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



                                  FORM 10-QSB/A
                                 Amendment No. 2


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

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

                  For the Quarterly period ended March 31, 2006

                        Commissions file number 002-90519

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

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


    25 Health Sciences Drive, Suite 113, Stony Brook, New York             11790
--------------------------------------------------------------------    --------

             (Address of Principal Executive Offices)                 (Zip Code)

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



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

                                 Yes |X| No |_|

The number of shares of Common Stock, $0.001 par value, outstanding on March 31,
2006, was 118,582,385 shares, held by approximately 1,380 shareholders.

Transitional Small Business Disclosure Format (check one):

                                 Yes |_| No |X|



<PAGE>


                                EXPLANATORY NOTE

This  Amendment  No. 2 to Form 10-QSB/A  ("Amendment  No. 2") amends the amended
Quarterly Report of Applied DNA Sciences,  Inc. (the "Company") on Form 10-QSB/A
for the quarter ended March 31, 2006, as filed with the  Securities and Exchange
Commission  on May 23, 2006 (the  "Original  Filing").  This  Amendment No. 2 is
being  filed  for  the  purpose  of  correcting  errors  in  accounting  for and
disclosing  the  issuance by the  Company of  warrants to acquire the  Company's
common stock. 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 May 23, 2006, the filing date of the Original Filing.

                            APPLIED DNA SCIENCES, INC


                    Quarterly Report on Form 10-QSB/A for the
                     Quarterly Period Ending March 31, 2006

                                Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

 Condensed Consolidated Balance Sheet:
 March 31, 2006 (Unaudited)                                                   3

 Condensed Consolidated Statements of Losses:
 Three and Six Months Ended March 31, 2006 and 2005 (Unaudited) and
 the Period from September 16, 2002 (Date of Inception) Through March
 31, 2006 (Unaudited)                                                         4

 Condensed Consolidated Statement of Deficiency in Stockholder's Equity:
 For the Period from September 16, 2002 (Date of Inception) Through March
 31, 2006 (Unaudited)                                                         5

 Condensed Consolidated Statements of Cash Flows:
 Six Months Ended March 31, 2006 and 2005 (Unaudited) and
 the Period from September 16, 2002 (Date of Inception) Through March
 31, 2006 (Unaudited)                                                        19

 Notes to Unaudited Condensed Consolidated Financial Information:
 March 31, 2006                                                            21-41

 Item 2. Management Discussion and Analysis                                  42

 Item 3. Controls and Procedures                                             55


 Part II. OTHER INFORMATION

 Item 1. Legal Proceedings                                                   56

 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds         56

 Item 3. Defaults Upon Senior Securities                                     56

                                      1


<PAGE>


 Item 4. Submission of Matters to a Vote of Security Holders                 56

 Item 5. Other Information                                                   56

 Item 6. Exhibits                                                            57


 Signatures                                                                  58

                                      2


<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

                                                                March 31, 2006
                                                             -------------------
<S>                                                          <C>
Current assets:

Cash and Equivalents                                                $    77,715
Advances and other receivables                                            3,128
                                                                    ------------
 Total Current Assets                                                    80,843

 Property and Equipment - Net of accumulated depreciation
 of $6,265                                                               42,337
 Capitalized financing costs                                            390,000
 Deposits and prepaid expenses                                           23,382
 Patents, net of accumulated amortization of $15,168 (Note B)            19,089
 Intellectual property, net of accumulated amortization of
 $1,010,454 (Note B)                                                  8,420,446
                                                                    ------------
 Total Assets                                                       $ 8,976,097
                                                                    ============
                                                                    ============

          LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

 Current Liabilities:
 Accounts Payable and Accrued Liabilities                           $ 3,318,451
 Accrued Liabilities Due Related Parties (Note D)                         2,496
 Note payable-related party (Note C )                                   510,429
                                                                    ------------
 Total Current Liabilities                                            3,831,376

 Warrant Liability (Note G)                                           7,631,128
 Convertible note payable, net of unamortized discount (Note D)         676,790

 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; 118,582,385 shares issued and outstanding                  118,582
 Common Stock Subscription                                            (200,000)
 Additional Paid-In-Capital                                          81,997,006
 Deficit Accumulated During Development Stage                      (85,078,791)
                                                                   -------------
 Total Stockholders' Equity                                         (3,163,197)
                                                                   -------------
 Total Liabilities and Deficiency in Stockholders' Equity          $  8,976,097
                                                                   =============
</TABLE>

See accompanying notes to unaudited consolidated financial statements

                                      3


<PAGE>


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

<TABLE>
<CAPTION>
                                                                                                                      September 16,
                                     For The Three Months Ended March 31      For The Six Months Ended March 31     2002, (Date of
                                                                                                                  Inception) through
                                            2006                 2005               2006              2005          March 31, 2006
                                    --------------------  -----------------   ---------------    --------------   ------------------
                                          RESTATED            RESTATED            RESTATED          RESTATED           RESTATED
<S>                                 <C>                   <C>                 <C>                <C>              <C>
Operating expenses:
Selling, general and administrative $           949,634   $     17,205,512    $     2,794,311    $   22,580,580   $      74,329,915
Research & Development                           75,033                                91,303                               968,711
Depreciation and amortization                   341,676              7,306            684,375            12,027           1,043,802
                                    -------------------   -----------------   ---------------     ------------    -----------------
Total operating expenses                      1,366,343         17,212,818          3,569,989        22,592,607          76,342,428
Loss from operations                         (1,366,343)       (17,212,818)        (3,569,989)      (22,592,607)        (76,342,428)

Net gain/(loss) on revaluation of
warrant liability                             3,967,870         10,775,753         10,756,660        10,775,753          27,457,650

Other Income (expense)                            3,520              3,100              9,493             3,415              40,835
Interest (expense)                             (571,696)       (30,783,777)        (2,350,402)      (32,351,586)        (36,234,848)
Income (taxes) benefit                               --                 --                 --                --                  --
                                    -------------------   ----------------    ---------------    ---------------  ------------------
Net income (loss)                   $         2,033,351   $   (37,217,742)    $     4,845,762    $  (44,165,025)  $     (85,078,791)
                                    ===================   ================    ===============    ===============  =================
Loss per common share
basic                               $              0.02   $          (0.71)   $          0.04    $        (1.11)  $           (1.81)
                                    ===================   ================    ===============    ===============  =================
Diluted                             $              0.02                       $          0.04
                                    ===================                       ===============
Weighted average shares
outstanding -Basic                          116,483,044         53,002,278        114,487,589        40,061,781          47,011,055

Weighted average shares
outstanding -fully
diluted                                     116,533,352                           114,550,086
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                      4


<PAGE>
                         APPLIED DNA SCIENCES, INC
                      (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
  FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH MARCH 31, 2006
                               (Unaudited)
                                RESTATED
<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 the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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 the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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 the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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 the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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 the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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 the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (Continued)
<TABLE>
<CAPTION>
                                                                                                               Deficit
                                                                         Additional                          Accumulated
                                        Preferred              Common      Paid in     Common       Stock       During
                              Preferred   Shares    Common      Stock      Capital      Stock   Subscription Development
                                Shares    Amount    Shares     Amount      Amount    Subscribed  Receivable     Stage      Total
                              --------- --------- ---------- ----------- ----------- ---------- ------------ ----------- ----------
<S>                              <C>    <C>       <C>        <C>         <C>         <C>       <C>        <C>           <C>
Common stock issued in
exchange for consulting
services at $0.46 per
share in September 2004             -         -        5,000       2,500        (212)       -        -           -            2,288

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

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

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

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


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

See accompanying notes to the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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 per share
in November 2004                    -         -      115,000      57,500     108,100        -            -           -     165,600

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

See accompanying notes to the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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
in exchange for note payable in
December 2004                       -         -    5,500,000   2,750,000  (2,661,500)       -            -           -      88,500

Common stock issued in
settlement of debt at  $0.50 per
share in December 2004              -         -    2,930,000   1,465,000        -      (125,000)         -           -   1,340,000

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

Fair value of 55,000 warrants
issued to consultants for
services at $1.31 per warrant in
February 2005                       -         -         -           -         72,017        -            -           -      72,017

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 the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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

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 the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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 the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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)

Common Stock issued in
exchange for consulting services
at $0.60 per share in July 2005     -         -      157,000         157      94,043        -            -           -      94,200

Common Stock issued in
exchange for intellectual property
at $0.67 per share in July 2005     -         -   36,000,000      36,000  24,084,000        -            -           -  24,120,000

Common Stock issued in
exchange for consulting
services at $0.60 per share
in July 2005                        -         -      640,000         640     383,360        -            -           -     384,000

Common Stock issued in
exchange for employee services
at $0.48 per share in July 2005     -         -    8,000,000       8,000   3,832,000        -            -           -   3,840,000
</TABLE>

See accompanying notes to the 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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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 $0.94 per share
in July 2005                        -         -      121,985         121     168,217        -          -            -       168,338

Common Stock issued in
exchange for consulting
services at $0.48 per share
in August 2005                      -         -      250,000         250     119,750        -          -            -       120,000

Common Stock penalty shares
issued pursuant to pending SB-2
registration at $0.62 per share in
September 2005                      -         -      814,158         814     501,858        -          -            -       502,672

Common Stock penalty shares
issued pursuant to pending SB-2
registration at $0.70 per share in
September 2005                      -         -      391,224         391     273,466        -          -            -       273,857

Common Stock issued in
exchange for consulting
services at $0.94 per share
in September 2005                   -         -      185,000         185     173,715        -          -            -       173,900

Common Stock returned in
September 2005, previously
issued for services rendered at
$0.40 per share                     -         -     (740,000)       (740)   (453,232)    56,000     1,000           -      (396,972)

Net Loss                                                                                                   (67,109,519) (67,109,519)
                              --------- --------- ---------- ----------- ----------- ---------- --------- ------------  -----------
Balance as of September
30, 2005                         60,000 $      6 112,230,392 $   112,230  82,320,715 $   20,000 $      -  $(89,924,553) $(7,471,602)
                              ========= ======== =========== =========== =========== ========== ========= ============  ===========
</TABLE>

See accompanying notes to the financial statements

                                      17


<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 MARCH 31, 2006
                               (Unaudited)
                                RESTATED
                               (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 pursuant
to subscription at $0.50 per
share in October 2005               -         -      400,000         400     199,600   (200,000)         -           -           -

Common Stock issued in
exchange for consulting
services at $0.75 per share
in October 2005                     -         -      100,000         100      74,900        -            -           -       75,000

Common Stock returned in
October 2005, previously
issued for services
rendered at $0.60 per share         -         -     (350,000)       (350)   (209,650)       -            -           -     (210,000)

Common stock issued pursuant
to subscription at $0.50 per
share in December 2005              -         -       40,000          40      19,960    (20,000)         -           -           -

Common Stock issued to investors
pursuant to registration rights
agreement at $0.51 per share in
December 2005                       -         -      505,854         506     257,480        -            -           -      257,986

Common Stock returned in
January 2006, previously issued
for services rendered at $0.60
per share                           -         -     (250,000)       (250)   (149,750)       -            -           -     (150,000)

Common Stock issued to investors
pursuant to registration rights
agreement at $0.32 per share
in January 2006                     -         -      806,212         806     257,182        -            -           -      257,988

Common Stock issued to investors
pursuant to registration rights
agreement at $0.20 per share
in January 2006                     -         -    1,289,927       1,290     256,695        -            -           -      257,985

Fair value of 200,000 warrants
issued to consultants for
services at $.21 per warrant in
January 2006                        -         -          -            -       43,098        -            -           -       43,098

Common Stock issued in
exchange for consulting services
at $0.17 share in February 2006     -         -      160,000         160      27,040        -            -           -       27,200

Common Stock issued in
exchange for consulting services
at $0.16 share in February 2006     -         -    3,800,000       3,800     604,200        -            -           -      608,000

Previously issued warrants
reclassed to warrant liability      -         -          -            -   (1,584,614)       -            -           -   (1,584,614)

Common Stock returned in
March 2006, previously issued
for services rendered at $0.80
per share                           -         -     (150,000)       (150)   (119,850)       -            -           -     (120,000)

Net Income                          -         -          -            -           -         -            -    4,845,762   4,845,762
                              --------- --------- -----------  --------- ----------- ---------- ----------- -----------  ----------
Balance as of March 31, 2006     60,000       6   118,582,385    118,582  81,997,006   (200,000)         -  (85,078,791) (3,163,197)
                              ========= ========= ===========  ========= =========== ========== =========== ===========  ==========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                      18
<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 Six Month Ended      Inception)
                                                                                           March 31,    March 31,   through March 31
                                                                                               2006         2005           2006
                                                                                           -----------------------------------------
                                                                                             RESTATED      RESTATED      RESTATED
<S>                                                                                        <C>          <C>            <C>
Cash Flows (used in) operating activities:
Net income (loss)                                                                          $ 4,845,762  $(44,165,025)  $(85,078,791)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization                                                                  684,375        12,027      1,031,887
Organizational expenses                                                                             --            --         88,500
Preferred shares issued in exchange for services                                                    --            --      1,500,000
Warrants issued to  in exchange for services                                                    43,100     3,241,069      9,421,530
 Income attributable to re-pricing of warrants                                             (10,756,660)  (10,775,753)   (27,457,651)
Financing costs attributable to the issuance of warrants                                     2,271,000    23,148,214     25,418,674
Amortization of beneficial conversion feature                                                       --     8,836,000     10,461,000
Amortization of debt discount attributable to convertible debentures                            35,390                       35,390
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 connection with penalty shares pursuant to pending SB-2 registration    773,958            --      1,550,487
Common stock issued in exchange for  services                                                  710,200    12,399,702     31,284,573
Common stock issued in exchange for intellectual property in connection with costs
acquiring intangible assets                                                                         --            --     14,689,100
Common stock canceled--previously issued for services rendered                                (480,000)     (142,098)    (1,343,845)
Increase (decrease)  in assets and liabilities:
Other current receivable                                                                         9,301                          233
Other Assets                                                                                    (9,120)      (23,941)       (26,743)
Due  related parties, net                                                                        2,496       (20,631)        55,158
Accounts payable and accrued liabilities                                                       742,575      (140,782)     3,142,529
                                                                                           -----------  ------------   ------------
Net cash (used in) operating activities                                                     (1,127,623)   (6,086,218)   (13,862,969)

Cash flows from investing activities:
Acquisition of property and equipment                                                          (35,852)           --        (48,602)
Payment of  patent filing fees                                                                      --        (4,347)       (25,698)
                                                                                           -----------  ------------   ------------
Net cash (used in) investing activities                                                        (35,852)       (4,347)       (74,300)

Cash flows from financing activities:
Proceeds from sale of common stock, net of cost                                                     --            --        432,000
Proceeds from  issuance  of convertible debt                                                 1,210,000     8,961,000     10,414,000
Proceeds from exercise  of options and warrants                                                     --       102,750        343,750
Payment of debt                                                                                                             (24,854)
Net advances from shareholders                                                                      --            --        100,088


See accompanying notes to unaudited condensed consolidated financial statements

</TABLE>

                                      19


<PAGE>


<TABLE>
<CAPTION>
                                                                                                                      For the Period
                                                                                                                       September 16,
                                                                                                                           2002
                                                                                                                         (Date of
                                                                                           For the Six Month Ended      Inception)
                                                                                           March 31,    March 31,   through March 31
                                                                                               2006         2005           2006
                                                                                           -----------------------------------------
                                                                                             RESTATED      RESTATED      RESTATED
<S>                                                                                        <C>          <C>            <C>
Proceeds from loans                                                                                 --            --      2,750,000
                                                                                           -----------  ------------   ------------
Net cash provided by financing activities                                                    1,210,000     9,063,750     14,014,984
Increase (decrease) in cash and cash equivalents                                                46,525     2,973,185         77,715
Cash and cash equivalents, beginning of  period                                                 31,190         1,832             --
                                                                                           -----------  ------------   ------------
Cash and cash equivalents, end of period                                                   $    77,715  $  2,975,017   $     77,715
                                                                                           ===========  ============   ============
Supplemental Information:
Cash paid during the period for interest                                                            --            --             --
Cash paid during the year for taxes                                                                 --            --             --

Non--cash disclosures:
Common stock issued for services                                                               710,200    12,399,702     31,284,573
Common stock issued in exchange for previously incurred debt                                        --     2,313,500      2,313,500
Amortization of beneficial conversion feature attributed to convertible notes                       --     8,836,000     10,461,000

Warrants issued in exchange for financing costs                                              2,271,000    23,148,214     25,418,674

Common stock canceled--previously issued for services rendered                                (480,000)     (142,098)    (1,343,845)
Preferred shares issued in exchange for services                                                    --            --      1,500,000
Warrants issued to consultants                                                                  43,100     3,241,069      9,421,530
Acquisition:
Common stock retained                                                                                             --          1,015
Assets acquired                                                                                                   --           (135)
                                                                                                                       ------------
Total consideration paid                                                                                          --            880
                                                                                                                       ============
Organization expenses-- note  issued in exchange of  shares retired                                               --         88,500
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements

                                      20


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (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 six month  periods ended March 31, 2006 are
not  necessarily  indicative  of the results that may be expected for the fiscal
year ended September 30, 2006. The unaudited  condensed  consolidated  financial
statements  should be read in conjunction  with the  consolidated  September 30,
2005 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  March  31,  2006,  the  Company  has  accumulated  losses of
$85,078,791.

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 March 31, 2006
property and equipment consist of:

<TABLE>
<CAPTION>
<S>                             <C>
Computer equipment              $ 15,328
Furniture                         33,274
Accumulated  depreciation        (6,265)
                                --------
Net                             $ 42,337
</TABLE>

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.

                                      21


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

The Company did not grant any stock  options to  employees  during the six month
period ended March 31, 2006.  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:

<TABLE>
<CAPTION>
                                                                                                            For the Period
                                                                                                             September, 16
                                  For Three         For Three                                                2002 (Date of
                                    Three             Three            For The Six       For The Six          Inception
                                 Months ended     Months ended         Months ended      Months ended          through
                                   March 31,        March 31,            March 31,         March 31,           March 31,
                                     2006             2005                 2006              2005                2006
<S>                               <C>             <C>                   <C>              <C>                 <C>
Net  income   (loss)  -  as
reported                          $2,033,351      $(37,217,742)         $4,845,762       $(44,165,025)       $(85,078,791)

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                             $2,033,351      $(38,624,092)         $4,845,762       $(45,571,375)       $(86,485,141)
                                  ==========      ============          ==========       ============        ============

Net      income      (loss)
attributable    to   common
stockholders - Pro Forma          $2,033,351      $(38,624,092)         $4,845,762       $(45,571,375)       $(86,485,141)
                                  ==========      ============          ==========       ============        ============

Basic  income   (loss)  per
share - as reported               $    (0.02)     $      (0.71)         $     0.04       $      (1.11)
                                  ==========      ============          ==========       ============

Basic  income   (loss)  per
share - Pro Forma                 $    (0.02)     $      (0,73)         $     0.04       $      (1.14)
                                  ==========      ============          ==========       ============

 Fully diluted income per
    share - as reported           $     0.02               N/A          $     0.04                N/A                 N/A

 Fully diluted income per
     share - Pro Forma            $     0.02               N/A          $     0.04                N/A                 N/A
</TABLE>

                                      22


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

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 Company's  consolidated
financial statements.

Concentrations of Credit Risk

Financial instruments and related items which potentially subject the Company to
concentrations  of credit risk consist  primarily of cash, cash  equivalents and
trade  receivables.  The Company places its cash and temporary cash  investments
with credit quality institutions. At times, such investments may be in excess of
the FDIC insurance limit. The Company periodically reviews its trade receivables
in determining its allowance for doubtful accounts. At March 31, 2006, allowance
for doubtful receivable was $0.

Derivative Financial Instruments

The Company's derivative  financial  instruments consist of embedded derivatives
related to the 10% Secured  Convertible  Promissory  Notes (the "Serial  Notes")
entered into on March 7, 2006 (see Note D). These embedded  derivatives  include
certain  conversion  features,  variable  interest  features,  call  options and
default provisions. The accounting treatment of derivative financial instruments
requires that the Company record the derivatives  and related  warrants at their
fair  values  as of the  inception  date of the  Note  Agreement  (estimated  at
$858,160)  and at fair  value  as of each  subsequent  balance  sheet  date.  In
addition,  under  the  provisions  of EITF  Issue  No.  00-19,  "Accounting  for
Derivative  Financial  Instruments  Indexed  to, and  Potentially  Settled in, a
Company's  Own  Stock," as a result of entering  into the Notes,  the Company is
required to  classify  all other  non-employee  stock  options  and  warrants as
derivative  liabilities and mark them to market at each reporting date. The fair
value of such options and warrants that were  reclassified  as liabilities  from
additional  paid-in  capital  in the six months  ended  March 31,  2006  totaled
$1,584,614. Any change in fair value will be recorded as non-operating, non-cash
income or expense at each reporting  date. If the fair value of the  derivatives
is higher at the  subsequent  balance  sheet  date,  the  Company  will record a
non-operating, non-cash charge. If the fair value of the derivatives is lower at
the  subsequent  balance  sheet  date,  the Company  will record  non-operating,
non-cash income.  Conversion-related  derivatives were valued using the Binomial
Option  Pricing  Model with the  following  assumptions:  dividend  yield of 0%;
annual  volatility  of 157.55%;  and risk free interest rate of 4.82% as well as
probability  analysis  related to trading  volume  restrictions.  The  remaining
derivatives  were valued using  discounted cash flows and probability  analysis.
The derivatives are classified as long-term liabilities (see Note F).

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
adopted  this  interpretation  from  January  1,  2006.  The  adoption  of  this
Interpretation  did not have a  material  impact on its  consolidated  financial
position, results of operations or cash flows.

                                      23


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

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  adopted of this SFAS with its  restatements
included within.

On February 16, 2006 the Financial Accounting Standards Board (FASB) issued SFAS
155,  "Accounting  for  Certain  Hybrid  Instruments,"  which  amends  SFAS 133,
"Accounting for Derivative  Instruments and Hedging  Activities,"  and SFAS 140,
"Accounting for Transfers and Servicing of Financial Assets and  Extinguishments
of  Liabilities."  SFAS 155  allows  financial  instruments  that have  embedded
derivatives  to be accounted for as a whole  (eliminating  the need to bifurcate
the  derivative  from its host) if the holder  elects to  account  for the whole
instrument on a fair value basis.  SFAS 155 also  clarifies  and amends  certain
other  provisions of SFAS 133 and SFAS 140. This  statement is effective for all
financial  instruments  acquired  or  issued  in fiscal  years  beginning  after
September  15,  2006.  The  Company  does not  expect its  adoption  of this new
standard  to have a  material  impact  on its  financial  position,  results  of
operations or cash flows.

In March 2006, the FASB issued FASB Statement No. 156,  Accounting for Servicing
of Financial  Assets - an amendment to FASB  Statement  No. 140.  Statement  156
requires that an entity recognize a servicing asset or servicing  liability each
time it undertakes an obligation to service a financial asset by entering into a
service  contract  under certain  situations.  The new standard is effective for
fiscal years beginning after September 15, 2006. The Company does not expect its
adoption  of this  new  standard  to have a  material  impact  on its  financial
position, results of operations or cash flows.


NOTE B - ACQUISITION OF INTANGIBLE ASSETS

The Company has adopted  SFAS No. 142,  Goodwill  and Other  Intangible  Assets,
whereby the Company  periodically test its intangible assets for impairment.  On
an annual basis, and when there is reason to suspect that their values have been
diminished or impaired, these assets are tested for impairment,  and write-downs
will be included in results from operations.


Biowell Technology, Inc.

On July 12, 2005, the Company  acquired  certain  intellectual  properties  from
Biowell  Technology,  Inc.  ("Biowell")  through  an  Asset  Purchase  Agreement
("Agreement")  in exchange  for 36 million  shares of the  Company's  restricted
common  stock  having  an  aggregate  fair  value  at the  date of  issuance  of
$24,120,000.   The  intangible   assets  acquired  consist  of  proprietary  DNA
anti-counterfeit  trade secrets  created by Biowell that are intended to protect
intellectual property from counterfeiting,  fraud, piracy, product diversion and
unauthorized intrusion.

                                      24


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE B - ACQUISITION OF INTANGIBLE ASSETS (continued)

The purchase price has been allocated as follows:

Amortizable intangible assets acquired are comprised of:

<TABLE>
<CAPTION>
<S>                                                     <C>
Developed core technologies                              $ 2,260,900
Developed product technologies                             7,170,000
                                                         -----------
Total amortizable intangible assets                        9,430,900
Transaction costs                                         14,869,100
                                                         =----------
Total purchase price                                     $24,120,000
                                                         ===========

</TABLE>


In Process Research & Development

The Company  concluded as of the date of  acquisition,  the acquired  intangible
assets,  consisting of developed core and product  technologies had reached full
development  and that it was not the  intention of the  Company's  management to
utilize the asset in specific research and development  activities as defined in
SFAS No. 2 Accounting for Research & Development Costs, As a result, the Company
determined there was no in-process  research and development ("IPR& D") projects
in place  related  to the  technology  acquired , nor any  future  research  and
development  activities planned.  Accordingly,  there is no charge to operations
during  the year  ended  September  30,  2005 for IPR&D in  connection  with the
acquisition of the assets.

Transaction costs

The  amount of the  purchase  price  that  could not be  allocated  to  acquired
identifiable  intangible  assets or IPR & D was  $14,689,100  and was charged to
operations  as a cost of the  transaction  during the year ended  September  30,
2005.

The  identifiable  intangible  assets acquired and their carrying value at March
31, 2006 are:

<TABLE>
<CAPTION>
                                                                                         Weighted
                          Gross Carrying                                                 Average
                              Amount       Accumulated                   Residual     Amortization
                                          Amortization        Net          Value         Period
                                                                                        (Years)
<S>                       <C>             <C>           <C>             <C>           <C>
Amortizable
 Intangible
 Assets:
Trade secrets  and
developed technologies
                          $9,430,900      $1,010,454    $8,420,446            -             7
Patents                       34,237          15,148        19,089            -             5
                          ----------     -----------    ----------      --------      -------

Total
 Amortized
 Identifiable
 Intangible Assets        $9,465,137      $1,025,602    $8,439,535            -           6.99
</TABLE>

                                      25


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE B - ACQUISITION OF INTANGIBLE ASSETS (continued)

Total amortization  expense charged to operations for the six months ended March
31, 2006 and 2005 were $677,040 and $7,306 respectively.


Estimated amortization expense as of March 31, 2006 is as follows:

<TABLE>
<CAPTION>
        <S>                         <C>
         2006                        $ 1,357,279
         2007                          1,357,279
         2008                          1,349,748
         2009                          1,349,271
         2010 and after                3,704,998
                                     -----------
         Total                       $ 9,116,575
                                     ===========
</TABLE>


NOTE C- RELATED PARTY TRANSACTIONS

At March 31, 2006, related party notes payable is as follows:

<TABLE>
<CAPTION>
<S>                                                                                  <C>
4%  Convertible  Note  Payable,  unsecured,  to related party and due August 1,
2005;  currently  in  default.  Note  holder  has the  option to covert  unpaid
principal  together with any accrued and unpaid  interest to 180,000  shares of
the Company's common stock.                                                          $ 410,429

7.5% note payable to  BioCogent,  Ltd, an entity  controlled  by the  Company's
President and CEO;  unsecured and repayment of principal and accrued and unpaid
interest  due upon the earlier of the (i) receipt by the Company of $250,000 in
debt or equity or other infusion of capital or (ii) by June 30, 2006                   100,000
                                                                                     ----------
                                                                                       510,429
Less: Current portion                                                                 (510,429)
                                                                                     ----------
                                                                                     $     -0-
                                                                                     ----------
</TABLE>


In February,  2005 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. There
was $2,496 in advances due at March 31, 2006.

                                      26


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE C- RELATED PARTY TRANSACTIONS (continued)

On July 15, 2005,  the Company  entered into a consulting  agreement with Timpix
International  Limited  ("Timpix") for the  consulting  services of three former
Biowell employees, Drs. 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.  The consulting  agreement shall  automatically  renew for one
year periods until terminated. Pursuant to the consulting agreement, the Company
is obligated to 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 us,  the  monthly  consulting  fee  shall  be  reduced  accordingly.  We have
negotiated an agreement in principle to restructure  the  Consulting  Agreement,
whereby,  fees owed to  Timpix  from July  2005  through  December  2005 will be
waived,  and salaries for each of the three consultants will be reduced starting
January 1, 2006.

In July 2005, the Company entered into a license agreement with Biowell, whereby
the  Company  granted  Biowell  an  exclusive  license  to  sell,   market,  and
sub-license the Company's  products in selected Asian  countries.  The exclusive
license for such selected territories is for an initial period of until December
31, 2010, and if Biowell meets its performance goals, the license agreement will
extend for an additional five year term. The license agreement gives Biowell the
initial rights to future anti-fraud biotechnologies developed by the Company and
also new applications for the existing  technology that may be developed for the
marketplace  as long as the license  agreement  remains in effect.  In the event
that Biowell shall  sub-license  the products  within its  territories,  Biowell
shall pay the Company 50% of all fees,  payments  or  consideration  or any kind
received in connection with the grant of the sublicense.  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. Cumulative royalties earned
from the period July 2005 through March 31, 2006 totaled $20,532.

On March 29, 2006, the Company borrowed $100,000 in the aggregate,  at a rate of
7.5% per annum, from BioCogent, Ltd., ("BioCogent"), an entity controlled by the
Company's President and Chief Executive Officer. These loans are due and payable
upon the earlier to occur of (1) the close of business on June 30, 2006,  or (2)
the closing of the issuance and sale by the Company of its  securities for gross
proceeds of at least $250,000.


NOTE D - PRIVATE PLACEMENT OF CONVERTIBLE NOTES

10% Secured Convertible Promissory Notes dated March 8, 2006

On March 8, 2006, in connection with a private placement, the Company issued 10%
Secured  Convertible  Promissory  Notes in the  aggregate  principal  amount  of
$1,500,000 (the "Serial Notes") and warrants to purchase 3,000,000 shares of the
Company's common stock to accredited  investors.  The Serial Notes bear interest
at 10%,  mature on  September  7, 2007 and are  convertible  into the  Company's
common stock, at the holder's option, at fifty cents ($.50) per share during the
period from the date of issuance  (March 8, 2006) through March 7, 2007.  Should
the holder of the Serial Note elect not to convert to the Company's common stock
on or before March 7, 2007, the  outstanding  principal,  along with accrued and
unpaid  interest  automatically  converts to the  Company's  common  stock at an
amount  equal to 80% of the average bid price of the  Company's  common stock on
the Over-The-Counter Bulletin Board for a period equal to ten (10) days prior to
conversion on the maturity date of September 7, 2007. The full principal  amount
of the Serial Notes is due upon a default under the terms of the Note Agreement.
In addition, the Company granted the Investors a security interest in all of its
assets (see Note B). The Company  agreed to file a  registration  statement with
the SEC to effect the  registration of the shares of its common stock underlying
the Serial Notes and the warrants  within 30 days of the  effective  date of the
Company's pending Registration  Statement being declared effective.  The Company
also  agreed  to use its  reasonable  best  efforts  to cause  the  registration
statement to be declared  effective no later than 180 days after its filing.  If
the  registration  statement  is not filed and  declared  effective as described
above,  the Company  will be required to pay  liquidated  damages in the form of
cash to the holders of the Serial Notes,  in an amount equal to 2% of the unpaid
principal  balance per month if the above deadlines are not met. In the event of
a default on the Serial  Notes,  the Serial  Notes will bear  interest at twelve
percent (12%) per annum until paid.

                                      27


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE D - PRIVATE PLACEMENT OF CONVERTIBLE NOTES (continued)

The warrants are exercisable  until five years from March 8, 2006 until March 7,
2011 at a price of $0.50 per  share.  The  Company  has the  right,  but not the
obligation, to call these warrants for $1.25 per share at the earlier of (i) one
year from  issuance or (ii) the date that shares of common stock  issuable  upon
conversion of the Serial Notes and exercise of the warrants are  registered  for
resale and the  Company's  common  stock  trades at or above $1.25 per share for
twenty (20)  consecutive  trading days. The Notes include certain  features that
are considered embedded derivative financial  instruments,  such as a variety of
conversion  options,  a variable interest rate feature,  events of default and a
variable liquidated damages clause.

The  initial  relative  fair value  assigned  to the  embedded  derivatives  was
$346,500.

In conjunction with the Notes, the Company issued warrants to purchase 3,000,000
shares of common stock. The accounting treatment of the derivatives and warrants
requires  that the  Company  record the  warrants at their fair values as of the
inception date of the debt issuance, which totaled $512,100.

The Company  recorded the fair value of the derivatives  ($346,500) and warrants
($ 512,100) to debt discount,  aggregating $858,600,  which will be amortized to
interest  expense  over the  term of the  Notes.  Amortization  of  $35,390  was
recorded for the six months ended March 31, 2006.

Balance of convertible note as of March 31, 2006, net of
unamortized discount:                                                  $676,790
---------------------------------------------------------------        ========

The market price of the Company's common stock significantly  impacts the extent
to which the Company may be required or may be  permitted  to convert the Serial
Notes into shares of the Company's  common stock.  The lower the market price of
the Company's common stock at the due date of September 7, 2007, the more shares
the Company will need to issue to convert the  principal  and interest  payments
then due on the 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.

$ 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.

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 2,930,000  shares of the
Company's common stock.

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

                                      28


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)


NOTE D - PRIVATE PLACEMENT OF CONVERTIBLE NOTES (continued)


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 March 31, 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:



    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  warrants as  derivative
liabilities  and mark then 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  at March 31,  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.

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.

                                      29


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)


NOTE D - PRIVATE PLACEMENT OF CONVERTIBLE NOTES (continued)

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.


In conjunction  with raising capital through the issuance of Convertible  Notes,
the Company has issued warrants that have 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.

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
                                                   Remaining              Weighted           Weighted         Exercisable
                             Number               Contractual              Average           Average           Weighted
         Exercise                                                         Exercise                              Average
         Prices            Outstanding           Life (Years)              Price           Exercisable      Exercise Price
     ================    ===============    =======================    ===============    ==============   =================
     <S>                 <C>                <C>                        <C>                <C>              <C>
          $0.10                 105,464              3.29                  $0.10                105,464         $0.10
          $0.20                   5,000              2.64                  $0.20                  5,000         $0.20
          $0.50               8,850,000              4.72                  $0.50              8,550,000         $0.50
          $0.55               9,000,000              2.22                  $0.55              9,000,000         $0.55
          $0.60               9,132,000              3.13                  $0.60              9,132,000         $0.60
          $0.70                 950,000              1.64                  $0.70                950,000         $0.70
          $0.75              17,727,000              3.50                  $0.75             17,727,000         $0.75
          $1.00                 100,000              .55                   $1.00                100,000         $1.00
                         ---------------                                                  --------------
                             45,569,464                                                      45,569,464
                         ===============                                                  ==============
</TABLE>

                                      30


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE E - STOCK OPTIONS AND WARRANTS (continued)

Transactions involving warrants are summarized as follows:

<TABLE>
<CAPTION>

                                               Number of           Weighted
                                                 Shares            Average
                                                                  Price Per
                                                                   Share
<S>                                       <C>                 <C>
Balance, September 30, 2003                       383,500                $1.38
Granted                                         4,574,753                 0.58
Exercised                                         (88,000)                1.00
Canceled or expired                                     -                    -
                                          ----------------    -----------------
Balance, September 30, 2004                     4,870,253                $0.63
Granted                                        32,873,000                 0.71
Exercised                                        (142,500)               .0.34
Canceled or expired                              (731,289)                0.65
                                          ----------------    -----------------
Balance, September 30, 2005                    36,869,464                 0.67
Granted                                         8,700,000                 0.51
Exercised                                               -                    -
Canceled or expired                                     -                    -
                                          ----------------    -----------------
 Outstanding at March 31, 2006                 45,569,464                $0.63
                                          ================    =================
</TABLE>



In  December  2005,  in  connection  with debt  financing,  the  Company  issued
5,500,000 warrants to non-employees to purchase the Company's common stock at an
exercise  price of $0.50 per  share.  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 fair value of the warrants at the date of issuance was recorded as a
warrant  liability of $1,758,900 and charged to operations as interest  expense.
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) dividends yield of 0%; (2) expected volatility of 156.19%, (3)
risk-free interest rate of 4.35%, and (4) expected life of 5 years.

During  the six  months  ended  March  31,  2006,  and in  connection  with debt
financing,  the Company issued 200,000 warrants to purchase the Company's common
stock at an exercise  price of $0.70,  expiring  in five  years.  The fair value
attributable   to  the  warrants  of  $43,098  was  charged  to  current  period
operations.

In the six months ended March 31, 2006, the Company granted  3,000,000  warrants
to holders of the Company's convertible notes (See Note D). The warrants have an
exercise price of $0.50 per with a five year life. Under certain conditions,  as
described in Note D, the Company as the option to redeem these warrants.

In accordance with SFAS 133  "Accounting for Derivative  Instruments and Hedging
Activities",  the Company  revalued  the warrants as of March 31, 2006 using the
Black-Scholes option pricing model. The difference between the fair value of the
warrants as of March 31. 2006 and the previous  valuation  as of July,  2005 has
been recorded as a gain on revaluation of warrant liability, and included in the
accompanying consolidated financial statements (see Note F)

Employee Stock Options

On February 15, 2005, the Company  established an Employee Stock  Ownership Plan
(ESOP), authorizing 16 million shares for the future issuance of incentive stock
options, non-statutory options and shares of common stock. Incentive options and
shares of common  stock are  issued at fair  market  value  while  non-statutory
options  are issued at 110% of fair  market  value.  3.660  million  shares were
granted as  incentive  stock  options  and vested as  follows;  50% or option to
purchase  1.830  million  shares of common stock  vesting on April 1, 2005,  25%
vesting on July 1, 2005 and the  remaining  25%  vesting on October 1, 2005.  No
ESOP shares were  exercised as of June 30,  2005.  ESOP grants must be exercised
within five (5) years. Had the Company charged these warrants to operations, the
resulting expense would have totaled $1,406,350.

                                      31


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE E - STOCK OPTIONS AND WARRANTS (continued)

The  following  table  summarizes  the  changes in options  outstanding  and the
related prices for the shares of the Company's  common stock issued to employees
of the Company under a non-qualified employee stock option plan.


<TABLE>
<CAPTION>
             Options Outstanding                    Options Exercisable
--------------------------------------------------------------------------------
<S>          <C>              <C>            <C>        <C>           <C>
                              Weighted
                               Average       Weighted                  Weighted
                              Remaining       Average                   Average
   Exercise     Number        Contractual    Exercise      Number      Exercise
   Prices      Outstanding    Life (Years)    Price      Exercisable     Price

$     0.68     3,660,000      3.50          $ 0.68         3,660,000    $  0.68

</TABLE>

Transactions  involving  stock  options  issued to employees  are  summarized as
follows:

<TABLE>
<CAPTION>
                                                            Weighted
                                                            Average
                                                            Exercise
                                         Number of         Price Per
                                           Shares            Share
<S>                                     <C>              <C>

Outstanding at October 1, 2004                     -      $          -
       Granted                             3,660,000              0.68
       Exercised                                   -                 -
       Cancelled or expired                        -                 -
                                        -------------
Outstanding at September 30, 2005          3,660,000      $       0.68
       Granted                                     -                 -
       Exercised                                   -                 -
       Canceled or expired                         -                 -
                                        -------------
Outstanding at March  31, 2006             3,660,000      $       0.68
</TABLE>


Employee  options  outstanding and options  exercisable at March 31, 2006 had no
intrinsic value. Aggregate intrinsic value represents the difference between the
Company's  closing  stock price on the last  trading  day of the fiscal  period,
which was $ .19 as of March 31, 2006, and the exercise  price  multiplied by the
number of options outstanding.  Total intrinsic value of options exercised was $
0 for  the  three  months  ended  March  31,  2006.  There  was no  unrecognized
stock-based  compensation expense related to non-vested stock options during the
three months ended March 31, 2006.

NOTE F - DEBT DERIVATIVE AND WARRANT LIABILITY

In accordance with SFAS 133  "Accounting for Derivative  Instruments and Hedging
Activities  and EITF 00-19  "Accounting  for  Derivative  Financial  Instruments
Indexed to, and  Potentially  Settled in, a  Company's  Own Stock",  the Company
accounted  for  identified  embedded  derivatives  and  warrants to purchase its
common  stock  that  provide  for  the  payment  of  liquidated  damages  if the
stipulated registration deadlines were not met as liabilities.

As of the  date of this  filing,  the  registration  statement  has not yet been
declared  effective  by the SEC.  The Company  determined  the fair value of the
embedded  derivatives  and valued the warrants  using the  Black-Scholes  option
pricing model.  Assumptions  regarding the life were one to five years, expected
dividend yield of 0%, a risk free rate of 4.55%,  and a volatility of 42.8%. The
determined value of both the warrants and the underlying embedded derivatives as
of March  31,  2006 was  $7,631,129.  The net  change  in the fair  value of the
derivative and warrant liability values from December 31, 2005 has been recorded
as a gain  from  change  in  debt  derivative  and  warrant  liabilities  in the
consolidated condensed statement of operations.

                                      32


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE G - 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
expired 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  had an option  through  December  10,  2004 to  acquire  the  remaining
1,000,000 shares from the former  controlling owner in exchange for $11,500.  On
June 30, 2003, the Company retired the 7,500,000 shares common acquired pursuant
to the option agreement.

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

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

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

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

During the fiscal year ended  September 30, 2004, the Company  issued  5,149,472
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

                                      33


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE G - CAPITAL STOCK (continued)

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.

During the fiscal year ended  September 30, 2005, the Company issued  11,040,647
shares of common stock, net of cancellation of 2,329,600 shares, in exchange for
consulting  and  employee  services.  The  Company  valued the shares  issued at
$13,008,371,  net of cancellation of $1,328,269, 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, 2005, the Company  issued  1,500,000
shares of common stock for shares  previously  subscribed at approximately  $.54
per share.

During the fiscal year ended  September  30, 2005,  the Company  issued  267,500
shares of common stock for warrants and options exercised at approximately $0.39
per share

During the fiscal year ended September 30, 2005, the Company retired  $1,796,057
of convertible notes payable for 5,363,809 shares of common stock. The Notes are
convertible into shares of common stock at a price of $0.34 per share.

During the fiscal year ended  September 30, 2005, the Company issued  14,442,000
shares of common  stock at $0.50 per share  pursuant  to the  exercise  terms of
notes  payable.  This  issuance is considered  exempt under  Regulation D of the
Securities Act of 1933 and Rule 506 promulgated thereunder.

In October 2004,  the Company  issued 500,000 shares of common stock in exchange
for debt at $0.50 per share.

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  February  2005,  the  Company in  exchange  for a related  party note in the
outstanding  principal  amount of $600,000 and as settlement  for certain claims
related thereto issued  1,500,000  shares of common stock using a price of $1.31
per share. (See note D)

In March,  2005,  the Company  granted an aggregate of 300,000  stock options to
employees  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 and $0 was charged to operations during
the period ended March 31, 2005 and 2004, respectively.

In June 2005, the Company  cancelled  300,000 stock options  previously  granted
valued at  $180,000.  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.

In July 2005, the Company issued 36 million shares in exchange for  intellectual
property at approximately $0.67 per share for a total of $24,120,000.  The value
of the  acquired  intangible  assets was  established  at  $9,430,900,  with the
balance of the purchase price,  or $14,689,100,  charged to operations as a cost
of the transaction. (See Note B)

                                      34


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE G - CAPITAL STOCK (continued)

In 2005,  the  Company  issued  8,550,000  shares of its  common  stock  without
restriction to employees in exchange for services  rendered.  The Company valued
the  shares  issued at market  value and  charged  operations  in the period the
shares were issued.  The Company is investigating the circumstances  surrounding
the issuance of the shares and the possible  subsequent resale of certain of the
shares on the open market and the  possibility of violations of securities  laws
(see Note H).

In September  2005, the Company issued  814,158  penalty shares  pursuant to the
pending SB-2  registration  terms.  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  paid 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 for the month of July and August 2005.  The
Company valued the shares issued at approximately $0.62 per share for a total of
$502,672.

In September  2005, the Company issued  391,224  penalty shares  pursuant to the
pending SB-2  registration  terms.  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  paid 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  for the  month of  September  2005.  The
Company valued the shares issued at approximately $0.70 per share for a total of
$273,857.

In October,  2005, the Company issued 400,000 shares of common stock  subscribed
for cash at $0.50 per share for a total of  $200,000  pursuant to the terms of a
subscription  payable.  This issuance is considered exempt under Regulation D of
the Securities Act of 1933 and Rule 506 promulgated thereunder.

In October 2005,  the Company  issued 100,000 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 $75,000,  which  represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In October 2005,  the Company  cancelled  350,000 shares  previously  issued for
services valued at $210,000.

In December,  2005, the Company issued 40,000 shares of common stock  subscribed
for cash at $0.50 per share for a total of  $20,000  pursuant  to the terms of a
subscription  payable.  This issuance is considered exempt under Regulation D of
the Securities Act of 1933 and Rule 506 promulgated thereunder.

For the fiscal year ended  September  30,  2005,  the Company  issued a total of
2,096,139  penalty shares  pursuant to the pending SB-2  registration  terms. In
connection with the 7,371,000 million  convertible debt financing in the quarter
ended March 31, 2005, the Company was obligated to complete a stock registration
by July 2005. Since the registration was not effective by July 2005, the Company
paid the  required  $773,959 of  liquidated  damages in shares of Company  stock
accruing  at the rate of 3.5% per  month on the face  value of the Notes for the
month of September  2005. The Company valued the shares issued at  approximately
$0.30 per share for a total of  $773,959.  The Company  continues  to accrue the
penalties relating to the pending SB-2 registration.

In  December  2005,  in  connection  with debt  financing,  the  Company  issued
5,500,000  warrants to purchase the Company's  common stock at an exercise price
of $0.50 for five years. The fair value attributable to the warrants of $563,750
was recorded as to current period  operations  with an offsetting  adjustment to
additional paid in capital.

In January,  2006, the Company  cancelled  250,000 shares  previously issued for
services valued at $150,000.

In January 2006, the Company  issued  2,096,139  penalty shares  pursuant to the
pending SB-2  registration  terms.  In  connection  with the  7,371,000  million
convertible  debt financing in the quarter ended March 31, 2005, the Company was
obligated to complete a stock  registration by July 2005. Since the registration
was not  effective  by July 2005,  the  Company  paid 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 for the month of  November  and  December
2005. The Company valued the shares issued at approximately  $0.25 per share for
a total of $515,973.  The Company continues to accrue the penalties  relating to
the pending SB-2 registration.

                                      35


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE G - CAPITAL STOCK (continued)

In February  2006, the Company issued 160,000 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.17 per share for a total of $27,200,  which  represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued

In  February  2006,  the  Company  issued  3,800,000  shares of common  stock in
exchange  for  consulting  services.  The  Company  valued the shares  issued at
approximately $0.16 per share for a total of $608,000, which represents the fair
value of the services received which did not differ materially from the value of
the stock issued

In March,  2006,  the Company  cancelled  150,000 shares  previously  issued for
services valued at $120,000.

NOTE H - COMMITMENTS AND CONTINGENCIES

Employment and Consulting Agreements

The Company has consulting agreements with outside contractors,  certain of whom
are also Company stockholders. The Agreements are generally month to month.

On July 15, 2005,  we entered into a  consulting  agreement  with Timpix for the
consulting  services of three former Biowell  employees,  Drs. 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 us.  Such  consulting
agreement  shall  automatically  renew for one year  periods  until  terminated.
Pursuant to the consulting  agreement,  we 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 us,  the  monthly  consulting  fee shall be
reduced accordingly. We have negotiated an agreement in principle to restructure
the Consulting  Agreement,  whereby,  fees owed to Timpix from July 2005 through
December  2005 will be waived,  and salaries  for each of the three  consultants
will be reduced starting January 1, 2006.

Litigation

On or about  November  24,  2004,  Oceanic  Consulting,  S.A.  filed a complaint
against  the  Company  in the  Superior  Court  of the  State of New  York.  The
Complaint  alleges a breach of contract.  The Company and the Plaintiff  settled
the dispute subsequent to the date of the financial statements.

On or about January 10, 2005, Stern & Co. filed a complaint  against the Company
in the United States  District Court for the Southern  District of New York. The
Complaint alleges a breach of contract.  Subsequent to the date of the financial
statements, the Company and the Plaintiff settled the dispute.

On April 29, 2005, Crystal Research Associates,  LLC obtained a default judgment
against us for $13,000 in the Superior  Court of New Jersey,  Middlesex  County.
The  Company  settled  this  matter  subsequent  to the  date  of the  financial
statements.

On or about  January 12,  2006,  James Paul Brown,  a former  consultant  to the
Company filed a complaint against the Company in the Superior Court of the State
of  California.  The Complaint  alleges a breach of contract.  Subsequent to the
date of the  financial  statements,  the Company and the  Plaintiff  settled the
dispute.

In January  2006, a former  employee of the Company  filed a complaint  alleging
wrongful  termination  against  the  Company.  The  former  employee  is seeking
$230,000 in damages.  The Company  believes that it has meritorious  defenses to
the  plaintiff's  claims and intends to  vigorously  defend  itself  against the
Plaintiff's claims. 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.

                                      36


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE H - COMMITMENTS AND CONTINGENCIES (continued)

On or about April 4, 2006,  the Company  filed a  complaint  against  Paul Reep,
Adrian  Butash,  John Barnett,  Chanty  Cheang,  Jaime Cardona  (former  Company
employees  and  officers),  and  Angela  Wiggins  ( a former  consultant  to the
Company)  in the  United  States  District  Court for the  Central  District  of
California  . The Company  has asked the court to make a judicial  determination
that an agreement, which the Company did not authorize and which is the basis of
previously  disclosed  litigation  against  the  Company by Paul Reep,  a former
employee  of the  Company,  and a new action  filed by former  employees  of the
Company as set forth in the subsequent paragraph,  is invalid and unenforceable.
This matter is in its early stages.

On or about April 17, 2006,  former  employees of the Company  filed a complaint
against the Company and certain of its current  officers  and  Directors  in Los
Angeles  County  Superior  Court.  The  Complaint  alleges a breach of contract,
violations  of  California  Labor Code and wrongful  termination  and is seeking
$950,000 in specified  damages,  plus fees and costs.  The  complaint  alleges a
breach of contract. The Company believes that it has meritorious defenses to the
plaintiff's   claims  and  intends  to  vigorously  defend  itself  against  the
Plaintiff's claims. 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.

The Company is subject to other legal proceedings and claims, which arise in the
ordinary  course of its  business.  Although  occasional  adverse  decisions  or
settlements may occur, the Company  believes that the final  disposition of such
matters  should not have a material  adverse  effect on its financial  position,
results of operations or liquidity.

Operating Lease Commitment

The Company leases office space under operating lease in Los Angeles, California
for  its  corporate  use  from  an  entity  controlled  by  significant   former
shareholder, expiring in November 2006. In November 2005, the Company closed its
Los Angeles facility and relocated to Stony Brook, New York.

Registration of Company's Shares of Common Stock

Until the Company successfully  completes its pending registration  statement on
SEC Form SB-2,  the Company is subject to  liquidated  damages  (see Note E). In
connection  with  the $  1,465,000  and $  7,371,000  million  convertible  debt
financing  during the  quarters  ended  December  31,  2004 and March 31,  2005,
respectively  (see  Note D),  the  Company  was  obligated  to file and  cause a
registration  with respect to the shares  underlying the  convertible  notes and
warrants to be declared effective by July 2005. Since the registration statement
was not  effective by July 2005,  the Company has been  accruing and charging to
operations the stipulated liquidated damages in shares of Company stock accruing
at the  rate of 3.5%  per  month on the  face  value  of the  previously  issued
convertible notes. During the three months ended March 31, 2006, the Company has
paid and charged to operations penalties of $515,973 in the form of unregistered
shares of its  common  stock to the  former  noteholders,  and has  accrued  and
charged to operations an additional $329,700 representing unpaid penalties as of
March 31, 2006.

                                      37


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE H - COMMITMENTS AND CONTINGENCIES (continued)

Matters Voluntarily Reported to the SEC and Securities Act Violations

We previously disclosed that we were investigating the circumstances surrounding
certain  issuances of 8,550,000 shares to employees and consultants in July 2005
(see  Note G),  and  have  engaged  our new  outside  counsel  to  conduct  this
investigation.  We have  voluntarily  reported  our  current  findings  from the
investigation  to the SEC,  and we have agreed to provide  the SEC with  further
information  arising  from the  investigation.  We believe  that the issuance of
8,000,000  shares to employees in July 2005 was  effectuated  by both our former
President and our former Chief Financial Officer/Chief Operating Officer without
approval of the Board of Directors.  These former  officers  received a total of
3,000,000 of these shares.  In addition,  it appears that the  8,000,000  shares
issued in July 2005, as well as an additional 550,000 shares issued to employees
and consultants in March, May and August 2005, were improperly  issued without a
restrictive legend stating that the shares could not be resold legally except in
compliance  with the Securities Act of 1933, as amended.  Our  investigation  is
continuing.  The members of our management who  effectuated  the stock issuances
that are being examined in the  investigation  no longer work for us. We believe
that  we  may  incur   significant   costs  and  expenses  in  continuing   this
investigation.  In the event that any of the exemptions from  registration  with
respect  to the  issuance  of the  Company's  common  stock  under  federal  and
applicable state securities laws were not available,  the Company may be subject
to claims by federal and state regulators for any such violations.  In addition,
if any  purchaser  of the  Company's  common  stock  were to  prevail  in a suit
resulting from a violation of federal or applicable  state  securities laws, the
Company  could be liable to return  the  amount  paid for such  securities  with
interest thereon, less the amount of any income received thereon, upon tender of
such securities,  or for damages if the purchaser no longer owns the securities.
As of the date of these  financial  statements,  the Company is not aware of any
alleged  specific  violation  or the  likelihood  of any claim.  There can be no
assurance that litigation  asserting such claims will not be initiated,  or that
the Company would prevail in any such litigation.

The  Company is unable to  predict  the extent of its  ultimate  liability  with
respect to any and all future securities matters. The costs and other effects of
any future litigation, government investigations, legal and administrative cases
and proceedings,  settlements, judgments and investigations,  claims and changes
in this matter could have a material  adverse effect on the Company's  financial
condition and operating results


NOTE I - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS

The accompanying  financial  statements for the three and six months ended March
31, 2006 have been restated for the purpose of  correcting  errors in accounting
for and  disclosing  the  issuance  by the  Company of  warrants  to acquire the
Company's common stock. 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
three and six months  ended  March 31,  2006 by  disclosing  the effect of these
errors in this Form 10-QSB/A.

For both the three and six months  ended March 31, 2006  Condensed  Consolidated
Income   Statement   restatement  is  to:
-  Decrease   Selling,   General  and Administrative  for capitalized  financing
   costs by $390,000.
- To correct the fair value of warrants  resulting  in a $843,734   increase  in
  Warrant  Liability compared to previous filing.
- Increase in liabilities for accrual of penalties relating to convertible notes
  of $1,044,051.
- Decrease  additional paid in capital for  initial   valuation   of  non   debt
  related  warrants  of  $1,584,614
- Reflect the  reclassification  of warrants from equity to liability  resulting
  in an $7,005,371 increase to   Warrant Liability  compared  to  the   previous
  filing.
- Net Deficit in  Shareholders'  Equity  decreased by $1,497,784 as a 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
March 31, 2006:

                                      38


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE I - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                  (As restated)    (As reported)
     <S>                                           <C>              <C>
      ASSETS                                       $ 8,976,097      $ 8,586,097
                                                   ===========      ===========
      LIABILITIES AND DEFICIENCY IN  STOCKHOLDERS'
      EQUITY
      Total current liabilities                      3,831,376        2,787,325
      Warrant liabilities                            7,631,128        6,787,395
      Convertible notes payable                        676,790          676,790

      Deficiency in Stockholders' Equity:
      Preferred stock                                        6                6
      Common stock                                     118,582          118,582
      Common stock subscription                       (200,000)        (200,000)
      Additional paid in capital                    81,997,006       88,220,817
      Deficit accumulated during development stage
                                                   (85,078,791)     (89,804,818)
                                                   -----------      -----------
      Total Liabilities and Deficiency in
      Stockholders' Equity                         $ 8,976,097      $ 8,586,097
                                                   ===========      ===========
</TABLE>

The changes in reported amounts are summarized in the following  reconciliations
of the Company's  restatement of the Condensed  Consolidated Income Statement as
of March 31, 2006:


<TABLE>
<CAPTION>
                                                 For the Three Months Ended March     For the Six Months Ended March 31,
                                                             31, 2006                                2006
                                                  (As Restated)     (As Reported)       (As Restated)      (As Reported)
<S>                                                <C>                   <C>             <C>
Operating Expenses:
Selling general and administrative                 $   949,634     $   1,009,934         $ 2,794,311       $  3,088,661
Research and development                                75,033            75,033              91,303             91,303
Depreciation and amortization                          341,676           341,676             684,375            684,375
                                                   -----------      ------------         -----------       ------------

Total Operating Expenses                             1,366,343         1,426,643           3,569,989          3,864,339
Operating Loss                                      (1,366,343)       (1,426,643)         (3,569,989)        (3,864,339)
Net gain/(loss) on  revaluation of
warrant liability                                    3,967,870         4,846,273          10,756,660         12,973,966
Other income (expense)                                   3,520             3,520               9,493              9,493
Interest income (expense)                             (571,696)          (59,597)         (2,350,402)           (79,403)
                                                   -----------      ------------         -----------       ------------

Net Income (Loss)                                  $ 2,033,351      $  3,356,513         $ 4,845,762       $  9,039,717
                                                   ===========      ============         ===========       ============
Net income (loss) per common share-basic           $      0.02      $       0.03         $      0.04       $       0.08
                                                   ===========      ============         ===========       ============
Net Income (Loss) per common share-diluted         $      0.02      $       0.03         $      0.04       $       0.08
                                                   ===========      ============         ===========       ============
Weighted average shares outstanding-basic          116,483,044       116,483,044         114,487,589        114,487,589
Weighted average shares
outstanding-Diluted                                116,533,352       116,533,352         114,550,086        114,550,086
</TABLE>

                                      39


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE I - RESTATEMENT OF QUARTERLY FINANCIAL STATEMENTS (continued)

The result of the Cash Flow restatement is to:
- Decrease  profit for the six months March 31, 20065 by $4,757,705 as described
above  -  Reflect  the  $3,967,870  warrant   revaluation  gain.  -  Adjust  for
capitalized financing costs paid from proceeds.

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 six month period ended March 31, 2006.

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 March 31, 2006. See the full Condensed  Consolidated
Statement  of Cash Flows for the periods  ended  March 31,  2006 for  additional
details.

<TABLE>
<CAPTION>
                                          For the Six Months Ended March 31,
                                                         2006
                                          (As Restated)         (As Reported)
<S>                                       <C>                   <C>
Cash Flows from operating
activities:
Net income from operating activities      $   4,845,762         $ 9,039,717
Summary of adjustments to reconcile
net loss to net cash (used in)
operating activities:

Change in fair value of warrant
liabilities                                 (10,756,660)         (8,057,745)
Other operating activities - see
Cash Flow statement for full details          4,783,275           3,094,266
                                          -------------         -----------
Net cash (used in) operating
activities                                   (1,127,623)         (1,517,623)

Cash flows from investing activities:
- see Cash Flow statement for full
details
Net cash (used in) investing
activities                                      (35,852)            (35,852)
Cash flows from financing activities:
- see Cash Flow statement for full
details
Proceeds from loans                           1,210,000           1,600,000
                                          -------------         -----------
Net cash provided by financing
activities
Increase (decrease) in cash and cash
equivalents                                      46,525              46,525
Cash and cash equivalents,
beginning of period                              31,190              31,190
                                          -------------         -----------
Cash and cash equivalents, end of
                                          -------------         -----------
period                                    $      77,715         $    77,715
                                          =============         ===========
</TABLE>

                                      40


<PAGE>


                           APPLIED DNA SCIENCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2006
                                   (Unaudited)

NOTE J - SUBSEQUENT EVENTS

On April 13, 2006, the Company borrowed  $100,000,  at a rate of 7.5% per annum,
from BioCogent,  Ltd., ("BioCogent") whose President and Chief Executive Officer
and sole stockholder is James A. Hayward, one of the Company's directors and its
Chief Executive Officer ("Dr.  Hayward").  This loan is due and payable upon the
earlier  to occur of (1) the  close of  business  on June 30,  2006,  or (2) the
closing of the  issuance  and sale by the  Company of its  securities  for gross
proceeds of at least $250,000 (see Note C).

In May, 2006 the Company  signed a Business  Development  and Trademark  License
Agreement with Dr. Suwelack Skin & Health Care AG ("Dr. Suwelack") providing Dr.
Suwelack rights to use the Company's  SigNature(TM)  logo, which is printed with
ink containing the Company's proprietary encrypted botanical DNA technology, and
to participate  in the Company's  SigNature(TM)  Program.  The terms of this one
year  license  agreement   provide  Suwelack  with  a  limited,   non-exclusive,
non-transferable  right  to use  the  SigNature(TM)  logo on its  packaging  and
labels.  Dr.  Suwelack  will pay us a one time  license fee in the amount of EUR
15,000  in  consideration  for  the  use of the  Company's  SigNature(TM)  logo.
EUR7,500  of the  license  fee was due upon  signing  of the  agreement  and the
remaining 50% is due upon receipt of the shipped labels. Dr. Hayward,  serves on
Dr.  Suwelack's  board  of  directors.  BioCogent,  whose  President  and  Chief
Executive  Officer and sole  stockholder  is Dr.  Hayward,  provides  consulting
services  to Dr.  Suwelack.  Dr.  Suwelack  and  BioCogent  recently  reached an
agreement  in  principle,  with respect to which no written  agreement  has been
executed, by which BioCogent will continue to provide consulting services to Dr.
Suwelack and Dr. Hayward will serve as Dr.  Suwelack's  president on a part-time
basis reporting to Dr. Suwelack's Chief Executive Officer.

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Item 2. Management's Discussion and Analysis

The following  discussion  should be read in conjunction  with our  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.  You should read  statements  that contain
these words carefully because they:

   o    Discuss our future expectations;

   o    Contain  projections  of  our future  results  of  operations or of  our
        financial condition; and

   o    State other "forward-looking" information.

We believe it is important to communicate  our  expectations.  However,  forward
looking  statements  involve risks and  uncertainties and our actual results and
the timing of certain  events could differ  materially  from those  discussed in
forward-looking  statements as a result of certain factors,  including those set
forth under "Risk  Factors,"  "Business" and elsewhere in this  prospectus.  All
forward-looking  statements and risk factors  included in this document are made
as of the date  hereof,  based  on  information  available  to us as of the date
thereof, and we assume no obligations to update any forward-looking statement or
risk factor, unless we are required to do so by law.

PLAN OF OPERATIONS

Sales and Marketing

We believe our revenues will come from three sources:

   o    Direct sales to manufacturers, distributors, and/or retailers;

   o    Sales through our OEM relationships; and

   o    Authentication (laboratory) services.

We employ a multi-tier sales and marketing  strategy involving our marketing and
sales staff working together with high-level  contacts in target  industries and
our OEM base.  We are  attempting to develop  strategic  alliances and marketing
partners by setting up alliances  with Biowell  Technology,  Inc.'s  ("Biowell")
technology partners,  granting licenses to existing  anti-counterfeit  suppliers
and partner with industry leaders for intellectual property development.

We are cognizant that no technology exists today to enable someone in the street
to  ascertain,  at the point of  purchase,  whether an expensive  product,  or a
child's foodstuff,  or pharmaceutical  product is genuine, worth the money being
paid and safe to use or  ingest.  No brand  owner is able to  rapidly  determine
whether a product is real of fake.  Many  multi-billion  dollar  brands  have no
technology to protect  against  counterfeiting,  to detect its occurrence and to
interdict or  prosecute  the  counterfeiter.  No company has the  capability  to
determine with forensic  certainty that it is subject to attack.  Such companies
remain seriously exposed to product liability,  loss of consumer  confidence and
loss of revenues. Governments have no rapid detection system to determine at the
point of entry, inspection or seizure whether products are real or fake. A major
thrust  of our  marketing  efforts  is to  work  with  consumer  groups,  media,
corporate  officers,  government  departments,  customs,  insurers and others to
bring home the message that, in a world of criminality and terrorism,  no-one is
safe.

Business Strategy and Approach

We have established  integrated business operations addressing and servicing the
needs  of the  global  security  marketplace  on the  part of  corporations  and
governments for; anti-counterfeiting,  fraud prevention, product authentication,
brand protection, supply chain management and protection.

Intellectual Property Development, Product Operations & Partnerships

We have proprietary DNA security technology, and develop security solutions that
protect corporate and intellectual  property from counterfeiting,  fraud, piracy
and product diversion using botanical DNA as an encrypted/code molecule that can
be embedded in inks, paper,  substrates,  liquids,  textiles,  thread, plastics,
holograms and microchips.

We produce security solutions  customized to our customer's needs. We market and
sell DNA  anti-counterfeit  and fraud prevention  solutions that integrate into,
and layer with,  existing  security  solutions.  These DNA security features are
integrated  at the  original  equipment  manufacturer  level  with  ink,  paper,
liquids,  thread  and  hologram  producers,  who in  turn  sell/supply  finished
security   products  such  as  primary  and  secondary   product  packaging  for
pharmaceuticals,  beauty products, textiles, currency, passports, ID cards, etc.
We have strict  protocols for  specifying,  integrating,  testing,  shipping and
confirming the presence of DNA in any given product.

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We plan to develop new product lines that will address  specific new  challenges
in the  security  marketplace,  and bring these  advances to target  industries,
customers and countries.

Additionally, we will identify strategic partnerships and co-marketing ventures,
and  licensees to work with us to develop  market and sell our  biotechnological
security  products.  This  will  include  sub-licensing  the  technology  to key
partners  in specific  sectors  with an  established  base of  customers.  These
partners  will be able to enhance  their  product  lines and client  services by
adding  our  technology  to the  existing  security  matrix  in their  products,
providing an enhanced solution to deter fraud and counterfeiting.

Management Strategy

We  anticipate  a period of rapid  change as we begin  commercialization  of the
products now available  subsequent signing of our licenses with Biowell, (b) the
establishment  of our  prototyping  labs at the State  University of New York at
Stony Brook ("Stony Brook  University"),  and (c) the  availability  of products
that have recently been commercialized in Asia by Biowell.

We have  organized  our resources to manage our  commercialization  effectively,
optimizing  the  delivery  of  new   prototypes  for  customers,   and  managing
outsourcing  especially  through  our  OEMs.  Our  Chief  Executive  Officer  is
responsible  for  the  strategic  direction,   coordinating  with  our  overseas
technology  partner Biowell,  scientific  development,  operations and corporate
governance,  business  development  and sales,  including  relations with US and
foreign  government  agencies,  developing  business  relationships  with target
corporations and OEM's, and securing  revenues.  Our Controller and acting Chief
Financial  Officer  cover overall  financial  management,  financial  reporting,
corporate  administration  and investors  relations.  Our  marketing  department
develops strategic awareness of our technologies across target industry sectors,
their associated media and lobbying companies and liaises with regulatory bodies
(EPA,  FDA, etc) and industry  associations  (CTFA,  PHARMA,  etc). Our Chairman
oversees the  operations  of Biowell,  including  the  development  of all Asian
territorial  sales  that are  subject to royalty  payments  due to us.  Both our
Chairman and our Strategic Technology Development Officer manage the development
of core  DNA  sciences  for  current  and  future  applications.  Our  Strategic
Technology  Development  Officer is principally engaged in the productization of
DNA  markers  for  specific   industry   applications,   and  for  liaison  with
corresponding  scientists  from our  principal  OEM  partners,  e.g.,  petroleum
markers, chemical markers, markers for precious stones,  DNA-encrypted inks, DNA
markers for the pharmaceutical industry, etc.

Consultant & Enforcement Operations

As nations are threatened by terrorism and corporations try to prevent corporate
fraud, counterfeiting,  product diversion and industrial espionage, the need for
secure  anti-counterfeiting and identification systems increases. Our technology
can provide important and cost-effective  support for local,  state, and federal
governments  as  well as  corporations  doing  business  with  highly  sensitive
information or products  susceptible  to  counterfeit.  Our  anti-counterfeiting
technology can be used for the following types of  identification  and important
government documents:

   o    Passports

   o    Green cards

   o    Visas

   o    Driver's licenses

   o    Social Security cards

   o    Student visas

   o    Military ID's

Other important Identity cards and official documents

We intend to work in collaboration with Biowell and other security organizations
in order to continue to research and develop new product lines derived from, but
not limited to, DNA technology. Research and development of new product lines is
an ongoing  commitment  and is  currently  underway in the Biowell labs and will
continue in the U.S. at our new  facilities  established at the Long Island High
Technology Incubator (LIHTI) at Stony Brook University. Research and development
objectives include the development of a new line of detection  technologies that
will provide faster and more  convenient ways to  authenticate  DNA,  continuous
effort  to   incorporate   our  DNA  markers  with  various   products  for  new
applications,  and establishment of a leading DNA authentication service lab. We
believe that we will obtain  commercial  revenues for these efforts within 12-24
months, although no assurances can be given that we will ever generate revenues.
Our  prototyping  laboratory  will  customize  "off-the-shelf"  products for new
customers  on a  case-by-case  basis.  These new products  are  typically  newly
configured labels, inks or packing elements.  We have identified several options
for remote detection and faster detection methodologies.

We will consult with our clients on a total security  service  offering;  how to
protect  their brands,  intellectual  property,  products and physical  security
access and how to reduce risk exposure,  product liability  exposure and product
recall liabilities.  We plan to offer worldwide DNA analysis services supporting
the authentication of products and the detection,  interdiction,  deterrence and
prosecution of counterfeiters  and related crimes,  through our  subcontractors,
sub-licensees and security industry collaborative partners.

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International Sub-License Operations

Developing  Technology  - We have an  in-depth  understanding  of DNA  microchip
design  and   applications.   We  will   jointly   develop   DNA-holograms   and
DNA-Hologram-RFID  devices,  DNA-inks,  DNA-dyes  and  DNA-security  labels with
leading original equipment manufacturers in these specialist fields.

We will utilize our existing relationships and develop new ones to introduce our
anti-counterfeiting  technology to generate  business.  Each industry has unique
requirements and needs for their anti-counterfeit  solutions, and we believe our
DNA technology  will provide maximum  security  technologies.  For example,  our
smart packaging  solutions with DNA security markers in ink, paper and holograms
has  widespread   application  in  packaging  for  pharmaceuticals,   cosmetics,
automotive markets,  passports,  ID's and currency.  Our proprietary  technology
offers  immediate  and  affordable  detection  and security for their brands and
products.

   o    Strong Technology Alliances - Our technology can also  provide  advanced
        security dimensions to:

   o    Electronics  security:  access  and  physical/plant  security (biometric
        security cards enhanced with DNA)

   o    Security Holograms (DNA enhanced)

   o    Security papers and printing

   o    Holograms (DNA holograms)

   o    Other security-related products and systems

   o    Law Enforcement Expertise - The resources of our collaborative  partners
        in the  security  industry  include  former  federal  law   enforcement,
        security,  and  intelligence  officers  who  provide us  with  extensive
        contacts and hands-on experience in:

   o    Intellectual property investigation

   o    Counter-intelligence

   o    Personal security services

   o    Anti-counterfeit technologies

   o    Secure communications and data management

Critical Accounting Policies

Financial  Reporting  Release No. 60, published by the SEC,  recommends that all
companies  include a  discussion  of critical  accounting  policies  used in the
preparation  of  their  financial   statements.   While  all  these  significant
accounting policies impact our financial condition and results of operations, we
view certain of these policies as critical.  Policies  determined to be critical
are those  policies that have the most  significant  impact on our  consolidated
financial  statements and require management to use a greater degree of judgment
and estimates. Actual results may differ from those estimates.

We believe  that given  current  facts and  circumstances,  it is unlikely  that
applying any other reasonable judgments or estimate  methodologies would cause a
material effect on our consolidated results of operations, financial position or
liquidity for the periods presented in this report.

The accounting policies identified as critical are as follows:

   o    Equity issued with registration rights

   o    Warrant liability

   o    Fair value of intangible assets

Equity Issued with Registration Rights

In connection  with placement of our  convertible  notes and warrants to certain
investors  during the fiscal  quarter ended March 31, 2005,  we granted  certain
registration  rights that provide for liquidated damages in the event of failure
to timely perform under the agreements. Although these notes and warrants do not
provide for net-cash  settlement,  the existence of liquidated  damages provides
for a defacto net-cash settlement option. Therefore, the common stock underlying
the notes and  warrants  subject to such  liquidated  damages  does not meet the
tests required for shareholders' equity classification, and accordingly has been
reflected  between  liabilities  and  equity  in the  accompanying  consolidated
balance sheet until such time as the conditions are eliminated.

Warrant Liability

In connection with the placement of certain debt  instruments  during the fiscal
quarter  ended  March 31,  2005,  as  described  above,  we issued  freestanding
warrants.    Although     the      terms   of  the   warrants   do  not  provide
for   net-cash   settlement,  in  certain   circumstances,   physical  or   net-

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share settlement is deemed to not be within our control  and,   accordingly,  we
are required  to  account  for  these   freestanding  warrants  as a derivatives
financial  instrument  liability, rather than as shareholders' equity.

The warrant liability is initially  measured and recorded at its fair value, and
is then  re-valued  at each  reporting  date,  with  changes  in the fair  value
reported  as  non-cash  charges  or  credits  to  earnings.   For  warrant-based
derivative financial instruments, the Black-Scholes option pricing model is used
to value the warrant liability.

The classification of derivative instruments, including whether such instruments
should be recorded as  liabilities  or as equity,  is  re-assessed at the end of
each reporting period.  Derivative instrument  liabilities are classified in the
balance  sheet as  current  or  non-current  based on  whether  or not  net-cash
settlement of the derivative  instrument  could be required  within 12 months of
the balance sheet date.

We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks.

Use of Estimates

In preparing  financial  statements in  conformity  with  accounting  principles
generally  accepted in the United  States of America,  management is required to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities and the disclosure of contingent  assets and liabilities at the date
of the  financial  statements  and revenue  and  expenses  during the  reporting
period. The most significant estimates relate to the estimation of percentage of
completion  on  uncompleted  contracts,  valuation of  inventory,  allowance for
doubtful  accounts and estimated  life of customer  lists.  Actual results could
differ from those estimates.

Fair Value of Intangible Assets

We have adopted SFAS No. 142, Goodwill and Other Intangible  Assets,  whereby we
periodically test our intangible assets for impairment.  On an annual basis, and
when  there is reason to suspect  that  their  values  have been  diminished  or
impaired,  these  assets are  tested for  impairment,  and  write-downs  will be
included in results from operations.

On July 12,  2005,  we acquired  certain  intellectual  properties  from Biowell
through an Asset  Purchase  Agreement in exchange  for 36 million  shares of our
restricted  common stock having an aggregate  fair value at the date of issuance
of $24.12 million.  The value of the acquired  intangible assets was $9,430,900,
with the balance of the purchase price, or $14,689,100, charged to operations as
a cost of the transaction.

Revenues

Since our  inception  on  September  16, 2002,  we have not  generated  material
revenues  from  operations.  We believe we will begin  generating  revenues from
operations  in  the  fiscal  year  as we  transition  from a  development  stage
enterprise to that of an active growth stage company, although no assurances can
be given that we will generate any revenues from operations.

Costs and Expenses

Selling, General and Administrative

Selling,  general and  administrative  expenses  for the six month  period ended
March 31, 2006 compared to same period in 2005 decreased  $19.786 million or 88%
to $2.794 million from $22.581 million in the prior period due to  non-recurring
financing and related costs incurred during the March 2005 quarter.

Research and Development

Research and  development  expenses  increased  $91,303 for the six month period
ended  March 31,  2006  compared  to the same  period in 2005 from $0 to $91,303
primarily due to collaboration  with The Center for Biotechnology at Stony Brook
University.

Depreciation and Amortization

In the six month  period  ended March 31, 2006,  depreciation  and  amortization
increased  $672,000  for the  period  compared  to the same  period in 2005 from
$12,000 to $684,000. In the year ended September 30, 2005, we capitalized $9.431
million related to an intellectual  property asset acquisition.  As a result, we
recorded  amortization  expense totaling $677,040 for the six month period ended
March 31, 2006 compared to no intangible asset  amortization in the three months
ended March 31, 2005. We estimate a seven year useful life that commenced during
the fourth fiscal quarter of 2005.

Total Operating Expenses

Total operating expenses during the six months ended March 31, 2006 decreased to
$3.570  million  from  $22.593  million,  or a decrease of $19.022  million as a
result of the combination of factors listed above.

Other income/expenses

Gain on revaluation of warrant liability decreased by $19,093 to $10.757 million
from $10.775  million for the six month  periods  ended March 31, 2006 and 2005,
respectively.

Interest Expenses

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Interest  expense,  for the six month period  ended March 31, 2006  decreased to
$2.350  million from  $32.352  million in the same period of 2005, a decrease of
$30.001 million  primarily  resulting from the reduction in financing in 2006 as
compared to 2005.

Net Income

Net Income for the six month  period  ended March 31, 2006  increased  to $4.846
million  from a loss of $44.165  million in the prior  period as a result of the
combination of factors described above.

Liquidity and Capital Resources

Our liquidity needs originate from working  capital  requirements,  indebtedness
payments and research and development expenditure funding. Historically, we have
financed our operations  through the sale of equity and convertible debt as well
as borrowings from various credit sources.

In the six month  period  ended March 31,  2006,  we  completed  two  additional
private placements of debt and associated warrants. In November, 2005, we issued
and sold a promissory note in principal  amount of $550,000.  We issued warrants
to purchase a total of 5,500,000 shares of our common stock at an exercise price
of $0.50 per share to certain persons  designated by International  Allied Fund,
and paid  $55,000 in cash to VC Arjent for its services as the  placement  agent
for this  placement.  All principal and accrued but unpaid  interest  under this
note was paid in full shortly  after the closing of and from the proceeds of the
March 8, 2006 offering.  On March 8, 2006, we issued and sold an aggregate of 30
units  consisting  of  (i)  a  $50,000  principal  amount  secured   convertible
promissory  note bearing  interest at 10% per annum and convertible at $0.50 per
share,  and (ii) a warrant to purchase  100,000 shares of our common stock at an
exercise price of $0.50 per share, for aggregate gross proceeds of $1.5 million.
The units were sold pursuant to  subscription  agreements by and between each of
the purchasers and Applied DNA Operations Management, Inc., a Nevada corporation
and our wholly owned subsidiary (our "Subsidiary").  The $2.050 million in gross
proceeds from these  offerings  were held by our  Subsidiary for our benefit and
used to fund commissions,  fees and expenses associated with the placements,  to
repay the  outstanding  promissory  note described  above plus accrued  interest
thereunder,  to fund financing  fees,  consultants and public  reporting  costs,
salaries and wages,  research  and  development,  facility  costs as well as and
general working capital needs.

On March 24, 2006, we commenced an offering (the  "Offshore  Offering") of up to
140 units, at a price of $50,000 per unit, for a maximum  offering of $7 million
for sale to "accredited  investors" who are not "U.S.  persons." The units being
sold as part of the Offshore  Offering consist of (i) a $50,000 principal amount
secured  convertible  promissory  note,  and (ii) a warrant to purchase  100,000
shares of our  common  stock at a price of $0.50 per share.  On May 2, 2006,  we
closed on the first  tranche of the Offshore  Offering in which we sold 20 units
for aggregate gross proceeds of $1,000,000. We incurred $375,000 in commissions,
fees and expenses which was paid at closing.

On March 29, 2006 and April 13, 2006, we borrowed $200,000 in the aggregate,  at
a rate  of  7.5%  per  annum,  from  BioCogent,  Ltd.,  a New  York  corporation
("BioCogent")  whose President and Chief Executive  Officer and sole stockholder
is James A. Hayward, on of our directors and our Chief Executive Officer.  These
loans are due and payable upon the earlier to occur of (1) the close of business
on June 30, 2006, or (2) the closing of the issuance and sale of our  securities
for gross  proceeds of at least  $250,000.  The proceeds  from the loans will be
used for  general  corporate  purposes.  The note  issued on March 29,  2006 was
repaid with interest in May, 2006.

Substantially  all of the real  property  used in our  business is leased  under
operating lease agreements.

As of March 31, 2006, we had a working capital deficit of $3,750,533 as a result
of our operating losses from our inception  through March 31, 2006. We generated
a cash flow deficit of $13,862,969 from operating  activities from our inception
on  September  16, 2002  through  March 31,  2006.  Cash flows used in investing
activities was $74,300 during this period. We met our cash  requirements  during
this period through the receipt of $14,014,984 in the form of private  placement
of our common stock,  the issuance of  convertible  notes (net of repayments and
costs),  and advances from the Company's  officers,  principal  shareholders and
third parties.

As of March 31, 2006, we had $1,187,219 in outstanding  notes  payables.  Please
see Note C in our unaudited financial  statements included in this Form 10-QSB/A
for the terms of such notes payable.

We expect capital expenditures to be less than $500,000 fiscal 2006. Our primary
investments  will be in  laboratory  equipment  to support  prototyping  and our
authentication services.

While we have raised capital to meet our working  capital needs in the past, and
will require additional financing within the next 12 months in order to meet our
current and projected  cash flow deficits from  operations and  development.  We
have sufficient funds to conduct our operations for several months,  but not for
12 months or longer.  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, a downturn in the U.S. or global
stock and debt markets and other reasons could make it more  difficult to obtain
financing through the issuance of equity securities or borrowing. Further, if we
issue  additional  equity  or  convertible  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,  this could have a material  adverse  effect on our business,
results of operations liquidity and financial condition.

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Our registered  independent  certified  public  accountants have stated in their
report dated  October 21, 2005,  that we have incurred  operating  losses in the
last two years, and that we are dependent upon  management's  ability to develop
profitable  operations.  These factors among others may raise  substantial doubt
about our ability to continue as a going concern.

In  connection  with the January and  February  2005  Placement,  we granted the
investors registration rights. Pursuant to the registration rights agreement, if
we did not file the  registration  statement by February 15, 2005,  or if we did
not have the  registration  statement  declared  effective on or before June 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.  All of the  liquidated
damages that we paid were paid in common stock,  although any future payments of
liquidated  damages may, at our option, 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  prices of $0.66,  $0.58,  $0.70,  $0.49,  $0.32 and $0.20 for our common
stock on July 15, 2005, August 15, 2005,  September 15, 2005,  October 17, 2005,
November  15, 2005 and December  15,  2005,  respectively,  we issued a total of
3,807,375  shares of common stock in  liquidated  damages  from August,  2005 to
January,  2006.  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.
Liquidated  damages in the form of common  stock  were paid for the period  from
June 15, 2005 to  December  15,  2005.  We believe  that we have no  enforceable
obligation  to pay  further  liquidated  damages  since the  shares we agreed to
register for resale are eligible for resale under Rule 144 of the Securities Act
of 1933,  as  amended,  and  such  continuing  liquidated  damages  are  grossly
inconsistent  with actual  damages to the  purchasers of the notes and warrants.
However,  we are seeking to confirm this  position by  obtaining  the waiver and
release of the holders of these  securities of further  liquidated  damages.  If
these persons do not waive and release and successfully bring a claim against us
with  respect  to such  liquidated  damages,  it could  result in a  significant
decrease in our  liquidity  or assets,  which could  result in the  reduction or
termination of our business.  As of March 31, 2006, we have accrued  $773,995 in
penalties  representing  the  further  liquidated  damages  associated  with our
failure to file the  registration  statement by the  deadline and have  included
this amount in accounts payable and accrued expenses.

Matters Voluntarily Reported to the SEC and Securities Act Violations

We previously disclosed that we were investigating the circumstances surrounding
certain  issuances  of shares to employees  and  consultants  in 2005,  and have
engaged  our  new  outside  counsel  to  conduct  this  investigation.  We  have
voluntarily reported our current findings from the investigation to the SEC, and
we have  agreed to provide the SEC with  further  information  arising  from the
investigation.  We believe that the issuance of 8,000,000 shares to employees in
July 2005 was  effectuated  by both our former  President  and our former  Chief
Financial  Officer/Chief  Operating  Officer  without  approval  of the board of
directors.  These former officers received a total of 3,000,000 of these shares.
In addition,  it appears that the 8,000,000  shares issued in July 2005, as well
as an additional  550,000  shares issued to employees and  consultants in March,
May and August 2005, were improperly issued without a restrictive legend stating
that the  shares  could not be resold  legally  except  in  compliance  with the
Securities Act of 1933, as amended. Our investigation is continuing. The members
of our management who effectuated the stock issuances that are being examined in
the  investigation  no  longer  work  for  us.  We  believe  that  we may  incur
significant costs and expenses in continuing this investigation.

In the event that any of the exemptions  from  registration  with respect to the
issuance of our common stock under federal and applicable  state securities laws
were not available,  we may be subject to claims by federal and state regulators
for any such violations.  In addition, if any purchaser of our common stock were
to prevail in a suit resulting  from a violation of federal or applicable  state
securities  laws,  we  could  be  liable  to  return  the  amount  paid for such
securities  with  interest  thereon,  less the  amount  of any  income  received
thereon,  upon tender of such  securities,  or for damages if the  purchaser  no
longer owns the securities. As of the date of these financial statements, we are
not aware of any alleged  specific  violation  or the  likelihood  of any claim.
There can be no  assurance  that  litigation  asserting  such claims will not be
initiated, or that we would prevail in any such litigation.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Product Research and Development

As a result of the  recent  financings,  we  anticipate  expending  $500,000  of
available  cash towards  research  and  development  activities  during the next
twelve (12) months.

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 March 31,  2006,  we have mainly
relied on the services of outside  consultants  for services.  We currently have
five     employees.  In  order    for   us   to   attract   and  retain  quality
personnel,  we   anticipate  we   will   have  to  offer   competitive  salaries

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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 our
continuance  of as a going  concern.  Our cash position may be inadequate to pay
all of the costs associated with testing,  production and marketing of products.
Management  intends to use borrowings and security sales to mitigate the effects
of its cash  position,  however  no  assurance  can be given that debt or equity
financing,  if and when required will be available.  The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded assets and classification of liabilities that might be necessary should
we 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 our 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.

RISKS RELATING TO OUR BUSINESS

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

For the six month  period  ended  March 31,  2006,  we  produced a net income of
$4,845,762 with $10,756,660  attributable to the revised  classification and for
the three  month  period  ended  March 31,  2006,  we  incurred  a net income of
$2,033,351. 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.  Our
revenues  and  profits,  if any,  will depend upon  various  factors,  including
whether we will be able to  generate  revenue.  As a result 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
$500,000 to fund our  anticipated  research and  development  operations for the
next twelve months,  depending on revenue from  operations.  Additional  capital
will  be  required  to  effectively  support  the  operations  and to  otherwise
implement  our  overall  business  strategy.  Even if we do  receive  additional
financing,  it may not be  sufficient  to  sustain or expand  our  research  and
development operations or continue our business operations.

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

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

In their report dated October 21, 2005, our independent auditors stated that our
financial  statements  for the year ended from  September 30, 2005 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  $89,924,553   during   the    period   September  16,  2002 (date
of   inception)     to      September   30,     2005.      We     continue    to

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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  increase  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  Limited  Manufacturing,  Sales,  Marketing  or  Distribution
Capabilities.

We currently have limited in-house manufacturing  capability. We rely on Biowell
and  third-party  vendors  for  this  service.  We do  not  currently  have  any
arrangements  with  any  distributors  and we may  not be  able  to  enter  into
arrangements  with  qualified  distributors  on  acceptable  terms or at all. We
currently have a limited sales and marketing team. If we are not able to develop
greater  sales,  marketing  or  distribution  capacity,  we may  not be  able to
generate revenue or sufficient revenue to support our operations.

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;

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   o    Scientists' opinions of the products' usefulness;

   o    Citation of the product in published research; and

   o    General trends in 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  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:

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   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, Hayward or Liang, 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 Dr.
Jun-Jei Sheu, the Chairman of our Board of Directors;  Dr. James A. Hayward, our
Chief Executive  Officer;  and Dr.  Benjamin Liang,  our Secretary and Strategic
Technology  Development Officer. We do not have employment  agreements with Drs.
Sheu,  Hayward or Liang.  Loss of the  services of Drs.  Sheu,  Hayward or Liang
could have a material  adverse effect on our growth,  revenues,  and prospective
business. We do not maintain key-man insurance on the life of Drs. Sheu, Hayward
or Liang.  We are not aware of any 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 DNA Security Technology  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 DNA  security  technology  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,  also work with 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  approximate  annual sales by some of
our competitors have been as follows:

InkSure - $1 million

DNA Technologies, Inc. - $22.6 million

November AG - $5.8 million

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

   o    Product performance, features and liability;

   o    Price;

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   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.

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.

                                      52


<PAGE>


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.

Litigation  Generally  Could  Affect  Our  Financial  Condition  and  Results of
Operations.

We  generally  may be  subject  to claims  made by and  required  to  respond to
litigation  brought by former  employees,  former  officers and  directors,  and
vendors  and  service  providers.  We have faced such  claims in the past and we
cannot assure that we will not be subject to claims in the future.  In the event
that a claim is successfully brought against us, considering our lack of revenue
and the losses our business  has  incurred for the period from our  inception to
March 31, 2006, this could result in a significant  decrease in our liquidity or
assets, which could result in the reduction or termination of our business.

Our  Failure  to  File a  Registration  Statement  Could  Affect  Our  Financial
Condition and Results of Operations.

In  June  2005,  we  engaged  Trilogy  Capital  Partners,  Inc.  ("Trilogy")  as
consultants.  In connection with that  engagement we issued Trilogy  warrants to
purchase  7,500,000 shares of our common stock at a price of $0.55 per share. We
also agreed to file a  registration  statement  with the SEC with respect to the
shares  underlying  such  warrants no later than the earlier to occur of: (i) 15
days following the  effectiveness  of the  registration  statement of which this
prospectus  forms a part,  or (ii)  September 15, 2005. As of the date hereof we
have not filed a registration statement with respect to the shares of our common
stock underlying the warrants we issued to Trilogy. In the event that a claim is
successfully brought by Trilogy against us with respect to this matter, it could
result in a significant  decrease in our liquidity or assets, which could result
in the reduction or termination of our business.

We Were Obligated to Pay Liquidated Damages As a Result of Our Failure to Have a
Registration  Statement  Declared  Effective  Prior  to June 15,  2005,  and any
Payment of  Liquidated  Damages  Will Either  Result in Depletion of 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 June 15, 2005, we are obligated to pay  liquidated  damages in the amount
of 3.5%  per  month of the face  amount  of the  notes  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. Thus far we have decided
to pay the liquidated  damages in common stock,  although any future payments of
liquidated damages may, at our option, be made in cash. If we decide to pay such
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  prices of $0.66,  $0.58,  $0.70,  $0.49,  $0.32 and $0.20 for our common
stock on July 15, 2005, August 15, 2005,  September 15, 2005,  October 17, 2005,
November  15, 2005 and December  15,  2005,  respectively,  we issued a total of
3,807,375  shares of common stock in  liquidated  damages  from August,  2005 to
January,  2006.  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.

Liquidated  damages in the form of common  stock  were paid for the period  from
June 15, 2005 to  December  15,  2005.  We believe  that we have no  enforceable
obligation  to pay  further  liquidated  damages  since the  shares we agreed to
register for resale are eligible for resale under Rule 144 of the Securities Act
of 1933,  as  amended,  and  such  continuing  liquidated  damages  are  grossly
inconsistent  with actual  damages to the  purchasers of the notes and warrants.
However,  we are seeking to confirm this  position by  obtaining  the waiver and
release of the holders of these  securities of further  liquidated  damages.  If
these persons do not waive and release and successfully bring a claim against us
with  respect  to such  liquidated  damages,  it could  result in a  significant
decrease in our  liquidity  or assets,  which could  result in the  reduction or
termination of our business.

Matters Voluntarily Reported to the SEC and Securities Act Violations

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<PAGE>


We previously disclosed that we were investigating the circumstances surrounding
certain  issuances  of shares to employees  and  consultants  in 2005,  and have
engaged  our  new  outside  counsel  to  conduct  this  investigation.  We  have
voluntarily reported our current findings from the investigation to the SEC, and
we have  agreed to provide the SEC with  further  information  arising  from the
investigation.  We believe that the issuance of 8,000,000 shares to employees in
July 2005 was  effectuated  by both our former  President  and our former  Chief
Financial  Officer/Chief  Operating  Officer  without  approval  of the board of
directors.  These former officers received a total of 3,000,000 of these shares.
In addition,  it appears that the 8,000,000  shares issued in July 2005, as well
as an additional  550,000  shares issued to employees and  consultants in March,
May and August 2005, were improperly issued without a restrictive legend stating
that the  shares  could not be resold  legally  except  in  compliance  with the
Securities Act of 1933, as amended. Our investigation is continuing. The members
of our management who effectuated the stock issuances that are being examined in
the  investigation  no  longer  work  for  us.  We  believe  that  we may  incur
significant costs and expenses in continuing this investigation.

In the event that any of the exemptions  from  registration  with respect to the
issuance of our common stock under federal and applicable  state securities laws
were not available,  we may be subject to claims by federal and state regulators
for any such violations.  In addition, if any purchaser of our common stock were
to prevail in a suit resulting  from a violation of federal or applicable  state
securities  laws,  we  could  be  liable  to  return  the  amount  paid for such
securities  with  interest  thereon,  less the  amount  of any  income  received
thereon,  upon tender of such  securities,  or for damages if the  purchaser  no
longer owns the securities. As of the date of these financial statements, we are
not aware of any alleged  specific  violation  or the  likelihood  of any claim.
There can be no  assurance  that  litigation  asserting  such claims will not be
initiated, or that we would prevail in any such litigation.

RISKS RELATING TO OUR COMMON STOCK

There Are a Large Number of Shares  Underlying Our Options and 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 March 31,  2006,  we had  118,582,385  shares of common  stock  issued and
outstanding  and  outstanding  options and warrants to purchase in the aggregate
approximately 49,229,464 shares of common stock. All of the shares issuable upon
exercise of our options and 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 options and 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 Over The Counter Bulletin Board ("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 SEC 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 receives 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

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<PAGE>


   o    That the broker or dealer received a signed, written agreement from  the
        investor prior to the transaction.

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

Disclosure  also has to be made about the risks of  investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative,  current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock  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 March 31,  2006,  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 SEC 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

Except as  described  below,  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 March 31, 2006,
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

As previously  reported,  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 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.  During the quarter ended March 31, 2006,
we implemented the following  changes in our internal  controls to resolve these
weaknesses and deficiencies:

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:

   o    Shares issued for services;

   o    Shares issued for employees;

   o    Warrant exercises;

   o    Option exercises;

   o    Authorized shares and warrant re-pricing;

   o    Shares issued in exchange for debt; and

   o    Upcoming ESOP grants and exercises;

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

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

   o    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.

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 for $13,000 in the Superior Court of New Jersey, Middlesex County. We
intend to move to vacate the default judgment on various grounds.  The plaintiff
has agreed in  principle  to settle this  matter with us in exchange  for a cash
payment,  but,  as of the  date  hereof,  we  have  not  executed  a  settlement
agreement.

Paul Reep v. Applied DNA Sciences, Inc., Case No.: BC345702

Plaintiff Paul Reep, a former employee,  commenced this action against us in the
Superior  Court for the Sate of  California  for the  County of Los  Angeles  on
January  10,  2006.  Paul Reep  asserts  eight  causes of action  for  breach of
contract, breach of an oral agreement, negligent misrepresentation, interference
with  prospective  business  advantages,   defamation,   fraud,  accounting  and
constructive  trust,  unjust enrichment.  The relief sought includes damages and
attorneys'  fees. We dispute all of the allegations of this complaint and intend
to vigorously  defend this mater. In this matter we have asked the court to make
a judicial determination that an agreement, which we did not authorize and which
is the basis of previously  disclosed  litigation  against us by Paul Reep,  our
former employee,  and a new action filed by our former employees as set forth in
the subsequent  paragraphs is invalid and  unenforceable.  This matter is in its
early stages.

Applied DNA Sciences,  Inc. v. Paul Reep, Adrian Butash,  John  Barnett,  Chanty
Cheang,  Jaime Cardona,  and Angela Wiggins, Case No. CV06-2027 RGK

We filed this action against the  defendants,  Paul Reep,  Adrian  Butash,  John
Barnett,  Chanty Cheang,  Jaime Cardona, and Angela Wiggins on April 4, 2006, in
the United States District Court for the Central District of California. In this
matter  we have  asked  the  court  to  make a  judicial  determination  that an
agreement,  which we did not  authorize  and  which is the  basis of  previously
disclosed  litigation  against us by Paul Reep, our former employee,  is invalid
and unenforceable. This matter is in its early stages.

Barnett, et al. v. Applied DNA Sciences, et al., Case No.: BC 350904

Plaintiffs John D. Barnett,  Jr., Adrian Butash, Jaime A. Cardona,   and  Chanty
Cheang, our former employees,  filed suit against us,  Applied  DNA   Operations
Management,  Inc.,  APDN  (B.V.I.), Inc.,  Peter  Brocklesby,  James A. Hayward,
and Jun-Jei Sheu in Los Angeles County Superior  Court  on  April 17, 2006.  The
complaint  alleges causes of action for breach of written  contract,  breach  of
oral contract,  fraud,  violations  of  the California Labor Code, and  wrongful
termination.   We  dispute all of the  allegations  and  intend  to   vigorously
defend this action.  This matter is in its early stages.

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

On March 8, 2006,  we completed a private  placement  offering in which 30 units
(the "Units") of our securities were sold, each Unit consisting of (i) a $50,000
Principal Amount 10% Secured Convertible  Promissory Note (the "Notes") and (ii)
a warrant (the "Warrants") to purchase 100,000 shares of our common stock, or an
aggregate of  $1,500,000  in principal  amount of Notes and Warrants to purchase
3,000,000  shares of common stock,  for aggregate  gross proceeds of $1,500,000.
The Units were sold pursuant to Subscription Agreements,  by and between each of
the  purchasers and Applied DNA  Operations  Management,  Inc., our wholly owned
subsidiary.  This  issuance  is  considered  exempt  under  Regulation  S of the
Securities Act of 1933.


Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission Of Matters To A Vote Of Security Holders

None.

Item 5. Other Information

Litigation

We previously disclosed that plaintiff James Paul Brown, filed an action against
us in the  Superior  Court for the  State of  California  for the  County of Los
Angeles on January 12, 2006 (James  Paul Brown v.  Applied DNA  Sciences,  Inc.,
Case No. BC 3457814). The complaint asserted a single cause of action for breach
of an alleged  oral  consulting  agreement.  The relief  sought  included  money
damages and attorneys'  fees. The parties have executed a settlement  agreement,
we have performed our obligations under such agreement, and this matter has been
dismissed with prejudice.

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<PAGE>


We  previously  disclosed  that  plaintiff  Rubenstein  Public  Relations,  Inc.
commenced  an  action  against  us in the  Civil  Court of the City of New York,
County of New York,  in New York State  Rubenstein  Public  Relations,  Inc.  v.
Applied  DNA  Sciences,  Inc.).  Plaintiff  Rubenstein  Public  Relations,  Inc.
asserted  a cause of action for breach of  contract  based upon the  allegations
that we failed to make  payments  pursuant  to a March 2005  investor  relations
consulting agreement governed by New York law. Rubenstein Public Relations, Inc.
sought  damages in the amount  $43,000.  The parties have  executed a settlement
agreement,  we have performed our  obligations  under such  agreement,  and this
matter has been dismissed with prejudice.

Related Party Transactions

On May 9, 2006, we issued a press release to announce that we had entered into a
Business  Development and Trademark  License  Agreement with Dr. Suwelack Skin &
Health  Care AG  ("Dr.  Suwelack")  providing  Dr.  Suwelack  rights  to use our
SigNature(TM)  logo,  which is  printed  with  ink  containing  our  proprietary
encrypted  botanical DNA  technology,  and to participate  in our  SigNature(TM)
Program.  The terms of this one year license  agreement  provide Suwelack with a
limited, non-exclusive,  non-transferable right to use the SigNature(TM) logo on
its packaging and labels. Dr. Suwelack will pay us a one time license fee in the
amount of  EUR15,000 in  consideration  for the use of our  SigNature(TM)  logo.
EUR7,500  of the  license  fee was due upon  signing  of the  agreement  and the
remaining 50% is due upon receipt of the shipped labels.  James A. Hayward,  one
of our directors and our Chief Executive Officer ("Dr. Hayward"),  serves on Dr.
Suwelack's  board of directors.  BioCogent,  whose President and Chief Executive
Officer and sole stockholder is Dr. Hayward, provides consulting services to Dr.
Suwelack. Dr. Suwelack and BioCogent recently reached an agreement in principle,
with respect to which no written agreement has been executed, by which BioCogent
will continue to provide  consulting  services to Dr.  Suwelack and Dr.  Hayward
will serve as Dr.  Suwelack's  president on a part-time  basis  reporting to Dr.
Suwelack's Chief Executive Officer.

Item 6. Exhibits

4.1 Form of Subscription Agreement, filed as an exhibit to the current report on
Form 8-K filed with the Commission on March 14, 2006 and incorporated  herein by
reference.

4.9 Form of 10% Secured  Convertible  Promissory  Note of Applied DNA  Sciences,
Inc.,  filed as an  exhibit  to the  current  report on Form 8-K filed  with the
Commission on March 14, 2006 and incorporated herein by reference.

4.10 Form of  Warrant  Agreement  of Applied  DNA  Sciences,  Inc.,  filed as an
exhibit to the current report on Form 8-K filed with the Commission on March 14,
2006 and incorporated herein by reference.

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. 2 to Form 10-QSB/A to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       APPLIED DNA SCIENCES, INC.



Date:  October 10, 2006                 By: /s/  JAMES A. HAYWARD
                                           -------------------------------------
                                        James A. Hayward
                                        Chief Executive  Officer  (Principal
                                        Executive  Officer, Principal  Financial
                                        Officer   and    Principal    Accounting
                                        Officer)


                                      58