilities and other of $144,000.

Cash used in investing  activities totaled $4,347, which was utilized for patent
filings.

Cash  provided  by  financing   activities  totaled  $1,676,000   consisting  of
$1,390,000 in proceeds from loans,  and $250,000 and $36,000 in common stock and
exercised options proceeds, respectively.

We expect capital  expenditures to be nominal for fiscal 2005. These anticipated
expenditures are for continued investments in property and equipment used in our
business.

By adjusting our operations and development to the level of  capitalization,  we
believe  we have  sufficient  capital  resources  to meet  projected  cash  flow
deficits. However, if during that period or thereafter, we are not successful in
generating sufficient liquidity from operations or in raising sufficient capital
resources,  on terms acceptable to us, this could have a material adverse effect
on our business, results of operations liquidity and financial condition.

The Company  presently  does not have any available  credit,  bank  financing or
other  external  sources of liquidity.  Due to its brief history and  historical
operating losses, the Company's  operations have not been a source of liquidity.
The Company will need to obtain additional capital in order to expand operations
and become profitable. The Company intends to pursue the building of a re-seller
network outside the United States, and if successful,  the re-seller  agreements
would  constitute  an  additional  source of liquidity and capital over time. In
order to obtain capital,  the Company may need to sell additional  shares of its
common  stock or borrow funds from  private  lenders.  There can be no assurance
that  the  Company  will be  successful  in  obtaining  additional  funding  and
execution of re-seller agreements outside the Unites States.

During the three months ended  December 31, 2004 and 2003 and from September 16,
2002  (inception)  through  December 31 2003, the Company's  priorities  were to
recruit and build its team,  organize  its new  infrastructure  and to develop a
successful strategy how best to exploit its exclusive Biowell license agreement.
No revenues  were  generated.  Although the  management of the Company is of the
opinion that continuing to develop and finance the Company's present business of
providing  DNA   anti-counterfeit   technology  may  ultimately  be  successful,
management   nevertheless   expects  that  the  Company  will  need  substantial
additional capital before the Company's operations can be fully implemented.

                                       31


<PAGE>


From our  inception  through  December  31,  2004,  we have  incurred  losses of
$29,762,317.  These  expenses  were  associated  principally  with  equity-based
compensation  to  employees  and  consultants,  product  development  costs  and
professional services.

While we have raised capital to meet our working  capital and financing needs in
the past,  additional  financing  is  required  in order to meet our current and
projected  cash flow deficits from  operations and  development.  We are seeking
financing in the form of equity through a Private Placement  Memorandum in order
to provide the necessary  working capital.  We currently have no commitments for
financing. There is no guarantee that we will be successful in raising the funds
required.

The effect of inflation on the Company's  operating results was not significant.
The Company's  operations are located in North America and there are no seasonal
aspects that would have a material effect on the Company's  financial  condition
or results of operations.

The Company's independent certified public accountant has stated in their report
included in the Company's  September 30, 2004 Form 10-KSB,  that the Company has
incurred operating losses from its inception,  and that the Company is dependent
upon management's ability to develop profitable operations.  These factors among
others may raise  substantial doubt about the Company's ability to continue as a
going concern.

Bridge Unit Offering

From  November  through  December  2004,  we sold 33.5  units (the  "Units")  to
accredited investors at a price of $50,000 per Unit (the "Offering") for a total
of $1,675,000.  Each Unit consists of (i) a $50,000 Principal Amount 10% Secured
Convertible  Promissory  Note  ("Note" or  "Notes"),  (ii)  warrants to purchase
50,000 shares of our common stock,  exercisable  for a period of five years at a
price of $3.20 per share ("$3.20 Warrant") and (iii) warrants to purchase 10,000
shares of our common stock, exercisable for a period of five years at a price of
$0.10 per share  ("$0.10  Warrant"  and  together  with the $3.20  Warrant,  the
"Warrants").  The Notes are  convertible  into  shares of our common  stock at a
price of $2.50 per share.

December Promissory Notes Payable

In December 2004,  the Company  received  $1,065,318 in proceeds  subject to the
terms of the December  Promissory Notes Payable agreement.  The Company held the
proceeds in escrow and  classified  the amount as Restricted  Cash - See Note A,
Restricted Cash.

The  aggregate  principal  amount of Notes  sold was  $1,375,000.  The Notes are
secured and bear  interest at 10% per annum,  computed on the basis of a 365-day
year,  accruing from the date an investor's  subscription was closed upon by the
Company.  Principal  and all  accrued  interest  will be  payable in full on the
earlier  of (i) the  9-month  anniversary  date of the  initial  closing  of the
Offering,  or (ii) the completion of any equity financing of $3,000,000 or more.
The Company,  in its sole  discretion,  may prepay principal at any time without
penalty. The Notes are convertible into shares of common stock of the Company at
a price of $2.50 per share.

The Notes are  secured  by a  security  agreement  giving  the Holder a security
interest in all the patents,  licenses,  equipment,  fixtures, and inventory and
accounts receivable of the Company, and/or any of its subsidiaries.

The following events constitute events of default under the Notes:

(i) Default in the payment of the  principal or accrued  interest on any Note or
upon any other indebtedness of the Company that is greater than $100,000, as and
when the same shall become due,  whether by default or otherwise,  which Default
shall have continued for a period of five (5) business days; or

(ii) Any  representation  or warranty  made by the Company or any officer of the
Company in the Notes, or in any agreement, report, certificate or other document
delivered to the Holder  pursuant to the Notes shall have been  incorrect in any
material  respect  when made which  shall not have been  remedied  ten (10) days
after   written   notice  thereof  shall  have been   given  by  the Holder;  or

                                       32


<PAGE>


(iii) The Company  shall  fail to  perform or  observe any  affirmative covenant
contained  in  Section  4 of  the Notes and  such  Default, if  capable of being
remedied,shall not have been remedied ten (10) days after written notice thereof
shall have been given by the Holder; or

(iv) The  Company  or any  subsidiary  (A) shall  institute  any  proceeding  or
voluntary  case  seeking to  adjudicate  it  bankrupt or  insolvent,  or seeking
dissolution,  liquidation, winding up, reorganization,  arrangement, adjustment,
protection,  relief or  composition of it or its debts under any law relating to
bankruptcy,  insolvency or reorganization  or relief of debtors,  or seeking the
entry of any  order  for  relief  or the  appointment  of a  receiver,  trustee,
custodian or other  similar  official for such Company or any  subsidiary or for
any  substantial  part of its  property,  or shall  consent to the  commencement
against  it of such a  proceeding  or case,  or shall file an answer in any such
case or proceeding  commenced  against it consenting  to or  acquiescing  in the
commencement of such case or proceeding, or shall consent to or acquiesce in the
appointment  of such a receiver,  trustee,  custodian or similar  official;  (B)
shall be unable to pay its debts as such debts  become  due,  or shall  admit in
writing its  inability  to apply its debts  generally;  (C) shall make a general
assignment  for the  benefit  of  creditors;  or (D)  shall  take any  action to
authorize or effect any of the actions set forth above ; or

(v) Any proceeding shall be instituted against the Company seeking to adjudicate
it bankrupt  or  insolvent,  or seeking  dissolution,  liquidation,  winding up,
reorganization,  arrangement,  adjustment,  protection,  relief of  debtors,  or
seeking  the entry of an order  for  relief or the  appointment  of a  receiver,
trustee,  custodian  or  other  similar  official  for  the  Company  or for any
substantial part of its property, and either such proceeding shall not have been
dismissed  or shall not have been  stayed for a period of sixty (60) days or any
of the actions sought in such proceeding  (including,  without  limitation,  the
entry of any order for  relief  against  it or the  appointment  of a  receiver,
trustee,  custodian or other similar official for it or for any substantial part
of its property) shall occur; or

(vi) One or more final judgments,  arbitration  awards or orders for the payment
of money in excess of $100,000 in the  aggregate  shall be rendered  against the
Company,  which judgment remains unsatisfied for thirty (30) days after the date
of such entry; or

(vii)Delisting  of the Common  Stock from the  principal  market or  exchange on
which the Common Stock is listed for trading;  Company's  failure to comply with
the  conditions  for  listing;  or  notification  that  the  Company  is  not in
compliance with the conditions for such continued listing; or

(viii)The  issuance of an SEC stop trade order or an order suspending trading of
the Common Stock from the principal market or exchange on which the Common Stock
is listed for trading for longer than five (5) trading days; or

(ix) The  failure by the Company to issue  shares of Common  Stock to the Holder
upon exercise by the Holder of the conversion rights of the Holder in accordance
with the terms of the Notes,  or the failure to  transfer or cause its  transfer
agent to transfer  (electronically  or in certificated form) any certificate for
shares of Common  Stock  issued to the Holder upon  conversion  of or  otherwise
pursuant  to the Notes as and when  required  by the  Notes,  or the  failure to
remove any restrictive legend (or to withdraw any stop transfer  instructions in
respect thereof) on any certificate for any shares of Common Stock issued to the
Holder  upon  conversion  of or  otherwise  pursuant  to the  Notes  as and when
required by the Notes,  and any such failure shall continue uncured for ten (10)
days  after the  Company  shall  have been  notified  thereof  in writing by the
Holder; or

(x) The  failure  by the  Company  to file  the  Registration  Statement  within
forty-five (45) days following the Closing Date (as defined in the  Subscription
Agreement) or obtain  effectiveness with the Securities and Exchange  Commission
of the  Registration  Statement  within  one  hundred  thirty  five  (135)  days
following  the Closing Date (as defined in the  Subscription  Agreement) or such
Registration  Statement  lapses in effect  (or sales  cannot  otherwise  be made
thereunder  effective,  whether by reason of the  Company's  failure to amend or
supplement  the  prospectus   included   therein)  for  more  than  twenty  (20)
consecutive  days or forty  (40)  days in any  twelve  month  period  after  the
Registration Statement becomes effective; or

(xi) The Company shall  encumber or hypothecate  the  collateral  subject to the
Security Agreement to any party; or

                                       33


<PAGE>


(xii) A default  by the  Company  of a  material  term,  covenant,  warranty  or
undertaking of any other  agreement to which the Company and Holder are parties,
or the occurrence of an event of default under any such other agreement.

Holders shall, at any time prior to the Maturity Date, have the right to convert
the Note into Shares of the  Company at $2.50 per such Share,  which right shall
be exercised in the Holder's sole and absolute  discretion.  Holders shall, with
respect  to any  Shares  acquired  thereby,  be  granted  the  same  demand  and
piggy-back  registration  rights as if such Shares were purchased as part of the
Units.

In the event of and  immediately  upon the  occurrence of an "Event of Default,"
the Notes shall  become  immediately  due and payable  without any action by the
Holder and the Notes shall bear interest until paid at the rate of 12% per annum
or such amount as shall be allowed by law.

In the event that the sum due under the Note is not repaid on the Maturity Date,
the Holder will have the option to either  have the Note accrue  interest at 12%
or such amount as legally  allowed until paid, or to convert the entirety of the
debt  then  outstanding  under the Note into the  number  of shares  derived  by
dividing  the sum of such debt by the dollar  value  equal to 80% of the closing
ask price of the  shares  on the last  trading  day  immediately  preceding  the
Maturity  Date as  reported  on the market  upon which the shares  shall then be
trading,  provided,  however, that the conversion price shall never be less than
$1.00 per share.  Any shares  acquired  thereby shall carry with them the demand
and piggy back registration  rights granted to the Holder under the terms of the
Note.

Bridge Offering Warrants

Each  Unit,  or $50,000  principal  amount of the Note,  entitles  the holder to
50,000  warrants  exercisable on a one for one basis into shares of Common Stock
at an  exercise  price of $3.20  during a  five-year  period  commencing  on the
initial closing of the Offering  (which was December 15, 2003,  2003) per share.
In addition,  each Unit also entitles the holder to 10,000 warrants  exercisable
on a one for one basis into shares of Common Stock at an exercise price of $0.10
per share during a five-year  period  commencing  on the initial  closing of the
Offering  (which was December 15, 2003) In the event a holder of Warrants  fails
to exercise the Warrants  prior to their  expiration,  the Warrants will expire,
and the holder thereof will have no further rights with respect to the Warrants.

The Warrants expire at 5:00 p.m., New York time, on the fifth  anniversary after
the initial closing of the Offering.  In the event a holder of Warrants fails to
exercise the Warrants  prior to their  expiration,  the Warrants will expire and
the holder thereof will have no further rights with respect to the Warrants.

We will still need  additional  investments  in order to continue  operations to
cash flow break even.  Additional  investments  are being sought,  but we cannot
guarantee  that  we  will  be  able  to  obtain  such   investments.   Financing
transactions  may include the issuance of equity or debt  securities,  obtaining
credit facilities, or other financing mechanisms.  However, the trading price of
our common stock and the downturn in the U.S.  stock and debt markets could make
it more  difficult  to obtain  financing  through the issuance of equity or debt
securities. Even if we are able to raise the funds required, it is possible that
we could  incur  unexpected  costs and  expenses,  fail to  collect  significant
amounts owed to us, or experience  unexpected cash requirements that would force
us to seek alternative financing. Further, if we issue additional equity or debt
securities,  stockholders may experience  additional  dilution or the new equity
securities  may  have  rights,  preferences  or  privileges  senior  to those of
existing  holders of our common stock. If additional  financing is not available
or is not available on acceptable terms, we will have to curtail our operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Product Research and Development

Without substantial  financial resources we do not anticipate incurring material
research and development costs during the next twelve months.

                                       34


<PAGE>


Acquisition of Plant and Equipment and Other Assets

We do not  anticipate  the sale of any  material  property,  plant or  equipment
during the next 12 months.  We do not anticipate the acquisition of any material
property, plant or equipment during the next 12 months.

Number of Employees

From our inception through the period ended December 31, 2004, we have primarily
relied on the  services  of outside  consultants  for  services  The Company has
employment  agreements  with the Company's  officers and certain  employees.  In
order for us to attract and retain quality personnel, we anticipate we will have
to offer  competitive  salaries to future  employees.  We anticipate that it may
become  desirable to add additional full and or part time employees to discharge
certain critical functions during the next 12 months. This projected increase in
personnel is dependent upon our ability to generate  revenues and obtain sources
of  financing.  There is no guarantee  that we will be successful in raising the
funds required or generating  revenues sufficient to fund the projected increase
in the number of employees.  As we continue to expand,  we will incur additional
cost for personnel.

Going Concern

The  financial  statements  included  in  this  filing  have  been  prepared  in
conformity with generally  accepted  accounting  principles that contemplate the
continuance of the Company as a going  concern.  The Company's cash position may
be inadequate to pay all of the costs  associated  with testing,  production and
marketing of products.  Management  intends to use borrowings and security sales
to mitigate the effects of its cash position,  however no assurance can be given
that debt or equity  financing,  if and when  required  will be  available.  The
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  and  classification  of recorded  assets and  classification  of
liabilities  that might be  necessary  should the  Company be unable to continue
existence.

Trends, Risks and Uncertainties

We have sought to identify what we believe to be the most  significant  risks to
our business,  but we cannot  predict  whether,  or to what extent,  any of such
risks may be realized nor can we guarantee that we have  identified all possible
risks that might arise.  Investors  should  carefully  consider all of such risk
factors  before  making an  investment  decision  with respect to the  Company's
Common Stock.

                                  RISK FACTORS

Much of the information  included in this quarterly  report includes or is based
upon  estimates,   projections  or  other  "forward-looking   statements".  Such
forward-looking  statements  include any projections or estimates made by us and
our  management  in  connection  with  our  business  operations.   While  these
forward-looking  statements,  and any assumptions upon which they are based, are
made in good faith and reflect our current  judgment  regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.

Such  estimates,  projections  or  other  "forward-looking  statements"  involve
various risks and  uncertainties  as outlined  below. We caution the reader that
important  factors  in some  cases  have  affected  and,  in the  future,  could
materially  affect actual results and cause actual results to differ  materially
from  the  results  expressed  in  any  such  estimates,  projections  or  other
"forward-looking statements".

Our common  shares are  considered  speculative.  Prospective  investors  should
consider carefully the risk factors set out below.

We Have a History Of Losses Which May  Continue, Which May Negatively Impact Our
Ability to Achieve Our Business Objectives.

We incurred net losses of $19,358,259  for the year ended September 30, 2004 and
$3,445,164  for the year ended  September  30, 2003.  For the three months ended
December 31, 2004,  we incurred a net loss of  $6,947,283.  We cannot assure you
that we can achieve or sustain  profitability  on a quarterly or annual basis in
the future. Our

                                       35


<PAGE>


operations    are   subject   to   the   risks   and   competition  inherent  in
the  establishment  of a business  enterprise.  There can be no  assurance  that
future operations will be profitable.  Revenues and profits, if any, will depend
upon various factors,  including whether we will be able to generate revenue. As
a result of  continuing  losses,  we may exhaust all of our  resources  prior to
completing  the  development  of our products.  Additionally,  as we continue to
incur losses,  our  accumulated  deficit will continue to increase,  which might
make it harder for us to obtain financing in the future.  We may not achieve our
business  objectives and the failure to achieve such goals would have an adverse
impact on us, which could result in reducing or terminating our operations.

If We Are Unable to Obtain  Additional  Funding Our Business  Operations Will be
Harmed and If We Do Obtain Additional  Financing Our Then Existing  Shareholders
May Suffer Substantial Dilution.

We will  require  additional  funds to  sustain  and  expand  our  research  and
development  activities.  We anticipate that we will require up to approximately
$555,000 to fund our  anticipated  research and  development  operations for the
next twelve months,  depending on revenue from  operations.  Additional  capital
will  be  required  to  effectively  support  the  operations  and to  otherwise
implement  our  overall  business  strategy.  Even if we do  receive  additional
financing,  it may not be  sufficient  to  sustain or expand  our  research  and
development operations or continue our business operations.

There can be no  assurance  that  financing  will be  available in amounts or on
terms  acceptable to us, if at all. The inability to obtain  additional  capital
will  restrict  our  ability to grow and may reduce our  ability to  continue to
conduct business operations. If we are unable to obtain additional financing, we
will likely be  required to curtail our  research  and  development  plans.  Any
additional  equity  financing  may  involve  substantial  dilution  to our  then
existing shareholders.

Our Independent  Auditors Have Expressed  Substantial Doubt About Our Ability to
Continue  As a Going  Concern,  Which May  Hinder Our  Ability to Obtain  Future
Financing.

In their report dated January 11, 2005, our independent auditors stated that our
financial  statements  for the year  ended  September  30,  2004  were  prepared
assuming that we would continue as a going concern. Our ability to continue as a
going concern is an issue raised due to our incurring net losses of  $22,815,035
during the period September 16, 2002 through  September 30, 2004. We continue to
experience net operating  losses.  Our ability to continue as a going concern is
subject to our ability to generate a profit and/or obtain necessary funding from
outside sources,  including  obtaining  additional  funding from the sale of our
securities,  generating  sales  or  obtaining  loans  and  grants  from  various
financial   institutions  where  possible.  Our  continued  net  operating  loss
increases  the  difficulty  in meeting such goals and there can be no assurances
that such methods will prove successful.

Our Research and Development Efforts for New Products May be Unsuccessful.

We will incur  significant  research  and  development  expenses  to develop new
products and technologies.  There can be no assurance that any of these products
or technologies will be successfully developed or that if developed they will be
commercially   successful.   In  the  event   that  we  are  unable  to  develop
commercialized  products  from our  research and  development  efforts or we are
unable or  unwilling  to  allocate  amounts  beyond  our  currently  anticipated
research and  development  investment,  we could lose our entire  investment  in
these new products and this may  materially  and  adversely  affect our business
operations,  which  would  result  in loss of  revenues  and  greater  operating
expenses.

Failure to License New Technologies Could Impair Our New Product Development.

To generate  broad  product  lines,  it is  advantageous  to  sometimes  license
technologies  from third  parties  rather  than  depend  exclusively  on our own
employees.  As a result, we believe our ability to license new technologies from
third  parties is and will  continue to be important to our ability to offer new
products.  In  addition,  from time to time we are  notified or become  aware of
patents held by third parties that are related to technologies we are selling or
may sell in the future. After a review of these patents, we may decide to seek a
license for these  technologies  from these  third  parties or  discontinue  our
products.  There  can be no  assurance  that we will  be  able  to  continue  to
successfully identify new technologies  developed by others. Even if we are able
to identify  new  technologies  of  interest,  we may not be able to negotiate a
license  on  favorable  terms,  or at all.  If we lose the  rights  to  patented
technology,  we may

                                       36


<PAGE>


need   to    discontinue   selling   certain   products   or   redesign      our
products, and we may lose a competitive  advantage.  Potential competitors could
license  technologies  that we fail to license and potentially  erode our market
share for  certain  products.  Our  licenses  typically  subject  us to  various
commercializations,  sublicensing, minimum payment, and other obligations. If we
fail to comply with these  requirements,  we could lose important rights under a
license. In addition, certain rights granted under the license could be lost for
reasons beyond our control. We may not receive significant  indemnification from
a licensor against third party claims of intellectual property infringement.

We Currently Have no or Limited Manufacturing, Sales, Marketing or  Distribution
Capabilities.

We currently have no in-house manufacturing  capability.  We rely on third-party
vendors for this service.  We do not currently  have any  arrangements  with any
distributors  and we may not be able to enter into  arrangements  with qualified
distributors  on acceptable  terms or at all. We currently  have a limited sales
and marketing  team. If we are not able to develop  greater sales,  marketing or
distribution  capacity,  we may not be able to  generate  revenue or  sufficient
revenue to support our operations.

We Rely on Our License Agreement With Biowell  Technology for the Development of
Our Products,  and the Termination of the License Would Have a Material  Adverse
Impact on Our Business.

We have executed a licensing  agreement with Biowell Technology and we intend to
focus our business on the products developed under this licensing agreement.  We
will rely upon Biowell  Technology to develop,  test and produce  products under
this  licensing  agreement.  As a result of the license  agreement,  we will not
incur  expenses  with  developing   products  for  sale;  however,  we  will  be
responsible  for marketing  the product and building  brand  recognition  in our
licensed  territories.  Our license  could  terminate  if we fail to perform any
material term or covenant under the license  agreement.  The  termination of our
license agreement would have a material adverse impact on our business,  such as
the loss of products and services,  which would reduce or eliminate  most of our
potential revenue source.

If We Fail to Introduce New Products,  or Our existing Products are not Accepted
by Potential Customers, We May Not Gain or May Lose Market Share.

Rapid technological  changes and frequent new product  introductions are typical
for the markets we serve.  Our future success will depend in part on continuous,
timely development and introduction of new products that address evolving market
requirements.   We  believe  successful  new  product  introductions  provide  a
significant  competitive  advantage  because  customers  invest  their  time  in
selecting  and learning to use new products,  and are often  reluctant to switch
products. To the extent we fail to introduce new and innovative products, we may
lose market share to our  competitors,  which will be difficult or impossible to
regain.  Any inability,  for  technological  or other reasons,  to  successfully
develop and  introduce  new products  could reduce our growth rate or damage our
business.

We may experience  delays in the  development and  introduction of products.  We
cannot  assure  that we will keep  pace  with the  rapid  rate of change in life
sciences research or that our new products will adequately meet the requirements
of the marketplace or achieve market  acceptance.  Some of the factors affecting
market acceptance of new products include:

      o        Availability, quality and price relative to competitive products;
      o        The timing of introduction of the product relative to competitive
               products;
      o        Customers' opinions of the products' utility;
      o        Ease of use;
      o        Consistency with prior practices;
      o        Scientists' opinions of the
      o        products' usefulness;
      o        Citation of the product in published research; and
      o        General trends in
      o        life sciences research.

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<PAGE>


We have not experienced any difficulties  with the preceding  factors;  however,
there  can be no  assurance  that we will  not  experience  difficulties  in the
future. The expenses or losses associated with unsuccessful  product development
or lack of market  acceptance  of our new products  could  materially  adversely
affect our business, operating results and financial condition.

A Manufacturer'sInability to Produce Our Goods on Time and to Our Specifications
Could Result in Lost Revenue and Net Losses

We do not own or operate any manufacturing  facilities and therefore depend upon
independent  third  parties  for the  manufacture  of all of our  products.  Our
products are manufactured to our specifications. The inability of a manufacturer
to ship  orders  of our  products  in a timely  manner  or to meet  our  quality
standards could cause us to miss the delivery date requirements of our customers
for those items, which could result in cancellation of orders, refusal to accept
deliveries or a reduction in purchase prices, any of which could have a material
adverse effect as our revenues would decrease and we would incur net losses as a
result of sales of the  product,  if any  sales  could be made.  Because  of our
business,  the  dates  on which  customers  need and  require  shipments  of our
security products from us are critical.

If  We  Need  to Replace Manufacturers, Our Expenses Could Increase Resulting in
Smaller Profit Margins

We compete with other companies for the production capacity of our manufacturers
and import quota capacity.  Some of these competitors have greater financial and
other  resources than we have, and thus may have an advantage in the competition
for  production  and import  quota  capacity.  If we  experience  a  significant
increase in demand, or if an existing  manufacturer of ours must be replaced, we
may have to expand our third-party  manufacturing capacity. We cannot assure you
that this additional  capacity will be available when required on terms that are
acceptable  to  us  or  similar  to  existing  terms  which  we  have  with  our
manufacturers, either from a production standpoint or a financial standpoint. We
do not have long-term contracts with any manufacturer. None of the manufacturers
we use produces our products exclusively.

Should  we be  forced  to  replace  one or  more  of our  manufacturers,  we may
experience an adverse financial impact, or an adverse  operational  impact, such
as being forced to pay increased  costs for such  replacement  manufacturing  or
delays upon  distribution  and delivery of our products to our customers,  which
could cause us to lose customers or lose revenues because of late shipments.

If a Manufacturer  of Ours Fails to Use  Acceptable  Labor  Practices,  We Might
Have Delays in  Shipments or Face  Joint Liability  for Violations, Resulting in
Decreased Revenue and Increased Expenses

While we require our  independent  manufacturers  to operate in compliance  with
applicable laws and regulations, we have no control over the ultimate actions of
our  independent   manufacturers.   While  our  internal  and  vendor  operating
guidelines  promote ethical  business  practices and our staff and buying agents
periodically visit and monitor the operations of our independent  manufacturers,
we do not control these manufacturers or their labor practices. The violation of
labor or other laws by an  independent  manufacturer  of ours,  or by one of our
licensing  partners,  or the  divergence  of an  independent  manufacturer's  or
licensing  partner's labor practices from those generally accepted as ethical in
the United  States,  could  interrupt,  or  otherwise  disrupt  the  shipment of
finished  products to us or damage our reputation.  Any of these, in turn, could
have a  material  adverse  effect on our  financial  condition  and  results  of
operations,  such as the loss of  potential  revenue  and  incurring  additional
expenses.

The Failure To Manage Our Growth In Operations And  Acquisitions  Of New Product
Lines And New  Businesses  Could Have A Material Adverse Effect On Us.

The expected  growth of our  operations  (as to which no  representation  can be
made) will place a significant  strain on our current management  resources.  To
manage this  expected  growth,  we will need to improve  our: o  operations  and
financial systems;  o procedures and controls;  and o training and management of
our employees.

Our future growth may be  attributable  to acquisitions of and new product lines
and  new  businesses.  We  expect  that  future  acquisitions,  if  successfully
consummated,  will create  increased  working capital  requirements,  which will
likely precede by several months any material  contribution of an acquisition to
our net income.

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<PAGE>


Our failure to manage growth or future acquisitions successfully could seriously
harm our operating  results.  Also,  acquisition costs could cause our quarterly
operating results to vary significantly.  Furthermore, our stockholders would be
diluted if we financed the acquisitions by incurring convertible debt or issuing
securities.

Although we currently only have operations  within the United States, if we were
to acquire an international operation; we will face additional risks, including:

    o   difficulties  in    staffing,   managing and  integrating  international
        operations due to language,  cultural or other differences;
    o   Different or conflicting regulatory or legal requirements;
    o   foreign currency fluctuations;  and
    o   diversion  of  significant  time  and  attention  of  our management.

If We Are Unable to Retain the Services of Messrs. Hutchison, Brocklesby, Butash
or Klemm, or If We Are Unable to Successfully  Recruit Qualified  Managerial and
Sales Personnel  Having  Experience in Business,  We May Not Be Able to Continue
Our Operations.

Our success  depends to a significant  extent upon the continued  service of Mr.
Rob Hutchison, our Chief Executive Officer, Mr. Peter Brocklesby, our President,
Mr. Adrian Butash,  our Chief Marketing  Officer and Ms. Karin Klemm,  our Chief
Operating Officer and Interim Chief Financial Officer. We do not have employment
agreements  with Messrs.  Hutchison,  Brocklesby,  Butash or Klemm.  Loss of the
services of Messrs. Hutchison, Brocklesby, Butash or Klemm could have a material
adverse effect on our growth,  revenues,  and  prospective  business.  We do not
maintain key-man insurance on the life of Messrs. Hutchison,  Brocklesby, Butash
or Klemm.  Besides Mr.  Hutchison's desire to retire within the next few months,
we are not aware of any other named executive  officer or director who has plans
to leave us or retire.  In  addition,  in order to  successfully  implement  and
manage our  business  plan,  we will be  dependent  upon,  among  other  things,
successfully   recruiting   qualified  managerial  and  sales  personnel  having
experience in business.  Competition for qualified individuals is intense. There
can be no assurance  that we will be able to find,  attract and retain  existing
employees  or  that  we will be able  to  find,  attract  and  retain  qualified
personnel on acceptable terms.

Failure to Attract and Retain Qualified Scientific or Production Personnel Could
Have a Material Adverse Effect On Us.

Recruiting  and  retaining  qualified  scientific  and  production  personnel to
perform research and development work and product  manufacturing are critical to
our success.  Because the industry in which we compete is very  competitive,  we
face significant challenges attracting and retaining a qualified personnel base.
Although  we believe we have been and will be able to attract  and retain  these
personnel,  there  is  no  assurance  that  we  will  be  able  to  continue  to
successfully  attract qualified personnel.  In addition,  our anticipated growth
and expansion into areas and activities requiring additional expertise,  such as
clinical testing,  government approvals,  production, and marketing will require
the addition of new  management  personnel  and the  development  of  additional
expertise by existing  management  personnel.  The failure to attract and retain
these personnel or,  alternatively,  to develop this expertise  internally would
adversely affect our business as our ability to conduct research and development
will be reduced or  eliminated,  resulting  in fewer or no products for sale and
lower revenues.  We generally do not enter into employment  agreements requiring
these employees to continue in our employment for any period of time.

We Need to  Expand  Our Sales  and  Support  Organizations  to  Increase  Market
Acceptance of Our Products.

We currently have a small  customer  service and support  organization  and will
need to increase our staff to support new customers  and the expanding  needs of
existing  customers.  The  employment  market for sales  personnel  and customer
service and support personnel in this industry is very  competitive,  and we may
not be able to hire the kind and number of sales personnel, customer service and
support  personnel we are  targeting.  Our  inability to hire  qualified  sales,
customer  service and support  personnel  may  materially  adversely  affect our
business, operating results and financial condition.

                                       39


<PAGE>


The Biomedical  Research Products  Industry is Very  Competitive,  and We may be
Unable to Continue to Compete Effectively in this Industry in the Future.

We are engaged in a segment of the biomedical research products industry that is
highly  competitive.  We compete with many other  suppliers and new  competitors
continue to enter the market. Many of our competitors, both in the United States
and elsewhere,  are major pharmaceutical,  chemical and biotechnology companies,
and  many  of them  have  substantially  greater  capital  resources,  marketing
experience,  research and development  staff,  and facilities than we do. Any of
these  companies  could succeed in developing  products that are more  effective
than the products that we have or may develop and may be more successful than us
in producing  and  marketing  their  products.  It is impossible to quantify the
number of  competitors  since they include both the companies we attempt to sell
our products and services to through their use of internal  security and various
other  security  product  companies.  Also,  it is also  impossible to determine
market size and market data  information  because  companies are secretive about
what  security  methods they  utilize and how much they spend on such  measures.
Some of the  anti-counterfeiting  and fraud  protection  competitors that we are
aware  of  include:  Authentix,  InkSure,  DNA  Technologies,  Inc.,  Art  Guard
International, Theft Protection Systems, Tracetag and November AG.

We expect this competition to continue and intensify in the future.  Competition
in our markets is primarily driven by:

    o   Product performance, features and liability;
    o   Price;
    o   Timing of product introductions;
    o   Ability  to  develop,  maintain   and   protect proprietary products and
        technologies;
    o   Sales and distribution  capabilities;
    o   Technical  support and service;
    o   Brand loyalty;
    o   Applications support; and
    o   Breadth of product line.

If a competitor develops superior  technology or cost-effective  alternatives to
our products, our business,  financial condition and results of operations could
be materially adversely affected.

Our  Trademark  and Other  Intellectual  Property  Rights May not be  Adequately
Protected Outside the United States, Resulting in Loss of Revenue.

We  believe  that our  trademarks,  whether  licensed  or owned by us, and other
proprietary rights are important to our success and our competitive position. In
the course of our international expansion, we may, however,  experience conflict
with  various  third  parties who acquire or claim  ownership  rights in certain
trademarks.  We cannot  assure that the actions we have taken to  establish  and
protect  these  trademarks  and other  proprietary  rights  will be  adequate to
prevent imitation of our products by others or to prevent others from seeking to
block sales of our products as a violation  of the  trademarks  and  proprietary
rights of others.  Also, we cannot assure you that others will not assert rights
in, or ownership of, trademarks and other proprietary  rights of ours or that we
will  be  able  to  successfully   resolve  these  types  of  conflicts  to  our
satisfaction. In addition, the laws of certain foreign countries may not protect
proprietary rights to the same extent, as do the laws of the United States.

Intellectual Property Litigation Could Harm Our Business.

Litigation regarding patents and other intellectual property rights is extensive
in the biotechnology industry. In the event of an intellectual property dispute,
we  may be  forced  to  litigate.  This  litigation  could  involve  proceedings
instituted by the U.S. Patent and Trademark  Office or the  International  Trade
Commission,  as well as proceedings  brought directly by affected third parties.
Intellectual property litigation can be extremely expensive, and these expenses,
as well as the  consequences  should we not prevail,  could  seriously  harm our
business.

If a third party claims an intellectual  property right to technology we use, we
might need to  discontinue  an  important  product or  product  line,  alter our
products  and  processes,  pay  license  fees or  cease  our  affected  business
activities.

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<PAGE>


Although    we   might   under    these    circumstances    attempt to  obtain a
license to this intellectual  property, we may not be able to do so on favorable
terms, or at all. We are currently not aware of any intellectual property rights
that are being  infringed nor have we received notice from a third party that we
may be infringing on any of their patents.

Furthermore, a third party may claim that we are using inventions covered by the
third party's  patent rights and may go to court to stop us from engaging in our
normal  operations  and  activities,  including  making or selling  our  product
candidates. These lawsuits are costly and could affect our results of operations
and divert the attention of managerial and technical personnel.  There is a risk
that a court would decide that we are infringing  the third party's  patents and
would order us to stop the activities covered by the patents. In addition, there
is a risk that a court will order us to pay the other  party  damages for having
violated the other party's patents.  The  biotechnology  industry has produced a
proliferation of patents,  and it is not always clear to industry  participants,
including  us, which  patents cover various types of products or methods of use.
The  coverage of patents is subject to  interpretation  by the  courts,  and the
interpretation is not always uniform. If we are sued for patent infringement, we
would  need to  demonstrate  that our  products  or methods of use either do not
infringe the patent claims of the relevant  patent and/or that the patent claims
are  invalid,  and we  may  not be  able  to do  this.  Proving  invalidity,  in
particular,  is  difficult  since it requires a showing of clear and  convincing
evidence to overcome the presumption of validity enjoyed by issued patents.

Because  some patent  applications  in the United  States may be  maintained  in
secrecy until the patents are issued,  because patent applications in the United
States and many foreign jurisdictions are typically not published until eighteen
months after filing, and because publications in the scientific literature often
lag behind actual  discoveries,  we cannot be certain that others have not filed
patent  applications for technology  covered by our licensors' issued patents or
our pending  applications or our licensors'  pending  applications or that we or
our licensors were the first to invent the technology.  Our competitors may have
filed,  and may in the future  file,  patent  applications  covering  technology
similar to ours. Any such patent  application  may have priority over our or our
licensors' patent  applications and could further require us to obtain rights to
issued patents covering such  technologies.  If another party has filed a United
States  patent  application  on  inventions  similar  to  ours,  we may  have to
participate in an interference  proceeding  declared by the United States Patent
and Trademark  Office to determine  priority of invention in the United  States.
The costs of these  proceedings  could be  substantial,  and it is possible that
such efforts  would be  unsuccessful,  resulting in a loss of our United  States
patent position with respect to such inventions.

Some of our  competitors  may be able to  sustain  the costs of  complex  patent
litigation more effectively than we can because they have substantially  greater
resources.  In addition,  any  uncertainties  resulting  from the initiation and
continuation  of any  litigation  could  have a material  adverse  effect on our
ability to raise the funds necessary to continue our operations.

Accidents Related to Hazardous Materials Could Adversely Affect Our Business.

Some of our  operations  require  the  controlled  use of  hazardous  materials.
Although we believe our safety procedures  comply with the standards  prescribed
by  federal,  state,  local  and  foreign  regulations,  the risk of  accidental
contamination  of property or injury to individuals  from these materials cannot
be completely  eliminated.  In the event of an accident,  we could be liable for
any damages that result,  which could seriously  damage our business and results
of operations.

Potential  Product  Liability  Claims  Could  Affect  Our Earnings and Financial
Condition.

We face a potential risk of liability claims based on our products and services,
and we have faced such claims in the past.  We currently do not have any product
liability  coverage but are attempting to obtain  coverage which we will believe
to be adequate.  We cannot  assure,  however,  that we will be able to obtain or
maintain this  insurance at reasonable  cost and on  reasonable  terms.  We also
cannot assure that this insurance,  if obtained,  will be adequate to protect us
against a product liability claim, should one arise. In the event that a product
liability  claim is  successfully  brought  against  us,  it could  result  in a
significant  decrease in our  liquidity  or assets,  which  could  result in the
reduction or termination of our business.

There Are a Large Number of Shares Underlying Our Warrants That May be Available
for Future Sale and the Sale of These Shares May Depress the Market Price of Our
Common Stock and Will Cause Immediate and  Substantial  Dilution to Our Existing
Stockholders.

                                       41


<PAGE>


As of April 26,  2005,  we had  68,371,025  shares of common  stock  issued  and
outstanding and  outstanding  warrants to purchase  25,248,717  shares of common
stock.  All of the shares  issuable  upon  exercise of our  warrants may be sold
without  restriction.  The sale of these shares may adversely  affect the market
price of our common stock. The issuance of shares upon exercise of warrants will
cause immediate and substantial  dilution to the interests of other stockholders
since the selling  stockholders may convert and sell the full amount issuable on
exercise.

If We Fail to Remain Current on Our Reporting Requirements,  We Could be Removed
From the OTC Bulletin Board Which Would Limit the Ability of  Broker-Dealers  to
Sell Our Securities and the Ability of Stockholders to Sell Their  Securities in
the Secondary Market.

Companies  trading on the OTC  Bulletin  Board,  such as us,  must be  reporting
issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and
must be current in their reports  under  Section 13, in order to maintain  price
quotation  privileges on the OTC Bulletin Board. If we fail to remain current on
our reporting requirements,  we could be removed from the OTC Bulletin Board. As
a result,  the market liquidity for our securities  could be severely  adversely
affected by limiting the ability of  broker-dealers  to sell our  securities and
the ability of  stockholders to sell their  securities in the secondary  market.
Prior  to May 2001  and new  management,  we were  delinquent  in our  reporting
requirements,  having failed to file our  quarterly  and annual  reports for the
years ended 1998 - 2000 (except the quarterly reports for the first two quarters
of 1999). We have been current in our reporting  requirements for the last three
years,  however,  there can be no assurance that in the future we will always be
current in our reporting requirements.

Our  Common  Stock is  Subject  to the  "Penny  Stock"  Rules of the SEC and the
Trading Market in Our  Securities is Limited,  Which Makes  Transactions  in Our
Stock Cumbersome and May Reduce the Value of an Investment in Our Stock.

The Securities and Exchange  Commission has adopted Rule 15g-9 which establishes
the  definition  of a "penny  stock,"  for the  purposes  relevant to us, as any
equity  security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.  For
any transaction involving a penny stock, unless exempt, the rules require:

    o   that a broker or dealer approve a person's  account for  transactions in
        penny stocks; and
    o   the  broker or  dealer  receive from the investor a written agreement to
        the  transaction, setting  forth the  identity and quantity of the penny
        stock to  be purchased.

    In  order to  approve a person's  account for  transactions in penny stocks,
the broker or dealer must:

    o   obtain financial information and investment experience objectives of the
        person; and
    o   make a  reasonable determination  that the  transactions in penny stocks
        are  suitable  for that person and the person has sufficient   knowledge
        and   experience  in financial matters to be capable of   evaluating the
        risks of transactions in penny stocks.

The broker or dealer  must also  deliver,  prior to any  transaction  in a penny
stock, a disclosure  schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:

    o   sets forth the basis on which the broker or dealer made the  suitability
        determination;  and
    o   that the  broker or  dealer  received  a  signed,  written     agreement
        from the investor prior to the transaction.

Generally,  brokers may be less willing to execute  transactions  in  securities
subject  to the  "penny  stock"  rules.  This  may  make it more  difficult  for
investors to dispose of our common stock and cause a decline in the market value
of our stock.

Disclosure  also has to be made about the risks of  investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative,  current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock

                                       42


<PAGE>


transactions.   Finally,  monthly  statements  have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.

Item 3. Controls and Procedures

Evaluation of Disclosure  Controls and Procedures.  As of December 31, 2004, the
Company's  management  carried out an evaluation,  under the  supervision of the
Company's  Chief  Executive  Officer  and the  Chief  Financial  Officer  of the
effectiveness  of the design and operation of the Company's system of disclosure
controls  and  procedures  pursuant to the  Securities  and Exchange  Act,  Rule
13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure  controls  and  procedures  were  effective,  as of the date of their
evaluation,  for the purposes of recording,  processing,  summarizing and timely
reporting material  information required to be disclosed in reports filed by the
Company under the Securities Exchange Act of 1934.

Changes in internal  controls.  There were no changes in internal  controls over
financial  reporting,  known to the Chief  Executive  Officer or Chief Financial
Officer  that  occurred  during  the  period  covered  by this  report  that has
materially  affected,  or is likely to materially effect, the Company's internal
control over financial reporting.

PART II--OTHER INFORMATION

Item 1. Legal Proceedings

NONE

Item 2. Changes in Securities and Use of Proceeds

On October 1, 2004, we issued a total of 199,999 shares to parties related to an
investment banker with which we have a non-exclusive engagement.

On October 13, 2004, we issued a total of 257,500 shares to two  consultants for
financial advisory and marketing services.

On October 18, 2004, we issued a total of 347,500  shares to previous  investors
as consideration for our agreement to extend our registration commitment.

On October 19, 2004, we issued  1,000,000  shares to a single investor for total
proceeds of $500,000.

On October 26, 2004, we issued a total of 500,000  shares to parties  related to
our investment  banker in settlement for various  breaches made in our Placement
Agent Agreement.

On  November 4, 2004,  we issued  100,000 to an  employee  as  compensation  for
services previously rendered.

On  November  15,  2004  through  December  17,  2004,  we  issued  a  total  of
415,000shares to a consultant for financial advisory services.

On  December  17,  2004,  we issued  5,000  shares to an employee  for  services
previously rendered.

To obtain funding for our ongoing operations,  we sold $1,465,000 in convertible
promissory  notes to 13 investors in December  2004.  Each  promissory  note was
automatically  convertible  into shares of our common stock, at a price of $0.50
per share,  upon the closing of a private  placement  for $1 million or more. In
connection  with  the  sale  of the  convertible  promissory  notes,  we  issued
2,930,000  warrants  to  purchase  shares  of common  stock.  The  warrants  are
exercisable  until three years from the date of issuance at a purchase  price of
$0.75 per share.  This issuance is considered  exempt under  Regulation D of the
Securities Act of 1933 and Rule 506 promulgated thereunder.


                                       43


<PAGE>

Subsequent Sale of Equity Securities

On  January  4,  2005,  we issued  12,500  shares  as a result of an  investor's
exercise  of his $0.10  warrants.  This  issuance  is  considered  exempt  under
Regulation D of the Securities Act of 1933 and Rule 506 promulgated thereunder.

Also on January  10,  2005,  we issued  additional  shares to our  investors  in
accordance with an adjustment  provision in our private  placement and placement
agent  agreement.  We issued a total of  3,249,750  shares of Common Stock to 24
investors.  This  issuance  is  considered  exempt  under  Regulation  D of  the
Securities Act of 1933 and Rule 506 promulgated thereunder.

On  January  13,  2005,  we  issued  additional  shares  to two  consultants  in
accordance with an adjustment provision in their consulting agreements.  A total
of 662,000  shares  were  issued.  This  issuance  is  considered  exempt  under
Regulation D of the Securities Act of 1933 and Rule 506 promulgated thereunder.

To obtain funding for our ongoing  operations,  we conducted a private placement
offering  in January  and  February  2005,  in which we sold  $7,311,000  of 10%
Secured  Convertible   Promissory  Notes  to  61  investors.   The  10%  Secured
Convertible  Promissory  Notes  automatically  convert into shares of our common
stock,  at a price of $0.50 per  share,  upon the  filing  of this  registration
statement.  In connection with the private  placement  offering,  we have issued
15,222,000 warrants. The warrants are exercisable until five years from the date
of issuance at a purchase price of $0.75 per share.  This issuance is considered
exempt under Regulation D of the Securities Act of 1933 and Rule 506 promulgated
thereunder.

On January 28, 2005, we closed upon a private placement transaction in excess of
$1 million,  and on February 2, 2005,  the  promissory  notes issued in December
2004 were converted into an aggregate of 2,930,000 shares of common stock.  This
issuance is considered  exempt under  Regulation D of the Securities Act of 1933
and Rule 506 promulgated thereunder.

The  following  table  provides  information  about  purchases  by  us  and  our
affiliated  purchasers  during the  quarter  ended  December  31, 2004 of equity
securities  that are  registered by us pursuant to Section 12 of the  Securities
Exchange Act of 1934:

<TABLE>
<CAPTION>

                                                         ISSUER PURCHASES OF EQUITY SECURITIES

Period                                   (a)                    (b)                     (c )                      (d)
                                Total  Number of        Average Price  Paid   Total Number of         Maximum Number (or
                                Shares (or units)       per share (or Unit)   Shares (or Units)       Approximate Dollar value) of
                                Purchased                                     Purchased as Part of    Shares (or Units) that May
                                                                              Publicly Announced      Yet Be Purchased Under the
                                                                              Plans or Programs (1)   Plans or Programs (1)
<S>                                     <C>                    <C>                    <C>                         <C>
10/01/04-
10/31/04                                  0                      $0                     0                           0
11/01/04-
11/30/04                                  0                      $0                     0                           0
12/01/04-
12/31/04                                  0                      $0                     0                           0
</TABLE>

(1)  We have  not  entered  into  any  plans  or  programs  under  which  we may
repurchase its common stock.

On December 17, 2003, we issued a total of 1,850,000  shares to ten  consultants
in connection with our agreement with the company's investment bankers, Vertical
Capital  Partners,  Inc. These issuances are considered exempt from registration
by reason of the Section 4(2) of the Securities Act of 1933.


Item 3. Defaults Upon Senior Securities

     None.

                                       44


<PAGE>


Item 4. Submission of Matters to a Vote of Security Holders

        None

Item 5. Other Information

        None.

Item 6. Exhibits

31.1       Certification of Chief Executive  Officer pursuant to Rule 13a-14 and
           Rule 15d-14(a),  promulgated under the Securities and Exchange Act of
           1934, as amended

31.2       Certification of Chief Financial  Officer pursuant to Rule 13a-14 and
           Rule 15d 14(a),  promulgated under the Securities and Exchange Act of
           1934, as amended

32.1       Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
           to  Section  906  of  the Sarbanes-Oxley Act of 2002 (Chief Executive
           Officer)

32.2       Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
           to  Section  906  of  the Sarbanes-Oxley Act of 2002 (Chief Financial
           Officer)

                                       45


<PAGE>


                                   SIGNATURES


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly caused this Amendment No. 2 to Form 10QSB/A to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                                   APPLIED DNA SCIENCES, INC.

Date: October 10, 2006                             By: /s/ JAMES A. HAYWARD
                                                       ---------------------

                                                   Chief Executive Officer
                                                   (Principal  Executive
                                                   Officer, Principal
                                                   Financial Officer and
                                                   Principal Accounting Officer)

                                       46