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


                               Amendment No. 1 to
                                   FORM 10-QSB


          [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 June 30, 2005

                        Commission 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, $0.001 par value, outstanding on August 9,
2005, was 110,653,025 shares, held by approximately 1,182 shareholders.

Transitional Small Business Disclosure Format (check one):

                                 Yes [_] No [X]

                                       1


<PAGE>


                                EXPLANATORY NOTE

This  Amendment No. 1 to Form 10-QSB/A (this  "Amendment")  amends the Quarterly
Report of Applied DNA  Sciences,  Inc.  (the  "Company")  on Form 10-QSB for the
quarter  ended  June  30,  2005,  as  filed  with the  Securities  and  Exchange
Commission on August 15, 2005 (the "Original  Filing").  This Amendment is being
filed for the purpose of correcting  errors in accounting for and the disclosing
the issuance by the Company of common  stock,  warrants,  and options to acquire
the Company's common stock for services and in exchange for previously  incurred
debt. In addition the Company is correcting certain errors in accounting for the
exchange  of its  common  stock  for  previously  incurred  debt  with a Company
Director.


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

                            APPLIED DNA SCIENCES, INC


            Amendment No. 1 to Quarterly Report on Form 10-QSB/A for the
                      Quarterly Period Ending June 30, 2005

                                Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

 Condensed Consolidated Balance Sheet:
 June 30, 2005 (Unaudited)                                                   4

 Condensed Consolidated Statements of Losses:
 Three and nine Months Ended June 30, 2005
 and 2004  (Unaudited)  and the Period
 from September 16, 2002 (Date of Inception)
 Through June 30,
 2005 (Unaudited)                                                            5

 Condensed Consolidated Statement of
 Stockholder's Equity:
 For the Period from September 16, 2002
 (Date of Inception) Through June 30,
 2005 (Unaudited)                                                            6

 Condensed Consolidated Statements
 of Cash Flows:
 Nine Months Ended June 30, 2005
 and 2004 (Unaudited) and
 the Period from September 16, 2002
 (Date of Inception) Through June 30,
 2005 (Unaudited)                                                           18

 Notes to Unaudited Condensed Consolidated
 Financial Information:
 June 30, 2005                                                             20-40

 Item 2. Management Discussion and Analysis                                 41

 Item 3. Controls and Procedures                                            52

Part II. OTHER INFORMATION

Item 1. Legal Proceedings                                                   54

                                       2


<PAGE>


Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds                                              54

Item 3. Defaults Upon Senior Securities                                     54

Item 4. Submission of Matters to a
Vote of Security Holders                                                    55

 Item 5. Other Information                                                  55

 Item 6. Exhibits                                                           55

Signatures                                                                  56

                                       3


<PAGE>


                          Part I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

                           APPLIED DNA SCIENCES, INC.
                          (A Development stage company)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                    RESTATED
                                   (Unaudited)

<TABLE>
<CAPTION>

                                ASSETS
                                                             June 30, 2005
                                                        ------------------------
<S>                                                     <C>

Current assets:

    Cash and Equivalents                                $             1,192,465
                                                        ------------------------
    Total Current Assets                                              1,192,465

   Property, plant and equipment - Net
   of accumulated depreciation of
      $8,844 as of June 30, 2005                                         20,663
   Security Deposits                                                     56,850
   Patent Filing - Net                                                   24,753
                                                        ------------------------
   Total Assets                                         $             1,294,731
                                                        ========================

          LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued liabilities             $             1,038,025
   Accrued liabilities due related parties (Note C)                     136,474

   Note payable (Note C)                                                425,000
                                                        ------------------------
   Total Current Liabilities                                          1,599,499

Warrant Liability (Note D)                                            9,802,137

Commitments and contingencies (Note F)

Deficiency in stockholders' equity:
   Preferred Stock, par value $.001
   per share; 10,000,000 shares
      authorized; 60,000 issued and outstanding                               6
   Common Stock, par value $.001
   per share; 250,000,000 shares
      authorized; 66,411,025 shares
      issued and outstanding                                             66,412
   Common stock Subscription                                           (36,000)

   Common stock receivable                                              (1,000)
   Additional Paid-In-Capital                                        53,143,538
   Deficit Accumulated During Development Stage                    (63,279,861)
                                                            --------------------
   Total Deficiency in
   Stockholders' Equity                                            (10,106,905)
   Total Liabilities and
   Deficiency in Stockholders' Equity                   $             1,294,731
                                                        ========================
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       4


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A development stage company)
              CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND LOSS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                 September 16, 2002,
                                   For The Three Months Ended June 30      For The Nine Months Ended June 30     (Date of Inception)
                                                                                                                       through
                                        2005                2004                 2005              2004             June 30, 2005
                                    --------------    --------------        --------------    --------------       --------------
                                       RESTATED                                 RESTATED                              RESTATED
<S>                                 <C>               <C>                   <C>               <C>                  <C>

Operating expenses:
Selling, general and
administrative                      $    1,865,631    $    1,672,449        $   24,188,882    $   10,989,349       $   45,010,419
Research and Development                    88,870                --               345,958                --              584,493
Depreciation and amortization                3,160               351                15,187             1,053               18,348
                                    --------------    --------------        --------------    --------------       --------------
Total operating expenses                 1,957,661         1,672,800            24,550,027        10,990,402           45,613,260
                                    --------------    --------------        --------------    --------------       --------------
Operating loss                          (1,957,661)       (1,672,800)          (24,550,027)         ,990,402)         (45,613,260)


Net gain on revaluation
of warrant liability                     5,679,175                --            16,454,928                --           16,454,928


Other Income (expense)                         241                --                 3,415             1,385               29,800
Interest (expense)                         (21,557)         (558,333)          (32,373,143)       (1,221,245)         (34,151,329)
Income (taxes) benefit                          --                --                    --                --                   --
                                    --------------    --------------        --------------    --------------       --------------
Net income (loss)                   $    3,700,198    $   (2,231,133)       $  (40,464,827)   $  (12,210,262)       $ (63,279,861)
                                    ==============    ==============        ==============    ==============       ==============

Income(loss) per common share
(basic)                             $         0.06    $        (0.10)       $        (0.83)   $        (0.61)       $       (2.37)
                                    ==============    ==============        ==============    ==============       ==============

Income per common share
(fully diluted)                     $         0.04
                                    ==============

Weighted average shares
outstanding (basic)                     66,308,115        21,350,449            48,810,559        20,164,783           26,793,544
                                    ==============    ==============        ==============    ==============       ==============
Weighted average
share outstanding
(fully diluted)                        109,223,832
                                    ==============
</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 JUNE 30, 2005
                                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

                                       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 JUNE 30, 2005
                                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

                                       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 JUNE 30, 2005
                                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


                                       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 JUNE 30, 2005
                                 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

                                       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 JUNE 30, 2005
                                 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

                                       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 JUNE 30, 2005
                                 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

                                       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 JUNE 30, 2005
                                  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 Septemberr 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

                                       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 JUNE 30, 2005
                                  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

                                       13
<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 JUNE 30, 2005
                                 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

Warrants exercised at $0.10 per
share in January 2005               -         -       25,000      12,500      (10,000)       -            -           -       2,500

Common Stock issued in
settlement of debt at $0.33 per
share in January 2005               -         -    1,628,789     814,395     (276,895)       -            -           -     537,500

Fair value of warant liability
reclassed due to registration
rights granted in January 2005      -         -         -           -      (3,108,851)       -            -           -  (3,108,851)

Warrants exercised at $0.10 per
share in January 2005               -         -       17,500       8,750       (7,000)       -            -           -       1,750

Common Stock issued in
settlement of debt at $0.33 per
share in January 2005               -         -    2,399,012   1,199,504     (407,830)       -            -           -     791,674

Common Stock issued in
exchange for consulting
services at $1.30 per share         -         -      315,636     157,818      252,508        -            -           -     410,326
in January 2005

Common Stock issued in
exchange for consulting
services at $1.44 per share
in February  2005                   -         -    5,796,785   2,898,393    5,418,814        -            -           -   8,317,207

Common stock issued in
settlement of debt at  $0.50 per
share in February 2005              -         -    2,930,000   1,465,000            -   (125,000)         -           -   1,340,000

Common Stock issued in
settlement of debt at $0.33 per
share in February 2005              -         -       75,757      37,879      (12,879)       -            -           -      25,000
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       14


<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 JUNE 30, 2005
                                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 $0.10 per
share in February 2005              -         -       20,000      10,000      (8,000)       -            -           -       2,000

Common Stock issued in
settlement of debt at $0.33 per
share in February 2005              -         -      606,060     303,030    (103,030)       -            -           -     200,000

Warrants exercised at $0.10 per
share in February 2005              -         -       45,000      22,500     (18,000)       -            -           -       4,500

Common Stock issued in
exchange for related party debt
at $1.31 per share in February
2005                                -         -    1,500,000     750,000   1,215,000        -            -           -   1,965,000

Common Stock issued in
settlement of debt at $0.33 per
share in February 2005              -         -      278,433     139,217     (47,334)       -            -           -      91,883

Common Stock issued in
exchange for consulting services
at $1.17 per share in February
2005                                -         -       17,236       8,618      11,548        -            -           -      20,166

Common stock issued in
exchange for debt at $0.50 per
share in February 2005              -         -      300,000     150,000        -           -            -           -     150,000

Common Stock issued in
exchange for consulting
services at $0.95 per share
in February 2005                    -         -      716,500     358,250     322,425        -            -           -     680,675

Common Stock issued in
exchange for consulting
services at $0.95 per share
in February 2005                    -         -       10,500       5,250       4,725        -            -           -       9,975

Fair value of 55,000 warrants
issued to consultants for
services rendered at $.71 per
warrant in February 2005            -         -         -           -         72,017        -            -           -        72,017


Common stock issued in
exchange for debt at $0.50 per
share in March 2005                 -         -   13,202,000   6,601,000        -           -            -           -   6,601,000

Common Stock issued in
exchange for consulting
services at $1.19 per share
in March 2005                       -         -      185,000      92,500     127,650        -            -           -     220,150

Options exercised at $0.60 per
share in March 2005                 -         -      100,000      50,000      10,000        -            -           -      60,000

Common Stock issued in
exchange for consulting
services at $0.98 per share
in March 2005                       -         -    1,675,272     837,636     804,131        -            -           -   1,641,767
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements

                                       15


<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 JUNE 30, 2005
                                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 $0.92 per share
in March 2005                       -         -       24,333      12,167      10,219        -            -           -      22,386

Common Stock issued in
exchange for consulting
services at $0.99 per share
in March 2005                       -         -       15,000       7,500       7,350        -            -           -      14,850

Common stock issued in exchange
for debt at $0.50 per share
in March 2005                       -         -    1,240,000     620,000        -           -            -           -     620,000

Common stock canceled for
shares issued in exchange of
debt in March 2005                  -         -     (500,000)   (250,000)       -           -            -           -    (250,000)

Common stock subscribed
Canceled in March 2005              -         -         -           -           -       750,000          -           -     750,000

Common Stock issued in
exchange for consulting
services at $0.89 per share
in March 2005                       -         -       10,000       5,000       3,900        -            -           -       8,900

Adjust common stock par value
from $0.50 to $0.001 per share,
per amendment of articles dated
March 2005                          -         -         -    (32,312,879) 32,312,879        -            -           -          -

Beneficial Conversion discount
relating to Notes Payable in
March 2005                          -         -         -           -      7,371,000        -            -           -   7,371,000

Stock options granted to
employees in exchange for
services rendered, at exercise
price below fair value of common
stock in March 2005                 -         -         -           -        180,000        -            -           -     180,000

Common Stock issued in
exchange for consulting services
at $0.80 per share in April 2005    -         -      160,000         160     127,840        -            -           -     128,000

Common Stock issued in
exchange for consulting services
at $0.80 per share in April 2005    -         -       40,000          40      31,960        -            -           -      32,000
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       16


<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 JUNE 30, 2005
                                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 $0.75 per share in April 2005    -       -        850,000         850     636,650        -        -           -          637,500

Common Stock issued in
exchange for consulting services
at $0.33 per share in April 2005    -       -        500,000         500     164,500        -        -           -          165,000

Common Stock canceled during
April 2005, previously issued for
services rendered at $3.42 per
share                               -       -        (10,000)        (10)    (34,190)       -        -           -          (34,200)

Common Stock issued in
settlement of debt at $0.33 per
share in April 2005                 -       -         75,758          77      24,923   (25,000)      -           -               -

Common Stock issued in
exchange for consulting services
at $0.68 per share in April 2005    -       -         50,000          50      33,950        -        -           -           34,000

Proceeds received against
subscription Payable in June
2005                                -       -            -            -          -     118,000       -           -          118,000

Common Stock canceled in
June 2005, previously issued for
services rendered at $0.50 per
share                               -       -        (10,000)        (10)     (4,990)       -        -           -           (5,000)

Cancellation of previously
granted stock options granted
to employees for services
rendered, at exercise price
below fair value of common stock    -       -            -            -     (180,000)       -        -           -         (180,000)


Net Loss                            -       -            -            -           -         -        -     (40,464,827) (40,464,827)
                                 ------  -----   -----------  ----------  ----------   -------   ------    ------------ -----------
Balance at June 30, 2005         60,000      6    66,411,025      66,412  53,143,538   (36,000)  (1,000)   (63,279,861) (10,106,905)
                                 ======  =====   ===========  ==========  ==========   =======   ======    ============ ===========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       17


<PAGE>
                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                      For the
                                                                                                       period
                                                                                                      September
                                                                                                      16, 2002
                                                                                                      (date of
                                                                   For The Nine Months Ended         inception)
                                                                                                       through
                                                                    2005              2004         June 30, 2005
                                                              ---------------    --------------    ---------------
                                                                  RESTATED                            RESTATED
                                                              ---------------                      ---------------
<S>                                                           <C>                <C>               <C>
Cash flows from operating activities:
Net loss from operating activities.......................     $   (40,464,827)   $  (12,210,262)   $   (63,279,861)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation.............................................              15,187             1,054             18,348
Organizational Expenses..................................                  --                --             88,500
Preferred Shares issued in exchange for service..........                  --                --          1,500,000
Warrants issued to consultants                                      3,241,068                --          5,260,930
Income attributable to re-pricing of warrants                     (16,454,929)                         (16,454,929)
Financing costs attributable to issuance of warrants               23,148,214                --         23,148,214
Amortization of beneficial conversion feature-convertible           8,836,000         1,219,444         10,461,000
notes....................................................
Fair value of common stock issued to related party in
excess of previously incurred debt                                  1,365,000                 -          1,365,000
Common stock issued in exchange for services ............          13,396,202         8,918,032         25,793,934
Common stock canceled-previously issued for services                 (181,298)         (285,575)          (466,873)
rendered.................................................

Changes in Assets and Liabilities:
Payments for security deposits                                        (33,291)          (23,559)           (56,850)
Increase in-other assets.................................                  --                --            (13,890)
Increase  in due related parties.........................             (20,631)               --            132,065

Increase (decrease) in accounts payable and accrued                  (833,465)          101,439            922,244
liabilities..............................................
Cash disbursed in excess of available....................                  --            17,870                 --
                                                              ---------------    --------------    ---------------
Net cash used in operating activities....................          (7,986,770)       (2,261,557)       (11,582,168)

Cash flows from investing activities:

Payments for patent filing...............................              (4,347)          (18,758)           (25,698)

Capital expenditures.....................................                  --           (29,507)           (29,507)
                                                              ---------------    --------------    ---------------
Net cash used in investing activities....................              (4,347)          (48,265)           (55,205)

Cash flows from financing activities:
Proceeds from sale of common stock, net of cost..........                  --                --            432,000
Proceeds from issuance of convertible notes..............           9,079,000           354,000          9,204,000
Proceeds from exercise  of options and warrants..........             102,750            87,000            343,750
Proceeds from loans......................................                  --         1,675,000          2,750,000
Advances from shareholders...............................                  --            34,004            100,088

Proceeds from related party advance......................                  --           (33,653)                --
                                                              ---------------    --------------    ---------------
Net cash provided by financing activities................           9,181,750         2,116,351         12,829,838

Net increase in cash and cash equivalents................           1,190,633          (193,471)         1,192,465
Cash and cash equivalents at beginning of period.........               1,832           193,471
                                                              ---------------    --------------
                                                                                                                --
Cash and cash equivalents at end of period...............     $     1,192,465    $           --    $     1,192,465
                                                              ===============    ==============    ===============

Supplemental Disclosures of Cash Flow Information:
Cash paid during period for interest.....................                  --                --                 --
Cash paid during period for taxes........................                  --                --                 --

Non-cash transactions:
Common stock issued for services.........................          13,396,202         8,918,032         25,793,934
Common stock issued in exchange for previously incurred debt        2,313,500                --          2,313,500
Common stock canceled-previously issued for services                 (181,298)         (285,575)          (466,873)
rendered.................................................
Common stock retired.....................................                  --                --                 --
Beneficial conversion feature attributed to convertible             8,836,000         1,219,444         10,461,000
notes....................................................
Preferred Shares in exchange for services................                  --                            1,500,000

Warrants issued to consultants...........................           3,241,068                --          5,260,930

Acquisition:
Common stock retained....................................                                 1,015              1,015
Assets acquired..........................................                                  (135)              (135)
                                                                                 --------------    ---------------
Total consideration paid.................................                                   880                880
                                                                                 --------------    ---------------
Organization expenses - note issued in exchange of shares                                                   88,500
retired..................................................
</TABLE>

                                       18
<PAGE>


<TABLE>
<CAPTION>
                                                                                                      For the
                                                                                                       period
                                                                                                      September
                                                                                                      16, 2002
                                                                                                      (date of
                                                                   For The Nine Months Ended         inception)
                                                                                                       through
                                                                    2005              2004         June 30, 2005
                                                              ---------------    --------------    ---------------
                                                                  RESTATED                            RESTATED
                                                              ---------------                      ---------------
<S>                                                           <C>                <C>               <C>
Common stock issued in exchange for note payable.........                  --                --             88,500
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       19


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (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/A, 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 and nine month  periods ended June 30, 2005 are
not  necessarily  indicative  of the results that may be expected for the fiscal
year ended September 30, 2005. The unaudited  condensed  consolidated  financial
statements  should be read in conjunction  with the  consolidated  September 30,
2004 financial  statements and footnotes  thereto  included in the Company's SEC
Form 10-KSB, as amended.


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  June  30,  2005,  the  Company  has  accumulated  losses  of
$63,279,861.

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 June 30, 2005
property and equipment consist of:


<TABLE>
<S>                             <C>
Furniture                       $     29,507
Accumulated  depreciation            (8,844)
                                     -------

Net                             $     20,663
</TABLE>

                                       20


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

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.

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 E):

<TABLE>
<CAPTION>
                                                                                                         For the
                                                                                                         Period
                                                                                                      September, 16
                                  For The                                                             2002 (Date of
                                   Three         For The Three     For The Nine     For The Nine        Inception
                                Months ended     Months ended      Months ended     Months ended         through
                                  June 30,         June 30,          June 30,         June 30,          June 30,
                                    2005             2004              2005             2004              2005
<S>                               <C>             <C>              <C>              <C>               <C>
Net income (loss) - as
reported                          $3,700,198      $(2,231,133)     $(40,464,827)    $(12,210,262)     $(63,279,861)

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 method (APB No.
123)                             (1,406,350)                --       (1,406,350)               --       (1,406,350)
                                 -----------      ------------       -----------    -------------       -----------

Net income (loss) - Pro
Forma                             $2,293,848      $(2,231,133)     $(41,871,177)    $(12,210,262)     $(64,686,211)
                                  ==========      ============     =============    =============     =============

Net income (loss)
attributable to common
stockholders - Pro Forma          $2,293,848      $(2,231,133)     $(41,871,177)    $(12,210,262)     $(64,686,211)
                                  ==========      ============     =============    =============     =============

Basic income (loss) per
share - as reported                    $0.06           $(0.10)           $(0.83)          $(0.61)           $(2.37)
                                      ======           =======           =======          =======           =======

Basic income (loss) per
share - Pro Forma                     $0.064           $(0.10)           $(0.86)          $(0.61)           $(2.42)
                                      ======           =======           =======          =======           =======
</TABLE>

                                       21


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

<TABLE>
<S>                                    <C>                 <C>               <C>              <C>               <C>
Stock Based Compensation (continued)


Fully diluted income  per
share - as reported                    $0.04               N/A               N/A              N/A               N/A
                                      ======           =======           =======          =======           =======

Fully diluted income per
share - Pro Forma                      $0.03               N/A               N/A              N/A               N/A
                                      ======           =======           =======          =======           =======
</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.

New Accounting Pronouncements

In March 2005, the FASB issued FASB Interpretation (FIN) No. 47, "Accounting for
Conditional  Asset Retirement  Obligations,  an interpretation of FASB Statement
No. 143," which  requires an entity to recognize a liability  for the fair value
of a conditional  asset  retirement  obligation when incurred if the liability's
fair value can be  reasonably  estimated.  The  Company is required to adopt the
provisions of FIN 47 no later than the first quarter of fiscal 2006. The Company
does not expect the adoption of this Interpretation to have a material impact on
its consolidated financial position, results of operations or cash flows.

In May 2005 the FASB issued Statement of Financial  Accounting  Standards (SFAS)
No. 154, "Accounting Changes and Error Corrections, a replacement of APB Opinion
No. 20 and FASB Statement No. 3." SFAS 154 requires retrospective application to
prior periods' financial statements for changes in accounting principle,  unless
it is  impracticable  to  determine  either the  period-specific  effects or the
cumulative  effect of the  change.  SFAS 154 also  requires  that  retrospective
application of a change in accounting principle be limited to the direct effects
of the change.  Indirect effects of a change in accounting principle,  such as a
change in non-discretionary profit-sharing payments resulting from an accounting
change,  should be recognized in the period of the accounting  change.  SFAS 154
also requires that a change in depreciation,  amortization,  or depletion method
for long-lived,  non-financial assets be accounted for as a change in accounting
estimate effected by a change in accounting principle. SFAS 154 is effective for
accounting  changes and  corrections  of errors made in fiscal  years  beginning
after December 15, 2005. Early adoption is permitted for accounting  changes and
corrections  of  errors  made in  fiscal  years  beginning  after  the date this
Statement  is issued.  The Company  does not expect the adoption of this SFAS to
have a  material  impact on its  consolidated  financial  position,  results  of
operations or cash flows.

                                       22


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE B - 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.

In January 2003, the Company issued 1,500,000 shares of common stock in exchange
for a licensing  agreement (see Note I). 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 C). 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.

                                       23


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE B - CAPITAL STOCK (continued)

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  5,149,472
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.

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.

                                       24


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE B - CAPITAL STOCK (continued)

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.

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.

 In  December  2004 , the Company  issued  5,796,785  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 $8,317,207,  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  2,930,000  shares of  common  stock
subscribed  for cash at $0.50 per share pursuant to the exercise terms of a note
payable. This issuance is considered exempt under Regulation D of the Securities
Act of 1933 and Rule 506 promulgated thereunder (See note D).

In January 2005, the Company  received $2,500 in exchange for previously  issued
warrants  to  purchase  the  Company's  common  stock at $0.10 per  share.  This
issuance is considered  exempt under  Regulation D of the Securities Act of 1933
and Rule 506 promulgated thereunder.

                                       25


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE B - CAPITAL STOCK (continued)

In January 2005, the Company  received $1,750 in exchange for previously  issued
warrants  to  purchase  the  Company's  common  stock at $0.10 per  share.  This
issuance is considered  exempt under  Regulation D of the Securities Act of 1933
and Rule 506 promulgated thereunder.

In January 2005, the Company retired  $791,673 of convertible  notes payable for
2,399,012  shares of common stock.  The Notes are convertible into shares of our
common stock at a price of $0.33 per share (see Note D).

In January 2005,  the Company  issued 315,636 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$1.30 per share for a total of $ 410,327, which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In February 2005, the Company retired  $25,000 of convertible  notes payable for
75,757  shares of common  stock.  The Notes are  convertible  into shares of our
common stock at a price of $0.33 per share (see Note D).

In February 2005, the Company received $2,000 in exchange for previously  issued
warrants  to  purchase  the  Company's  common  stock at $0.10 per  share.  This
issuance is considered  exempt under  Regulation D of the Securities Act of 1933
and Rule 506 promulgated thereunder.

In February 2005, the Company retired $200,000 of convertible  notes payable for
606,060  shares of common stock.  The Notes are  convertible  into shares of our
common stock at a price of $0.33 per share (see Note D).

In February 2005, the Company received $4,500 in exchange for previously  issued
warrants  to  purchase  the  Company's  common  stock at $0.10 per  share.  This
issuance is considered  exempt under  Regulation D of the Securities Act of 1933
and Rule 506 promulgated thereunder.

In February 2005,  the Company  exchanged a related party note payable valued at
$1,965,000 with 1,500,000 shares using a price of $1.31 per share. (See note C).
The  Company  valued  the  shares at $1.31 per share for a total of  $1,965,000,
which represents the fair value of the common stock on the date of the exchange.
The difference  between the fair value of the common stock of $1,965,000 and the
face amount of the debt $ 600,000,  or $1,365,000 has been charged to operations
as current period interest expense.

In February 2005, the Company retired  $91,883 of convertible  notes payable for
278,433  shares of common stock.  The Notes are  convertible  into shares of our
common stock at a price of $0.33 per share.

In February  2005,  the Company issued 17,236 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$1.17 per share for a total of $ 20,166,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In February 2005, the Company issued 300,000 shares of common stock at $0.50 per
share  pursuant  to the  exercise  terms of a note  payable.  This  issuance  is
considered  exempt under Regulation D of the Securities Act of 1933 and Rule 506
promulgated thereunder. (See note D)

                                       26


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE B - CAPITAL STOCK (continued)

In February  2005, the Company issued 716,500 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.95 per share for a total of $ 680,675, which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In February  2005,  the Company issued 10,500 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.95 per share for a total of $,9,975  which  represents  the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In March 2005, the Company issued 13,202,000 shares of common stock at $0.50 per
share  pursuant  to the  exercise  terms of a note  payable.  This  issuance  is
considered  exempt under Regulation D of the Securities Act of 1933 and Rule 506
promulgated thereunder. (See note D)

In March 2005, the Company issued 185,000 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $1.19
per share  for a total of $  220,150,  which  represents  the fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In March 2005, the Company  received  $60,000 in exchange for previously  issued
options to purchase the Company's common stock at $0.60 per share.

In March 2005, the Company issued  1,675,272  shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.98 per share for a total of $ 1,641,767,  which  represents the fair value of
the  services  received  which did not differ  materially  from the value of the
stock issued.

In March 2005,  the Company issued 24,333 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $0.92
per  share  for a total of $  22,386,  which  represents  the fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In March 2005,  the Company issued 15,000 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $0.99
per  share  for a total of $  14,850,  which  represents  the fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In March 2005, the Company issued  1,240,000 shares of common stock at $0.50 per
share  pursuant  to the  exercise  terms of a note  payable.  This  issuance  is
considered  exempt under Regulation D of the Securities Act of 1933 and Rule 506
promulgated thereunder. (See note D)

In March 2005, the Company  canceled 500,000 shares of common stock related to a
debt exchange for shares valued at $0.50 per share.

In March 2005,  the Company issued 10,000 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $0.89
per  share  for a total  of $ 8,900,  which  represents  the  fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

                                       27


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE B - CAPITAL STOCK (continued)


In April 2005, the Company issued 160,000 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 $  128,000,  which  represents  the fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In April 2005,  the Company issued 40,000 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 $  32,000,  which  represents  the fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In April 2005, the Company issued 850,000 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $0.75
per share  for a total of $  637,000,  which  represents  the fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In April 2005, the Company issued 500,000 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $0.33
per share  for a total of $  165,000,  which  represents  the fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In April  2005,  the  Company  cancelled  10,000  shares  previously  issued for
services valued at $34,200 in exchange for a cash settlement.

In April 2005,  the Company  retired  $25,000 of  convertible  notes payable for
75,758  shares of common  stock.  The Notes are  convertible  into shares of our
common stock at a price of $0.33 per share.

In April 2005,  the Company issued 50,000 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 $  34,000,  which  represents  the fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In June 2005, the Company cancelled 10,000 shares previously issued for services
valued at $5,000.


In accordance with EITF 96-18 the  measurement  date to determine fair value 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 for
consulting  services at the rate which represents the fair value of the services
received which did not differ materially from the value of the stock issued.

                                       28


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE C - RELATED PARTY TRANSACTIONS

At June 30, 2005, notes payable are as follows:

<TABLE>
<CAPTION>
                                                                                      June 30, 2005
                                                                                       (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
                                                                                     ===============
                                                                                             425,000

Less; current portion                                                                        425,000
Note Payable - long-term                                                             $            --
                                                                                     ===============
</TABLE>

The Company issued 1,500,000 shares of its restricted  common stock to a Company
officer and Director in exchange for $600,000 of previously  incurred  debt. The
debt was in the form of a promissory note.

The  Company  valued  the  shares at $1.31 per share for a total of  $1,965,000,
which represents the fair value of the common stock on the date of the exchange.
The difference  between the fair value of the common stock of $1,965,000 and the
face value of the debt of $600,000 or  $1,365,000,  has been  charged to current
period interest expense.

The Company's officers have advanced funds to the Company for travel related and
working capital purposes.  No formal repayment terms or arrangements  exist. The
amount of the advances due at June 30, 2005 was $136,474.

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 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  during  the
quarter ended March 31, 2005 (see Note B).

$ 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.

                                       29


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (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 during the quarter ended March 31, 2005 (see Note B).

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  Convertible  Notes  were
converted 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 six months ended June 30, 2005.

In conjunction  with raising capital through the issuance of Convertible  Notes,
the Company has issued a warrant in February,  2005 that has registration rights
for the  underlying  shares.  As the contract must be settled by the delivery of
registered shares and the delivery of the registered shares is not controlled by
the  Company,  pursuant  to EITF 00-19,  "Accounting  for  Derivative  Financial
Instruments  Indexed to, and Potentially Settled in, a Company's Own Stock", the
net value of the  warrants  at the date of  issuance  was  recorded as a warrant
liability on the balance sheet $23,148,214 and charged to operations as interest
expense.  Upon the  registration  statement being declared  effective,  the fair
value of the warrant on that date will be  reclassified  to equity.  The Company
initially  valued the warrants  using the  Black-Scholes  pricing model with the
following  assumptions:  (1) dividend  yield of 0%; (2) expected  volatility  of
152.59%, (3) risk-free interest rate of 3.67%, and (4) expected life of 5 years.

In connection  with the  placement of the  $1,465,000  of  convertible  notes as
described above, the Company agreed to registered shares of the Company's common
stock underlying  certain  previously issued and outstanding  warrants that were
not subject to a  registration  rights  agreement at the time the warrants  were
issued. These warrants consist of following:

                                       30


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE D - PRIVATE PLACEMENT OF CONVERTIBLE NOTES (continued)

     o     105,464  warrants  entitling the holder to purchase 105,464 shares of
           the  Company's  common  stock at the price of $ .10 per share.  These
           warrants were issued in July,  2004 and lapse if unexercised by July,
           2009.

     o     1,602,500  warrants entitling the holder to purchase 1,602,500 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.


As a result,  the Company is required to classify the above referenced  warrants
as derivative  liabilities  and mark them to market at each reporting  date. The
fair value of the warrants  that were subject to  registration  reclassified  as
liabilities   from  additional  paid  in  capital  in  February,   2005  totaled
$3,108,851.  Upon the registration statement being declared effective,  the fair
value of the warrants on that date will be reclassified  to equity.  The Company
initially  valued the warrants  using the  Black-Scholes  pricing model with the
following  assumptions:  (1) dividend  yield of 0%; (2) expected  volatility  of
148.66%, (3) risk-free interest rate of 3.21%, and (4) expected life of 3 years.

$ 7,371,000 Convertible Notes

In January and February,  2005, the Company sold an 10% convertible debenture in
the aggregate  amount of $7,371,000 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.

The  Company  filed the  registration  statement  on  February  15, 2005 and the
Convertible  Notes were  converted to an aggregate of  14,742,000  shares of the
Company's common stock (see Note B).

As  additional  consideration  for the purchase of the  Convertible  Notes,  the
Company  granted to the holders  warrants  entitling  it to purchase  14,742,000
common  shares of the  Company's  common  stock at the price of $ .75 per share.
These warrants lapse if  unexercised  by February,  2010. A registration  rights
agreement was executed and consummated in January, 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 $ 257,985 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 $ 7,731,000 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 in February,  2005,  2005,  the debt
discount  attributed  to the  beneficial  conversion  feature of $ 7,371,000 was
charged to interest  expense in its  entirety  during the six months ended March
31, 2005.

                                       31


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE D - PRIVATE PLACEMENT OF CONVERTIBLE NOTES (continued)

In conjunction  with raising capital through the issuance of Convertible  Notes,
the Company has issued a warrant that has registration rights for the underlying
shares. As the contract must be settled by the delivery of registered shares and
the delivery of the registered shares is not controlled by the Company, pursuant
to EITF 00-19,  "Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock", the net value of the warrants at
the date of issuance  was recorded as a warrant  liability on the balance  sheet
$23,148,214 and charged to operations as interest expense. Upon the registration
statement being declared  effective,  the fair value of the warrant on that date
will be reclassified to equity.  The Company initially valued the warrants using
the  Black-Scholes  pricing model with the following  assumptions:  (1) dividend
yield of 0%; (2) expected volatility of 152.59%,  (3) risk-free interest rate of
3.67%, and (4) expected life of 5 years.

Revaluation of Warrant Liability

In accordance with SFAS 133  "Accounting for Derivative  Instruments and Hedging
Activities",  the Company  revalued the warrants  issued subject to registration
rights  as of June 30,  2005  using  the  Black-Scholes  option  pricing  model.
Assumptions  regarding the life, the expected dividend yield and volatility were
left unchanged but the Company did apply a risk free interest rate from 3.67% to
3.72%,  a  volatility  of 144.181%  and a deemed  fair value of common  stock of
$0.60,  which was the closing  price of the  Company's  common stock on June 30,
2005. The difference of $5,679,175  between the fair value of the warrants as of
June 30, 2005 and the previous  valuation as of March 31, 2005 has been recorded
as a gain on revaluation of warrant liability,  and included in the accompanying
consolidated financial statements.

NOTE E - 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         Weighted                           Exercisable
                                                 Remaining                Average          Weighted           Weighted
         Exercise           Number              Contractual              Exercise           Average           Average
         Prices           Outstanding           Life (Years)              Price           Exercisable      Exercise Price
     ================    =============    ========================    ===============    =============    ================
          <S>              <C>                     <C>                    <C>              <C>                 <C>
          $0.10               105,464              4.04                   $0.10               105,464          $0.10
          $0.20                 5,000              3.39                   $0.20                 5,000          $0.20
          $0.50                50,000              4.27                   $0.50                50,000          $0.50
          $0.55             9,000,000              3.00                   $0.55             9,000,000          $0.55
          $0.60             9,132,000              3.89                   $0.60             9,132,000          $0.60
          $0.70               750,000              2.09                   $0.70               750,000          $0.70
          $0.75            17,727,000              4.24                   $0.75            17,727,000          $0.75
          $1.00               100,000              1.30                   $1.00               100,000          $1.00
                           36,869,464                                                      36,869,464
                         =============                                                   =============
</TABLE>

                                       32


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE E - STOCK OPTIONS AND WARRANTS (continued)

Transactions involving warrants are summarized as follows:

<TABLE>
<CAPTION>
                                                Number of         Weighted Average
                                                  Shares           Price Per Share
 <S>                                      <C>                    <C>
 Outstanding at September 30, 2004              4,870,253                $0.63
 Granted                                       32,873,000                 0.71
 Exercised                                       (142,500)                0.10
 Canceled or expired                             (731,289)                0.60
                                          ----------------       --------------
 Outstanding at June 30, 2005                  36,869,464                $0.70
                                          ================       ==============
</TABLE>

During the nine  months  ended June 30,  2005,  the  Company  granted  6,118,500
warrants to non-employees in exchange for services and financing expenses.

The estimated fair value of the  compensatory  warrants granted to non-employees
in exchange  for  services  and  financing  expenses  was  determined  using the
Black-Scholes pricing model and the following assumptions: contractual term of 2
to 5 years, a risk free interest rate from 2.47 to 3.53%, a dividend yield of 0%
and  volatility  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 $3,241,069 for the nine months ended June 30, 2005.

Options

The  following  table  summarizes  the  changes in options  outstanding  and the
related  prices  for  the  shares  of  the  Company's  common  stock  issued  to
shareholders at June 30, 2005.

<TABLE>
<CAPTION>
                           Options Outstanding                              Options Exercisable
                    ---------------------------------                   -----------------------------
                                         Weighted
                                          Average         Weighed                          Weighted
                                         Remaining        Average                          Average
      Exercise          Number          Contractual      Exercise          Number         Exercise
       Prices        Outstanding       Life (Years)        Price         Exercisable        Price
    -------------   ---------------    --------------    -----------    --------------    -----------
      <S>           <C>                   <C>            <C>            <C>               <C>
           $ .68         3,660,000                 7          $ .68         1,830,000         $ 1.35
    -------------   ---------------    --------------    -----------    --------------    -----------

                    ---------------    --------------    -----------    --------------    -----------
                         3,660,000                 7          $ .68         1,830,000         $ 0.60
                    ===============    ==============                   ==============    ===========
</TABLE>
Transactions involving the Company's options issuance are summarized as follows:

<TABLE>
<CAPTION>
                                                               Weighted
                                                                Average
                                                 Number        Price Per
                                               of Shares         Share
                                              -----------     ------------
<S>                                            <C>                 <C>
Outstanding at October 1, 2004                         -           $    -
Granted                                          300,000             0.60
Exercised                                      3,660,000             1.35
Canceled or expired                            (300,000)            (.60)
                                              -----------     ------------
Outstanding at June 30,2005                    3,660,000           $ 1.35
                                              ===========     ============
</TABLE>

                                       33


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE E - STOCK OPTIONS AND WARRANTS (continued)

During the three months ended March 31, 2005,  the Company  granted an aggregate
of 300,000  stock  options to directors  that vested  immediately.  The exercise
prices of the stock  options  granted were below the fair value of the Company's
common stock at the grant date.  Compensation expense of $180,000 was charged to
operations during the period ended March 30, 2005. In the quarter ended June 30,
2005, the Company  canceled the  unexercised  300,000 stock options and credited
expense for the previously recorded $180,000 in compensation.

The weighted-average fair value of stock options granted to employees during the
six months  ended June 30,  2005 and 2004 and the  weighted-average  significant
assumptions  used to determine those fair values,  using a Black-Scholes  option
pricing model are as follows:

<TABLE>
<CAPTION>
                                                           2005               2004
                                                           ----               ----
       <S>                                                 <C>                <C>
       Significant assumptions (weighted-average):
           Risk-free interest rate at  grant date          3.5%               N/A
           Expected stock price volatility                  85%               N/A
           Expected dividend payout                           -                 -
           Expected option life (in years)                  5.0               N/A
</TABLE>

If the Company recognized compensation cost for the non-qualified employee stock
option plan in  accordance  with SFAS No. 123, the  Company's pro forma net loss
and net loss per share would have been $( 2,293,848) and $(0.06),  respectively,
for the nine months ended June 30, 2005.

NOTE F- COMMITMENTS AND CONTINGENCIES

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.  On April 8,
2005  Giuliani  Partners  terminated  the  agreement  with  the  Company.  Total
compensation paid to Giuliani Partners through June 30, 2005 was $1,250,000.

On March 24, 2005,  the Company  amended its existing  Cooperative  Research and
Development  Agreement  ("CRADA")  with  Battelle  Energy  Alliance,   LLC,  the
Department  of  Energy's  National   Laboratory  in  Idaho  Falls,   Idaho  (the
"Amendment").  The Amendment adds additional joint research projects,  including
development of marker applications for textiles,  inks, gasoline,  and explosive
materials.  Per the Amendment and at the Company's  discretion,  the Company can
spend up to  $1,701,216 to further  develop and refine  selected DNA and related
applications.

Litigation

Stern & Co. v. Applied DNA Sciences, Inc., Case No.: 05 CV 00202

Plaintiff  Stern & Co.  commenced  this action  against us in the United  States
District  Court for the  Southern  District of New York on or about  January 10,
2005. In this action,  Stern & Co.  alleges that it entered into a contract with
us to perform media and investor relations for a monthly fee of $5,000 and stock
options.  Stern & Co. claims that we failed to make certain payments pursuant to
the contract and seeks damages in the amount of $96,042.00. Although our time to
answer  the  complaint  has not  expired,  we  dispute  the  allegations  of the
complaint  in its  entirety  and intend on  vigorously  defending  this  matter.
Management believes the ultimate outcome of this matter will not have a material
adverse effect on the Company's  consolidated  financial  position or results of
operations

                                       34


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE F- COMMITMENTS AND CONTINGENCIES (continued)

Oceanic Consulting, S.A. v. Applied DNA Sciences, Inc., Index No.: 603974/04

Plaintiff  Oceanic  Consulting,  S.A.  commenced  this action  against us in the
Supreme Court of the State of New York, County of New York. Oceanic  Consulting,
S.A.  asserts a cause of action for breach of contract based upon the allegation
that we failed to make  payments  pursuant to a  consulting  agreement.  Oceanic
Consulting, S.A. also asserts a causes of action in which it seeks reimbursement
of its expenses and attorneys' fees. Oceanic  Consulting,  S.A. seeks damages in
the  amount  of  $137,500.00.  Oceanic  Consulting,  S.A.  moved  for a  default
judgment, which we have opposed based upon Oceanic Consulting, S.A.'s failure to
properly serve the complaint as well as our meritorious  defenses.  We intend on
vigorously  defending this matter.  Management  believes the ultimate outcome of
this  matter  will  not  have  a  material   adverse  effect  on  the  Company's
consolidated financial position or results of operations

Crystal  Research  Associates,  LLC v. Applied DNA Sciences,  Inc.,  Docket No.:
L-7947-04

On April 29, 2005, Crystal Research Associates,  LLC obtained a default judgment
against us in the Superior Court of New Jersey,  Middlesex  County. We intend to
move to  vacate  the  default  judgment  on  various  grounds.  We  dispute  the
allegations  of the complaint  and we intend to  vigorously  defend this matter.
Management believes the ultimate outcome of this matter will not have a material
adverse effect on the Company's  consolidated  financial  position or results of
operations


NOTE G - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS

The accompanying  financial  statements for the three and nine months ended June
30, 2005 as well as the period  September 16, 2002 (date of  inception)  through
June 30,  2005  have been  restated  for the  purpose  of  correcting  errors in
accounting  for and the  disclosing the issuance by the Company of common stock,
warrants,  and options to acquire the Company's common stock for services and in
exchange for  previously  incurred  debt.  In addition the Company is correcting
certain errors in accounting for the exchange of its common stock for previously
incurred debt with a Company Director.

Accordingly,  the Company  restated the  financial  statements as of and for the
nine months ended June 30, 2005 by disclosing the effect of these errors in this
amended Form 10-QSB/A.

The result of the June 30, 2005 Condensed Consolidated Balance Sheet restatement
is to:
-     Increase liabilities by $54,951 for additional compensation expenses
-     Reflect  the   reclassification  of  warrants  from  equity  to  liability
      resulting in a $9,802,137  increase to Warrant  Liability  compared to the
      previous filing.
-     Reduced Additional Paid in Capital by $100,000 as a result of the $750,000
      subscription  adjustment and the $100,000 additional compensation recorded
      in the restatement
-     Increased Accumulated Deficit by $9,757,088
-     Net Deficiency in Shareholder Equity decreased by $9,857,088 as the result
      of the combination of factors described above.

The changes in reported amounts are summarized in the following  reconciliations
of the Company's  restatement of the Condensed  Consolidated Balance Sheet as of
June 30, 2005.

                                       35


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE G - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS (continued)

<TABLE>
<CAPTION>
                                                                 For the Period Ended June 30, 2005
                                                                  (As Restated)      (As Reported)
   <S>                                                          <C>                 <C>
   ASSETS                                                       $   1,294,731          1,294,731

   LIABILITIES AND  DEFICIENCY IN STOCKHOLDERS' EQUITY

    Total Current Liabilities                                       1,599,499          1,544,548

   Warrant Liability                                                9,802,137                  -

   Deficiency in  Stockholders' Equity:
    Preferred Stock                                                         6                  6
    Common Stock                                                       66,412             66,412
    Common Stock Subscription                                        (37,000)           (37,000)
    Additional Paid-In-Capital                                     53,143,538         54,355,065
    Deficit Accumulated During Development Stage                 (63,279,861)       (54,634,300)
    Total Deficiency in Stockholders' Equity                     (10,106,905)          (249,817)
                                                                -------------       ------------
    Total Liabilities and Deficiency in Stockholders'
   Equity                                                       $   1,294,731          1,294,731
</TABLE>

For both the nine months ended as well as the period  September 16, 2002 through
June 30, 2005,  the result of the June 30, 2005  Condensed  Consolidated  Income
Statement restatement is to:
-     Increase Selling,  General and Administrative for compensation  expense by
      $1,952,275,  primarily from  correction of warrant  valuation  issuance to
      non-employees.
-     Reflect a net loss on the  revaluation  of  warrants  of  $9,802,136  as a
      result of  reclassifying  warrants from equity to a liability for the nine
      months  ended  June 30,  2005 as well as the  period  September  16,  2002
      through June 30, 2005. A net gain on the  adjustment  to fair value of the
      warrants of $5,679,175 for the three months ended June 30, 2005.

Net loss increased by $9,757,088 for the nine months ended as well as the period
September  16,  2002  through  June 30, 2005 as a result of the  combination  of
factors  described  above. Net loss for the three months ended June 30, 2005 was
reduced by $5,624,224 to a Net Income of $2,851,151.

The changes in reported amounts are summarized in the following  reconciliations
of the Company's  restatement of the Condensed  Consolidated Income Statement as
of June 30, 2005.

                                       36


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE G - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS (continued)

<TABLE>
<CAPTION>
                                                                                                  For the Period September 16, 2002
                          For the Three Months Ended June     For the Nine Months Ended June    (Date of Inception) Through June 30,
                                      30, 2005                           30, 2005                        30, 2005
                          (As Restated)     (As Reported)     (As Restated)     (As Reported)     (As Restated)      (As Reported)
<S>                        <C>              <C>               <C>               <C>               <C>                <C>
Operating Expenses:
Selling general and
administrative             $  1,865,631     $   2,659,727     $  24,188,882     $  22,236,607     $  45,010,419      $  43,058,144
Research and development         88,870            88,870           345,958           345,958           584,493            584,493
Depreciation and
amortization                      3,160             3,160            15,187            15,187            18,348             18,348
                           -------------    -------------     -------------     -------------     -------------      -------------

Total Operating Expenses      1,957,661         2,751,757        24,550,027       22,597,752         45,613,260         43,660,985
                           ------------     -------------     -------------     -------------     -------------      -------------
Operating Loss               (1,957,661)       (2,751,757)      (24,550,027)      (22,597,752)      (45,613,260)       (43,660,985)

Net gain/(loss) on
revaluation of warrant
liability                     5,679,175                --        16,454,929                --        16,454,929                 --
Other income (expense)              241               241             3,415             3,415            29,800             29,800
Interest income
(expense)                       (21,557)          (21,557)      (32,373,143)       (9,224,929)      (34,151,329)       (11,003,115)
                           ------------     -------------     -------------     -------------    --------------      -------------

Net Income (Loss)          $  3,700,198     $  (2,773,073)    $ (40,464,827)    $ (31,819,266)    $ (63,279,861)     $ (54,634,300)
                           ============     =============     =============     =============     =============      =============
Net income (loss) per      $       0.06     $       (0.04)    $       (0.83)    $       (0.65)    $       (2.37)     $       (2.04)
common share-basic
                           ============     =============     =============     =============     =============      =============
Weighted average shares      66,308,115        66,298,115        48,810,559        48,806,398        26,793,544         26,793,544
outstanding-basic
Net income per common
share-fully diluted        $       0.04
                           ============
Weighted average shares
outstanding-fully
diluted                     109,223,832
</TABLE>

     The result of the Cash Flow restatement is to:
     -     Increase  loss for the nine  months June 30,  2005 by  $8,645,561  as
           described above
     -     Reflect  the   $9,802,137   warrant   valuation   and  the   $100,000
           compensation  expense revision within operating activities and adjust
           valuation of warrants issued to non-employees by $1,997,324

                                       37


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE G - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS (continued)

-     Reflect  $849,460 in common stock,  subscription  and  Additional  Paid in
      Capital  revisions - see the summarized  Other Operating  Activities items
      within operating activities below
-     Net  cash  flow  used in  operating  activities  decreased  by  $2,911,764
      primarily as a result of equity revisions involving stock subscriptions as
      described in the above balance sheet restatement
-     Net cash flow from  financing  activities  decreased  by  $3,716,784  as a
      result of the  combination  of  factors  described  above.  See  preceding
      comment.

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 June 30, 2005.

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 June 30, 2005. See the full  Condensed  Consolidated
Statement  of Cash  Flows for the  periods  ended June 30,  2005 for  additional
details.

<TABLE>
<CAPTION>
                                                                             For the Period September 16, 2002
                                                                           (Date of Inception) Through June 30,
                                 For the Nine Months Ended June 30, 2005                    2005
                                    (As Restated)       (As Reported)         (As Restated)       (As Reported)
<S>                                 <C>                 <C>                 <C>                   <C>
Cash Flows from operating
activities:

Net loss from operating
activities                          $ (40,464,827)      $ (31,819,266)      $   (63,279,861)      $ (54,634,300)
Summary of adjustments to
reconcile net loss to net cash
(used in) operating activities:

Change in fair value of
warrant liabilities                     6,693,285                   -             6,693,285                   -

Other operating activities -
see Cash Flow statement for
full details                           25,784,772          20,920,732            45,004,408          40,163,927
                                    -------------       -------------       ---------------       -------------
Net cash (used in) operating
activities                             (7,986,770)        (10,898,534)          (11,582,168)        (14,470,373)
                                    -------------       -------------       ---------------       -------------

Cash flows from investing
activities:
- see Cash Flow statement for
full details
Net cash (used in) investing
activities                                 (4,347)            (37,638)              (55,205)           (112,055)
                                    -------------       -------------       ---------------       -------------
</TABLE>

                                       38


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE G - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS (continued)

<TABLE>
<CAPTION>
                                 For the Nine Months Ended June 30, 2005     For the Period September 16, 2002
                                                                           (Date of Inception) Through June 30,
                                                                                           2005
                                    (As Restated)       (As Reported)       (As Restated)         (As Reported)
<S>                                 <C>                 <C>                 <C>                   <C>
Cash flows from financing
activities:
- see Cash Flow statement for
full details
Proceeds from loans                     9,181,750          12,898,534            12,829,838          15,774,893
                                     ------------       -------------       ---------------       -------------
Net cash provided by financing
activities
Increase (decrease) in cash
and cash
equivalents                             1,190,633           1,190,633             1,192,465           1,192,465
Cash and cash equivalents,
beginning of year                           1,832               1,832                     -                   -
                                     ------------       -------------       ---------------       -------------
Cash and cash equivalents, end
of year                             $   1,192,465       $   1,192,465       $     1,192,465       $   1,192,465
                                     ============       =============       ===============       =============
</TABLE>

NOTE H- SUBSEQUENT EVENTS

On July 15, 2005,  Applied DNA Sciences,  Inc. (the  "Company")  closed upon the
stock  purchase  agreement (the  "Agreement")  with Biowell  Technology  Inc., a
Taiwan corporation  ("Biowell") that was executed on January 28, 2005.  Pursuant
to the  Agreement,  the  Company,  through  its  wholly-owned  subsidiary,  APDN
(B.V.I.) Inc., a British Virgin Islands company,  acquired all of the issued and
outstanding shares of Rixflex Holdings Limited, a British Virgin Islands company
("Rixflex"). Pursuant to an asset purchase agreement, Biowell transferred all of
its  intellectual  property (the "Biowell  Technology")  to Rixflex prior to the
Company's  acquisition  of  Rixflex.  In  exchange  for  all of the  issued  and
outstanding  shares of  Rixflex,  we issued to the  shareholders  of  Rixflex 36
million  shares of our common  stock.  As of August 15,  2005,  the  Company has
received some of the intellectual property but is still awaiting the transfer of
certain intellectual property and related paperwork.

In connection with the closing,  the Company terminated the October 2002 license
agreement  with  Biowell,  replacing  it with a new  Biowell  license  agreement
granting an exclusive  license in selected Asian countries for an initial period
through  December 31, 2010. If Biowell meets its performance  goals, the license
agreement extends for an additional five year term.  Sub-license payments due to
the Company are 50% for all fees, payments and consideration  received.  Biowell
is  required  to pay a royalty of 10% on all net sales made and is  required  to
meet certain minimum annual net sales in its various territories.

On July 15, 2005, Mr. Robin Hutchison,  resigned as Chief Executive  Officer and
Chairman of the Board of Directors  with Jun-Jei Sheu elected as Chairman of the
Board.

                                       39


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                  JUNE 30, 2005
                                   (Unaudited)


NOTE H- SUBSEQUENT EVENTS (continued)

As part of the  Biowell  acquisition,  the  Company  entered  into a  consulting
agreement with Timpix International Limited for the consulting services of three
former  Biowell  employees,  Jun-Jei  Sheu,  Ben Liang  and  Johnson  Chen.  The
consulting  agreement  is for the  shorter  of two  years,  or until  all of the
consultants  have  obtained  a visa to work in the  United  States  and  execute
employment   agreements  with  the  Company.  Such  consulting  agreement  shall
automatically  renew for one year  periods  until  terminated.  Pursuant  to the
consulting  agreement,  the  Company  shall  pay  $47,000  per  month,  which is
apportioned  at $20,000 per month for Mr. Sheu,  $15,000 per month for Mr. Liang
and $12,000 per month for Mr.  Chen.  In the event that either of Messrs.  Sheu,
Liang or Chen becomes employed by the Company,  the monthly consulting fee shall
be reduced accordingly.

On June 20, 2005,  the Company  entered into an agreement  with Trilogy  Capital
Partners,  Inc.  ("Trilogy") to provide marketing  services to the Company for a
term of one year, and  terminable  thereafter by either party upon 30 days prior
written  notice.  In connection  with the agreement,  we agreed to pay Trilogy a
monthly fee of $12,500. The Company also issued to Trilogy a warrant to purchase
7.5 million shares of common stock at $0.55 per share,  exercisable for a period
of three  years  from  issuance.  The  warrant  contains a  "cashless"  exercise
provision.  The shares underlying the warrants contain  registration rights. The
holder has  contractually  agreed to restrict its ability to convert or exercise
the  warrants  and  receive  shares of our common  stock such that the number of
shares of common  stock held by it after such  conversion  or exercise  does not
exceed 5% of the then issued and outstanding shares of common stock.

In  connection  with the 7,371,000  million  convertible  debt  financing in the
quarter  ended March 30,  2005,  the Company was  obligated  to complete a stock
registration  by July 2005.  Since the  registration  was not  effective by July
2005, the Company anticipates paying the required $257,985 of liquidated damages
in shares of Company  stock  accruing  at the rate of 3.5% per month on the face
value of the Notes. The Company will continue accruing  liquidated damages until
the stock registration is declared effective

Subsequent to June 30, 2005,  the Company issued 8 million S-8 shares to various
employees  with an  approximate  market  value  of  $4.8  million.  These  fully
registered  shares are included within the total  authorized 16 million Employee
Stock Ownership Plan shares, as approved on February 14, 2005.

                                       40


<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

Revenues

From our inception on September  16, 2002,  we have not generated  revenues from
operations.  We believe we will begin generating revenues from operations in the
fiscal year as the Company  transitions  from a development  stage enterprise to
that of an active growth and acquisition stage company.


Costs and Expenses

From  our  inception   through  June  30,  2005,  we  have  incurred  losses  of
$63,279,861.  These  expenses  were  associated  principally  with  equity-based
compensation  to  employees  and  consultants,   warrant  revaluation,   product
development costs and professional services.

Selling,  general and  administrative  expenses  for the nine month period ended
June 30, 2005 compared to same period in 2004 increased  $13.200 million or 220%
to $24.189 million from $10.989 million in the prior period due to financing and
related costs incurred during the March and June 2005 quarters.

Research and Development

In the  nine  month  period  ended  June  30,  2005,  research  and  development
increased to $346,000 from zero for the same period in 2004.

Depreciation and Amortization

In the nine month  period  ended June 30, 2005,  depreciation  and  amortization
increased to $15,000 from $1,000 for the same period in 2004.

Total Operating Expenses

Total  operating  expenses  during the nine  month  period  ended June 30,  2005
increased to $24.550  million from  $10.990  million,  or an increase of $13.560
million as a result of the combination of factors listed above.

Other income/expense

The  Company  realized a fiscal  year to date gain from  change in fair value of
warrant  liability of $16.455  million which compared to zero the same period in
2004.

Interest Expenses

                                       41


<PAGE>


Interest  expense for the nine month  period  ended June 30, 2005  increased  to
$32.373  million from $1.221  million in the same period of 2004, an increase of
$31.152  million  primarily  resulting  from  $23.148  million  initial  warrant
valuation charged to interest expense and $8.004 million in increased  financing
in 2005 as compared to 2004.

Net Loss

Net Loss for the nine month  period  ended June 30,  2005  increased  to $40.465
million from a net loss of $12.2  million in the nine months ended June 30, 2004
as a result of the combination of factors described above.

Liquidity and Capital Resources

For the nine month  period  ended June 30,  2005,  we  generated a net cash flow
deficit from operating activities of $7,986,000,  consisting primarily of fiscal
year  to  date  losses  of   $40,464,827,   $16,454,929  in  gain  from  warrant
revaluation,  $23,148,214 loss in initial warrant valuation,  $13,396,202 in net
stock issued for consulting  services,  $8,836,000 for beneficial  conversion of
convertible  notes  payable and  warrants,  $1,365,000 in stock issued for debt,
$3,241,068 for warrants issued to consultants.

Cash used in investing  activities totaled  $4,347,which was utilized for patent
filings.  Cash provided by financing activities totaled $9,182,000 consisting of
$9,079,000 in proceeds from common stock  subscribed  and $103,000 from warrants
and options.

From our  inception  to June 30, 2005 we have  incurred an  operating  cash flow
deficit of  $11,582,168.  Cash flows used in  investing  activities  was $55,205
during the period from  September 16, 2002 (date of inception)  through June 30,
2005.  We met our cash flow  requirements  through  the  issuance of capital and
other notes payable (net of repayments),  private  placement of our common stock
and advances from our shareholders and officers.

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.

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

From our inception,  our priorities were to recruit and build our team, organize
our new infrastructure and to develop a successful  strategy how best to exploit
our exclusive Biowell license  agreement.  No revenues were generated.  Although
our  management  is of the opinion  that  continuing  to develop and finance our
present business of providing DNA anti-counterfeit  technology may ultimately be
successful,  management  nevertheless  expects  that  we will  need  substantial
additional capital before our operations can be fully implemented.

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 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 our  operating  results  was not  significant.  Our
operations  are located in North America and there are no seasonal  aspects that
would  have  a  material  effect  on  our  financial  condition  or  results  of
operations.

Our independent  certified public accountant has stated in their report included
in our September 30, 2004 Form 10-KSB,  that we have incurred  operating  losses
from   our    inception,  and    that   we   are  dependent  upon   management's

                                       42


<PAGE>


ability to  develop profitable operations.  These factors among others may raise
substantial doubt about our ability to continue as a going concern.

To obtain funding for our ongoing  operations,  we conducted a private placement
offering  in January  and  February  2005,  in which we sold  $7,371,000  of 10%
Secured  Convertible   Promissory  Notes  to  61  investors.   The  10%  Secured
Convertible  Promissory Notes automatically  converted into shares of our common
stock,  at a price of $0.50  per  share,  upon the  filing  of the  registration
statement  on February  15,  2005.  In  connection  with the  private  placement
offering, we have issued 14,742,000 warrants. The warrants are exercisable until
five years from the date of issuance at a purchase price of $0.75 per share.

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

As a  result  of  the  recent  financings,  the  Company  anticipates  expending
$2,764,000 of available cash towards research and development  activities during
the next twelve (12) months.  The anticipated  development  programs  consist of
Petro  Chemical  Marker,  Ink/Substraits  and  Hologram  projects  with  planned
spending of $1,245,000, $747,000 and $772,000, respectively.

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 June 30, 2005, we have mainly relied
on the services of outside  consultants  for services.  We currently  have eight
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.

                                       43


<PAGE>


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  December  31,  2003.  For the fiscal  nine month
period  ending June 30, 2005, we incurred a net loss of  $40,464,827.  We cannot
assure you that we can achieve or sustain profitability on a quarterly or annual
basis in the future.  Our  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
$2,800,000 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.

                                       44


<PAGE>


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 December 31, 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 $22,815,034 during
the period September 16, 2002 (date of inception) through September 30, 2004. In
addition,  we have a deficiency in stockholder's equity of $407,034. 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  losses
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.

Our Acquired  Technology Has Yet to be Independently  Validated In July 2005, we
acquired certain intellectual  property.  Such intellectual property relating to
the botanical DNA,  encapsulation  methods,  integrity of the technology and all
other stated claims by the seller need to be independently  validated by a third
party.  Satisfactory  completion of this independent validation will be required
prior to their being  available for  commercial  sale. In the event that some or
all of the technology  cannot be independently  validated,  we will be unable to
commercially  develop  products  utilizing such  technology,  which could have a
materially adverse effect on our business and results of operations.

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 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

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<PAGE>


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.

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.

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's   Inability   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

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<PAGE>


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.

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. Sheu,  Brocklesby,  Botash 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.
Jun-Jei Sheu, our Chairman of the Board of Directors, Mr. Peter Brocklesby,  our
President,  Mr. Adrian Botash,  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. Sheu,  Brocklesby,  Botash or Klemm. Loss of
the services of Messrs. Sheu, Brocklesby,  Botash or Klemm could have a material
adverse effect on our growth,  revenues,  and  prospective  business.  We     do

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<PAGE>


not maintain key-man insurance on the life of Messrs.Sheu, Brocklesby, Botash or
Klemm. 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 is 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.

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.  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.  Although it is  impossible  to determine the total market size
and market data information  because companies are secretive about what security
methods  they  utilize  and  how  much  they  spend  on such  measures,  we have
determined that annual sales by some of our competitors have been as follows:

     Authentix - $4.7 million
     Inksure - $2.0 million
     DNA Technologies, Inc. - $26 million
     Suretrace - $4.3 million
     November AG - $7 million

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

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<PAGE>


    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.  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.

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<PAGE>


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.

We are  Obligated to Pay  Liquidated  Damages As a Result of Our Failure to Have
this Registration  Statement  Declared Effective Prior to July 15, 2005, and the
Payment of  Liquidated  Damages  Will  Either  Result in  Depleting  Our Working
Capital or Issuance of Shares of Common Stock Which Would Cause  Dilution to Our
Existing Shareholders.

Pursuant  to the terms of our  private  placement  that  closed in  January  and
February  2005,  if we did not have a  registration  statement  registering  the
shares underlying the convertible  notes and warrants  declared  effective on or
before July 15, 2005, we are obligated to pay  liquidated  damages in the amount
of 3.5% per month of the face amount of the notes, which equals $257,985,  until
the  registration  statement  is  declared  effective.   At  our  option,  these
liquidated damages can be paid in cash or restricted shares of our common stock.
We have  currently  decided to pay the  liquidated  damages due at this point in
common stock,  although any future payments of liquidated  damages could be made
in cash.  If we  decide  to pay the  liquidated  damages  in  cash,  we would be
required to use our limited  working capital and  potentially  raise  additional
funds. If we decide to pay the liquidated damages in shares of common stock, the
number of shares issued would depend on our stock price at the time that payment
is due.  Based on the closing market price of $0.66 for our common stock on July
15, 2005, which is when our first payment of liquidate  damages was due, a month
of  liquidated  damages  would result in the issuance of  approximately  390,887
shares of common  stock.  The  issuance  of shares  upon  payment of  liquidated
damages  will have the  effect of  further  diluting  the  proportionate  equity
interest and voting power of holders of our common stock, including investors in
this offering.

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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.

As of August 9,  2005,  we had  110,653,025  shares of common  stock  issued and
outstanding and  outstanding  warrants to purchase  28,713,717  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.

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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  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 June 30, 2005,  our
management  carried  out an  evaluation,  under  the  supervision  of our  Chief
Executive Officer and Chief Financial Officer of the effectiveness of the design
and operation of our 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 on that evaluation,  our chief executive officer and chief financial
officer concluded that our disclosure  controls and procedures are not effective
to provide reasonable  assurance that information we are required to disclose in
reports that we file or submit  under the  Exchange Act is recorded,  processed,
summarized  and reported  within the time periods  specified in  Securities  and
Exchange   Commission  rules  and  forms,  and  that  such  information  is  not
accumulated and  communicated  to our management,  including our chief executive
officer and chief financial officer,  as appropriate,  to allow timely decisions
regarding   required   disclosure.   Please  see  the  subsection   "Significant
Deficiencies In Disclosure Controls And Procedures Or Internal Controls" below.

Changes in internal  controls:  There were no changes in internal  controls over
financial  reporting that occurred during the period covered by this report that
have materially  affected,  or are reasonably likely to materially  effect,  our
internal  control over financial  reporting.  As described below, as a result of
our evaluation of our disclosure controls and procedures as of June 30, 2005, we
determined  that our controls and procedures are not effective and subsequent to
the period of this report, began to implement changes to our internal controls.

Significant   Deficiencies    In  Disclosure Controls And Procedures Or Internal
Controls

On July 11,  2005,  we  determined  there  were  errors  in  accounting  for the
valuation of equity consulting service  transactions  during the January through
March  2005  time  period.  The  valuation  resulted  in  the  overstatement  of
approximately $2.9 million in services  provided.  The errors were discovered in
connection  with a comment  raised by the  Securities  and  Exchange  Commission
("SEC") in their review and comment on our registration  statement on Form SB-2.
The SEC requested that we provided additional  disclosure regarding issuances of
common stock to  non-employees  in exchange for  services.  Upon  reviewing  and
updating our  disclosure,  we discovered  our errors.  We have  implemented  the
following procedures and policies to resolve these weaknesses and deficiencies:

    1   Establish  and  maintain  a  separate  binder  of  all  board authorized
        activities and a binder with forward  looking "budget" of anticipated or
        contemplated  activity for each of the following:

                   a. shares issued for services;

                   b. shares issued for employees;

                   c. warrant exercises;

                   d. option exercises;

                   e. authorized shares and warrant re-pricing;

                   f. shares issued in exchange for debt; and

                   g. upcoming ESOP grants and exercises;

    2   Require the signature of the principal executive and accounting officers
        for all issuances of securities;

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<PAGE>


    3   Require monthly review of share issuances compared to binders; and

    4   Authorize our transfer agent to handle   and track all warrants and ESOP
        grants.

    We believe that these actions will correct   the  material deficiencies  and
    significant  weaknesses  in  our  controls  and procedures.

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<PAGE>


PART II--OTHER INFORMATION

Item 1. Legal Proceedings

From  time to time,  we may  become  involved  in  various  lawsuits  and  legal
proceedings which arise in the ordinary course of business.  However, litigation
is subject to inherent  uncertainties,  and an adverse  result in these or other
matters  may  arise  from  time to time  that may harm our  business.  Except as
described  below,  we are currently not aware of any such legal  proceedings  or
claims that we believe will have,  individually or in the aggregate,  a material
adverse affect on our business, financial condition or operating results.

Stern & Co. v. Applied DNA Sciences, Inc., Case No.: 05 CV 00202

Plaintiff  Stern & Co.  commenced  this action  against us in the United  States
District  Court for the  Southern  District of New York on or about  January 10,
2005. In this  action, Stern & Co.  alleges that it entered into a contract with
us   to   perform media and investor  relations  for a monthly fee of $5,000 and
stock  options.  Stern &  Co.  claims   that we failed to make certain  payments
pursuant to the  contract and seeks  damages in the amount of   $96,042.00.   We
answered the complaint on May 12, 2005, denying Stern & Co.'s allegations and we
asserted a number of defenses. This   action is in the early stages of discovery
and we intend to vigorously defend this matter.

Oceanic Consulting, S.A. v. Applied DNA Sciences, Inc., Index No.: 603974/04

Plaintiff  Oceanic  Consulting,  S.A.  commenced  this action  against us in the
Supreme Court of the State of New York, County of New York. Oceanic  Consulting,
S.A.  asserts a cause of action for breach of contract based upon the allegation
that  we  failed  to make payments pursuant to a consulting  agreement.  Oceanic
Consulting,  S.A.also   asserts    a causes    of  action    in  which it  seeks
reimbursement  of its  expenses and  attorneys'  fees. Oceanic Consulting,  S.A.
seeks damages in the  amount of  $137,500.00.  Oceanic  Consulting,  S.A.  moved
for a default  judgment,  which  we have opposed based upon Oceanic  Consulting,
S.A.'s  failure   to   properly   serve the complaint as well as our meritorious
defenses.  Thereafter, Oceanic Consulting, S.A. agreed  to  withdraw  its motion
for a  default  judgment and accepted  service of our answer on May 23, 2005. We
dispute the allegations of the complaint.  This action is in the early stages of
discovery and we intend to vigorously defend this matter.

Crystal Research Associates, LLC v. Applied   DNA Sciences, Inc.,    Docket No.:
L-7947-04

On April 29, 2005, Crystal Research Associates,  LLC obtained a default judgment
against us in the Superior Court of New Jersey,  Middlesex  County. We intend to
move to  vacate  the  default  judgment  on  various  grounds.  We  dispute  the
allegations of the complaint and we intend to vigorously defend this matter.

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

During the three months ended June 30, 2005, we issued  575,758 shares of common
stock in exchange for debt. We valued the shares issued at  approximately  $0.29
per share for a total of $165,000.  Such issuances were  considered  exempt from
registration by reason of Section 4(2) of the Securities Act of 1933.

During the three  months  ended June 30,  2005,  we issued  1,080,000  shares of
common  stock in exchange for  consulting  services  valued at  $792,300,  which
represents  the  fair  value  of the  services  received  which  did not  differ
materially  from the value of the stock issued.  Such issuances were  considered
exempt from  registration  by reason of Section  4(2) of the  Securities  Act of
1933.

During the three  months ended June 30, 2005,  we granted  3,660,000  options as
part of the  authorized  Employee  Stock  Ownership  Plan  (ESOP) we  adopted on
February 14, 2005.  Such issuances were considered  exempt from  registration by
reason of Section 4(2) of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities

     None.

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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)

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<PAGE>


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly caused  this  Amendment  No. 1 to Form 10-QSB  report 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
                                                 ---------------------
                                              James A. Hayward
                                              Chief Executive Officer (Principal
                                              Executive   Officer  and Principal
                                              Accounting Officer)

                                       56