As filed with the Securities and Exchange Commission on June 16, 2005
                                      An Exhibit List can be found on page II-7.
                                                     Registration No. 333-122848


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549
                          ----------------------------

                                 AMENDMENT NO 2
                                       TO
                                    FORM SB-2
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                          -----------------------------

                           APPLIED DNA SCIENCES, INC.
                 ---------------------------------------------
                 (Name of small business issuer in its charter)

         Nevada                           2836                     59-2262718
------------------------------ ------------------------------ ------------------
(State or other Jurisdiction   (Primary Standard Industrial    (I.R.S. Employer
    of Incorporation or         Classification Code Number)  Identification No.)
        Organization)                                       


                       9229 W. Sunset Boulevard, Suite 830
                          Los Angeles, California 90069
                                 (310) 860-1362
        (Address and telephone number of principal executive offices and
                          principal place of business)

                     Rob Hutchison, Chief Executive Officer
                           APPLIED DNA SCIENCES, INC.
                       9229 W. Sunset Boulevard, Suite 830
                          Los Angeles, California 90069
                                 (310) 860-1362
            (Name, address and telephone number of agent for service)

                                   Copies to:
                              Andrea Cataneo, Esq.
                       Sichenzia Ross Friedman Ference LLP
                     1065 Avenue of the Americas, 21st Flr.
                            New York, New York 10018
                                 (212) 930-9700
                              (212) 930-9725 (fax)

                APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
     From time to time after this Registration Statement becomes effective.

If any securities  being  registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than   securities   offered  only  in  connection   with  dividend  or  interest
reinvestment plans, check the following box: [X]



If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the  Securities  Act,  check the following box and list the
Securities  Act  registration   statement   number  of  the  earlier   effective
registration statement for the same offering. ________

If this Form is a  post-effective  amendment filed pursuant to Rule 462(c) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. _________

If this Form is a  post-effective  amendment filed pursuant to Rule 462(d) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. _________

If delivery  of the  prospectus  is  expected  to be made  pursuant to Rule 434,
please check the following box. _________






                         CALCULATION OF REGISTRATION FEE                                                                    

   -------------------------------   --------------------  ----------------   ------------------   --------------------
     TITLE OF EACH CLASS OF               AMOUNT TO BE          PROPOSED            PROPOSED           AMOUNT OF
   SECURITIES TO BE REGISTERED            REGISTERED            MAXIMUM             MAXIMUM        REGISTRATION FEE
                                          OFFERING              AGGREGATE
                                          PRICE PER          OFFERING PRICE
                                          SHARE (1)
   -------------------------------  --------------------   ----------------   ------------------   --------------------
                                                                                               
  Common Stock, $.001 par value               25,628,326             $1.215       $31,138,416.09           $3,664.99
  -------------------------------   --------------------   ----------------   ------------------   --------------------
        Common Stock, $.001 par                  285,000             $1.215          $   346,275              $40.76
   value issuable upon exercise  
     of Warrants exercisable at
                $0.10 per share
  -------------------------------   --------------------   ----------------   ------------------   --------------------
        Common Stock, $.001 par                    5,000             $1.215          $     6,075               $0.72
   value issuable upon exercise
     of Warrants exercisable at
                $0.20 per share
  -------------------------------   --------------------   ----------------   ------------------   --------------------
        Common Stock, $.001 par                1,500,000             $1.215          $ 1,822,500             $214.51
   value issuable upon exercise
     of Warrants exercisable at
                $0.60 per share
  -------------------------------   --------------------   ----------------   ------------------   --------------------
        Common Stock, $.001 par                  750,000             $1.215          $   911,250             $107.25
   value issuable upon exercise
     of Warrants exercisable at
                $0.70 per share
  -------------------------------   --------------------   ----------------   ------------------   --------------------
        Common Stock, $.001 par               17,827,000             $1.215          $21,659,805           $2,549.36
   value issuable upon exercise
     of Warrants exercisable at
                $0.75 per share
  -------------------------------   --------------------   ----------------   ------------------   --------------------
                          Total               45,995,326                         $55,884,321.09           $6,577.59 (2)
  -------------------------------   --------------------   ----------------   ------------------   --------------------



(1)  Estimated  solely for  purposes  of  calculating  the  registration  fee in
accordance  with Rule 457(c) and Rule 457(g) under the  Securities  Act of 1933,
using the average of the high and low price as reported on the  Over-The-Counter
Bulletin Board on February 14, 2005, which was $1.215 per share.

(2) $6,571.87 previously paid.

     THE REGISTRANT  HEREBY AMENDS THIS  REGISTRATION  STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER  AMENDMENT  WHICH  SPECIFICALLY  STATES  THAT  THIS  REGISTRATION
STATEMENT SHALL  THEREAFTER  BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE  SECURITIES  ACT OF 1933 OR UNTIL THE  REGISTRATION  STATEMENT  SHALL BECOME
EFFECTIVE  ON SUCH  DATE  AS THE  SECURITIES  AND  EXCHANGE  COMMISSION,  ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.




        PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE 16, 2005

                           APPLIED DNA SCIENCES, INC.
                              45,995,326 SHARES OF
                                  COMMON STOCK

     This prospectus relates to the resale by the selling  stockholders of up to
45,995,326  shares  of our  common  stock,  including  up to  30,367,000  shares
issuable  upon the exercise of common  stock  purchase  warrants and  25,628,326
shares of common stock. The selling stockholders may sell common stock from time
to time in the principal  market on which the stock is traded at the  prevailing
market  price  or in  negotiated  transactions.  We  will  pay the  expenses  of
registering these shares.

     The following selling  stockholders are deemed an "underwriter"  within the
meaning  of the  Securities  Act of 1933 in  connection  with  the sale of their
common  stock  under  this  prospectus:   Vertical  Capital  Partners,  Inc.,  a
registered  broker-dealer;  Michael Morris,  Susan Diamond;  Ronald Heineman and
Michael Gochman;  all of whom are employees of Vertical Capital  Partners.  With
the exception of Vertical Capital Partners, Inc., Michael Morris, Susan Diamond,
Ronald  Heineman and Michael  Gochman,  no other  underwriter or person has been
engaged to facilitate the sale of shares of common stock in this offering.

     Our  common  stock is  registered  under  Section  12(g) of the  Securities
Exchange Act of 1934 and is listed on the Over-The-Counter  Bulletin Board under
the symbol  "APDN".  The last reported sales price per share of our common stock
as reported by the Over-The-Counter Bulletin Board on June 14, 2005, was $.65.

     INVESTING  IN  THESE  SECURITIES  INVOLVES  SIGNIFICANT  RISKS.  SEE  "RISK
                         FACTORS" BEGINNING ON PAGE 4.

     Neither the  Securities and Exchange  Commission  nor any state  securities
commission has approved or disapproved of these securities or determined if this
Prospectus  is truthful or  complete.  Any  representation  to the contrary is a
criminal offense.

                  The date of this prospectus is _______, 2005.

     The information in this Prospectus is not complete and may be changed. This
Prospectus is included in the  Registration  Statement that was filed by Applied
DNA Sciences,  Inc. with the  Securities  and Exchange  Commission.  The selling
stockholders  may not sell these  securities  until the  registration  statement
becomes effective.  This Prospectus is not an offer to sell these securities and
is not  soliciting an offer to buy these  securities in any state where the sale
is not permitted.





                               TABLE OF CONTENTS

                                                                         Page

Prospectus Summary                                                         1
Risk Factors                                                               3
Use of Proceeds                                                           11
Market For Common Stock and Related Stockholder Matters                   11
Management's Discussion and Analysis and Plan of Operations               13
Business                                                                  19
Description of Property                                                   32
Legal Proceedings                                                         32
Management                                                                33
Executive Compensation                                                    35
Certain Relationships and Related Transactions                            36
Security Ownership of Certain Beneficial Owners and Management            37
Description of Securities                                                 39
Indemnification for Securities Act Liabilities                            40
Plan of Distribution                                                      41
Penny Stock                                                               42
Selling Stockholders                                                      43
Legal Matters                                                             47
Experts                                                                   47
Additional Information                                                    47
Index to Financial Statements                                             48





                               PROSPECTUS SUMMARY

     The following summary  highlights  selected  information  contained in this
prospectus.  This  summary  does not  contain  all the  information  you  should
consider  before  investing  in the  securities.  Before  making  an  investment
decision,  you should read the entire prospectus carefully,  including the "risk
factors" section,  the financial statements and the secured convertible notes to
the financial statements.

                           APPLIED DNA SCIENCES, INC.

     We  are a  provider  of  proprietary  DNA-embedded  biotechnology  security
products that protect corporate and intellectual  property from  counterfeiting,
fraud,  piracy,  product diversion and unauthorized  intrusion.  We offer a cost
effective  method to  detect,  deter,  interdict  and  prosecute  counterfeiting
enterprises.  We use segments of  naturally  occurring  botanical  DNA that have
unique characteristics,  which are one-of-a-kind sequences.  Botanical DNA means
the DNA, or  Deoxyribonucleic  acid, of plants. DNA is the molecular base of all
living life forms, including animals and plants. Using various  anti-counterfeit
mediums, or substrates, such as ink, microchips,  glue, paints and holograms, we
can  authenticate  the unique DNA  characters to ensure that the product has not
been  counterfeited or tampered with.  Substrates are materials or substances on
which the botanical DNA will  interact  with the  anti-counterfeit  solutions we
utilize to determine if a product has been tampered with.

     For the six months ended March 31,  2005,  we did not generate any revenues
and had a net loss of $26,154,951. For the year ended September 30, 2004, we did
not  generate any  revenues  and had a net loss of  $19,358,259.  As a result of
recurring  losses from  operations and a net deficit in both working capital and
stockholders' equity, our auditors, in their report dated January 11, 2005, have
expressed substantial doubt about our ability to continue as going concern.

Our principal  offices are located at 9229 W. Sunset  Boulevard,  Suite 830, Los
Angeles,  California 90069, and our telephone number is (310) 860-1362. We are a
Nevada  corporation.  We maintain a website at  www.adnas.com.  The  information
contained on that website is not deemed to be a part of this prospectus.



 The Offering

                                                                                              
Common stock offered by selling stockholders............  Up to 45,995,326 shares, including the following:

                                                          -   25,628,326 shares of common stock;

                                                          -   up to 285,000  shares of common  stock  issuable  upon the exercise of
                                                              common stock purchase warrants at an exercise price of $.10 per share;

                                                          -   up to 5,000  shares of common  stock  issuable  upon the  exercise  of
                                                              common stock purchase warrants at an exercise price of $.20 per share;

                                                          -   up to 1,500,000  shares of common stock  issuable upon the exercise of
                                                              common stock purchase warrants at an exercise price of $.60 per share;

                                                          -   up to 750,000  shares of common  stock  issuable  upon the exercise of
                                                              common stock purchase warrants at an exercise price of $.70 per share;
                                                              and



                                                          -   up to 17,827,000  shares of common stock issuable upon the exercise of
                                                              common stock purchase warrants at an exercise price of $.75 per share.

                                                                               
                                                          This number represents 53.51% of our current outstanding stock.

Common stock to be outstanding after the offering.......  Up to 85,958,025 shares

Use  of   proceeds......................................  We will not  receive  any  proceeds  from the sale of the common  stock.
                                                          However,  we will  receive the sale price of any  common  stock we sell to
                                                          the selling  stockholders upon  exercise of the warrants. We expect to use
                                                          the proceeds  received  from  the exercise  of the  warrants,  if any, for
                                                          general working capital purposes.

Over-The-Counter Bulletin Board Symbol..................  APDN

     The above  information  regarding common stock to be outstanding  after the
offering is based on 65,856,025  shares of common stock  outstanding  as of June
14,  2005 and  assumes  the  subsequent  exercise  of  warrants  by our  selling
stockholders.

                                       2

                                  RISK FACTORS

     This  investment  has a high  degree of risk.  Before you invest you should
carefully  consider the risks and  uncertainties  described  below and the other
information in this  prospectus.  If any of the following  risks actually occur,
our business,  operating results and financial condition could be harmed and the
value of our stock  could go down.  This  means you could  lose all or a part of
your investment.

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.

     We incurred net losses of $19,358,259 for the year ended September 30, 2004
and  $3,445,164  for the year ended  December 31, 2003. For the six months ended
March 31, 2005, we incurred a net loss of $26,154,951. We cannot assure you that
we can achieve or sustain  profitability  on a quarterly  or annual basis in the
future. Our operations are subject to the risks and competition  inherent in the
establishment  of a business  enterprise.  There can be no assurance that future
operations  will be profitable.  Revenues and profits,  if any, will depend upon
various factors,  including  whether we will be able to generate  revenue.  As a
result of  continuing  losses,  we may  exhaust  all of our  resources  prior to
completing  the  development  of our products.  Additionally,  as we continue to
incur losses,  our  accumulated  deficit will continue to increase,  which might
make it harder for us to obtain financing in the future.  We may not achieve our
business  objectives and the failure to achieve such goals would have an adverse
impact on us, which could result in reducing or terminating our operations.

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

     We will  require  additional  funds to sustain and expand our  research and
development  activities.  We anticipate that we will require up to approximately
$3,000,000 to fund our anticipated  research and development  operations for the
next twelve months,  depending on revenue from  operations.  Additional  capital
will  be  required  to  effectively  support  the  operations  and to  otherwise
implement  our  overall  business  strategy.  Even if we do  receive  additional
financing,  it may not be  sufficient  to  sustain or expand  our  research  and
development operations or continue our business operations.

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

OUR INDEPENDENT  AUDITORS HAVE EXPRESSED  SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO
CONTINUE  AS A GOING  CONCERN,  WHICH MAY  HINDER OUR  ABILITY TO OBTAIN  FUTURE
FINANCING.

     In their report dated January 11, 2005,  our  independent  auditors  stated
that our financial statements for the year ended December 31, 2004 were prepared
assuming that we would continue as a going concern. Our ability to continue as a
going concern is an issue raised due to our incurring net losses of  $22,815,034
during the period September 16, 2002 (date of inception)  through  September 30,
2004. In addition,  we have a deficiency in stockholder's  equity of $4,706,508.
We continue to  experience  net operating  losses.  Our ability to continue as a
going  concern is subject to our  ability  to  generate a profit  and/or  obtain
necessary funding from outside sources,  including obtaining  additional funding
from the sale of our securities,  generating sales or obtaining loans and grants
from various financial  institutions where possible. Our continued net operating
losses  increases  the  difficulty  in  meeting  such  goals and there can be no
assurances that such methods will prove successful.

OUR RESEARCH AND DEVELOPMENT EFFORTS FOR NEW PRODUCTS MAY BE UNSUCCESSFUL.

     We will incur significant  research and development expenses to develop new
products and technologies.  There can be no assurance that any of these products
or technologies will be successfully developed or that if developed they will be

                                       3

commercially   successful.   In  the  event   that  we  are  unable  to  develop
commercialized  products  from our  research and  development  efforts or we are
unable or  unwilling  to  allocate  amounts  beyond  our  currently  anticipated
research and  development  investment,  we could lose our entire  investment  in
these new products and this may  materially  and  adversely  affect our business
operations,  which  would  result  in loss of  revenues  and  greater  operating
expenses.

FAILURE TO LICENSE NEW TECHNOLOGIES COULD IMPAIR OUR NEW PRODUCT DEVELOPMENT.

     To generate broad product lines, it is  advantageous  to sometimes  license
technologies  from third  parties  rather  than  depend  exclusively  on our own
employees.  As a result, we believe our ability to license new technologies from
third  parties is and will  continue to be important to our ability to offer new
products.

     In  addition,  from time to time we are notified or become aware of patents
held by third  parties  that are related to  technologies  we are selling or may
sell in the  future.  After a review of these  patents,  we may decide to seek a
license for these  technologies  from these  third  parties or  discontinue  our
products.  There  can be no  assurance  that we will  be  able  to  continue  to
successfully identify new technologies  developed by others. Even if we are able
to identify  new  technologies  of  interest,  we may not be able to negotiate a
license  on  favorable  terms,  or at all.  If we lose the  rights  to  patented
technology,  we may need to discontinue selling certain products or redesign our
products, and we may lose a competitive  advantage.  Potential competitors could
license  technologies  that we fail to license and potentially  erode our market
share for  certain  products.  Our  licenses  typically  subject  us to  various
commercializations,  sublicensing, minimum payment, and other obligations. If we
fail to comply with these  requirements,  we could lose important rights under a
license. In addition, certain rights granted under the license could be lost for
reasons beyond our control. We may not receive significant  indemnification from
a licensor against third party claims of intellectual property infringement.

WE CURRENTLY HAVE NO OR LIMITED MANUFACTURING,  SALES, MARKETING OR DISTRIBUTION
CAPABILITIES.

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

WE RELY ON OUR LICENSE AGREEMENT WITH BIOWELL  TECHNOLOGY FOR THE DEVELOPMENT OF
OUR PRODUCTS,  AND THE TERMINATION OF THE LICENSE WOULD HAVE A MATERIAL  ADVERSE
IMPACT ON OUR BUSINESS.

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

IF WE FAIL TO  CLOSE  ON OUR  ACQUISITION  AGREEMENT  WITH  BIOWELL  TECHNOLOGY,
BIOWELL  IS LIKELY TO  TERMINATE  OUR  LICENSE,  WHICH MAY FORCE US TO CEASE OUR
OPERATIONS.

     We have entered into an agreement  with Biowell  Technology to purchase all
of their intellectual property, which we currently license from them pursuant to
a license agreement. In the event that we do not close on the acquisition of the
Biowell  technology,  it is  likely  that  we  will  lose  our  license  to  the
technology.  The  termination  of our  license  agreement  would have a material
adverse impact on our business, such as the loss of products and services, which
would reduce or eliminate most of our potential  revenue source and may force us
to cease our operations.

                                       4

IF WE FAIL TO INTRODUCE NEW PRODUCTS,  OR OUR EXISTING PRODUCTS ARE NOT ACCEPTED
BY POTENTIAL CUSTOMERS, WE MAY NOT GAIN OR MAY LOSE MARKET SHARE.

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

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

     o    Availability, quality and price relative to competitive products;
     o    The timing of  introduction  of the product  relative  to  competitive
          products;
     o    Customers' opinions of the products' utility;
     o    Ease of use;
     o    Consistency with prior practices;
     o    Scientists' opinions of the 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.

                                       5

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

IF A MANUFACTURER OF OURS FAILS TO USE ACCEPTABLE LABOR PRACTICES, WE MIGHT HAVE
DELAYS IN  SHIPMENTS  OR FACE  JOINT  LIABILITY  FOR  VIOLATIONS,  RESULTING  IN
DECREASED REVENUE AND INCREASED EXPENSES

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

THE FAILURE TO MANAGE OUR GROWTH IN OPERATIONS AND  ACQUISITIONS  OF NEW PRODUCT
LINES AND NEW BUSINESSES COULD HAVE A MATERIAL ADVERSE EFFECT ON US.

     The expected growth of our operations (as to which no representation can be
made) will place a significant  strain on our current management  resources.  To
manage this expected growth, we will need to improve our:

     o    operations and financial systems;
     o    procedures and controls; and
     o    training and management of our employees.

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

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


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


     o    difficulties  in  staffing,  managing  and  integrating  international
          operations due to language, cultural or other differences;

     o    Different or conflicting regulatory or legal requirements;

     o    foreign currency fluctuations; and

     o    diversion of significant time and attention of our management.

IF WE ARE UNABLE TO RETAIN THE SERVICES OF MESSRS. HUTCHISON, BROCKLESBY, BOTASH
OR KLEMM, OR IF WE ARE UNABLE TO SUCCESSFULLY  RECRUIT QUALIFIED  MANAGERIAL AND
SALES PERSONNEL  HAVING  EXPERIENCE IN BUSINESS,  WE MAY NOT BE ABLE TO CONTINUE
OUR OPERATIONS.

     Our success depends to a significant  extent upon the continued  service of
Mr. Rob  Hutchison,  our Chief  Executive  Officer,  Mr. Peter  Brocklesby,  our
President,  Mr. Adrian Botash,  our Chief Marketing Officer and Ms. Karin Klemm,
our Chief Operating Officer and Interim Chief Financial Officer.  We do not have
employment agreements with Messrs. Hutchison,  Brocklesby, Botash or Klemm. Loss

                                       6

of the services of Messrs. Hutchison,  Brocklesby,  Botash or Klemm could have a
material adverse effect on our growth, revenues, and prospective business. We do
not maintain  key-man  insurance on the life of Messrs.  Hutchison,  Brocklesby,
Botash or Klemm.  Besides Mr.  Hutchison's  desire to retire within the next few
months,  we are not aware of any other named  executive  officer or director who
has plans to leave us or retire. In addition, in order to successfully implement
and manage our business  plan,  we will be dependent  upon,  among other things,
successfully   recruiting   qualified  managerial  and  sales  personnel  having
experience in business.  Competition for qualified individuals is intense. There
can be no assurance  that we will be able to find,  attract and retain  existing
employees  or  that  we will be able  to  find,  attract  and  retain  qualified
personnel on acceptable terms.

FAILURE TO ATTRACT AND RETAIN QUALIFIED SCIENTIFIC OR PRODUCTION PERSONNEL COULD
HAVE A MATERIAL ADVERSE EFFECT ON US.

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

WE NEED TO  EXPAND  OUR SALES  AND  SUPPORT  ORGANIZATIONS  TO  INCREASE  MARKET
ACCEPTANCE OF OUR PRODUCTS.

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

THE BIOMEDICAL  RESEARCH PRODUCTS  INDUSTRY IS VERY  COMPETITIVE,  AND WE MAY BE
UNABLE TO CONTINUE TO COMPETE EFFECTIVELY IN THIS INDUSTRY IN THE FUTURE.

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

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

                                       7

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

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

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

OUR  TRADEMARK  AND OTHER  INTELLECTUAL  PROPERTY  RIGHTS MAY NOT BE  ADEQUATELY
PROTECTED OUTSIDE THE UNITED STATES, RESULTING IN LOSS OF REVENUE.

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

INTELLECTUAL PROPERTY LITIGATION COULD HARM OUR BUSINESS.

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

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

                                       8

particular,  is  difficult  since it requires a showing of clear and  convincing
evidence to overcome the presumption of validity enjoyed by issued patents.

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

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

ACCIDENTS RELATED TO HAZARDOUS MATERIALS COULD ADVERSELY AFFECT OUR BUSINESS.

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

POTENTIAL  PRODUCT  LIABILITY  CLAIMS COULD  AFFECT OUR  EARNINGS AND  FINANCIAL
CONDITION.

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

RISKS RELATING TO OUR COMMON STOCK:

THERE ARE A LARGE NUMBER OF SHARES UNDERLYING OUR WARRANTS THAT MAY BE AVAILABLE
FOR FUTURE SALE AND THE SALE OF THESE SHARES MAY DEPRESS THE MARKET PRICE OF OUR
COMMON STOCK AND WILL CAUSE IMMEDIATE AND  SUBSTANTIAL  DILUTION TO OUR EXISTING
STOCKHOLDERS.

     As of June 14, 2005,  we had  65,856,025  shares of common stock issued and
outstanding and  outstanding  warrants to purchase  20,367,000  shares of common
stock.  All of the shares  issuable  upon  exercise of our  warrants may be sold
without  restriction.  The sale of these shares may adversely  affect the market
price of our common stock. The issuance of shares upon exercise of warrants will
cause immediate and substantial  dilution to the interests of other stockholders
since the selling  stockholders may convert and sell the full amount issuable on
exercise.

IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS,  WE COULD BE REMOVED
FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF  BROKER-DEALERS  TO
SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR  SECURITIES IN
THE SECONDARY MARKET.

                                       9


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

OUR  COMMON  STOCK IS  SUBJECT  TO THE  "PENNY  STOCK"  RULES OF THE SEC AND THE
TRADING MARKET IN OUR  SECURITIES IS LIMITED,  WHICH MAKES  TRANSACTIONS  IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.

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

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

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

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

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

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

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

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

                                       10


                                 USE OF PROCEEDS

     This  prospectus  relates to shares of our common stock that may be offered
and sold from time to time by the selling stockholders.  We will not receive any
proceeds from the sale of shares of common stock in this offering.  However,  we
will  receive  the  sale  price  of any  common  stock  we sell  to the  selling
stockholders  upon  exercise  of the  warrants.  We expect  to use the  proceeds
received from the exercise of the warrants,  if any, for general working capital
purposes.

            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our  Common  Stock is  traded  over-the-counter  on the  Over  the  Counter
Bulletin  Board  maintained by the National  Association  of Securities  Dealers
under the symbol "APDN".  There is no certainty  assurance that the Common Stock
will continue to be quoted or that any liquidity exists for our shareholders.

     The following table sets forth the quarterly  quotes of high and low prices
for our Common Stock on the OTC Bulletin Board during the fiscal years September
30, 2003 and September 30, 2004. In February of 2003, we changed our year end to
September 30. We changed our fiscal year end in connection with a reverse merger
we entered into in December 2002, in which the acquirer for accounting  purposes
had a fiscal year end of September 30. For ease of fiscal reporting,  we adopted
the same fiscal year end.


             Year ended 9/30/03*        High     Low    
             
             December 31, 2002          $2.55   $0.02
             March 31, 2003             $2.85   $2.00
             June 30, 2003              $2.85   $2.25
             September 30, 2003         $2.80   $2.40
             
             Year ended 9/30/04         High     Low
             
             December 31, 2003          $3.54   $2.45
             March 31, 2004             $3.55   $1.51
             June 30, 2004              $2.55   $0.71
             September 30, 2004         $0.96   $0.43
             
             Year ended 9/30/05         High     Low
             
             December 31, 2004          $2.39   $0.42
             March 31, 2005             $1.83   $0.78
             June 30, 2005 (1)          $1.01   $0.61

(1) As of June 14, 2005.

* We  have  disclosed  the  numbers  with  years  ending  on  September  30  for
comparative  purposes.  Effective  January 31, 2003,  we changed our fiscal year
from December 31 to September 30.

HOLDERS

     As of June 14, 2005, we had  approximately 589 holders of our common stock.
The number of record  holders was  determined  from the records of our  transfer
agent and does not include  beneficial  owners of common  stock whose shares are
held in the names of various security brokers,  dealers, and registered clearing
agencies.  The transfer  agent of our common stock is American  Stock Transfer &
Trust Company, 6201 15th Avenue, Brooklyn, New York 11219.

                                       11


     We have never declared or paid any cash  dividends on our common stock.  We
do not anticipate  paying any cash dividends to  stockholders in the foreseeable
future. In addition,  any future  determination to pay cash dividends will be at
the  discretion  of the  Board  of  Directors  and  will be  dependent  upon our
financial condition, results of operations, capital requirements, and such other
factors as the Board of Directors deem relevant.

EQUITY COMPENSATION PLAN INFORMATION

STOCK OPTION PLAN

     In  November  of 2002,  we created a special  compensation  plan to pay the
founders,  consultants and  professionals  that had been  contributing  valuable
services  to us  during  the  previous  nine  months.  The  plan is  called  the
Professional/Employee/Consultant  Compensation  Plan. Share and option issuances
from the Compensation  Plan were to be staggered over the following six to eight
months,  and consultants  that were to continue  providing  services  thereafter
either became employees or received  renewed  contracts from us in July of 2003,
which contracts  contained a more traditional cash compensation  component.  The
Compensation  Plan was designed by the Board to meet our important team building
objectives in our early stages, and to be temporary.  As of December 31, 2004, a
total of  1,440,003  shares  have been  issued  from the  Compensation  Plan and
560,000 options, 264,000 of which were exercised as of as of December 31, 2004.

     Each  qualified and eligible  recipient of shares and/or  options under the
Compensation Plan received securities in lieu of cash payment for services. Each
recipient agreed, in his or her respective  consulting contract with us, to sell
a limited  number  of shares  monthly.  We feel  that  this  carefully  designed
Compensation  Plan was successful in attracting and retaining a strong team at a
time  when we had no  established  revenue  stream  and  limited  or no  outside
financing.

     In our  financial  statements,  shares that were issued from  November 2002
through  June 30, 2003 that were  valued at $0.065 per share were shares  issued
from  this  Compensation  Plan  created  in  November  of 2002 on the  basis  of
contracts executed at that time for previously  rendered services.  Common Stock
disclosed  as being  issued in exchange  for cash at $1.00 per share  represents
options that were  exercised  under this Plan.  In December of 2004, we adjusted
the exercise price to $0.60 per share.

     Any other unrestricted  shares that were issued either before or after July
1, 2003 were valued at the fair market value.



------------------------   ---------------------------    -------------------------  ------------------
Plan Category              Number of Securities to be     Weighted Average Exercise  Number of Securities
                           Issued Upon Exercise of        Price of Outstanding       Remaining Available
                           Outstanding Options,           Options, Warrants          for Future Issuance
                           Warrants and Rights            and Rights 
------------------------   ---------------------------    -------------------------  ------------------
                                     (a)                             (b)                   (c)
------------------------   ---------------------------    -------------------------  ------------------

                                                                                      
Professional/Consultant/
Employee Stock and Stock
Option Compensation Plan            2,000,000                       $177,600                 -0-
------------------------   ---------------------------    -------------------------  ------------------
Total                               2,000,000                       $177,600                 -0-
------------------------   ---------------------------    -------------------------  ------------------


     As of December 31, 2004, a total of 1,440,000  shares have been issued from
the  Compensation  Plan and 560,000  options have been issued,  264,000 of which
were exercised as of that date.

     On January 26,  2005,  the  majority  stockholders  approved the 2005 Stock
Incentive Plan and authorized  16,000,000 shares of Common Stock for issuance of
stock awards and stock options  thereunder.  We filed a preliminary  information
statement  with the  Securities  and  Exchange  Commission  on  February 3, 2005
containing the information on the 2005 Stock Incentive Plan,  which shall become
effective 20 days after the mailing of the definitive information statement.

                                       12

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                             AND PLAN OF OPERATIONS

     Some  of  the  information  in  this  Form  SB-2  contains  forward-looking
statements that involve  substantial risks and  uncertainties.  You can identify
these  statements  by  forward-looking  words such as "may,"  "will,"  "expect,"
"anticipate," "believe," "estimate" and "continue," or similar words. 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, there
may be events in the future that we are not able to  accurately  predict or over
which we have no control.  Our actual  results and the timing of certain  events
could  differ  materially  from  those  anticipated  in  these   forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors," "Business" and elsewhere in this prospectus. See "Risk Factors."

PLAN OF OPERATIONS

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.  We believe  that we use
highly  reputable  outside labs to provide  independent  third party  validation
testing to assure  maximum  quality  control,  objectivity  and strict  security
procedures in handling and shipping.  The outside lab we use for the  validation
testing is the Idaho National Laboratory, a part of the U.S. National Laboratory
System. No compromise can enter the security chain of our product(s).

     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.


                                       13

CONSULTANT & ENFORCEMENT OPERATIONS

     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.

INTERNATIONAL SUB-LICENSE OPERATIONS

     This   division   will  oversee  the   activities   of  all   international
sub-licensees  and  partnerships.  This  division  will also develop a corporate
policy for all marketing and promotional activities.

     We intend to establish  alliances with existing  anti-counterfeit  experts,
agencies and companies in each market.  This collaborative  security  consortium
will employ DNA  technology to detect  illegal  activities,  counterfeiting  and
fraud,  and provide a high standard in security for  corporations and government
agencies.

     These   operations  will  provide   multiple   security   solutions.   Each
sub-licensee or collaborative  partnership will produce separate revenue streams
and be operational via integrated organizational structures.

     Our  management  and  advisory  board and  strategic  consultants  have the
knowledge,  experience,  contacts  and  skills to  provide a  comprehensive  DNA
security business,  with advanced  anti-counterfeit and fraud prevention systems
for the protection and tracking of currency,  documents,  consumer products, and
intellectual property.

     Strong Security  Knowledge Base -- Our executives and consultants  have the
requisite  experience to provide  solutions  that address the security  needs of
major  companies  in  such  diverse  markets  as  pharmaceuticals,   automotive,
cosmetics, apparel and accessories, aerospace, luxury goods, among others.

     Developing  Technology - We plan to acquire all rights,  title and interest
in all patents,  patents pending,  developing,  DNA anti-counterfeit,  and fraud
prevention   technologies   created  by  Biowell.   We  also  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 OEM's in these specialist fields.

     Strategic  Corporate  Relationships  -  Our  management  has  personal  and
corporate relationships with leaders in key industries such as: pharmaceuticals,
cosmetics/beauty,   fashion,  retail,  computers,  entertainment,   automobiles,
petroleum, fine arts and collectibles.

     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.

     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    Radio Frequency Identification systems (DNA + RFID)
     o    Security papers and printing o Holograms (DNA holograms)
     o    Other security-related products and systems

                                       14


     Law Enforcement Expertise - The resources of our collaborative  partners in
the security  industry  include former federal law  enforcement,  security,  and
intelligence  officers  who provide  the company  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

     The preparation of our consolidated financial statements in conformity with
accounting  principles  generally  accepted in the United States  requires us to
make  estimates  and  judgments  that affect our reported  assets,  liabilities,
revenues, and expenses, and the disclosure of contingent assets and liabilities.
We base our  estimates and  judgments on  historical  experience  and on various
other  assumptions we believe to be reasonable under the  circumstances.  Future
events,   however,  may  differ  markedly  from  our  current  expectations  and
assumptions.  While  there  are a  number  of  significant  accounting  policies
affecting  our  consolidated  financial  statements;  we believe  the  following
critical  accounting  policy involve the most complex,  difficult and subjective
estimates and judgments:

     o    stock-based compensation

STOCK-BASED COMPENSATION

     In December 2002, the FASB issued SFAS No. 148 - Accounting for Stock-Based
Compensation - Transition and Disclosure.  This statement  amends SFAS No. 123 -
Accounting  for  Stock-Based  Compensation,  providing  alternative  methods  of
voluntarily  transitioning  to the fair market value based method of  accounting
for stock based employee  compensation.  FAS 148 also requires disclosure of the
method used to account for stock-based  employee  compensation and the effect of
the method in both the annual and interim financial  statements.  The provisions
of this statement  related to transition  methods are effective for fiscal years
ending  after  December  15,  2002,  while  provisions   related  to  disclosure
requirements  are effective in financial  reports for interim periods  beginning
after December 31, 2003.

     We elected to continue to account for stock-based  compensation plans using
the  intrinsic  value-based  method  of  accounting  prescribed  by APB No.  25,
"Accounting for Stock Issued to Employees," and related  interpretations.  Under
the provisions of APB No. 25, compensation expense is measured at the grant date
for the difference between the fair value of the stock and the exercise price.

     From  its  inception,   the  Company  has  incurred  significant  costs  in
connection with the issuance of equity- based  compensation,  which is comprised
primarily  of our common  stock and  warrants  to acquire our common  stock,  to
non-employees.  The Company anticipates  continuing to incur such costs in order
to  conserve  its  limited  financial   resources.   The  determination  of  the
volatility, expected term and other assumptions used to determine the fair value
of equity based  compensation  issued to  non-employees  under SFAS 123 involves
subjective judgment and the consideration of a variety of factors, including our
historical  stock  price,  option  exercise  activity  to date and the review of
assumptions used by comparable enterprises.

     We account  for  equity  based  compensation,  issued to  non-employees  in
exchange for goods or services , in accordance  with the  provisions of SFAS No.
123 and EITF No. 96-18,  "Accounting for Equity  Instruments  That are Issued to
Other Than Employees for Acquiring,  or in  Conjunction  with Selling,  Goods or
Services".

REVENUES

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

                                       15

COSTS AND EXPENSES

     From our  inception  through  March 31, 2005,  we have  incurred  losses of
$48,969,986.  These  expenses  were  associated  principally  with  equity-based
compensation  to  employees  and  consultants,  product  development  costs  and
professional  services.  We record the equity-based  compensation expense in the
period the services  are rendered  based upon the value of the fair value of our
shares issued.

RECENT ACCOUNTING PRONOUNCEMENTS

     In April 2003, the FASB issued Statement of Financial  Accounting Standards
(SFAS) No. 149,  Amendment of Statement  No. 133 on Derivative  Instruments  and
Hedging Activities. SFAS 149 amends SFAS No. 133 to provide clarification on the
financial  accounting  and  reporting  of  derivative  instruments  and  hedging
activities and requires that contracts with similar characteristics be accounted
for on a  comparable  basis.  The  provisions  of  SFAS  149 are  effective  for
contracts  entered  into or  modified  after  June  30,  2003,  and for  hedging
relationships  designated  after June 30, 2003. The adoption of SFAS 149 did not
have a material  impact on the  Company's  results of  operations  or  financial
position.
 
     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments  with  Characteristics  of Both  Liabilities  and  Equity.  SFAS 150
establishes standards on the classification and measurement of certain financial
instruments with  characteristics of both liabilities and equity. The provisions
of SFAS 150 are  effective for  financial  instruments  entered into or modified
after May 31, 2003 and to all other  instruments  that exist as of the beginning
of the first interim  financial  reporting period beginning after June 15, 2003.
The adoption of SFAS 150 did not have a material impact on the Company's results
of operations or financial position.

     In December 2003,  the FASB issued a revision of SFAS No. 132,  "Employers'
Disclosures   About   Pensions   And  Other   Postretirement   Benefits."   This
pronouncement,  SFAS No. 132-R,  expands  employers'  disclosures  about pension
plans and other post-retirement benefits, but does not change the measurement or
recognition of such plans required by SFAS No. 87, No. 88, and No. 106. SFAS No.
132-R retains the existing disclosure requirements of SFAS No. 132, and requires
certain  additional  disclosures  about defined benefit  post-retirement  plans.
Except as described in the following  sentence,  SFAS No. 132-R is effective for
foreign  plans for fiscal years ending after June 15, 2004;  after the effective
date, restatement for some of the new disclosures is required for earlier annual
periods. Some of the interim-period disclosures mandated by SFAS No. 132-R (such
as the components of net periodic benefit cost, and certain key assumptions) are
effective  for foreign  plans for quarters  beginning  after  December 15, 2003;
other interim-period  disclosures will not be required for the Company until the
first  quarter of 2005.  Since the  Company  does not have any  defined  benefit
post-retirement  plans,  the  adoption  of this  pronouncement  did not have any
impact on the Company's results of operations or financial condition.


     In November 2004, the Financial  Accounting  Standards  Board (FASB) issued
SFAS  151,  Inventory  Costs--  an  amendment  of ARB No.  43,  Chapter  4. This
Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory  Pricing," to
clarify the accounting for abnormal amounts of idle facility  expense,  freight,
handling costs, and wasted material  (spoilage).  Paragraph 5 of ARB 43, Chapter
4, previously  stated that ". . . under some  circumstances,  items such as idle
facility expense,  excessive spoilage,  double freight, and rehandling costs may
be so abnormal as to require  treatment as current period  charges.  . . ." This
Statement  requires  that those items be recognized  as  current-period  charges
regardless  of whether they meet the  criterion of "so  abnormal."  In addition,
this Statement  requires that  allocation of fixed  production  overheads to the
costs  of  conversion  be  based  on  the  normal  capacity  of  the  production
facilities.  This  Statement is effective for inventory  costs  incurred  during
fiscal  years  beginning  after June 15, 2005.  Management  does not believe the
adoption  of this  Statement  will  have any  immediate  material  impact on the
Company.


     In December 2004, the FASB issued SFAS No.152,  "Accounting for Real Estate
Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67" ("SFAS
152) The amendments  made by Statement 152 This Statement  amends FASB Statement
No.  66,  Accounting  for  Sales of Real  Estate,  to  reference  the  financial
accounting and reporting guidance for real estate time-sharing transactions that
is  provided in AICPA  Statement  of Position  (SOP) 04-2,  Accounting  for Real
Estate Time-Sharing Transactions.  This Statement also amends FASB Statement No.

                                       16

67,  Accounting for Costs and Initial Rental Operations of Real Estate Projects,
to state that the guidance for (a) incidental  operations and (b) costs incurred
to sell  real  estate  projects  does  not  apply  to real  estate  time-sharing
transactions.  The accounting  for those  operations and costs is subject to the
guidance in SOP 04-2.  This Statement is effective for financial  statements for
fiscal years beginning after June 15, 2005. with earlier application encouraged.
The Company does not anticipate  that the  implementation  of this standard will
have a material impact on its financial position,  results of operations or cash
flows.


     On December 16, 2004,  the Financial  Accounting  Standards  Board ("FASB")
published  Statement of Financial  Accounting  Standards No. 123 (Revised 2004),
Share-Based  Payment ("SFAS 123R").  SFAS 123R requires that  compensation  cost
related to  share-based  payment  transactions  be  recognized  in the financial
statements.  Share-based  payment  transactions  within  the  scope of SFAS 123R
include stock options,  restricted stock plans,  performance-based awards, stock
appreciation  rights,  and employee share purchase plans. The provisions of SFAS
123R are  effective  as of the first  interim  period that begins after June 15,
2005. Accordingly,  the Company will implement the revised standard in the third
quarter of fiscal year 2005. Currently, the Company accounts for its share-based
payment  transactions under the provisions of APB 25, which does not necessarily
require  the  recognition  of  compensation  cost in the  financial  statements.
Management is assessing the  implications  of this revised  standard,  which may
materially  impact the  Company's  results of operations in the third quarter of
fiscal year 2005 and thereafter.

     On  December  16,  2004,  FASB issued  Statement  of  Financial  Accounting
Standards No. 153, Exchanges of Nonmonetary  Assets, an amendment of APB Opinion
No. 29,  Accounting for Non-monetary  Transactions (" SFAS 153"). This statement
amends APB Opinion 29 to eliminate the exception for  non-monetary  exchanges of
similar productive assets and replaces it with a general exception for exchanges
of non-monetary assets that do not have commercial substance. Under SFAS 153, if
a    non-monetary    exchange   of   similar    productive    assets   meets   a
commercial-substance  criterion and fair value is determinable,  the transaction
must be  accounted  for at fair value  resulting in  recognition  of any gain or
loss. SFAS 153 is effective for non-monetary transactions in fiscal periods that
begin  after  June  15,  2005.  The  Company  does  not   anticipate   that  the
implementation  of this  standard  will have a material  impact on its financial
position, results of operations or cash flows.

LIQUIDITY AND CAPITAL RESOURCES

     As of March 31,  2005,  we had  working  capital of  $682,834.  For the six
months ended March 31, 2005, we generated a net cash flow deficit from operating
activities of ($5,312,817).  

     Cash used in investing  activities totaled $28, 288, which was utilized for
patent  filings  and,  facility  lease  deposits.  Cash  provided  by  financing
activities totaled $8,314,300

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

     While we have  raised  capital to meet our working  capital  and  financing
needs in the past, additional financing is required 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 more. There can be no assurance that financing
will be available in amounts or on terms acceptable to us, if at all.

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

     Our registered  independent  certified  public  accountants  have stated in
their report dated January 11, 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.

     To  obtain  funding  for our  ongoing  operations,  we sold  $1,465,000  in
convertible  promissory  notes to 13 investors in December 2004. Each promissory

                                       17

note was  automatically  convertible into shares of our common stock, at a price
of $0.50 per share,  upon the closing of a private  placement  for $1 million or
more. On January 28, 2005,  we closed upon a private  placement  transaction  in
excess of $1  million,  and on  February  2,  2005,  the  promissory  notes were
converted into an aggregate of 2,930,000 shares of common stock. This prospectus
includes the resale of the common stock issued upon conversion of the promissory
notes.  In connection  with the sale of the  convertible  promissory  notes,  we
issued  2,930,000  warrants to purchase shares of common stock. The warrants are
exercisable  until three years from the date of issuance at a purchase  price of
$0.75 per share.

     To obtain  funding  for our  ongoing  operations,  we  conducted  a private
placement  offering in January and February 2005, in which we sold $7,371,000 of
10%  Secured  Convertible  Promissory  Notes to 61  investors.  The 10%  Secured
Convertible  Promissory  Notes  automatically  convert into shares of our common
stock,  at a price of $0.50 per  share,  upon the  filing  of this  registration
statement.  This prospectus includes the resale of the common stock to be issued
upon conversion of the 10% Secured  Convertible  Promissory Notes. In connection
with the private placement  offering,  we have issued 15,242,000  warrants.  The
warrants  are  exercisable  until  five  years  from the date of  issuance  at a
purchase price of $0.75 per share.

     Since the conversion price will be less than the market price of the common
stock at the time the  secured  convertible  notes  are  issued,  we  anticipate
recognizing  a charge  relating  to the  beneficial  conversion  feature  of the
secured convertible notes during the quarter in which they are issued, including
the first quarter of fiscal 2005 when  $1,465,000 of secured  convertible  notes
were  issued and the second  quarter of fiscal 2005 when  $7,361,000  of secured
convertible notes were issued

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

                                       18


                                    BUSINESS

HISTORY

     We are a Nevada  corporation,  which was initially formed under the laws of
the state of Florida as Datalink  Systems,  Inc. in 1983.  We changed  names and
then was redomesticated to Nevada in 1998, and in 1999, became ProHealth Medical
Technologies,  Inc.  In November of 2002,  we changed  our  corporation  name to
Applied DNA Sciences,  Inc. in connection with a reverse merger.  As a result of
the reverse  merger,  we changed our  business  to that of our  acquirer,  which
involves  researching,  developing and selling security and  anti-counterfeiting
products that utilize  plant DNA for  verification  purposes.  During this time,
most of our  efforts  have been  focused on  research  and  development  and the
execution of an exclusive license, as described further herein.

OVERVIEW

     We  are a  provider  of  proprietary  DNA-embedded  biotechnology  security
products that protect corporate and intellectual  property from  counterfeiting,
fraud,  piracy,  product diversion and unauthorized  intrusion.  We offer a cost
effective  method to  detect,  deter,  interdict  and  prosecute  counterfeiting
enterprises.  We provide  proprietary  DNA-embedded  biotechnology  solutions to
companies to protect  corporate and intellectual  property from  counterfeiting,
fraud, piracy, product diversion and unauthorized  intrusion. We use segments of
naturally  occurring botanical DNA that have unique  characteristics,  which are
one-of-a-kind sequences.  Using various anti-counterfeit mediums, or substrates,
such as ink,  microchips,  glue,  paints and holograms,  we can authenticate the
unique DNA characters to ensure that the product has not been  counterfeited  or
tampered with.

     Sectors  of  commerce  that  could  benefit  from  our  products   include:
corporations,  federal government agencies, information technology, security and
surveillance,  entertainment  media,  the arts,  cosmetics,  pharmaceutical  and
biometrics,  as well as  vertical  retail  markets.  Our  applications  can also
enhance capabilities of product origination,  identification  verification,  and
validation  of the source of  components  for critical  manufacturing,  defense,
medical and other highly-integrity or secure products.

     Our  mission  is to become  the  recognized  standard  in  providing  total
security   solutions  to  protect  corporate  and  intellectual   property  from
counterfeiting  and fraud.  We intend to deliver our products to a global market
via  existing  and  emerging  strategic  business  development  agreements  with
recognized  leaders in the  security  industry and through  collaborations  with
leading security consultancy companies.

     We have acquired the exclusive license to sell, market, and sub-license all
of  Biowell  Technology,   Inc's  DNA   anti-counterfeit  and  fraud  prevention
biotechnology and products in North America (U.S. and Canada), Latin America and
Europe.  Biowell  Technology Inc. is a Taiwan  company,  formed in October 1999,
with its  headquarters  in  Chung-Ho  City,  Taiwan and  currently  has over 600
shareholders, with no shareholder holding 20% or more of the outstanding shares.
To date, Biowell products have only been offered within Asia, with limited sales
made.  The  exclusive  license  also  gives  us the  initial  rights  to  future
biotechnologies  developed by Biowell and also new applications for the existing
technology that may be developed for the marketplace. Biowell has selected us to
be its  marketing  and  licensing  partner to  introduce  the DNA  biotechnology
products to the world's largest consumer  markets.  In addition to marketing the
DNA products in our territories,  we will develop DNA production laboratories in
the  United  States,  as well as  develop  capabilities  in DNA  authentication,
analysis and detection  products with ongoing  relationships with the Department
of Energy's national laboratory system.

     We believe that we have a very seasoned and  experienced  management  team.
This was a key factor in establishing the partnership with Biowell. Our combined
executive   team  has  extensive   professional   experience  in  the  areas  of
anti-counterfeiting  technology,  microchip  development,   security,  printing,
marketing, and corporate sub-licensing development. Lawrence Lee has 10 years of
experience in microchip design and  anti-counterfeiting  technology with Boeing,
Hughes and Applied DNA Sciences. Paul Reep, our Chief Technology Officer, has 35
years  experience  security,   energy  and  aerospace  technologies,   corporate
development  and  marketing,  working  for or with  Lockheed  Martin,  the  U.S.
Department  of Energy,  U.S.  Department  of  Agriculture,  U.S.  Department  of
Defense,  Rockwell  International,  InVision, The National Institute of Justice,
Applied DNA Sciences and EG&G.  Peter  Brocklesby has 20 years  experience  with
security  and  defense  intelligence  as an  officer  in the Royal Air Force and

                                       19

working for e-Systems,  Air America and Applied DNA Sciences.  Rob Hutchison has
15 years experience with anti-counterfeiting and security,  working with eCharge
Corporation,  Powerhouse Technologies and Applied DNA Sciences. Ron Erickson has
20 years experience in  anti-counterfeiting  with an emphasis on software piracy
with  Egghead  Software  Inc.,  Globaltel  Resources,  2Charge  and  Applied DNA
Sciences.  We  believe  that our  management  team has also  been  active in the
International   Anti-Counterfeiting   Coalition,  Homeland  Security  technology
communities,  and the  anti-fraud  investigation  industry.  We have  signed  an
agreement  with  Holomex  to co-own IP  created  utilizing  our  technology.  In
addition,  we have research and  development  agreements  with the Department of
Energy, United Stated Department of Agriculture and Department of Defense.

LICENSE AGREEMENT WITH BIOWELL TECHNOLOGY

     We entered into exclusive  license  agreement with Biowell in October 2002,
which was amended in July 2003. Our territories  under the license agreement are
the United States, the European Union, Canada,  Mexico,  Colombia,  Saudi Arabia
and the  United  Arab  Emirates.  It has an  initial  term of five years with an
automatic  ten-year  renewal  upon  the  meeting  of  certain  minimum-guarantee
objectives. Thereafter, the license is renewable for successive three-year terms
upon the successful completion of certain minimum-guarantee objectives.

     The minimum guarantees that we must meet each year of the license agreement
to retain the exclusive license for the technologies are as follows:

       YEAR                         MINIMUM GUARANTEE

     1st year            $50,000 gross purchase orders or payment of $25,000
     2nd year            $300,000 gross purchase orders or payment of $50,000
     3rd year            $360,000 gross purchase orders 
     4th year            $432,000 gross purchase orders
     5th year            $518,400 gross purchase orders

     The minimum guarantee payment requirement has been suspended by Biowell. In
consideration  for the granting of the exclusive license to us, Biowell received
1.5 million  shares of our common  stock,  with the option to  purchase  another
500,000 shares.  In return, we received the option to purchase 500,000 shares of
Biowell  common stock.  We have not exercised the option to purchase the Biowell
shares.

         The license agreement may be terminated by Biowell if:

1)   we  sell,  assign,  attempt  to sell or  assign,  or  cease to carry on our
     business;
2)   we fail to make the minimum payment guarantees;
3)   there is a change in control of our company;
4)   we become insolvent,  commence bankruptcy proceedings or make an assignment
     for the benefit of creditors; or
5)   upon 60 days  written  notice of a breach of a  material  obligation,  such
     breach is not cured.

     In the event that we fail to make the minimum payment  guarantees or we are
unable to cure a breach  within the 60 day period,  we have the  option,  in our
sole discretion, prior to termination by Biowell, including during any time when
we are in breach of this agreement,  to elect to change the agreement whereby we
are a non-exclusive manufacturer in our territories.

     In connection with our contemplated acquisition of Biowell's technology, as
described  below in greater  detail,  Biowell  and we have agreed to suspend all
payments due or to become due under the license  agreement have been  suspended,
pursuant  to a letter  agreement,  dated  November  2, 2004.  The fees have been
suspended in contemplation of the acquisition and will become due and payable if
the acquisition is terminated.

     Under the  license,  we would  submit  orders to Biowell and Biowell  would
fulfill such orders.  We would generate income by charging a higher price to our
customer  than our cost for the goods from  Biowell.  The  aggregate  minimum of
$2,000,000  in the first five  years was not an  indication  of the  anticipated
market for the  products.  It was a level  established  in goodwill  between the

                                       20

parties  at a minimum  level of  performance  because  of the  risks,  costs and
potential problems associated with undertaking a new business product.

BIOWELL TECHNOLOGY ACQUISITION AGREEMENT

     On January  28,  2005,  we entered  into a stock  purchase  agreement  with
Biowell Technology Inc., whereby a to-be-formed  wholly-owned  subsidiary of the
Company  would  acquire  a  company  to be  formed  which  would  own all of the
intellectual  property  of  Biowell in  exchange  for  36,000,000  shares of the
Company's common stock to be issued to the shareholders of Biowell.  The parties
have agreed to amend the agreement,  with such amendment to be executed and take
effect upon closing, which is scheduled to occur during June 2005.

     The closing of the acquisition is subject to numerous terms and conditions,
including:

     1)   due  diligence  review  of  Biowell's  intellectual  property  by  our
          intellectual property counsel and the issuance of a report and opinion
          by such counsel satisfactory to us;
     2)   release of encumbrances on the assets to be acquired;
     3)   the formation of and sale of the assets to be acquired from Biowell to
          a British  Virgin  Islands  company;
     4)   amendments to an agreement between us and Giuliani Partners LLC;
     5)   reorganization of our Board of Directors of the Company;
     6)   formation of a  wholly-owned  subsidiary of ours in the British Virgin
          Islands; and
     7)   such  other  customary  representations,   warranties  and  conditions
          customary to transactions of this nature.

     As of the date of this  filing,  all of the above terms and  conditions  to
closing have  occurred  except for the approval by the  shareholders  of Biowell
Technology and the reorganization of our board of directors.  In connection with
the closing,  if it occurs,  we will reorganize our board to establish the board
at seven members,  with Biowell having the right to appoint three of the initial
seven members.

     In the event  that the  closing  has not  occurred  on or prior to July 31,
2005, either party may terminate the agreement.  In addition,  the agreement may
be terminated by the written  consent of both parties or  unilaterally by either
party upon a material  violation  or breach by the other party that has not been
cured within 10 business days of notice of such violation or breach.

     In connection with the closing,  the parties will also enter into a license
agreement, whereby we will grant Biowell an exclusive license to market and sell
our products in selected Asian  countries,  a consulting  agreement with Biowell
for the services of key employees of Biowell and non-competition agreements.

     In the  event  that  we do not  close  on the  acquisition  of the  Biowell
technology, it is likely that we will lose our license to the technology. We are
currently  in default of the license  agreement  for failure to make our royalty
payments,  although our requirement to make royalty  payments has been suspended
since November in contemplation of this acquisition. If the acquisition does not
occur, we are required to make all royalty  payments owed,  including those that
were suspended, within 30 days of the acquisition being called off.

SUB-LICENSING AGREEMENT

     In July of 2003,  Applied  DNA,  Biowell and G. A.  Corporate  Finance Ltd.
entered  into a  Sub-License  Agreement  for the United  Kingdom in exchange for
$3,000,000.  G. A. Corporate Finance Ltd. paid $25,000 upon its execution of the
Agreement,  and the  remaining  $2,975,000  is  subject to an  interest  bearing
promissory note,  payable in twenty (20) consecutive  quarterly  installments of
Principal and Interest in the amount equal to the lower of $185,937.50 or 35% of
Gross Revenues for that quarter due on the final day of the quarter.

     The minimum  guarantees  that G. A. Corporate  Finance,  LLC must meet each
year  of  the  license  agreement  to  retain  the  exclusive  license  for  the
technologies are as follows:

                                       21


      YEAR                  MINIMUM GUARANTEE

    1st year            $50,000 gross purchase orders 
    2nd year           $150,000 gross purchase orders 
    3rd year           $300,000 gross purchase orders 
    4th year           $360,000 gross purchase orders 
    5th year           $432,000 gross purchase orders

     Due to the lack of marketable  products since  execution of this agreement,
we suspended the payment under the note and the minimum  guarantees  owed to us.
We are  currently  in  negotiations  with this  sub-licensee  to either amend or
terminate this agreement.

     As with our Exclusive License  Agreement with Biowell,  our UK Sub-Licensee
will have the  opportunity to apply for new product  licenses,  which can remain
exclusive in its territory for the first eighteen months.

Biowell DNA Technologies
-----------------------
     Every living thing has a unique DNA code in its  cellular  composition.  By
taking the DNA from a plant  material,  Biowell is able to create a group of DNA
codes that can be turned into a unique and traceable marking for any product.

     In the early  1980's the primary  emphasis in DNA  research  was applied to
pharmaceutical  applications.   There  was  very  little  focus  in  the  living
biotechnology arena. During the l990's, a group of elite scientists,  led by Dr.
Sheu Jun-Jei of Taiwan,  focused on the first research and  development of a DNA
based anti-counterfeit  biotechnology. In the late 1990's, Dr. Sheu made a major
breakthrough in  biotechnology,  and patents with commercial  applications  were
filed.  Biowell  was formed in Taiwan in  October of 1999 to hold these  pending
patents  and  continues  to  advance  in the  areas  of DNA  anti-counterfeiting
biotechnology.

     The key to this  exclusive  biotechnology  is the  ability to mix or attach
scientifically selected and processed DNA to specific media such as paint, glue,
polymer,  and  ink.  In  doing  this,  the  characteristics  of DNA are  used to
distinguish genuine products from counterfeits. This technology can also be used
to  authenticate  microchips  and circuit  boards that contain them.  The DNA AC
(anti-counterfeit)  biochip is a Biowell product in which DNA is embedded into a
microchip. When biochips are embedded into circuitry, the biological data can be
read   electronically   and  the   component  can  be   authenticated.   Without
authentication, the device will not operate.

Intellectual Property
----------------------

     Key to our success is ongoing research and development. Biowell has over 10
patents pending and we have filed two new patent applications. While patents are
an  important  asset,  they are not the only  instruments  used to  sequester  a
competitive  position  for us.  We are  developing  numerous  tools to  maintain
technical   superiority,   which   includes   licensing   other   component  and
complementary technologies that will keep pace with our speed to market efforts.

     We regard our trade secrets and other intellectual  property as an integral
component of our success.  We rely on patent law,  trademark  law,  trade secret
protection  and  confidentiality   and/or  license  agreements  with  employees,
customers,  partners and others to protect our intellectual property.  Effective
patent,  trademark  and trade  secret  protection  may not be available in every
country in which our products are  available.  We cannot be certain that we have
taken  adequate  steps to  protect  our  intellectual  property,  especially  in
countries  where the laws may not  protect  our rights as fully as in the United
States. In addition, if our third-party  confidentiality agreements are breached
there may not be an adequate remedy available to us. If our trade secrets become
publicly known, we may lose our competitive position.

     Additionally,  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.

                                       22

     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.

Global Market Penetration
-------------------------
     We have  redirected our sales and marketing  strategy to place a premium on
business-to-business opportunities. In order to effectively service our products
globally, we may enter into both exclusive and non-exclusive agreements. Each of
these  agreements  will have time limits and have very specific  revenue targets
set against  them. In the case of an exclusive  agreement,  we may further limit
our  relationship  to certain  products  that are offered for sale in a specific
region. All exclusive agreements will have time limits with specific targets for
revenue  to be derived  out of a given  region.  Additionally,  we have and will
retain the right to allow  certain  global  partners  (as we decide from time to
time) to sell into a restricted  exclusive  market with the provision that a fee
be paid to the  exclusive  licensee in a given region for products  sold in that
region that are covered  under  their  exclusive  license.  This  provision  was
adopted to allow for certain Fortune 50 companies to pursue selling our products
and services  globally  without  restrictions  and  encumbrances  with  specific
geographical regions.

Our Products

         With our exclusive licensing of Biowell's DNA technologies, we will be
working to provide complete DNA anti-counterfeit and fraud prevention solutions.
We will offer comprehensive and price-competitive products and solutions. The
key characteristics of the DNA biotechnology are as follows:

     UNIQUE AND  IMPOSSIBLE  TO REPLICATE  DNA CODES -- specially  processed DNA
     fragments,  with unique  characteristics and one-of-a-kind  sequences,  are
     used. The embedded DNA  concentration  is extremely  small (3-5 micron) and
     cannot be analyzed unless  proprietary  biochemistry and reagents are used,
     along with our proprietary DNA reader systems.

     EASY TO CUSTOMIZE  -- We can tailor the DNA tagging to meet the  customer's
     product requirements.  For example, the DNA codes can be generated based on
     one or more DNA sources and one or more anti-counterfeit technologies.

     EASY AND QUICK TO USE -- With the DNA instant  verification kit or scanner,
     instant verification can be obtained at the  point-of-purchase.  Hence, the
     authentication    process   can   be   performed    quickly.    Traditional
     anti-counterfeit technology analysis requires anywhere from 24 to 48 hours.
     Our technology will achieve an effective and timesaving  deterrent  against
     counterfeiters.

     BROAD APPLICATIONS -- DNA anti-counterfeiting  technology can be applied to
     almost any product on the market.  The DNA ink is edible and can be used on
     tablets or capsules ensuring against counterfeiting pharmaceuticals.

DNA MARKER

     Our first anti-counterfeiting  product is the DNA Marker, an agent that can
be used to authenticate  textile products.  The DNA Marker can be applied at any
point in the manufacturing  process,  from the freshly cut raw fibers through to
the finished garment. As the DNA Marker can be applied to any fabric from cotton
to wool, this will help textile vendors and governments  determine the origin of
thread, yarn and fabric through to the high-end garment manufacturers who suffer
lost sales at the hands of counterfeiters.  DNA Marker protection will also help
preserve jobs at the legitimate  textile and clothing  manufacturers  as well as
ensuring  that the proper taxes are  collected  on textiles  and  garments  from
authorities.


     The DNA Marker  will  remain  effective  into the 22nd  century and will be
detectable throughout the different  manufacturing stages without degrading.  It
can be detected in a variety of manners from inspection  under infrared light to
laboratory  forensic  analysis that  authenticates  it to a certainty of 99.9999
percent

                                       23


     Driven  by market  needs,  this is the  first of what is  expected  to be a
number of products and services  based upon the DNA marker  technology.  We will
continuously  assess  the  anti-counterfeit  needs  of  markets,  companies  and
governmental organizations and will develop proprietary technologies,  solutions
and products for these opportunities.

INKS

     DNA anti-counterfeit ink has been developed as two major applications.  The
first ink is Biowell's  unique  anti-counterfeit  ink (covert ink), which can be
authenticated at a forensic-science level of certainty,  in a lab, with detailed
DNA  analysis.  The  second  application  is an  enhanced  version of the first,
integrating  into  the  original  anti-counterfeit  ink  an  additional  instant
detection function for on-site authentication (overt ink).

     This instant  verification  process has been designed to allow  sampling at
any point in the product supply chain.  By swabbing  testing fluid  containing a
special  activation  buffer across the authentic DNA ink surface,  a biochemical
reaction  occurs  between  the coating of the DNA  molecules  in the ink and the
buffer fluid. This reaction manifests as a reversible color change, with the ink
changing color from blue to pink, and back to blue within  seconds.  Testing can
be repeated at various checkpoints throughout the product supply chain.

     Proprietary  production  techniques  are used to  manufacture  DNA with the
unique  property  for  integration  with  ink.  The  key to  utilizing  DNA  for
anti-counterfeit  purposes  lies in the  preservation  of  DNA.  The  system  of
production ensures that DNA can survive for over 100 years. In addition, special
materials are used to shield purified DNA from  environmental  variation,  which
allows  perpetual  preservation of DNA and permanent  proof of authenticity  for
genuine products.

         DNA ink can be applied to:

     o    GENERAL COMPANY USE: trade marks,  patents,  company logos,  important
          documents
     o    FINANCIAL INDUSTRY: currency, stocks, checks, bills, bonds, checks
     o    RETAIL: event tickets, VIP tickets, clothing labels
     o    MEDICINES: capsule and pill surface printing
     o    INNER PACKAGE: foil blister packs
     o    OUTER PACKAGE: boxes, bottles
     o    ARTS: paintings, artifacts, collectibles and memorabilia
     o    OTHERS: lottery tickets, stamps, custom seals, passports, visas, etc.

     Virtually any item that can be duplicated  now can be protected with any of
these DNA ink applications.  These  applications are  cost-effective  and can be
adapted  to  any  company's  current  branding,   product  tracking,   or  other
anti-counterfeiting program.

DNA LABELS

     DNA  anti-counterfeit  ink can be applied to garment labels. It can also be
printed  onto  logos  or on any  other  surface.  Labels  are  printed  with the
proprietary  ink  containing  the  specific   authentication   DNA  code  for  a
manufacturer. The labels can then be easily tested for authenticity.

     Knowledge that the labels are  DNA-imprinted  and can be quickly and easily
verified serves as a deterrent to counterfeiters. We believe this in itself will
create a demand for the proprietary DNA ink-impregnated label technology.

DNA CHIP

     Computer and electronic  signals  constitute most of the corporate security
systems.  These systems are of similar function and design,  and are susceptible
to duplication and counterfeit.  The  polymorphism of DNA is significantly  more
complex than electronic signals, and better suited for security systems.

                                       24

     The DNA  chip  card is  intended  for both  authentication  of the card and
identification of the individual.  For that purpose, a set of DNA chip cards are
assigned   with   specific   DNA  (group  ID),   along  with  the   individual's
identification information and recorded in the chip's memory. A reader module is
configured  to  recognize  (and  therefore  verify)  only the chip  carrying the
correct group ID. Any DNA chip card with different group ID, or indeed any other
chip card, will be rejected.

     The DNA chip uses artificially constructed DNA, with each user group having
the  same  DNA  code.   Individuals   are   differentiated   in  the  system  by
identification codes stored in the chip's memory. In addition,  the DNA chip can
be configured for the customer to have a particular person have their own DNA as
the source DNA for that user group.  The DNA chip  generates  unique signals and
will not function  properly once removed from the casing.  The empty chip is not
available anywhere else on the market, thus making it impossible to counterfeit.
Once  the  imbedded  DNA chip is  sabotaged  or  removed  the  chip  will  cease
functioning, thus preventing data on the chip from being duplicated.

     The signal of a DNA chip is generated  through an  interaction  between DNA
and a specially  devised  mechanism known as a DNA chip reader.  A real DNA chip
will generate an analogical  signal and be received by the reader after the chip
is  stimulated.  An LCD display  screen  provides  immediate  authentication  by
reading the unique DNA signals embedded in the chip.

     The DNA chip function is versatile,  which allows it to be integrated  into
the form of slot  reader,  slide  through  reader,  or contact  point reader for
instant  authentication.  Biowell has also  developed  a portable,  lightweight,
hand-held  scanner that can be used to authenticate  the DNA chips.  The cost of
the DNA chip,  card,  and reader  system is  comparable  to existing  smart card
systems.  Above all,  the reader can be linked  externally  with  existing  card
readers to save replacement costs.

     We believe that the DNA chip system is more secure than all other  systems;
since it cannot  be  copied or  hacked,  and  works  with  specially  configured
readers.

     The DNA biochip can be applied to many products. For example:

     o    Security  ID cards
     o    Passports o Licenses
     o    Credit and ATM cards o Debit cards
     o    Consumer  merchandise  (CDs, VCDs,  DVDs,  notebook  computers,  PDAs,
          handbags, etc.)
     o    Other  applications  where   authentication  is  required   (antiques,
          paintings, etc.,)

DEMANDS FOR SECURITY AND POSITIVE IDENTIFICATION

     As nations are  threatened  by terrorism  and  corporations  try to prevent
corporate  fraud and  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.   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
    o  Other important Identity cards and official documents

                                       25

     We will explore  contracting  with consultants in Washington D.C. that will
assist with identifying and securing  potential  Government  contracts that will
utilize the DNA technology for identity and authentication.  In 2004, we won the
"Best of New technology" prize at the Security Industry  Association  conference
in  Washington  D.C.  in  competition   against  some  of  the  world's  largest
corporations.  Shortly thereafter, we were inducted into the InteGuard Alliance,
a consortium  of 29 major  companies  providing  security  services and security
technology to the US Government.

     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 of our and is currently  underway in
the Biowell labs.

BUSINESS STRATEGY AND APPROACH

     Our goal is to establish three integrated  business  operations  addressing
and  servicing  the  needs  of  the  marketplace  for  anti-counterfeit,   fraud
prevention, and homeland security solutions.

Intellectual Property Development, Product Operations & Partnerships
--------------------------------------------------------------------
     We are a developer  of  security  solutions  that  protects  corporate  and
intellectual  property from counterfeiting,  fraud, piracy and product diversion
using a proprietary line of DNA embedded  biotechnology  products accompanied by
monitoring and enforcement  support,  we produce  solutions  customized to their
customer's  need.  We intend to market and sell DNA  anti-counterfeit  and fraud
prevention  products  and  oversee  laboratory  facilities  where  consumer  and
corporate  products  can  be  tested  for  authenticity.  We  will  oversee  the
development  of new product  lines that will  address  specific  and  individual
customer needs.  Additionally,  this division will identify strategic  licensees
and partnerships in multiple sectors that will license and sell our products and
biotechnologies.  This will include sub-licensing the technology to key partners
in each sector with an established base of customers. These new partners will be
able to enhance their client  services by adding our  technology to the existing
product line or current security methods to deter fraud and counterfeiting.

Consultant & Enforcement Operations
-----------------------------------
     As a  service  to our  clients,  we will  consult  with them on how to best
protect  their  intellectual  property  and  products.  We will offer  worldwide
investigative  and DNA analysis  services for the enforcement and prosecution of
counterfeiters and fraud itself and through our subcontractors or sub-licensees.

International Sub-License Operations
------------------------------------
     This division will oversee the activities of all international  sub-license
alliances and  partnerships.  This division will also develop a corporate policy
for all marketing and promotional activities.

     We intend to seek alliances with existing anti-counterfeit networks in each
market. We will train these networks to use our technology to detect and monitor
counterfeit  and fraud,  and we will use our own  anti-counterfeit  and security
experts  to  help  detect  counterfeiting   attempts  against  corporations  and
government agencies.

     By  combining  our three  operations,  we will  provide  multiple  security
solutions.  Each division will produce  separate  revenue streams and integrated
organizational  structures that we believe will make us a leader in the field of
anti-counterfeit and fraud prevention services.

     We believe our management team and advisory board have a unique combination
of skills for providing  integrated DNA  anti-counterfeit  and fraud  prevention
systems for the protection and tracking of documents, products, and intellectual
property:

          --   STRONG SECURITY KNOWLEDGE BASE --We believe that our team has the
               experience  to analyze and  provide  solutions  that  address the
               security  needs of companies in such diverse  market  segments as
               pharmaceuticals,  designer clothing,  luxury goods and cosmetics,
               aerospace,  defense,  diamonds,  automotive,  holography and chip

                                       26

               manufacturing.  Several team members are published authors in the
               area of security and we believe they are  recognized  globally as
               experts in their fields.

          --   LEADING  TECHNOLOGY  -- We have  exclusive  rights to all  patent
               pending,  leading  DNA  anti-counterfeit,  and  fraud  prevention
               technologies  created by Biowell.  We also have an  agreement  in
               place  with   HoloMex,   Inc.,   a  leading   security   hologram
               manufacturer, to create DNA-holograms,  a new generation security
               product.   We  believe  our  management   also  has  an  in-depth
               understanding of microchip design and applications.

          --   STRATEGIC CORPORATE  RELATIONSHIPS -- Our management has personal
               and corporate  relationships  with leaders in key industries such
               as:   high-end   fashion   retail,   computers,    entertainment,
               automobiles,  aerospace,  defense  and  pharmaceuticals.  We will
               utilize   these   existing   relationships   to   introduce   our
               anti-counterfeiting products and generate contracts,  although no
               discussions have yet been held. Each industry has multiple facets
               for the  anti-counterfeit  DNA technology.  For example,  fashion
               retail can use our anti-counterfeit  chip in its high-end fashion
               handbags, while a company producing fine wines can take advantage
               of our  DNA-embedded  label. Our proprietary  technologies  offer
               immediate and affordable  detection and security for all of their
               trademarks and products.

          --   STRONG  TECHNOLOGY  ALLIANCEs  -- Our products can also work with
               and   supplement   products  in  key   anti-fraud   and  security
               industries, such as:

                    o     Electronics security
                    o     Hologram manufacturing
                    o     Radio Frequency Identification (RFID) systems
                    o     Isotopic Markers
                    o     Security papers and printing
                    o     Other security-related products, systems, and services

          --   LAW  ENFORCEMENT  EXPERTISE  -- Our  management  includes  former
               federal law enforcement,  security, and intelligence officers who
               we believe provide us with extensive 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

Patents Pending



------------------------------ --------------------------- --------------------------- --------------------------- -----------------
Patent Name                    Application No.             Filed by                    Date Filed                  Jurisdiction
------------------------------ --------------------------- --------------------------- --------------------------- -----------------


------------------------------ --------------------------- --------------------------- --------------------------- -----------------
                                                                                                                     
A Method of Utilizing          089108443                   Biowell                     March 17, 2000              Taiwan
Nucleic Acids as
Markers for Product            00107580.2                                              May   18, 2000              China
Anti-Counterfeit Labeling
and Verification               09/832,048;                                             April  9, 2001              United States
                               published 20020187263-A1
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
EppenLocker (A                 089204158                   Biowell                     March 10, 2000              Taiwan
Leakage-Prevention Apparatus
of Microcentrifuge)
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------

                                       27

Multiple Tube Structure for    089210575                   Biowell                     June 20, 2000               Taiwan
Multiple in a Closed
Container
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
Method for Processing          89111477                    Biowell                     June 12, 2000               Taiwan
Multi-PCR in Closed Vessel
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
Method for Mixing Nucleic      2002-294229                 Biowell                     August 31, 2002             Japan
Acid in
Water Insoluble Media and      03007023.9                                              March  27, 2003             European
Application Thereof                                                                                                Patent Office
                               92121973                                                August 11, 2003             Taiwan
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
Method for Hiding Secret       92121490                    Biowell                     August  6, 2003             Taiwan
Message Carrying a DNA
Molecule and a Method for      pending                                                 August  6, 2003             China
Decoding the Secret Message
Hiding by thereof
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
Method for Transferring        92119302                    Biowell                     July   15, 2003             Taiwan
Giveback Funds by
Recognizing Plurality of       03150071.4                                              July   31, 2003             China
Objects
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
Anti-Counterfeit Chip          None                        Biowell                     To be filed                 Taiwan
Recognizing Device
                                                                                                                   China
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
A System and Method for        60/463215                   Biowell                     April  16, 2003             United States
Marking Textiles Using DNA
                              Applied DNA Sciences
------------------------------ --------------------------- --------------------------- --------------------------- -----------------
A System and Method for         2004/012031                Applied DNA Sciences        April  15, 2004             United States
Marking Textiles Using
Nucleic Acids
------------------------------ --------------------------- --------------------------- --------------------------- -----------------
System and Method for           10/825968                  Applied DNA Sciences        January 21, 2004            United States
Authenticating Clients on a
Local Area Network Using
Nucleic Acids


PRODUCT RESEARCH AND DEVELOPMENT

     We anticipate incurring research and development expenditures in connection
with the  development of our DNA embedded  biotechnology  security  products and
solutions  during the next twelve months.  This includes,  but is not limited to
projects involving the following agencies and companies:

          o    Department of Energy;
          o    Department of Agriculture;
          o    Oakridge National Laboratories; and
          o    Holo-Mex.

     These projected expenditures are dependent upon our generating revenues and
obtaining  sources of  financing in excess of our  existing  capital  resources.
There is no guarantee  that we will be successful in raising the funds  required
or generating  revenues  sufficient to fund the projected  costs of research and
development during the next twelve months.

     The  relationship  with the  Department of Energy,  as  constituted  in the
Cooperative  Research and  Development  Agreement,  as amended,  encompasses the
following scope of work for each  initiative,  recognizing that each application
may require a discrete set of unique processes:

                                       28

TEXTILES

     Develop and verify DNA embedding  recovery  procedures and test methods for
sewing thread and fabric labels.  Confirm DNA integration  recipes.  Demonstrate
novel Real-Time Polymerase Chain Reaction DNA amplification  techniques.  Create
prototype  consumable  kits for commercial  laboratory and customer  testing for
threads and labels.  This  initiative is on schedule for the first phase by June
30, 2005 for commercial readiness. A commercialization  partner has been engaged
for over one year,  where  nominally 100 sample  prototypes have been evaluated.
DNA recovery tests have proved positive.

INKS/COATINGS

     Develop DNA integration recipes to optimize DNA concentrations. Develop and
verify  DNA  recovery  procedures  and test  methods.  Demonstrate  a rapid  PCR
amplification technique. Conduct scalability study for each application.  Create
prototype  consumable kits for commercial  use.  Schedule for completion is TBD,
but a commercialization  partner has been engaged and will be sending samples to
the lab this month.

PETROCHEMICAL

     Develop system architecture for a fully integrated, autonomously controlled
DNA petroleum marker,  for crude and refined products.  Engineer a secure system
and model system behavior and identify critical design constraints and solutions
for  implementation.  The schedule for  completion  is TBD, but will be a longer
duration than the other initiatives. Develop and demonstrate standoff DNA sensor
and control systems  capability.  Develop  proprietary  processes.  A commercial
partner has been engaged and has been  replicating  positive DNA recovery during
the past few months.

SUBSTRATES/HOLOGRAMS

     Develop   interference-free  DNA  integration   techniques  for  paper  and
composite  material.  Develop and verify DNA extraction and recovery  protocols,
and demonstrate a rapid PCR  amplification  technique.  Assist scaling  studies,
with  industrial  partners.  Create  prototype  consumable  kits for  commercial
laboratory and customer testing. A  commercialization  partner for holograms has
been  engaged,  has sent  samples to the lab,  where  positive  results  for DNA
recovery were recently achieved.  The next phase will be to integrate and test a
hot-stamped  hologram,  validate DNA recovery and prepare for commercial launch.
Scheduled completion is within the next 90 days.

     The relationship  with the United States  Department of Agriculture will be
used in the near  future,  as the  configuration  and rapid  assay  and  testing
methods  for the DNA are more  completely  advanced.  The  Agriculture  Research
Service lab at Clemson will be utilized to expand the textile  applications  for
that industry.

     The reference of Oak Ridge National  Laboratory was made, because we intend
to  demonstrate  the textile  marker  project  results to the Oak Ridge National
Laboratory program,  which is being sponsored by the Department of Commerce,  to
compete and select  textile  marking  technologies  for use by U.S.  Customs and
other venues.

     The reference to Holo-Mex  references our current agreement and development
strategy with Holo-Mex, which has been discussed above.

     It is  likely  that  we  will be able  to  attract  industry  partners  for
financial  participation/cost  sharing once  successful  results are achieved at
commercial scale; on an application by application basis, although no assurances
can be given that we will be able to attract such  investments.  Similarly,  the
Department  of Energy has access to other funding  sources  within their agency,
and outside  the agency,  which may help to defray  program  costs,  although no
assurances can be given that we will be able to attract such investments.

Project Title: "Validation and Verification for DNA Authentication"

                                       29


     This project is the main focus of R&D activities to date. These activities
support industry initiatives for textiles, inks, substrates and petrochemicals.
The first such project scheduled for completion is for textiles. This project
has been the major focus of this reporting period. The other three projects are
currently being planned.

     1.   Development  efforts for the first period were  $433.765,  and for the
          second period $450,330, for a total of $884,095
     2.   The nature of the  textile  project  has  involved  embedding  the DNA
          marker into textile processing materials, where, ultimately a security
          thread  can  be  used  in  a  wide  range  of  textile  authentication
          applications.
     3.   The  expected  completion  date  for the  textile  marker  project  as
          described above is June 30, 2005.
     4.   The risks  involved  are low to medium.  Once the DNA  textile  marker
          begins commercial scale-up testing, unforeseen issues may arise. These
          risks are being  minimized by planning more  stability  tests (approx.
          one month)  for the DNA marker  under  manufacturing  conditions.  The
          consequences of not completing  this on time are offset  significantly
          because  the  amount  of  research  and  data on this  application  is
          supported  by over a year of  development  with  Biowell,  and  recent
          support from the Department of Energy's National Laboratory.
     5.   As success is achieved in the manufacturing  beta testing,  the actual
          DNA  concentrations  will  be  formulated  for  each  security  thread
          application  and market.  Accordingly,  pricing will be confirmed  and
          reliable  revenue  forecasts can be made available.  

SALES AND MARKETING

     We employ a multi-tier sales and marketing  strategy.  We develop strategic
alliances  and  marketing  partners,  by setting  up  alliances  with  Biowell's
technology partners,  granting licenses to existing  anti-counterfeit  suppliers
and partner with industry leaders for intellectual property development.

     We provide  anti-counterfeiting  and security  solutions  through our sales
force  covering  a  multitude  of  potential  clients  either  directly  or  via
resellers.

CUSTOMERS

     We do not currently  have any  revenue-generating  customers at this point.
Our targeted client base includes major  corporations,  government  entities and
educational  institutions.   We  will  provide  DNA  chip  technology,  DNA  ink
technology as well as DNA profiling/tagging  technology through various types of
resale agreements.  We will apply these technologies to labels and security ink,
to a chip and reader as well as textile markers and agriculture profiling.

COMPETITION

     The  anti-counterfeit and fraud prevention market is highly competitive and
diverse. Since we believe that other forms of  anti-counterfeiting  and security
measures can be easily  defeated,  we expect that  utilizing DNA which cannot be
replicated  will  garner  great  demand  from  the  market.   Some  examples  of
biotechnology and other security technologies include:

     FINGERPRINT-  a  systems  scans  fingerprints  before  granting  access  to
computer files.

     VOICE- Off-the-shelf software authenticates users based on individual vocal
patterns.

     CORNEA-  Scanners that scan the iris of a user's eye to match compared to a
computer database.

     FACIAL SCAN-  Computers can use complex  algorithms to distinguish one face
from another.

     IC CHIP & MAGNETIC  STRIP-  Integrated  circuit  chip that runs an electric
current through a circuit and is verified by a IC card. Is used in many parts of
Europe and Asia.

     HOLOGRAPH- Optical security elements  ('holograms')  constitute a family of
optically  variable  microstructures,  which are difficult to copy. Most of them
are  difficult to  reproduce  using  advanced  color  photocopiers  and printing

                                       30

techniques.  This is why they are so widely  used as  anti-counterfeit  devices.
Holograms  are only one member of a family of optically  variable  devices which
all have several features in common. These are:

     o    Highly visible to the naked eye under good or reasonable conditions of
          illumination.
     o    Colorful and change their colors with viewing angle.
     o    They derive their  colorful  effects from  microstructures  within the
          devices,  which cause interference or diffraction of the light falling
          upon them.

     FLUORESCENCE-  X-ray Fluorescence (XRF) and elemental taggant  technologies
were developed as a unique method for assaying uranium ore. Later on was used as
a handheld alloy grade identification and spectral analysis instrument.  Its use
is limited to label/printing applications.

     RADIOACTIVITY&  RARE  MOLECULES-  a method of  Radiation  detection is very
effective but limited to use on crude oil.

     Some of the  bigger  competitors  in the field of  anti-counterfeiting  and
fraud protection include:

     o    DNA Technologies. Inc.
     o    Art Guard International
     o    Theft Protection Systems
     o    Cypher Science (United Kingdom) Mt. Sinai Hospital
     o    ChemTAG (Norway)
     o    NTT DATA Labs (Japan)
     o    November AG

MANAGEMENT STRATEGY

     In anticipation of internal  growth,  we will organize  resources to manage
our development effectively, minimizing organic growth, while optimizing our use
of  excess  capacity,  where  core  competency  in the  biotech  arena  is  made
available.  Our  Chief  Executive  Officer  is  responsible  for  the  strategic
direction,  coordinating with our overseas technology partner Biowell and others
as well as  operations.  Our  President is  responsible  for  government  entity
relations,  corporate  governance  and  building  shareholder  value.  Our Chief
Financial  Officer covers overall  financial  management,  financial  reporting,
corporate  administration,   investors  relations.  Our  Vice  President  covers
specific industries, such as the pharmaceutical, cosmetic and comestible sectors
and  acts as our  media  spokesperson,  clarifying  for the  pharmaceutical  and
nutraceutical   industries,   allied  health  professionals  and  consumers  the
advantages  of our  anti-counterfeit,  diversion  and  piracy  applications  and
products.

GIULIANI PARTNERS

     In August 2004, we engaged Giuliani Partners LLC as our strategic marketing
partner and advisor. The engagement agreement had an effective date of September
1, 2004.  Giuliani  Partners had been  engaged,  on a  non-exclusive  basis,  to
provide  advice  and  assistance  to us  regarding  issues  associated  with our
proprietary DNA embedded security solutions.  The term of the engagement was one
year from the effective  date,  with  automatic one year renewals  unless either
party expresses,  in writing,  an intention not to renew within 60 days prior to
the expiration of the term.

     As compensation for Giuliani Partners' performance, we were to pay Giuliani
Partners an aggregate  advisory fee of $2,000,000 payable in increments over the
term and  renewal  term.  The initial  payment of $500,000  was made by us on or
about  September  7,  2004.  Additionally,  we were to  issue a  net-exercisable
warrant to purchase shares of our common stock at a later date. Fees were placed
in escrow during Giuliani Partners' completion of its due diligence review.

     On April 11, 2005, we and Giuliani Partners mutually agreed to conclude our
engagement agreement.  As a result of the termination of this agreement,  we are
not  obligated to pay the remainder of the advisory fee of $750,000 and Giuliani
Partners  will not receive  any shares or  warrants  to  purchase  shares of our
common stock.

                                       31

EMPLOYEES

     As of April 25, 2005, we employed 12 full-time employees,  of which six are
in management,  four in sales & marketing and two in administration.  We believe
that our relations with our employees are good.

                            DESCRIPTION OF PROPERTIES

     Presently,  we maintain our principal  office at 9229 W. Sunset  Boulevard,
Suite 830, Los Angeles, California 90069. We signed a lease for our office space
in November 2003.  The office space,  which is provided to us for $11,312.70 per
month for the first twelve months of the lease, for $11,635.92 for the second 12
months and  $12,031.01  for the last 12 months of the lease,  has  approximately
5,387 square feet. We believe that our current  office space and  facilities are
sufficient  to meet our  present  needs  and do not  anticipate  any  difficulty
securing  alternative or additional space, as needed, on terms acceptable to us.
We  maintain a website  at  www.adnas.com.  The  information  contained  on that
website is not deemed to be a part of this prospectus.

                                LEGAL PROCEEDINGS

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

STERN & Co. v. APPLIED DNA SCIENCES, INC., CASE NO.: 05 CV 00202

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

OCEANIC CONSULTING, S.A. V. APPLIED DNA SCIENCES, INC., INDEX NO.: 603974/04

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

                                       32


                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Names:                  Ages          Titles:                Board of Directors
------------------     ------   --------------------------   ------------------
Rob Hutchison            49     Chairman & CEO                  Director
Peter Brocklesby         52     President                       Director
Lawrence Lee             44     Chief Technology Strategist     Director
Michael Hill             44                                     Director
Ron Erickson             61                                     Director
Karin Klemm              38     Interim Chief Financial
                                Officer and Secretary

     Directors   are  elected  to  serve  until  the  next  annual   meeting  of
stockholders  and until their  successors are elected and  qualified.  Currently
there are three seats on our board of directors.

     Currently,  our Directors are not compensated for their services.  Officers
are  elected by the Board of  Directors  and serve until  their  successors  are
appointed by the Board of  Directors.  Biographical  resumes of each officer and
director are set forth below.

CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER - ROBIN HUTCHISON

     On November 17, 2003,  Robin "Rob" Hutchison joined our Board of Directors.
On December 12,  2003,  he was  appointed  Chairman of the Board and on March 1,
2004, he was appointed Chief Executive  Officer.  Since June 1997, Mr. Hutchison
has served as a director of eCharge  Corporation,  a Seattle,  Washington  based
company  specializing in alternative  payment methods for the Internet.  Between
June 1997 and  December  1997,  Mr.  Hutchison  served as  President  of eCharge
Corporation.  Between  January 1998 and December 2001, Mr.  Hutchison  served as
Chief  Technology  Officer at eCharge  Corporation.  Since  December  2000,  Mr.
Hutchison  has  served as a  director  of Golden  Goliath  Resources,  a British
Columbia, Canada-based company with mining operations in Mexico. Between October
2001 and  December  2003,  Mr.  Hutchison  served as a Director  of Global  Golf
Holdings,  Inc. a company that marketed golf course GPS hand held system to golf
courses in Western Canada.  Since March 2003, Mr. Hutchison has also served as a
director  of Serebra  Learning  Corporation,  a British  Columbia,  Canada-based
company that specializes in delivering eLearning solutions. Between October 2003
and April 2005, Mr.  Hutchison  served as a Director of PowerHouse  Technologies
Group, Inc. a San Jose, California based developer of mobile computing solutions
that enhance personal productivity.

     Mr. Hutchison has also served as president of Canada-based SNI Corporation,
specialists  in the  integration  of SUN  Microsystems  UNIX-based  systems  and
Internet and computer firewall security,  western regional director of sales and
operations  for Everex Canada Inc. and as vice president and co-founder of Vivox
International Inc.

PRESIDENT AND DIRECTOR - PETER BROCKLESBY

     Mr.  Brocklesby  became our President  and a Director in May 2004.  Between
2000 and January  2003,  Mr.  Brocklesby  was the Vice  President  for  Business
Development at Boss Industrial Design Company,  a communications  and electronic
product design company based in Newport Beach, California.  Between January 2003
and May 2004,  Mr.  Brocklesby  served as a Project  Development  Consultant  to
Professor Alfred Wong, A.W.  Technologies at the University of California at Los
Angeles.  In March 2003,  Mr.  Brocklesby  co-founded  Cool Grip,  Inc.,  a golf
accessory company,  based in Newport Beach,  California,  and served as the Vice
President of Business Development through May 2004.

                                       33


     Mr. Brocklesby graduated from Leeds University,  UK with a BA Honors degree
in  History  in 1970.  He  attended  the  Royal Air  Force  College,  UK and was
commissioned in the RAF. In 1977,  after 7 years service in the UK Armed Forces,
Mr.  Brocklesby left to become Director of Logistics for Air Asia (Air America),
a US defense  contractor  providing  support for the US  military  and for other
governments in Asia.

     Following  acquisition  of Air Asia by  E-Systems,  Inc.,  a  multi-billion
dollar  defense  contractor,  and  now  part of  Raytheon,  Mr.  Brocklesby  was
appointed VP Marketing. E-Systems specialized in the development and integration
of advanced  airborne  and  land-based  military and  government  communications
systems,  electronic  warfare  equipment,  electronic  surveillance and airborne
intelligence gathering systems.

CHIEF TECHNOLOGY STRATEGIST AND DIRECTOR - LARRY LEE

     Larry Lee has served as a Director since September  2002.  Between 1994 and
2001, Mr. Lee was a senior  scientist and manager for GM Hughes  Electronics,  a
Los Angeles,  California based electronics,  space and defense company.  Between
January  2000 and  September  2002,  Mr.  Lee was a  manager  and  senior  staff
scientist  for  Boeing,  a space and  defense  company,  in their  Los  Angeles,
California  location.  Between  September 2002 and March 2004, Mr. Lee served as
our  President  and Chief  Executive  Officer.  Mr. Lee was  appointed our Chief
Technology  Strategist in March 2004,  in which  capacity he continues to serve.
Since August 2004, Mr. Lee has been a senior staff scientist with Boeing.

     Mr. Lee  currently  serves on the board of  advisors  and/or  partners  for
several U.S. and international  companies  including:  Dery Resources Inc.; IMC,
and VO Management, LLC.

     Mr.  Lee has a Master of Science in  Computer/Electronic  Engineering  from
California State  University and a Bachelor of Science in  Mechanical/Biomedical
Engineering  from  Virginia  Tech.  He has also  received  advanced  training in
Business  Executive  Management and Finance from  University of California,  Los
Angeles and the Hughes Education Center.

CONSULTANT AND DIRECTOR - MICHAEL E. HILL

     Mr. Hill has been a director  since October 2002.  Since 1986, Mr. Hill has
been a director and Vice President of Hill's Koksilah Holdings, a private retail
and real estate holding company located in Vancouver,  Canada.  Between 1987 and
1997, Mr. Hill was a registered  representative  with Scotia Capital Markets and
Burns  Fry  Ltd.  Between  November  1997 and  September  2002,  Mr.  Hill was a
registered  representative at Research Capital Corp., a securities broker/dealer
located in Calgary,  Canada.  Mr. Hill is currently the trustee and governor for
the Shawnigan Lake School, a top ranked, international private school in Canada.

DIRECTOR - RONALD P. ERICKSON

     Mr.  Erickson has been a director  since  January  2004.  From 1992 through
1994, he was Chairman,  Interim President and Chief Executive Officer of Egghead
Software, Inc. in Issaquah,  Washington.  Previously, from 1995 through 1997, he
served as Chairman  and Chief  Executive  Officer of Globaltel  Resources,  Inc.
where he  co-founded  and lead the worldwide  financing  efforts and managed all
aspects of growth of this privately held  international  telecommunications  and
networking  company.  From 1997 through the present,  Mr. Erickson has served as
Chairman  and  Chief  Executive  Officer  of  eCharge  Corporation  in  Seattle,
Washington.

INTERIM CHIEF FINANCIAL OFFICER AND SECRETARY - KARIN KLEMM

     Karin Klemm has been our Chief Operating Officer since July 2004, Secretary
since  August 2004 and Interim  Chief  Financial  Officer  since March 15, 2005.
Between  1997 and 2000,  Ms.  Klemm was a branch  manager of RH11,  an executive
search firm in Los Angeles, California. Ms. Klemm is currently the President and
Chief Executive  Officer of Poly Pacific  Entertainment,  Inc., an entertainment
company based in Beverly Hills,  which she has been since 1997.  Since August of
2003,  Ms.  Klemm has  served as Chief  Executive  Officer of  Uncensored  Music
Network, Inc., an entertainment company.

                                       34


                             EXECUTIVE COMPENSATION

     The following  tables set forth certain  information  regarding our CEO and
each of our most highly-compensated executive officers whose total annual salary
and bonus for the fiscal years ending September 30, 2004, 2003 and 2002 exceeded
$100,000:


                                                           Other
                                                           Annual      Restricted     Options       LTIP
  Name & Principal                Salary       Bonus       Compen-        Stock         SARs       Payouts      All Other
      Position          Year        ($)         ($)      sation ($)    Awards ($)      (#)(1)        ($)      Compensation
--------------------- --------- ------------ ----------- ------------ -------------- ----------- ------------ --------------
                                                                                             
Rob Hutchison,          2004    159,450           0            0       39,000            0             0             0
CEO                     2003          0           0            0            0            0             0             0
                        2002          0           0            0            0            0             0             0

--------------------- --------- ------------ ----------- ------------ -------------- ----------- ------------ --------------
Lawrence C. Lee,        2004    150,000           0            0    2,017,500            0             0             0
CEO                     2003    300,000           0            0            0            0             0             0
                        2002          0           0            0      182,000            0             0             0

--------------------- --------- ------------ ----------- ------------ -------------- ----------- ------------ --------------
Gerhard Wehr,           2004     58,328           0       22,489       54,000            0             0             0
CFO                     2003    180,000           0            0            0            0             0             0
                        2002          0           0            0       40,000            0             0             0
--------------------- --------- ------------ ----------- ------------ -------------- ----------- ------------ --------------


     The Board of  Directors,  in their  discretion,  may award  stock and stock
options to key  executives for achieving  financing or  expenditure  guidelines,
meeting  our  business  plan  objectives,  as part  of  their  compensation  for
employment or for retention purposes.

EMPLOYMENT AGREEMENTS

None.

                                       35



                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In September of 2004, Larry Lee entered into a private transaction with Mr.
Chaim Stern,  selling a total of 2,500,000  shares to him, after which he loaned
all proceeds of $600,000 to us. On November 3, 2004, we issued a promissory note
to Larry  Lee for the loan of the  $600,000.  The note bore  interest  at 6% per
annum, and was payable upon demand any time following 120 days after we complete
a financing of at least $5 million. We had the right to repay the note, plus all
accrued interest,  at any time, in whole or in part, without premium or penalty.
Upon the  repayment of  $125,000,  we had the right to repay the  remainder  due
under the note by the issuance of shares of common stock and founders' preferred
stock.  We repaid  the note in full by paying Mr.  Lee  $125,000  and issued him
500,000 shares of common stock and 60,000 shares of founders' preferred stock.

     We have no policy  regarding  entering into  transactions  with  affiliated
parties.

                                       36


         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth certain  information  regarding  beneficial
ownership of our common stock as of June 14, 2005:

     o    by each person who is known by us to beneficially  own more than 5% of
          our common stock;
     o    by each of our officers and directors; and
     o    by all of our officers and directors as a group.



                                                                    PERCENTAGE OF      PERCENTAGE OF
                                                                       CLASS               CLASS
NAME AND ADDRESS                                   NUMBER OF          PRIOR TO             AFTER
OF OWNER                        TITLE OF CLASS     SHARES OWNED(1)   OFFERING(2)         OFFERING(3)
-----------------------------------------------------------------------------------------------------

                                                                                 
Rob Hutchison                   Common Stock        1,100,000 (4)       1.65%              1.26%
9229 Sunset Blvd., Suite 830
Los Angeles, CA 90069

Peter Brocklesby                Common Stock        1,000,000 (5)       1.50%              1.15%
9229 Sunset Blvd., Suite 830
Los Angeles, CA 90069

Lawrence Lee                    Common Stock        4,170,000 (6)       6.27%              4.82%
9229 Sunset Blvd., Suite 830
Los Angeles, CA 90069

Michael Hill                    Common Stock          515,000 (7)         *                  *
9229 Sunset Blvd., Suite 830
Los Angeles, CA 90069

Ron Erickson                    Common Stock          710,000 (8)       1.07                 *
9229 Sunset Blvd., Suite 830
Los Angeles, CA 90069

Karin Klemm                     Common Stock                0              0%                 0%
9229 Sunset Blvd., Suite 830
Los Angeles, CA 90069

All Officers and Directors      Common Stock        7,495,000 (9)      10.83%              8.39%
As a Group (6 persons)

RHL Management, Inc. (10)       Common Stock        4,250,000           6.45%              4.94%
Roxbury Road
Los Angeles, CA 90069

Chaim Stern                     Common Stock        3,308,318           5.02%              3.85%
1880 East 26th Street
Brooklyn, NY 11229


(1)  Beneficial  Ownership is  determined  in  accordance  with the rules of the
Securities and Exchange  Commission and generally  includes voting or investment
power with respect to  securities.  Shares of common stock subject to options or
warrants  currently  exercisable or  convertible,  or exercisable or convertible
within  60 days of June 14,  2005  are  deemed  outstanding  for  computing  the
percentage  of the person  holding  such  option or  warrant  but are not deemed
outstanding for computing the percentage of any other person.

(2) Based upon 65,856,025 shares issued and outstanding on June 14, 2005.

(3) Percentage based on 85,958,025 shares of common stock outstanding,  assuming
all shares being registered in the offering are sold.

(4) Includes 1,000,000 shares underlying currently exercisable options.

(5) Includes 1,000,000 shares underlying currently exercisable options.


                                       37

(6) Includes 600,000 shares underlying currently exercisable options.

(7) Includes 315,000 shares underlying currently exercisable options.

(8) Includes 400,000 shares underlying currently exercisable options, and 50,000
shares  underlying  currently  exercisable  options and 160,000 shares of common
stock owned by Alpha Spectrum Investments,  LLC, of which Mr. Erickson is deemed
a beneficial owner.

(9) Includes 3,365,000 shares underlying currently exercisable options.

(10) Rick Langley has investment and voting control over the shares owned by RHL
Management, Inc.

                                       38


                            DESCRIPTION OF SECURITIES

COMMON STOCK

     We are  authorized to issue up to 250,000,000  shares of common stock,  par
value $.001. As of June 14, 2005,  there were 65,856,025  shares of common stock
outstanding.  Holders of the common  stock are entitled to one vote per share on
all matters to be voted upon by the  stockholders.  Holders of common  stock are
entitled to receive  ratably such  dividends,  if any, as may be declared by the
Board  of  Directors  out  of  funds  legally  available   therefor.   Upon  the
liquidation,  dissolution,  or winding up of our company,  the holders of common
stock are  entitled  to share  ratably  in all of our assets  which are  legally
available for distribution  after payment of all debts and other liabilities and
liquidation  preference of any outstanding common stock. Holders of common stock
have  no  preemptive,   subscription,   redemption  or  conversion  rights.  The
outstanding  shares  of  common  stock  are  validly  issued,   fully  paid  and
nonassessable.

     We have  engaged  American  Stock  Transfer  & Trust  Company,  located  in
Brooklyn, New York, as independent transfer agent or registrar.

PREFERRED STOCK

     We are authorized to issue up to 10,000,000  shares of Preferred Stock, par
value  $.001.   The  10,000,000   shares  of  Preferred  Stock   authorized  are
undesignated as to preferences,  privileges and restrictions.  As the shares are
issued,  the Board of  Directors  must  establish a "series" of the shares to be
issued and designate the preferences,  privileges and restrictions applicable to
that series. To date, the Board has designated a Founders' Series of Convertible
Preferred  Stock,  which,  in six  months  from the date of  issuance,  shall be
convertible at the option of the holder and upon our reaching certain  financial
objectives,  into  shares of our  restricted  Common  Stock.  Each  share,  when
eligible,  is convertible  into 25 fully paid and  non-assessable  shares of our
Common Stock,  subject to a leak out agreement  that extends the Rule 144 period
to two years. Holders will be permitted to sell, after a one year holding period
through a three year holding period, 1% of the issued and outstanding  shares of
our common stock every 90 days.  This series has been authorized by the Board of
Directors. On or about February 1, 2005, the Founders' Series of Preferred Stock
was converted  into 1,500,000  shares of our common stock.  As of June 14, 2005,
there were no shares of preferred stock issued and outstanding.

OPTIONS

     There are  currently  options  outstanding  that  have  been  issued to our
officers and directors to purchase 3,365,000 shares of our common stock pursuant
to  our   Professional/Employee/Consultant   Compensation  Plan  and  employment
agreements.

WARRANTS

     In connection  with the sale of  convertible  promissory  notes in December
2004,  we issued  2,930,000  warrants to purchase  shares of common  stock.  The
warrants  are  exercisable  until  three  years from the date of  issuance  at a
purchase price of $0.75 per share.

     In addition, in connection with a private placement offering in January and
February  of  2005,  we  have  issued  14,742,000  warrants.  The  warrants  are
exercisable  until five years from the date of issuance  at a purchase  price of
$0.75 per share.

     We also have outstanding  285,000 warrants  exercisable at $0.10 per share,
5,000 warrants exercisable at $0.20 per share, 1,500,000 warrants exercisable at
$0.60 per share,  750,000  warrants  exercisable  at $0.70 per share and 155,000
warrants exercisable at $0.75 per share.

CONVERTIBLE SECURITIES

     To  obtain  funding  for our  ongoing  operations,  we sold  $1,465,000  in
convertible  promissory  notes to 13 investors in December 2004. Each promissory
note was  automatically  convertible into shares of our common stock, at a price

                                       39

of $0.50 per share,  upon the closing of a private  placement  for $1 million or
more. On January 28, 2005,  we closed upon a private  placement  transaction  in
excess of $1  million,  and on  February  2,  2005,  the  promissory  notes were
converted into an aggregate of 2,930,000 shares of common stock. This prospectus
includes the resale of the common stock issued upon conversion of the promissory
notes.

     To obtain  funding  for our  ongoing  operations,  we  conducted  a private
placement  offering in January and February 2005, in which we sold $7,371,000 of
10%  Secured  Convertible  Promissory  Notes to 61  investors.  The 10%  Secured
Convertible  Promissory  Notes  automatically  convert into shares of our common
stock,  at a price of $0.50 per  share,  upon the  filing  of this  registration
statement.  This prospectus includes the resale of the common stock to be issued
upon conversion of the 10% Secured Convertible Promissory Notes.

                 INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

     Our Articles of  Incorporation,  as amended,  provide to the fullest extent
permitted  by Nevada law,  our  directors  or officers  shall not be  personally
liable to us or our  shareholders  for damages for breach of such  director's or
officer's  fiduciary  duty.  The effect of this  provision  of our  Articles  of
Incorporation,  as  amended,  is to  eliminate  our rights and our  shareholders
(through  shareholders'  derivative  suits on behalf of our  company) to recover
damages  against a director or officer for breach of the fiduciary  duty of care
as a director or officer (including breaches resulting from negligent or grossly
negligent  behavior),  except under certain  situations  defined by statute.  We
believe that the indemnification provisions in our Articles of Incorporation, as
amended,  are necessary to attract and retain qualified persons as directors and
officers. In addition, we have entered into indemnification  agreements with our
officers and directors.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act" or "Securities Act") may be permitted to directors,
officers or persons controlling us pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.

                                       40


                              PLAN OF DISTRIBUTION

     The selling  stockholders  and any of their  respective  pledgees,  donees,
assignees and other  successors-in-interest  may, from time to time, sell any or
all of their  shares of common  stock on any stock  exchange,  market or trading
facility on which the shares are traded or in private transactions.  These sales
may be at fixed or negotiated prices.  The selling  stockholders may use any one
or more of the following methods when selling shares:

     o    ordinary   brokerage   transactions  and  transactions  in  which  the
          broker-dealer solicits the purchaser;
     o    block  trades  in which the  broker-dealer  will  attempt  to sell the
          shares as agent but may  position and resell a portion of the block as
          principal to facilitate the transaction;
     o    purchases  by  a   broker-dealer   as  principal  and  resale  by  the
          broker-dealer  for  its  account;  
     o    an  exchange   distribution  in  accordance  with  the  rules  of  the
          applicable exchange; o privately-negotiated transactions;
     o    short sales that are not violations of the laws and regulations of any
          state or the United States;
     o    broker-dealers  may  agree  with the  selling  stockholders  to sell a
          specified  number of such shares at a  stipulated  price per share; 
     o    through the writing of options on the shares;
     o    a combination of any such methods of sale; and
     o    any other method permitted pursuant to applicable law.

     The  selling  stockholders  may also sell  shares  under Rule 144 under the
Securities  Act, if available,  rather than under this  prospectus.  The selling
stockholders  shall  have the sole and  absolute  discretion  not to accept  any
purchase  offer or make any sale of shares if they deem the purchase price to be
unsatisfactory at any particular time.

     The selling  stockholders  may also engage in short sales  against the box,
puts and calls and other  transactions  in our  securities or derivatives of our
securities and may sell or deliver shares in connection with these trades.

     The selling stockholders or their respective pledgees,  donees, transferees
or other  successors  in interest,  may also sell the shares  directly to market
makers  acting  as  principals  and/or   broker-dealers  acting  as  agents  for
themselves or their customers.  Such broker-dealers may receive  compensation in
the form of discounts,  concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom such  broker-dealers  may act as agents
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer  might be in excess of customary  commissions.  Market  makers and
block  purchasers  purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling  stockholder  will attempt to sell
shares  of  common  stock  in  block  transactions  to  market  makers  or other
purchasers  at a price per share which may be below the then market  price.  The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus  will be issued to, or sold by, the  selling  stockholders.  Vertical
Capital  Partners,  Inc.,  a registered  broker-dealer;  Michael  Morris,  Susan
Diamond;  Ronald  Heineman  and Michael  Gochman;  all of whom are  employees of
Vertical  Capital  Partners,  are an "underwriter" as that term is defined under
the Securities Exchange Act of 1933, as amended,  the Securities Exchange Act of
1934, as amended, and the rules and regulations of such acts. Further, the other
selling stockholders and any brokers, dealers or agents, upon effecting the sale
of  any  of  the  shares  offered  in  this  prospectus,  may  be  deemed  to be
"underwriters." In such event, any commissions  received by such  broker-dealers
or agents and any profit on the  resale of the shares  purchased  by them may be
deemed to be underwriting commissions or discounts under the Securities Act.

     We are required to pay all fees and expenses  incident to the  registration
of the  shares,  including  fees and  disbursements  of counsel  to the  selling
stockholders, but excluding brokerage commissions or underwriter discounts.

     The selling  stockholders,  alternatively,  may sell all or any part of the
shares offered in this prospectus through an underwriter. No selling stockholder
has entered into any agreement  with a prospective  underwriter  and there is no
assurance that any such agreement will be entered into.

     The selling stockholders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a selling stockholder defaults on a
margin  loan,  the broker  may,  from time to time,  offer and sell the  pledged
shares. The selling stockholders and any other persons participating in the sale
or  distribution  of the shares will be subject to applicable  provisions of the

                                       41

Securities Exchange Act of 1934, as amended, and the rules and regulations under
such act,  including,  without  limitation,  Regulation M. These  provisions may
restrict  certain  activities of, and limit the timing of purchases and sales of
any of the shares by, the selling  stockholders or any other such person. In the
event  that  the  selling  stockholders  are  deemed  affiliated  purchasers  or
distribution  participants  within the meaning of Regulation M, then the selling
stockholders  will not be  permitted  to engage in short sales of common  stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from  simultaneously  engaging in market making and certain other
activities with respect to such securities for a specified  period of time prior
to the commencement of such  distributions,  subject to specified  exceptions or
exemptions.  In regards to short sells,  the selling  stockholder can only cover
its short position with the securities they receive from us upon conversion.  In
addition,  if such short sale is deemed to be a stabilizing  activity,  then the
selling  stockholder  will not be  permitted  to engage  in a short  sale of our
common  stock.  All of these  limitations  may affect the  marketability  of the
shares.

     We have agreed to indemnify the selling stockholders,  or their transferees
or assignees,  against  certain  liabilities,  including  liabilities  under the
Securities  Act of 1933,  as amended,  or to  contribute to payments the selling
stockholders  or  their  respective  pledgees,   donees,  transferees  or  other
successors in interest, may be required to make in respect of such liabilities.

     If the selling stockholders notify us that they have a material arrangement
with a  broker-dealer  for the  resale  of the  common  stock,  then we would be
required to amend the registration statement of which this prospectus is a part,
and file a prospectus  supplement to describe the agreements between the selling
stockholders and the broker-dealer.

                                   PENNY STOCK

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

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

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

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

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

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

     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.

                                       42


                              SELLING STOCKHOLDERS

     The table below sets forth information  concerning the resale of the shares
of common  stock by the selling  stockholder.  We will not receive any  proceeds
from the resale of the common stock by the selling stockholder.  We will receive
proceeds from the exercise of the warrants.  Assuming all the shares  registered
below are sold by the selling stockholder,  none of the selling stockholder will
continue to own any shares of our common stock.

     The following table also sets forth the name of each person who is offering
the resale of shares of common stock by this prospectus, the number of shares of
common stock  beneficially  owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common stock
each person will own after the  offering,  assuming  they sell all of the shares
offered.

     For the table set forth below,  the following  persons have  investment and
voting control over the shares owned by the respective entities:



         -------------------------------------------------- --------------------------------------------------------
         ENTITY                                             CONTROL PERSON
         -------------------------------------------------- --------------------------------------------------------

         -------------------------------------------------- --------------------------------------------------------
                                                                
         Allied International Fund                          Rosemarie DePalo
         -------------------------------------------------- --------------------------------------------------------
         AS Capital Partners                                Michael Coughlan
         -------------------------------------------------- --------------------------------------------------------
         Avonwoods Ltd.                                     C. Rand
         -------------------------------------------------- --------------------------------------------------------
         Basso Private Opportunity Holding Fund Ltd.        Howard I. Fischer
         -------------------------------------------------- --------------------------------------------------------
         Basso Multi-Strategy Holding Fund Ltd.             Howard I. Fischer
         -------------------------------------------------- --------------------------------------------------------
         F Berdon Comp.                                     Frederick Berdon
         -------------------------------------------------- --------------------------------------------------------
         Beston Worldwide Ltd                               Michael Ben-Jacob
         -------------------------------------------------- --------------------------------------------------------
         Blumfield Investments                              M. Kraus
         -------------------------------------------------- --------------------------------------------------------
         Brighton Capital                                   Jeffery Wolin
         -------------------------------------------------- --------------------------------------------------------
         Clear Mountain Holdings                            Raul Garrido Garibaldo
         -------------------------------------------------- --------------------------------------------------------
         The Condor Group, LLC                              Robert Lowinger
         -------------------------------------------------- --------------------------------------------------------
         Consultants and Advisors NJB, Inc.                 Gary Schonwald
         -------------------------------------------------- --------------------------------------------------------
         Cordilliera Funds                                  Stephen J. Carter
         -------------------------------------------------- --------------------------------------------------------
         DC Capital                                         Craig Kirsch
         -------------------------------------------------- --------------------------------------------------------
         Double U Master Fund                               David Sims
         -------------------------------------------------- --------------------------------------------------------
         -------------------------------------------------- --------------------------------------------------------
         Equilibrium Solutions                              Johnny Vage
         -------------------------------------------------- --------------------------------------------------------
         First London Finance, Ltd.                         Moshe Grauman
         -------------------------------------------------- --------------------------------------------------------
         Galileo Asset Management, SA                       Marie-Christine Wright, John Sauickie and John Wright
         -------------------------------------------------- --------------------------------------------------------
         Gemini Master Funds                                Steve Winters
         -------------------------------------------------- --------------------------------------------------------
         Global Asset Management                            Robert Fallah
         -------------------------------------------------- --------------------------------------------------------
         Goldenberg & Hirsch Properties                     Leo Hirsch
         -------------------------------------------------- --------------------------------------------------------
         GSSF Master Fund                                   E.B. Lyon IV
         -------------------------------------------------- --------------------------------------------------------
         Guerilla IRA L.P.                                  Leigh Curry
         -------------------------------------------------- --------------------------------------------------------
         Hirsch Family Foundation                           Leo Hirsch
         -------------------------------------------------- --------------------------------------------------------
         ID Federman Holdings LTD                           Iris Federman
         -------------------------------------------------- --------------------------------------------------------
         Ivelocity Fund                                     Scott Parent
         -------------------------------------------------- --------------------------------------------------------
         KA Steel Chemical                                  Kenneth Steel Jr.
         -------------------------------------------------- --------------------------------------------------------
         Livingston Ventures, LLC                           Ronald Heineman
         -------------------------------------------------- --------------------------------------------------------

                                       43

         Lone Star Equity                                   Mark A. Bogina
         -------------------------------------------------- --------------------------------------------------------
         Marina Ventures                                    Michael Hartstein
         -------------------------------------------------- --------------------------------------------------------
         Melton Management                                  Yehuda Breitkops
         -------------------------------------------------- --------------------------------------------------------
         Odin Partners LP                                   John A. Gibbons
         -------------------------------------------------- --------------------------------------------------------
         Omega Capital Small Cap                            Abraham Sylverin
         -------------------------------------------------- --------------------------------------------------------
         P.R. Diamonds Pinkus Reisz
         -------------------------------------------------- --------------------------------------------------------
         Provident Master Fund                              Steven Winters
         -------------------------------------------------- --------------------------------------------------------
         Rock Capital Partners, LLC                         Howard Chalfin
         -------------------------------------------------- --------------------------------------------------------

         Salzwedel Financial Communications, Inc.           Jeff Salzwedel
         -------------------------------------------------- --------------------------------------------------------
         San Rafael Consulting Group, LLC                   Isabelle H. Wright and John Wright
         -------------------------------------------------- --------------------------------------------------------
         Rabbi Scheinerman KBY LLC                          Rabbi Schenerman
         -------------------------------------------------- --------------------------------------------------------
         Sichenzia Ross Friedman Ference LLP                Greg  Sichenzia,   Marc  Ross,   Richard  Friedman  and
                                                            Michael Ference
         -------------------------------------------------- --------------------------------------------------------
         Spencer Edwards, Inc.                              Thomas Kaufman
         -------------------------------------------------- --------------------------------------------------------
         Starboard Capital Markets, LLC                     James Dotzman
         -------------------------------------------------- --------------------------------------------------------
         Steel Harbor Holdings                              Mark Step
         -------------------------------------------------- --------------------------------------------------------
         Stonestreet, LP                                    Michael Finkelstein
         -------------------------------------------------- --------------------------------------------------------
         Vertical Capital Partners, Inc.                    Robert DePalo
         -------------------------------------------------- --------------------------------------------------------
         Vestal Venture Capital                             Allan Lyons
         -------------------------------------------------- --------------------------------------------------------
         Whalehaven                                         Evan Schemenauer
         -------------------------------------------------- --------------------------------------------------------
         Wolfson Trust                                      Franchesca Wolfson
         -------------------------------------------------- --------------------------------------------------------


                                                Beneficial Ownership                                          Beneficial Ownership
                                               Prior to Offering (1)                                           After Offering (1)
Name of Selling Security                       Shares           Percentage (2)        Shares Offered        Shares    Percentage(2)
Holder                                                                                                       
------------------------------------- -------------------------- ---------------- ------------------------ ----------- -------------

Allied International Fund                      1,237,500              1.88%              1,237,500                 0             *
AS Capital Partners                              100,000                  *            100,000 (3)                 0             *
Avonwoods Ltd.                                   800,000              1.21%            800,000 (3)                 0             *
Evan B. Azriliant                                100,000                  *            100,000 (3)                 0             *
Mordechai Bank                                   200,000                  *            200,000 (3)                 0             *
Judith Barclay                                   400,000                  *            400,000 (3)                 0             *
Jack Basch                                       600,000                  *            600,000 (3)                 0             *
Basso Private Opportunity Holding                630,000                  *            630,000 (3)                 0             *
Fund Ltd.
Basso Multi-Strategy Holding Fund              2,370,000              3.54%          2,370,000 (3)                 0             *
Ltd.
Lon E Bell                                        60,000                  *             60,000 (4)                 0             *
F Berdon Comp.                                   200,000                  *            200,000 (3)                 0             *
Beston Worldwide Ltd                              67,500                  *             67,500 (4)                 0             *
Robert R. Blakely                                 33,334                  *             33,334                     0             *
Blumfield Investments                            400,000                  *            400,000 (3)                 0             *
Doug Bowen                                       138,750                  *            138,750 (5)                 0             *
Brighton Capital                                  46,750                  *             46,750                     0             *
Salvatore Cantatore                              112,500                  *            112,500 (6)                 0             *
Jaime Cardona                                    100,000                  *                100,000                 0             *
Andrea Cataneo                                   250,000                  *                250,000                 0             *
Notzer Chesed                                    400,000                  *            400,000 (3)                 0             *
Clear Mountain Holdings                          300,000                  *            300,000 (3)                 0             *
David Cohen                                      200,000                  *            200,000 (3)                 0             *
The Condor Group, LLC                              8,250                  *              8,250                     0             *
Consultant and Advisors NJB, Inc.                145,000                  *            145,000                     0             *
Cordilliera Funds                              1,000,000              1.51%          1,000,000 (3)                 0             *
Adrian Davidescu                                 400,000                  *            400,000 (3)                 0             *
Jacob and Linda Davidowitz JTWROS                800,000              1.21%            800,000 (3)                 0             *
DC Capital                                        60,000                  *             60,000 (4)                 0             *
David and Jeanette Defoto JTWROS                 200,000                  *            200,000 (3)                 0             *
Robert DePalo Jr.                                 20,000                  *                 20,000                 0             *

                                       44

Susan Diamond                                      5,000                  *              5,000                     0             *
Joseph Digiacamo                                  50,000                  *             50,000 (3)                 0             *
Double U Master Fund                             800,000              1.21%            800,000 (3)                 0             *
Richard Durkee                                    27,000                  *             27,000                     0             *
Asher Avishay Ephrathi                         1,040,230              1.58%          1,040,230 (7)                 0             *
Equilibrium Solutions                            100,000                  *            100,000 (3)                 0             *
Douglas Falkner                                  120,000                  *                120,000                 0             *
Jeanine Fehn                                     240,000                  *            240,000 (3)                 0             *
First London Finance, Ltd.                     1,250,000              1.90%              1,250,000                 0             *
Frederick Frank                                  110,000                  *            110,000 (8)                 0             *
Galileo Asset Management, SA                     157,000                  *                157,000                 0             *
Charles Gargano                                   62,500                  *             62,500 (8)                 0             *
Gemini Master Funds                              200,000                  *            200,000 (3)                 0             *
Nicholas Giustino                                133,750                  *            133,750 (9)                 0             *
Michael Glazer                                    16,875                  *             16,875 (10)                0             *
Global Asset Management                        1,257,500              1.91%          1,257,500                     0             *
Michael Gochman                                   36,750                  *                 36,750                 0             *
Rochelle Gold                                    600,000                  *            600,000 (3)                 0             *
Harold Goldenberg                                400,000                  *            400,000 (3)                 0             *
Goldenberg & Hirsch Properties                   400,000                  *            400,000 (3)                 0             *
Mary Anne Gray                                    60,000                  *            60,000 (11)                 0             *
Scott R. Griffith                                 33,333                  *                 33,333                 0             *
Eugene Gross                                     400,000                  *            400,000 (3)                 0             *
Wayne Grubb                                       67,500                  *             67,500 (4)                 0             *
GSSF Master Fund                               1,000,000              1.51%          1,000,000 (3)                 0             *
Guerilla IRA L.P.                                115,000                  *            115,000 (4)                 0             *
Paul Reyes-Guerra                                 31,250                  *            31,250 (12)                 0             *
Michael Hamblett                                  84,060                  *                 84,060                 0             *
Ronald Heineman                                   22,000                  *                 22,000                 0             *
Joseph Henn                                       15,000                  *            15,000 (10)                 0             *
Hirsch Family Foundation                         160,000                  *            160,000 (3)                 0             *
Leo Hirsch                                       240,000                  *            240,000 (3)                 0             *
ID Federman Holdings LTD                         600,000                  *            600,000 (3)                 0             *
Joseph Iorio                                     100,000                  *            100,000 (3)                 0             *
Thomas Iovino                                    200,000                  *            200,000 (3)                 0             *
Ivelocity Fund                                   135,000                  *           135,000 (13)                 0             *
William L. Jiler                                  16,875                  *             16,875 (9)                 0             *
KA Steel Chemical                                 33,750                  *            33,750 (14)                 0             *
Ahmed Kareem                                      10,500                  *                 10,500                 0             *
Jeffery Kessler                                   33,750                  *            33,750 (14)                 0             *
Tibor Klein                                      720,000              1.09%            720,000 (3)                 0             *
Yisreal Klein                                    200,000                  *            200,000 (3)                 0             *
Yossi Kraus                                      100,000                  *            100,000 (3)                 0             *
Alexander J. Lapatka                              67,500                  *             67,500 (4)                 0             *
Livingston Ventures, LLC                         170,000                  *                170,000                 0             *
Lone Star Equity                                 400,000                  *            400,000 (3)                 0             *
Jason Lyons                                       57,000                  *                 57,000                 0             *
Michael Mangan                                   100,000                  *            100,000 (3)                 0             *
Tony Manual                                      200,000                  *            200,000 (3)                 0             *
Marina Ventures                                  195,000                  *                195,000                 0             *
Paul Masters IRA                                 200,000                  *            200,000 (3)                 0             *
Melton Management                                400,000                  *            400,000 (3)                 0             *
Linda Michaels                                   250,000                  *                250,000                 0             *
Raymond Mikulich                                 335,000                  *           335,000 (15)                 0             *
Kyle Morgan                                      200,000                  *            200,000 (3)                 0             *
Michael Morris                                    75,000                  *                 75,000                 0             *

                                       45

Houston Muthart                                  267,500                  *           267,500 (16)                 0             *
Richard Neslund                                1,000,000              1.51%          1,000,000 (3)                 0             *
Michael Nizza                                     50,000                  *             50,000 (3)                 0             *
Marvin Numeroff                                  267,500                  *           267,500 (16)                 0             *
Odin Partners LP                                  67,500                  *             67,500 (4)                 0             *
Eric Okamoto                                     493,880                  *           493,880 (17)                 0             *
Omega Capital Small Cap                        1,200,000              1.81%          1,200,000 (3)                 0             *
Eileen Patterson                                  38,750                  *            38,750 (18)                 0             *
Platinum Partners                                400,000                  *            400,000 (3)                 0             *
P.R. Diamonds                                    240,000                  *            240,000 (3)                 0             *
Joseph Prezioso                                  400,000                  *            400,000 (3)                 0             *
Arthur Priver                                    228,750                  *           228,750  (7)                 0             *
Provident Master Fund                          1,200,000              1.81%          1,200,000 (3)                 0             *
Robert & Claudia Quinn JTWROS                     28,750                  *            28,750 (10)                 0             *
Avindam Rapaport                                 100,000                  *            100,000 (3)                 0             *
Kenneth Reichelle                                116,875                  *           116,875 (19)                 0             *
Rock Capital Partners, LLC                       600,000                  *            600,000 (3)                 0             *
Joseph Rozehzadeh                                400,000                  *            400,000 (3)                 0             *
Edward M Rotter                                3,320,000              4.91%         3,320,000 (20)                 0             *
Angela Chen Sabella                              120,000                  *           120,000 (21)                 0             *
Salzwedel Financial                              365,000                  *                365,000                 0             *
Communications, Inc.
San Rafael Consulting Group, LLC                  67,236                  *                 67,236                 0             *
Frederick Sandvick                               200,000                  *            200,000 (3)                 0             *
Rabbi Scheinerman KBY LLC                        100,000                  *            100,000 (3)                 0             *
Joel Schindler                                   100,000                  *            100,000 (3)                 0             *
Shatashvili Sharona                              200,000                  *            200,000 (3)                 0             *
Jesse B. Shelmire IV                              33,333                  *                 33,333                 0             *
Sichenzia Ross Friedman Ference LLP              112,000                  *                112,000                 0             *
Jerry Silva                                    1,000,000              1.51%          1,000,000 (3)                 0             *
Jerry and Esther Soloman JTWROS                  800,000              1.21%            800,000 (3)                 0             *
Anthony Spatacco                                  42,030                  *                 42,030                 0             *
Spencer Edwards, Inc.                              8,000                  *                   8,00                 0             *
Starboard Capital Markets, LLC                    42,030                  *                 42,030                 0             *
Steel Harbor Holdings                            170,000                  *                170,000                 0             *
Kenneth Steel Jr.                                 33,750                  *            33,750 (14)                 0             *
Chaim Stern                                    3,000,000              4.45%          3,000,000 (3)                 0             *
Alexander Stolin                                 240,000                  *            240,000 (3)                 0             *
Stonestreet, LP                                  600,000                  *           600,000 (22)                 0             *
Richard Swier Jr.                                 60,000                  *             60,000 (3)                 0             *
Stewart Taylor                                    33,750                  *            33,750 (14)                 0             *
Marcovich Tibo                                   100,000                  *            100,000 (3)                 0             *
Doron Rafael Toledano                             56,735                  *                 56,735                 0             *
Ester Tuman                                       67,500                  *             67,500 (4)                 0             *
Alex Verjovski                                   200,000                  *            200,000 (3)                 0             *
Vertical Capital Partners, Inc.                  165,750                  *                165,750                 0             *
Vestal Venture Capital                            67,500                  *             67,500 (4)                 0             *
Sem Victori                                      240,000                  *            240,000 (3)                 0             *
Whalehaven                                     1,150,000              1.73%         1,150,000 (23)                 0             *
Phil Westridge                                    33,750                  *            33,750 (14)                 0             *
Peter Wieser                                     200,000                  *            200,000 (3)                 0             *
Wolfson Trust                                     16,875                  *            16,875 (10)                 0             *
Franchesca Wolfson                                16,875                  *            16,875 (10)                 0             *
Eric Yaoz                                        320,000                  *            320,000 (3)                 0             *
Harry/Temy/Ark Zelcer                            200,000                  *            200,000 (3)                 0             *

* Less than 1%

(1) Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of June 14, 2005 are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person.

(2)  Percentage  prior to offering is based on 65,856,025 shares of common stock
outstanding;  percentage after offering is based on 85,958,025  shares of common
stock outstanding, which assumes that all shares registered in the offering will
be sold.

(3)  Of which 50% of such number of shares are issuable upon exercise of
     currently exercisable warrants.

(4)  Includes 60,000 shares of common stock underlying warrants.

                                       46

(5)  Includes 85,000 shares of common stock underlying warrants.

(6)  Includes 90,000 shares of common stock underlying warrants.

(7)  Includes 115,000 shares of common stock underlying warrants.

(8)  Includes 55,000 shares of common stock underlying warrants.

(9)  Includes 80,000 shares of common stock underlying warrants.

(10) Includes 15,000 shares of common stock underlying warrants.

(11) Includes 52,500 shares of common stock underlying warrants.

(12) Includes 27,500 shares of common stock underlying warrants.

(13) Includes 120,000 shares of common stock underlying warrants.

(14) Includes 30,000 shares of common stock underlying warrants.

(15) Includes 220,000 shares of common stock underlying warrants.

(16) Includes 160,000 shares of common stock underlying warrants.

(17) Includes 232,000 shares of common stock underlying warrants.

(18) Includes 35,000 shares of common stock underlying warrants.

(19) Includes 65,000 shares of common stock underlying warrants.

(20) Includes 1,720,000 shares of common stock underlying warrants.

(21) Includes 120,000 shares of common stock underlying warrants.

(22) Includes 600,000 shares of common stock underlying warrants.

(23) Includes 650,000 shares of common stock underlying warrants.

                                  LEGAL MATTERS

     Sichenzia  Ross  Friedman  Ference  LLP,  New York,  New York will issue an
opinion with respect to the validity of the shares of common stock being offered
hereby.  Sichenzia Ross Friedman Ference LLP is also the owner of 112,000 shares
of our common stock, which are included in this registration  statement.  Andrea
Cataneo,  a partner  of  Sichenzia  Ross  Friedman  Ference  LLP is the owner of
250,000  shares of our common  stock,  which are  included in this  registration
statement.

                                     EXPERTS

     Russell Bedford Stefanou  Mirchandani LLP,  independent  registered  public
accounting  firm, have audited,  as set forth in their report thereon  appearing
elsewhere  herein,  our financial  statements at September 30, 2004 and 2003 and
for the years then ended that appear in the prospectus. The financial statements
referred  to above  are  included  in this  prospectus  with  reliance  upon the
independent registered public accounting firm's opinion based on their expertise
in accounting and auditing.

                              AVAILABLE INFORMATION

     We have filed a  registration  statement on Form SB-2 under the  Securities
Act of 1933, as amended, relating to the shares of common stock being offered by
this  prospectus,  and reference is made to such  registration  statement.  This
prospectus  constitutes the prospectus of Applied DNA Sciences,  Inc.,  filed as
part of the registration  statement,  and it does not contain all information in
the registration  statement, as certain portions have been omitted in accordance
with the rules and regulations of the Securities and Exchange Commission.

     We are subject to the informational requirements of the Securities Exchange
Act of 1934  which  requires  us to file  reports,  proxy  statements  and other
information  with the Securities and Exchange  Commission.  Such reports,  proxy
statements and other information may be inspected at public reference facilities
of the SEC at Judiciary  Plaza,  450 Fifth Street N.W.,  Washington  D.C. 20549.
Copies of such material can be obtained from the Public Reference Section of the
SEC at  Judiciary  Plaza,  450 Fifth  Street  N.W.,  Washington,  D.C.  20549 at
prescribed rates. Because we file documents electronically with the SEC, you may
also  obtain  this  information  by  visiting  the  SEC's  Internet  website  at
http://www.sec.gov.

                                       47

INDEX TO FINANCIAL STATEMENTS

                           APPLIED DNA SCIENCES, INC.
                          INDEX TO FINANCIAL STATEMENTS


                                                                                       
For the Years Ended September 30, 2004 and September 30, 2003

         Report of Independent Registered Public Accounting Firm                        F-1
         Consolidated Balance Sheet                                                     F-2
         Consolidated Statement of Losses for the years ended September
                  30, 2004 and 2003 and the period September 16, 2002
                  (date of inception) to September 30, 2004                             F-3
         Consolidated Statement of Deficiency in Stockholders' Equity
                  for the period September 16, 2002 (date of inception) to
                  September 30, 2004                                                    F-4 to F-11
         Consolidated Statements of Cash Flows for the years ended
                  September 30, 2004 and 2003, and the period
                  September 16, 2002 (date of inception) to September 30, 2004          F-12 to F-13 
         Notes to Consolidated Financial Statements                                     F-14 to F-34

For the Three Months Ended March 31, 2005 and March 31, 2004

      Condensed Consolidated Balance Sheet March 31, 2005 (Unaudited)                   F-35  
      Condensed Consolidated Statements of Losses for the three and six
                  months ended March 31, 2005 and 2004 and the period 
                  September 16, 2002 (date of inception) to 
                  September 30, 2004 (Unaudited)                                        F-36 
      Condensed Consolidated Statements of Deficiency in Stockholders'
                  Equity   for the period September 16, 2002 (date of inception)
                  to March 31, 2005 (Unaudited)                                         F-37 to F-47
         Condensed Consolidated Statements of Cash Flows for the six months
                  ended March 31, 2005 and the period September 16,
                  2002 (date of inception) to March 31, 2005 (Unaudited)                F-48  
         Notes to the Condensed Consolidated Financial Statements (Unaudited)           F-49 to F-62


                                       48



                    RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                          CERTIFIED PUBLIC ACCOUNTANTS

          REPORT OF REGISTERED INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Applied DNA Sciences, Inc.
Los Angeles, California

We have  audited the  accompanying  consolidated  balance  sheets of Applied DNA
Sciences,  Inc. (a  development  stage company) as of September 30, 2004 and the
related consolidated  statements of losses,  deficiency in stockholders' equity,
and cash flows for the years  ended  September  30, 2004 and 2003 and the period
September  16,  2002 (date of  inception)  through  September  30,  2004.  These
financial  statements are the  responsibility of the company's  management.  Our
responsibility  is to express an opinion on the financial  statements based upon
our audits.

We have conducted our audits in accordance with auditing standards of the Public
Company  Accounting  Oversight Board (PCAOB)  (United States of America).  Those
standards  require  that we plan and  perform  the  audit to  obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining on a test basis,  evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Applied DNA Sciences , Inc. (a
development  stage  company)  at  September  30,  2004  and the  results  of its
operations  and its cash flows for the years ended  September 30, 2004 and 2003,
and the period September 16, 2002 (date of inception) through September 30, 2004
in conformity with accounting principles generally accepted in the United States
of America.

The accompanying  financial  statements have been prepared  assuming the Company
will continue as a going concern. As discussed in the Note K to the accompanying
financial  statements,  the  Company  is in the  development  stage  and has not
established  a source of  revenues.  This  raises  substantial  doubt  about the
company's  ability to continue as a going concern.  The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.

/s/ RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
--------------------------------------------
Russell Bedford Stefanou Mirchandani LLP
Certified Public Accountants
McLean, Virginia
January 11, 2005

                                      F-1





                           APPLIED DNA SCIENCES , INC
                          (A development stage company)
                           CONSOLIDATED BALANCE SHEET



   
                                                                                         September 30, 2004
                                       ASSETS
                                                                                                    
Current Assets:
Cash                                                                                              $  1,832
                                                                                               ------------
       Total Current Assets                                                                          1,832


Property, Plant and Equipment (Note A)                                                              29,507
Less: accumulated depreciation                                                                      (1,405)
                                                                                               ------------
       Total Property, Plant and Equipment                                                          28,102

Other Assets:
Deposits                                                                                            23,559
Intangible assets (net of accumulated amortization of $1,756) (Note A)                              28,154
                                                                                               ------------
       Total Other Assets                                                                           51,713
                                                                                               ------------
                                                                                                  $ 81,647
                                                                                               ============
                 LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued liabilities                                                       $ 1,770,379
Accrued expenses - related parties (Note D)                                                        117,333
Convertible notes payables  (Note F)                                                             1,625,000
Due to related parties (Note D)                                                                    111,943
Note payable -related parties  (Note C)                                                          1,163,500

                                                                                               ------------
    Total  Current  Liabilities                                                                  4,788,155

Commitments and contingencies (Note J)

DEFICIENCY IN STOCKHOLDERS' EQUITY: (Note E)
Convertible Preferred Stock, par value $0.001 per share; 10,000,000 shares
authorized; 60,000 shares issued and outstanding at September 30, 2004                                   6
Common Stock, par value $0.50 per share; 100,000,000 authorized;
23,981,054 shares issued and outstanding at September 30, 2004                                  11,990,527
Additional paid in capital                                                                       6,118,993
Common stock subscribed                                                                             (1,000)
Deficit accumulated during development stage                                                   (22,815,034)
                                                                                               ------------
      Total deficiency in stockholders' equity                                                  (4,706,508)
                                                                                               $    81,647
                                                                                               ============

           See accompanying notes to consolidated financial statements

                                      F-2



                           APPLIED DNA SCIENCES , INC.
                         ( A development stage company)
                        CONSOLIDATED STATEMENT OF LOSSES




                                                                                                    For the Period
                                                                                                September 16, 2002
                                                     For the Year Ended For the Year Ended      (Date Of Inception)
                                                          September 30,       September 30,   through September 30,
                                                                   2004               2003                     2004
                                                         ---------------     --------------   ----------------------
                                                                                                       
Operating expenses:
    General and administrative                           $   17,580,098      $   3,468,363    $          21,060,073
   Depreciation and Amortization                                  3,161                  -                    3,161
                                                         ---------------     --------------   ----------------------
      Total expenses                                         17,583,259          3,468,363               21,063,234
                                                         ---------------     --------------   ----------------------
Loss from operations                                        (17,583,259)        (3,468,363)             (21,063,234)
                                                         ---------------     --------------   ----------------------
Other income(expense)                                             1,385             25,000                   26,385

Interest (expense)                                           (1,776,385)            (1,801)              (1,778,186)
Income (taxes) benefit                                                -                  -                        -
                                                         ---------------     --------------   ----------------------
Net loss                                                 $  (19,358,259)     $  (3,445,164)   $         (22,815,035)
                                                         ===============     ==============   ======================
Basic and diluted loss per common share (Note H)         $        (0.93)     $       (0.27)                     n/a
                                                         ===============     ==============   ======================
Weighted average common shares outstanding                   20,819,700         12,955,358                      n/a
                                                         ===============     ==============   ======================


          See accompanying notes to consolidated financial statements


                                      F-3


                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
                               SEPTEMBER 30, 2004



                                                                                                          Deficit
                                                                      Additional                          Accumulated
                                         Preferred                      Paid in    Common        Stock      During
                               Preferred  Shares   Common Common Stock  Capital    Stock      Subscription Development
                                Shares    Amount   Shares   Amount      Amount    Subscribed    Receivable   Stage          Total
                               --------  -------- -------- ---------   --------   ------------  ---------- ----------    -----------
                                                                                                      
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 1,018             -         -             -            -            1,000
Cancellation of Common
stock in connection with
merger with Prohealth
Medical Technologies ,
Inc on October
21, 2002                            -      -     (100,000)   10        (1,000)        -             -            -           (1,000)
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            -                -
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 1in 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     9       230,625         -             -            -          230,634

           See accompanying notes to consolidated financial statements

                                      F-4

                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
                               SEPTEMBER 30, 2004
                                   (Continued)

                                                                                                             Deficit
                                                                      Additional                            Accumulated
                                         Preferred                      Paid in  Common         Stock         During
                               Preferred  Shares   Common Common Stock  Capital   Stock      Subscription   Development
                                Shares    Amount   Shares   Amount      Amount  Subscribed     Receivable     Stage        Total
                              ---------   -------  ---------- -------   --------   ----------   ----------    -------     --------
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        21 428,797             -             -            -          428,818

           See accompanying notes to consolidated financial statements

                                      F-5

                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
                               SEPTEMBER 30, 2004
                                   (Continued)

                                                                                                              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
                              ---------   -------  ---------- -------   --------   ----------   ----------    -------     --------

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     410,913        -         -                -     410,931
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        -         -                -      95,000
Common stock subscription
receivable reclassification
adjustment
Common Stock subscribed to
at $2.50 per share in
September 2003                                         -              -           -        -     2,600                -       2,600



Net Loss for the year
ended September 30, 200                                -              -           -  300,000         -                -     300,000

Balance at September 30,
2003                          -           -            -              -           -        -         -       (3,445,164) (3,445,164)
                         --------   --------  -----------      -------- ----------- --------- ---------   ------------- -----------
                              -         $ -   17,811,082       $  1,781  $2,577,568 $300,000   $     -      $(3,456,776)  $(577,427)
                         ========   ========  ===========      ======== =========== ========= =========   ============= ============
           See accompanying notes to consolidated financial statements

                                      F-6

                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
                               SEPTEMBER 30, 2004
                                   (Continued)
                                                                                                              Deficit
                                                                          Additional                         Accumulated
                                     Preferred                             Paid in    Common       Stock       During
                          Preferred   Shares     Common     Common Stock   Capital    Stock     Subscription  Development
                            Shares     Amount    Shares        Amount       Amount   Subscribed   Receivable    Stage        Total
                          ---------   -------  ----------     -------       ------   ----------   ----------    -------     --------
Preferred shares issues
in exchange for services
at $25.00 per share,
October 2003                1500        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
December 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

           See accompanying notes to consolidated financial statements

                                      F-7

                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
                               SEPTEMBER 30, 2004
                                   (Continued)



                                                                                                              Deficit
                                                                          Additional                         Accumulated
                                     Preferred                             Paid in    Common       Stock       During
                          Preferred   Shares     Common     Common Stock   Capital    Stock     Subscription  Development
                            Shares     Amount    Shares        Amount       Amount   Subscribed   Receivable    Stage        Total
                          ---------   -------  ----------     -------       ------   ----------   ----------    -------     --------

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           -          -           -       19,288
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           -          -           -       16,344

           See accompanying notes to consolidated financial statements

                                      F-8

                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
                               SEPTEMBER 30, 2004
                                   (Continued)
                                                                                                               Deficit
                                                                          Additional                         Accumulated
                                     Preferred                             Paid in    Common       Stock       During
                          Preferred   Shares     Common     Common Stock   Capital    Stock     Subscription  Development
                            Shares     Amount    Shares        Amount       Amount   Subscribed   Receivable    Stage        Total
                          ---------   -------  ----------     -------       ------   ----------   ----------    -------     --------
Common stock issued in
exchange for employee
services at $3.15 per
share, Mar 2004                                  5,769          2,885         15,293       -              -       -        18,177
Preferred shared
converted to common
shares for consulting
services at $3.00per
share, Mar 2004              (5000)   (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          4,403         22,236       -              -       -        26,639
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,
Apr 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        (4000)   (4)      100,000         50,000         51,250       -              -       -       101,246
Common stock issued per
subscription May 2004                           10,000          5,000         (4,000)      -         (1,000)      -             -
Common stock issued in
exchange for consulting
services at $0.86 per
share in May 2004                              137,000         68,500         50,913       -              -       -       119,413
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)


           See accompanying notes to consolidated financial statements

                                      F-9


                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
                               SEPTEMBER 30, 2004
                                   (Continued)


                                                                                                               Deficit
                                                                          Additional                         Accumulated
                                     Preferred                             Paid in    Common       Stock       During
                          Preferred   Shares     Common     Common Stock   Capital    Stock     Subscription  Development
                            Shares     Amount    Shares        Amount       Amount   Subscribed   Receivable    Stage        Total
                          ---------   -------  ----------     -------       ------   ----------   ----------    -------     --------
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)          -         -            -       58,500
Preferred stock converted
to common stock for
consulting services at
$0.39 per share in
August 2004                  (2000)   (2)        50,000          25,000      (5,500)          -         -            -       19,498


           See accompanying notes to consolidated financial statements

                                      F-10

                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (Date of Inception) THROUGH
                               SEPTEMBER 30, 2004
                                   (Continued)
                                     Deficit
                                                                          Additional                         Accumulated
                                     Preferred                             Paid in    Common       Stock       During
                          Preferred   Shares     Common     Common Stock   Capital    Stock     Subscription  Development
                            Shares     Amount    Shares        Amount       Amount   Subscribed   Receivable    Stage        Total
                          ---------   -------  ----------     -------       ------   ----------   ----------    -------     --------



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      (8,787)          -         -            -       37,463
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
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                       (4000)   (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
Warrants issued to
consultants in the
fourth quarter 2004                                                       2,019,862                                       2,019,862


Net Loss                                              -               -           -           -         -  (19,358,259) (19,358,259)
                          ------    --       ----------      ----------   ---------      --------  ------- ------------  -----------
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)
                          ======    ==       ==========      ==========   =========      ========  ======= ============  ===========


                                      F-11


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENT OF CASH FLOWS




                                                                                               For the Period
                                                                                           September 16, 2002
                                                 For the Year Ended    For the Year Ended  (Date of Inception)
                                                   September 30,       September 30,        through September
                                                        2004                 2003                30, 2004
                                                     -------------     -------------         -------------
                                                                                              
Cash Flows from operating activities:

Net loss from operating activities                   $ (19,358,259)     $(3,445,164)         $(22,815,034)
Adjustments to reconcile net loss to net 
cash (used in) operating activities:

Depreciation and amortization                                3,161                -                 3,161

Organizational expenses                                          -           88,500                88,500
Preferred shares issued in exchange for
service at $25 per share in September 2004               1,500,000                -             1,500,000
Warrants issued to consultants in the
fourth quarter 2004                                      2,019,862                -             2,019,862
Amortization of beneficial conversion
feature                                                  1,625,000                -             1,625,000
Common stock issued in exchange for
consultant services rendered                            10,105,382        2,292,350            12,397,732
Common stock canceled-previously issued for
services rendered                                         (285,575)               -              (285,575)
Changes in assets and liabilities:
Prepaid Expenses and Deposits                                    -                -                     -
Increase in-Other Assets                                         -          (13,890)              (13,890)
Increase (decrease) in:                                                                                 -
Increase in due related parties                             20,000          132,696               152,696
Accounts payable and accrued liabilities                 1,301,560          454,000             1,755,560
                                                     -------------     -------------         -------------
Net cash (used in) operating activities                 (3,068,719)        (491,509)           (3,571,838)

Cash flows from investing activities:
Payments for Patent Filing                                 (21,351)               -               (21,351)
Payments for security deposits                             (23,559)               -               (23,559)
Capital expenditures                                       (29,507)               -               (29,507)
                                                     -------------     -------------         -------------
Net cash (used in) investing activities                    (74,417)               -               (74,417)
Cash flows from financing activities:
Proceeds from sale of common stock, net of
cost                                                             -          432,000               432,000
Proceeds from subscription of common stock                 124,000                -               125,000
Proceeds from sale of options                               87,000          154,000               241,000
Net advances from shareholders                              (9,504)          98,980               100,088
Proceeds from loans                                      2,750,000                -             2,750,000
                                                     -------------     -------------         -------------
Net cash provided by financing activities                2,951,496          684,980             3,648,088
                                                     -------------     -------------         -------------
Increase (decrease) in cash and cash
equivalents                                               (191,640)         193,471                 1,832
Cash and cash equivalents, beginning of year               193,471                -                     -
                                                     -------------     -------------         -------------
Cash and cash equivalents, end of year
                                                     $       1,832      $   193,471          $      1,832
                                                     ==============     ============         =============
Supplemental Information:
  Cash paid during the period for interest           $           -      $         -          $          -
  Cash paid during the year for taxes                            -                -                     -

                                      F-12

  Non-cash disclosures:
Common stock issued for services
                                                     $  10,105,382      $ 2,292,350          $ 12,398,732
                                                     ==============     ============         =============
Amortization of beneficial conversion
feature                                              $   1,625,000                           $  1,625,000
                                                     ==============                          =============
Common stock canceled-previously issued for
services rendered                                    $    (285,575)                          $   (285,575)
                                                     ==============                          =============
Preferred shares issued in exchange for
service at $25 per share in September 2004           $   1,500,000                           $  1,500,000
                                                     ==============                          =============
Warrants issued to consultants in the
fourth quarter 2004                                  $   2,019,862                           $  2,019,862
                                                     ==============                          =============
Acquisition:
Common stock retained                                                   $     1,015          $      1,015
Assets acquired                                                                (135)                 (135)
                                                                        -------------         -------------
Total consideration paid                                                $       880          $        880
                                                                        ============         =============
Organization expenses- note  issued in
exchange of  shares retired                                             $    88,500          $     88,500
                                                                        ============         =============


          See accompanying notes to consolidated financial statements

                                      F-13


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES

A summary of the significant  accounting  policies applied in the preparation of
the accompanying financial statements follows.

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  September 30, 2004,  the Company has  accumulated  losses of
$22,815,034.

Estimates

The preparation of the financial statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain  reported amounts and  disclosures.  Accordingly,  actual results
could differ from those estimates.

Revenue Recognition

The Company recognizes revenue in accordance with SEC Staff Accounting  Bulletin
No. 101,  "Revenue  Recognition in Financial  Statements"  ("SAB 101").  SAB 101
requires that four basic  criteria must be met before  revenue can be recognized
:(1) persuasive  evidence of an arrangement  exists;  (2) delivery has occurred;
(3) the  selling  price is fixed and  determinable;  and (4)  collectibility  is
reasonably  assured.  Determination  of  criteria  (3)  and  (4)  are  based  on
management's  judgments  regarding the fixed nature of the selling prices of the
products  delivered and the  collectibility  of those  amounts.  Provisions  for
discounts and rebates to customers,  estimated returns and allowances, and other
adjustments are provided for in the same period the related sales are recorded.

On December 17, 2003, the SEC staff released Staff Accounting Bulletin (SAB) No.
104,  Revenue  Recognition.  The staff updated and revised the existing  revenue
recognition in Topic 13, Revenue Recognition,  to make its interpretive guidance
consistent with current accounting  guidance,  principally EITF Issue No. 00-21,
"Revenue  Arrangements with Multiple  Deliverables."  Also, SAB 104 incorporates
portions of the Revenue  Recognition in Financial  Statements - Frequently Asked
Questions  and  Answers  document  that the SEC staff  considered  relevant  and
rescinds  the  remainder.   The  company's  revenue  recognition   policies  are
consistent  with  this  guidance;  therefore,  this  guidance  will  not have an
immediate impact on the company's consolidated financial statements.

Cash Equivalents

For the purpose of the  accompanying  financial  statements,  all highly  liquid
investments  with a maturity of three months or less are  considered  to be cash
equivalents.

                                      F-14

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

Income Taxes

The Company has adopted Financial  Accounting  Standard No. 109 (SFAS 109) which
requires the recognition of deferred tax liabilities and assets for the expected
future tax  consequences  of events  that have been  included  in the  financial
statement or tax returns. Under this method, deferred tax liabilities and assets
are determined  based on the  difference  between  financial  statements and tax
basis of assets and  liabilities  using enacted tax rates in effect for the year
in which the differences are expected to reverse.  Temporary differences between
taxable income reported for financial reporting purposes and income tax purposes
are insignificant.

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 September  30,
2004 property and equipment consist of:

                                               September 30, 2004
                                               ------------------

Furniture                                      $          29,507
Accumulated depreciation                                   1,405

                                               ------------------
Net                                            $          28,102
                                               ==================

Impairment of Long-Lived Assets

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 144
(SFAS  144).  The  Statement   requires  that  long-lived   assets  and  certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.  Events relating to recoverability  may include
significant  unfavorable changes in business conditions,  recurring losses, or a
forecasted  inability to achieve  break-even  operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based upon
forecasted  undercounted cash flows. Should an impairment in value be indicated,
the carrying value of intangible assets will be adjusted,  based on estimates of
future discounted cash flows resulting from the use and ultimate  disposition of
the asset.  SFAS No. 144 also  requires  assets to be disposed of be reported at
the lower of the carrying amount or the fair value less costs to sell.

Comprehensive Income

The  Company  does not have any  items  of  comprehensive  income  in any of the
periods presented.

Segment Information

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 131,
Disclosures  about  Segments of an  Enterprise  and Related  Information  ("SFAS
131"). SFAS establishes  standards for reporting information regarding operating
segments in annual financial  statements and requires  selected  information for
those  segments  to  be  presented  in  interim   financial  reports  issued  to
stockholders.  SFAS 131 also establishes standards for related disclosures about
products and services and geographic areas. Operating segments are identified as
components of an enterprise about which separate discrete financial  information
is available for evaluation by the chief  operating  decision maker, or decision
making  group,  in  making  decisions  how  to  allocate  resources  and  assess

                                      F-15

performance.  The information disclosed herein, materially represents all of the
financial  information  related to the Company's  principal  operating  segment.
APPLIED DNA SCIENCES , Inc. (A Development  Stage Company) NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS SEPTEMBER 30, 2004 AND 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

Net Loss Per Share

The Company has adopted  Statement  of  Financial  Accounting  Standard No. 128,
"Earnings Per Share,"  specifying the  computation,  presentation and disclosure
requirements  of earnings per share  information.  Basic  earnings per share has
been  calculated  based  upon the  weighted  average  number  of  common  shares
outstanding.  Stock  options and  warrants  have been  excluded as common  stock
equivalents  in  the  diluted   earnings  per  share  because  they  are  either
antidilutive, or their effect is not material.

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, 2004 and for
the subsequent periods.

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



                                                        For the Year Ended           For the Year Ended
                                                         September 30,2004           September 30, 2003
                                                        ------------------           -------------------
                                                                                                  
Net loss - as reported                                  $     (19,358,259)           $      (3,445,164)
Add: Total stock based employee compensation                            -                            -
expense as reported under intrinsic value method
(APB. No. 25)
Deduct: Total stock based employee compensation
expense as reported under fair value based method
(SFAS No. 123)                                                          -                            -
                                                        ------------------           -------------------
Net loss - Pro Forma                                    $     (19,358,259)           $       (3,445,164)
                                                        ==================           ===================
Net loss attributable to common stockholders -
Pro forma                                               $     (19,358,259)           $       (3,445,164)
                                                        ==================           ===================
Basic (and assuming dilution) loss per share - as
reported                                                $           (0.93)           $            (0.27)
                                                        ==================           ===================
Basic (and assuming dilution) loss per share -
Pro forma                                               $           (0.93)           $            (0.27)
                                                        ==================           ===================


                                      F-16

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

Liquidity

As shown in the accompanying  financial  statements,  the Company incurred a net
loss of  $22,815,034.  during the period  September 16, 2002 (date of inception)
through  September 30, 2004. The Company's current  liabilities  assets exceeded
its current assets by $4,786,323 as of September 30, 2004.

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 high credit quality  institutions.  At times,  such investments
may be in excess of the FDIC insurance limit.

Research and Development

The Company  accounts for research and development  costs in accordance with the
Financial   Accounting  Standards  Board's  Statement  of  Financial  Accounting
Standards  No. 2 ("SFAS 2"),  "Accounting  for Research and  Development  Costs.
Under SFAS 2, all research and  development  costs must be charged to expense as
incurred.  Accordingly,  internal research and development costs are expensed as
incurred.  Third-party  research and  developments  costs are expensed  when the
contracted  work has been performed or as milestone  results have been achieved.
Company-sponsored  research and  development  costs  related to both present and
future products are expensed in the period  incurred.  The Company did not incur
any  research  and  development  expenses  from  September  16,  2002  (date  of
inception) through September 30, 2004.

Advertising

The  Company  will  follow a policy  of  charging  the costs of  advertising  to
expenses  incurred.  The Company incurred  advertising costs of $125,758 and $0,
respectively during the years ended September 30, 2004 and 2003, respectively.

Reclassifications

Certain reclassifications have been made in prior year's financial statements to
conform to classifications used in the current year.

Intangible Assets

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

                                      F-17

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

At September 30, 2004, intangible assets consist of:

                                                      September 30,
                                                          2004

Intangible assets                                     $   29,910
Accumulated amortization                                  (1,756)
                                                      -----------

Net Intangible Assets                                 $   28,154
                                                      ===========

New Accounting Pronouncements

In April 2003,  the FASB issued  Statement  of  Financial  Accounting  Standards
(SFAS) No. 149,  Amendment of Statement  No. 133 on Derivative  Instruments  and
Hedging Activities. SFAS 149 amends SFAS No. 133 to provide clarification on the
financial  accounting  and  reporting  of  derivative  instruments  and  hedging
activities and requires that contracts with similar characteristics be accounted
for on a  comparable  basis.  The  provisions  of  SFAS  149 are  effective  for
contracts  entered  into or  modified  after  June  30,  2003,  and for  hedging
relationships  designated  after June 30, 2003. The adoption of SFAS 149 did not
have a material  impact on the  Company's  results of  operations  or  financial
position.

In May 2003,  the FASB  issued SFAS No. 150,  Accounting  for Certain  Financial
Instruments  with  Characteristics  of Both  Liabilities  and  Equity.  SFAS 150
establishes standards on the classification and measurement of certain financial
instruments with  characteristics of both liabilities and equity. The provisions
of SFAS 150 are  effective for  financial  instruments  entered into or modified
after May 31, 2003 and to all other  instruments  that exist as of the beginning
of the first interim  financial  reporting period beginning after June 15, 2003.
The adoption of SFAS 150 did not have a material impact on the Company's results
of operations or financial position.

In  December  2003,  the FASB  issued a revision  of SFAS No.  132,  "Employers'
Disclosures   About   Pensions   And  Other   Postretirement   Benefits."   This
pronouncement,  SFAS No. 132-R,  expands  employers'  disclosures  about pension
plans and other post-retirement benefits, but does not change the measurement or
recognition of such plans required by SFAS No. 87, No. 88, and No. 106. SFAS No.
132-R retains the existing disclosure requirements of SFAS No. 132, and requires
certain  additional  disclosures  about defined benefit  post-retirement  plans.
Except as described in the following  sentence,  SFAS No. 132-R is effective for
foreign  plans for fiscal years ending after June 15, 2004;  after the effective
date, restatement for some of the new disclosures is required for earlier annual
periods. Some of the interim-period disclosures mandated by SFAS No. 132-R (such
as the components of net periodic benefit cost, and certain key assumptions) are
effective  for foreign  plans for quarters  beginning  after  December 15, 2003;
other interim-period  disclosures will not be required for the Company until the
first  quarter of 2005.  Since the  Company  does not have any  defined  benefit
post-retirement  plans,  the  adoption  of this  pronouncement  did not have any
impact on the Company's results of operations or financial condition.

                                      F-18

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

In November 2004, the Financial  Accounting  Standards  Board (FASB) issued SFAS
151,  Inventory  Costs-- an amendment of ARB No. 43,  Chapter 4. This  Statement
amends the guidance in ARB No. 43,  Chapter 4,  "Inventory  Pricing," to clarify
the accounting for abnormal amounts of idle facility expense,  freight, handling
costs,  and  wasted  material  (spoilage).  Paragraph  5 of ARB 43,  Chapter  4,
previously  stated  that ". . . under  some  circumstances,  items  such as idle
facility expense,  excessive spoilage,  double freight, and rehandling costs may
be so abnormal as to require  treatment as current period  charges.  . . ." This
Statement  requires  that those items be recognized  as  current-period  charges
regardless  of whether they meet the  criterion of "so  abnormal."  In addition,
this Statement  requires that  allocation of fixed  production  overheads to the
costs  of  conversion  be  based  on  the  normal  capacity  of  the  production
facilities.  This  Statement is effective for inventory  costs  incurred  during
fiscal  years  beginning  after June 15, 2005.  Management  does not believe the
adoption  of this  Statement  will  have any  immediate  material  impact on the
Company.

In  December  2004,  the FASB issued SFAS  No.152,  "Accounting  for Real Estate
Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67" ("SFAS
152) The amendments  made by Statement 152 This Statement  amends FASB Statement
No.  66,  Accounting  for  Sales of Real  Estate,  to  reference  the  financial
accounting and reporting guidance for real estate time-sharing transactions that
is  provided in AICPA  Statement  of Position  (SOP) 04-2,  Accounting  for Real
Estate Time-Sharing Transactions.  This Statement also amends FASB Statement No.
67,  Accounting for Costs and Initial Rental Operations of Real Estate Projects,
to state that the guidance for (a) incidental  operations and (b) costs incurred
to sell  real  estate  projects  does  not  apply  to real  estate  time-sharing
transactions.  The accounting  for those  operations and costs is subject to the
guidance in SOP 04-2.  This Statement is effective for financial  statements for
fiscal years beginning after June 15, 2005. with earlier application encouraged.
The Company does not anticipate  that the  implementation  of this standard will
have a material impact on its financial position,  results of operations or cash
flows.

On  December  16,  2004,  the  Financial  Accounting  Standards  Board  ("FASB")
published  Statement of Financial  Accounting  Standards No. 123 (Revised 2004),
Share-Based  Payment ("SFAS 123R").  SFAS 123R requires that  compensation  cost
related to  share-based  payment  transactions  be  recognized  in the financial
statements.  Share-based  payment  transactions  within  the  scope of SFAS 123R
include stock options,  restricted stock plans,  performance-based awards, stock
appreciation  rights,  and employee share purchase plans. The provisions of SFAS
123R are  effective  as of the first  interim  period that begins after June 15,
2005. Accordingly,  the Company will implement the revised standard in the third
quarter of fiscal year 2005. Currently, the Company accounts for its share-based
payment  transactions under the provisions of APB 25, which does not necessarily
require  the  recognition  of  compensation  cost in the  financial  statements.
Management is assessing the  implications  of this revised  standard,  which may
materially  impact the  Company's  results of operations in the third quarter of
fiscal year 2005 and thereafter.

On December 16, 2004, FASB issued  Statement of Financial  Accounting  Standards
No. 153,  Exchanges of Non-monetary  Assets, an amendment of APB Opinion No. 29,
Accounting for  Non-monetary  Transactions (" SFAS 153").  This statement amends
APB Opinion 29 to eliminate the exception for non-monetary  exchanges of similar
productive  assets and  replaces it with a general  exception  for  exchanges of
non-monetary assets that do not have commercial substance.  Under SFAS 153, if a
non-monetary exchange of similar productive assets meets a  commercial-substance
criterion and fair value is determinable,  the transaction must be accounted for
at fair  value  resulting  in  recognition  of any  gain or  loss.  SFAS  153 is
effective for non-monetary  transactions in fiscal periods that begin after June
15,  2005.  The Company  does not  anticipate  that the  implementation  of this
standard  will have a  material  impact on its  financial  position,  results of
operations or cash flows.

                                      F-19

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE B - MERGER

Acquisition

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

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

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

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

Common stock retained by  ProHealth shareholders             $   1,015
Assets acquired                                                   (135)
                                                             ----------
Total consideration paid                                     $     880
                                                             ==========

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

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 E). The option
expires on December 10, 2004. On June 30, 2003, the Company exercised its option
and acquired  7,500,000  common  shares under this  agreement in exchange for an
$88,500 convertible promissory note payable to the former controlling owner.

The Company  accounted for the acquisition of the shares as an organization cost
and charged  $88,500 to  operations  and retired the 7,500,000  shares  acquired
common stock.

                                      F-20

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003


NOTE C - RELATED PARTY TRANSACTIONS

At September 30, 2004, notes payable are as follows:

                                                                                            September
                                                                                            30, 2004
                                                                                          --------------
                                                                                                              
Note payable , related party, together with interest at 8% per annum, unsecured.
Should  the  Company  default  under the terms of the Note,  Noteholder  has the
option to convert the unpaid  principal at maturity to  7,500,000  shares of the
Company's  common  stock and receive  additional  common  shares in exchange for
accrued and unpaid  interest at a conversion  rate equal to the then fair market
value of the Company's common stock. (refer to note J)                                    $      88,500

Note payable,  unsecured,  related party,  payable from August 1, 2005, right to
convert to restricted stock in lieu of cash, rate of interest 4%, 160,000 shares
prior to October 31, 2005 or 180,000 shares after that date.                                    425,000

Due to  ex-president,  in  September  2004,  note holder  entered into a private
transaction,  selling a total of 2,500,000  shares to him, after which he loaned
all proceeds of $600,000 to us.                                                                 600,000

Note payable,  ex-officer of the Company,  due $70,000 upon first  funding,  20%
rate of interest, or 100,000 shares at par value of $0.001
                                                                                                 50,000
                                                                                          --------------
                                                                                              1,163,500

Less: current portion
                                                                                             (1,163,500)
                                                                                          --------------
Note payable - long-term
                                      
                                                                                          $           -
                                                                                          --------------


Included  in  current  liabilities  is  $111,943  at  September  30,  2004 which
represents  advances from the stockholders of the Company.  No formal agreements
or repayment terms exist.

Also,  the Company owed $117,333 at September 30, 2004 to the  stockholders  and
other related parties towards accrued expenses.

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

The Company has entered into long term employment and consulting agreements with
Company's ex- President and Chief Executive  Officer and an entity controlled by
a significant Company shareholder, respectively (see Note H).

NOTE D - CAPITAL STOCK

The Company is authorized to issue  10,000,000  shares of convertible  preferred
stock,  with  $0.001 par value per share.  The  Company is  authorized  to issue
100,000,000  shares of common stock,  with $0.50 par value per share. In January
2004,  the Company passed a resolution  authorizing  change in the par value per
common  shares from $0.0001 per share to $0.50 per share.  As of  September  30,
2004, the Company has issued and  outstanding  23,981,054  common share with par
value of $0.50 per share and 60,000 convertible  preferred shares with par value
of $0.0001.

                                      F-21

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE D- CAPITAL STOCK (continued)

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 (see Note
B).

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

In October 2002 the Company  issued  602,000  shares of common stock in exchange
for  services  valued at $ 0.065 per share.  In  accordance  with EITF 96-18 the
measurement  date to determine fair value was in October 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
$0.065 per share,  which presents the fair value of the services  received which
did not differ materially from the value of the stock issued.

In November and December 2002, the Company issued 876,000 shares of common stock
in exchange for subscription at $ 0.065 per share. In accordance with EITF 96-18
the  measurement  date to determine fair value was in October 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  $0.065 per share,  which  presents the fair value of the services
received which did not differ materially from the value of the stock issued.

In January 2003, the Company  canceled 836,000 shares of common stock previously
issued in exchange for consulting services.

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

In January 2003,  the Company  issued 586,250 shares of common stock in exchange
for consulting  services.  In accordance with EITF 96-18 the measurement date to
determine  fair  value  was in  October  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  $0.13 per
share,  which  presents  the fair value of the services  received  which did not
differ materially from the value of the stock issued.

In February  2003,  the Company  issued 9,000 shares of common stock in exchange
for consulting  services.  In accordance with EITF 96-18 the measurement date to
determine  fair  value  was in  October  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  $0.065 per
share,  which  presents  the fair value of the services  received  which did not
differ materially from the value of the stock issued.

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.

                                      F-22

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE D- CAPITAL STOCK (continued)

In March 2003,  the Company issued 91,060 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $2.53
per share,  which  represents the fair value of the services  received which did
not differ materially from the value of the stock issued.

In March 2003,  the Company  issued 6,000 shares of common stock in exchange for
consulting  services.  The Company valued the shares issued at  approximately  $
0.065 per share,  which represents the fair value of the services received which
did not differ materially from the value of the stock issued.

In March 2003,  the Company  received  subscription  for 18,000 shares of common
stock in exchange for cash at $1 per share.

On April 1, 2003,  the Company issued 860,000 shares of common stock in exchange
for consulting  services provided to the Company.  In accordance with EITF 96-18
the  measurement  date to determine fair value was in October 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  $0.065 per share,  which  presents the fair value of the services
received which did not differ materially from the value of the stock issued.

On April 9, 2003,  the Company  issued 18,000 shares of common stock in exchange
for previously  issued  options to purchase the Company's  common stock at $1.00
per share.

On April 9, 2003,  the Company  issued  9,000 shares of common stock in exchange
for consulting  services provided to the Company.  In accordance with EITF 96-18
the  measurement  date to determine fair value was in October 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  $0.065 per share,  which  presents the fair value of the services
received which did not differ materially from the value of the stock issued.

On April 23, 2003,  the Company  issued 5,000 shares of common stock in exchange
for consulting  services provided to the Company.  The Company valued the shares
issued at approximately  $2.50 per share, which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

On June 12, 2003,  the Company issued 10,000 shares common stock in exchange for
consulting  services  provided to the  Company.  The  Company  valued the shares
issued at approximately $ 2.50 per share, which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

On June 17 2003,  the Company  issued  50,000 shares of common stock in exchange
for cash at $1.00 per share

On June 30, 2003,  the Company issued 270,000 shares of common stock in exchange
for consulting  services provided to the Company.  In accordance with EITF 96-18
the  measurement  date to determine fair value was in October 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  $0.065 per share,  which  presents the fair value of the services
received which did not differ materially from the value of the stock issued.

On June 30, 2003, the Company  received  $10,000 as subscription  for options to
purchase the Company's common stock at $1.00 per share.

In June, 2003, the Company received $48,000 in connection with a subscription to
purchase the Company's common stock pursuant to a private placement.

                                      F-23

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE D- CAPITAL STOCK (continued)

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

In July 2003 the Company  issued  213,060  shares of common stock for consulting
services  provided  to the  Company.  The  Company  valued the shares  issued at
approximately $ 2.01 per share,  which represents the fair value of the services
received which did not differ materially from the value of the stock issued.

In July 2003,  the Company  canceled  24,000 shares of common stock,  previously
issued for services valued at $2.50 per share.

In July 2003, the Company  received  $20,000 in exchange for  previously  issued
options to purchase the Company's common stock at $1.00 per share.

In July  2003,  the  Company  issued  10,000  shares  of  common  stock for cash
previously subscribed at $1.00 per share.

In August 2003,  the Company  issued  172,500 shares of common stock in exchange
for consulting  services provided to the Company.  The Company valued the shares
issued at approximately $ 2.38 per share, which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued

In August 2003, the Company received  $29,000 in exchange for previously  issued
options to purchase the Company's common stock at $1.00 per share.

In September 2003, the Company issued 395,260 shares of common stock in exchange
for consulting  services provided to the Company.  The Company valued the shares
issued at approximately $ 2.42 per share, which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

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

In  September  2003,  the Company  issued 6,400 shares of common stock issued in
exchange for cash at $2.50 per share pursuant to private placement.

In September  2003,  the Company  received  $95,000 in exchange  for  previously
issued options to purchase the Company's common stock at $1.00 per share.

In  September  2003,  the  Company  received   $300,000  in  connection  with  a
subscription  to  purchase  the  Company's  common  stock  pursuant to a private
placement.

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 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.

                                      F-24

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE D- CAPITAL STOCK (continued)

In October 2003,  the Company  issued 287,439 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$2.85 per share for a total of $820,418,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In October 2003,  the Company  issued  120,000 shares of common stock for shares
previously subscribed at $2.50 per share in September 2003.

In October 2003, the Company  canceled 100,000 shares of common stock previously
issued in exchange for services at $2.50 per share.

In November  2003, the Company issued 100,000 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$3.00 per share,  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 sold 100,000 shares of common stock subscribed for
cash at $2.50 per share pursuant to private placement.

In December 2003,  the Company sold 6,400 shares of common stock  subscribed for
cash at $2.50 per share pursuant to private placement.

In  December  2003,  the  Company  issued  2,125,500  shares of common  stock in
exchange for  consulting  services.  . The Company  valued the shares  issued at
approximately  $2.59 per share,  which represents the fair value of the services
received which did not differ materially from the value of the stock issued.

In December 2003, the Company  received  $104,000 in exchange for a common stock
subscription at $2.50 per share pursuant to private placement.

In January 2004, the Company issued 41,600 shares of common stock at $2.50 share
pursuant to a subscription made on December 2003.

In January 2004,  the Company  issued 13,040 shares of common stock at $2.95 per
share in exchange for consulting services valued at $38,468.

In January 2004,  the Company issued 123,000 shares of common stock at $2.60 per
share in exchange for consulting services valued at $319,800.

In January  2004,  the Company  issued 1,000 shares of common stock at $3.05 per
share in exchange for consulting services valued at $3,050.

In February  2004,  the Company issued 6,283 shares of common stock at $3.07 per
share in exchange for employee services valued at $19,288.

In March 2004,  the Company  issued  44,740  shares of common stock at $3.04 per
share in exchange for consulting services valued at $136,010.

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

In March 2004,  the Company  issued  5,443  shares of common  stock at $3.00 per
share in exchange for employee services valued at $16,344.


                                      F-25

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE D- CAPITAL STOCK (continued)

In March 2004,  the Company  issued  5,769  shares of common  stock at $3.15 per
share in exchange for employee services valued at $18,177.

In March 2004, the Company  converted 5,000 preferred shares into 125,000 shares
of common stock at $3.00 per share in exchange for employee  services  valued at
$375,000.

In March 2004,  the Company  issued  8,806  shares of common  stock at $3.03 per
share in exchange for employee services valued at $26,639.

In April 2004,  the Company  issued  22,500  shares of common stock at $0.10 for
subscription of warrants to be exercised.

In April 2004,  the Company  issued  9,860  shares of common  stock at $2.58 per
share in exchange for employee services valued at $25,441.

In April 2004,  the Company  issued  11,712  shares of common stock at $2.35 per
share in exchange for consulting services valued at $27,523.

In April 2004,  the Company  issued  367,500 shares of common stock at $1.50 per
share in exchange for consulting services valued at $551,250.

In April 2004,  the Company  retired  50,000  shares of common stock  previously
issued for consulting services at $0.065 per share or $3,250.

In May 2004, the Company converted 4,000 preferred shares into 100,000 shares of
common stock at $1.01 per share in exchange for  consulting  services  valued at
$101,250.

In May 2004, the Company issued 10,000 shares of common stock at $0.10 per share
in a stock subscription for $1,000.

In May 2004,  the Company  issued  137,000  shares of common  stock at $0.86 per
share in exchange for consulting services valued at $119,233.

In May 2004, the Company issued 26,380 shares of common stock at $1.15 per share
in exchange for consulting services valued at $30,337.

In June 2004, the Company retired 5,000 shares of common stock previously issued
for consulting services at $0.065 per share or $325.

In June 2004,  the Company  issued  270,500  shares of common stock at $0.67 per
share in exchange for consulting services valued at $180,560.

In June 2004, the Company issued 8,000 shares of common stock at $0.89 per share
in exchange for consulting services valued at $7,120.

In June 2004,  the Company  issued  50,000  shares of common stock at $0.645 per
share in exchange for consulting services valued at $32,250.

                                      F-26

                           APPLIED DNA SCIENCES , Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE D- CAPITAL STOCK (continued)

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

In July 2004,  the Company  issued  100,000  shares of common stock at $0.54 per
share in exchange for consulting services valued at $54,000.

In July 2004, the Company issued 5,000 shares of common stock at $0.72 per share
in exchange for consulting services valued at $3,600.

In July 2004,  the Company  issued  100,000  shares of common stock at $0.47 per
share in exchange for consulting services valued at $47,250.

In August 2004, the Company  converted 2,000 preferred shares into 50,000 shares
of common stock at $0.39 in exchange for consulting services valued at $19,500.

In August 2004,  the Company  issued  100,000 shares of common stock at $0.39 in
exchange for consulting services valued at $39,000.

In August 2004,  the Company  issued  100,000 shares of common stock at $0.50 in
exchange for consulting services valued at $50,250.

In August 2004,  the Company  issued  200,000 shares of common stock at $0.56 in
exchange for consulting services valued at $112,500.

In September 2004, the Company issued  1,000,000 shares of common stock at $0.52
in exchange for consulting services valued at $517,500.

In September  2004, the Company issued 45,000 shares of common stock at $0.50 in
exchange for consulting services valued at $22,288.

In September 2004, the Company  converted  4,000  preferred  shares into 100,000
shares of common stock at $0.41 in exchange for  consulting  services  valued at
$54,000.

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

In 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.

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.

                                      F-27

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE E- STOCK OPTIONS AND WARRANTS (continued)



                             Warrants Outstanding                              Warrants Exercisable
                                       Weighted Average        Weighed                       Weighted
                       Number       Remaining Contractual      Average         Number        Average
Exercise Prices     Outstanding          Life (Years)       Exercise Price  Exercisable   Exercise Price
---------------     -----------     ---------------------   --------------  -----------   --------------
                                                                                  
    $0.10             335,000                4.79              $ 0.10         335,000         $  0.10
    $0.60           3,472,750                4.01              $ 0.60       3,472,750         $  0.60
    $0.70             750,000                2.84              $ 0.70         750,000         $  0.70
    $1.00             250,000                1.61              $ 1.00         250,000         $  1.00
    $3.00              62,503                1.25              $ 3.00          62,503         $  3.00
                    ---------                                               ---------
                    4,870,253                                               4,870,253
                    =========                                               =========

Transactions involving warrants are summarized as follows:

                                              Number of Shares       Weighted Average
                                                                      Price Per Share
                                              ----------------       -----------------
Outstanding at September 30, 2003                     383,500        $           1.38
Granted                                             4,574,753                    0.58
Exercised                                             (88,000)                   1.00
Canceled or expired                                         -                       -
                                              ----------------       -----------------
Outstanding at September 30, 2004                   4,870,253        $           0.63

                                              ================


The estimated value of the  compensatory  warrants  granted to  non-employees in
exchange  for  services  and  financing   expenses  was  determined   using  the
Black-Scholes pricing model and the following assumptions: contractual term of 2
to 5 years,  a risk free  interest  rate of 1.00%,  a  dividend  yield of 0% and
volatility  of 22.9%.  The  amount of the  expense  charged  to  operations  for
compensatory  warrants  granted in exchange for services was  $2,019,862 and $0,
respectively, for the years ended September 30, 2004 and 2003.

NOTE F - CONVERTIBLE PROMISSORY NOTES PAYABLE

A summary of  convertible  promissory  notes payable at September 30, 2004 is as
follows:

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 $3M or more; The Company,
in its sole discretion,  may prepay  principal at any time without penalty.  The
notes are  convertible  into shares of common stock of the Company at a price of
$2.50 per share.

                                      F-28

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE F - CONVERTIBLE PROMISSORY NOTES PAYABLE (continued)

                                                              September 30, 2004
                                                              ------------------

Convertible notes
payable                                                       $       1,675,000
Debt discount - beneficial conversion feature, net of
accumulated amortization of $1,270,444                                  (20,393)
Debt discount, net of accumulated amortization of
$354,556
                                                                        (29,607)
                                                              ------------------

Net balance                                                   $       1,625,000

                                                              ==================

During the three  months ended  December  31, 2003,  the Company sold 27.5 units
(the  "Units")  to  accredited  investors  at a price of  $50,000  per Unit (the
"Bridge  Offering")  for a total of  $1,375,000.  Each  Unit  consists  of (i) a
$50,000  Principal  Amount 10% Secured  Convertible  Promissory  Note ("Note" or
"Notes"),  (ii)  detachable  warrants  to purchase  50,000  shares of our common
stock,  exercisable  for a period  of five  years at a price of $3.20  per share
("$3.20 Warrant") and (iii) detachable warrants to purchase 10,000 shares of our
common  stock,  exercisable  for a period of five  years at a price of $0.10 per
share ("$0.10 Warrant" and together with the $3.20 Warrant, the "Warrants"). The
Notes are  convertible  into shares of our common  stock at a price of $2.50 per
share.

The Company  accounted for the warrants and notes payable in accordance with APB
No. 14,  "Accounting  for  Convertible  Debt and Debt Issued with Stock Purchase
Warrants"  ("APB  14").  APB 14  requires  a portion  of the  proceeds  from the
issuance of debt securities  with detachable  stock warrants be allocated to the
warrants and treated as paid-in  capital.  Any resulting  discount or premium on
the notes payable  should be recorded and amortized  over the life of the notes.
The Company used the Black-Scholes  model to determine the value of the warrants
issued to the  noteholders.  Under  the  Black-Scholes  model,  the value of the
warrants are  determined by taking the  difference  between  acquiring the stock
outright and the present  value of paying the exercise  price on the  expiration
day. As a result,  the Company valued the warrants at $206,526.  This amount was
recorded as paid-in capital and the resulting  discount on the notes payable was
recorded and is being  amortized  using the interest method over the life of the
notes.  The debt  discount  attributed is amortized  over the Bridge  Offering's
earliest maturity period of 9 months from the date of issue as interest expense.

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 Bridge Offering note. 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  $1,168,474 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 Bridge  Offering.  The debt  discount  attributed  to the
beneficial  conversion feature is amortized over the Bridge Offering's  earliest
maturity period of 9 months from the date of issue as interest expense.


                                      F-29

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE F - CONVERTIBLE PROMISSORY NOTES PAYABLE (continued)

The  Company  valued the  beneficial  conversion  of the notes and  warrants  in
accordance  with  EITF  00-27  using  the  Black-Scholes  pricing  model and the
following assumptions:

o contractual terms of 5 years 
o an average risk free interest rate of 1.00% 
o a dividend yield of 0.00% 
o volatility of 22.9%.

During the three  months  ended March 31,  2004,  the Company  sold 6 units (the
"Units") to  accredited  investors  at a price of $50,000 per Unit (the  "Bridge
Offering")  for a  total  of  $300,000.  Each  Unit  consists  of (i) a  $50,000
Principal  Amount 10% Secured  Convertible  Promissory Note ("Note" or "Notes"),
(ii) warrants to purchase  50,000 shares of our common stock,  exercisable for a
period of five years at a price of $3.20 per share  ("$3.20  Warrant") and (iii)
warrants to purchase 10,000 shares of our common stock, exercisable for a period
of five years at a price of $0.10 per share  ("$0.10  Warrant" and together with
the $3.20 Warrant, the "Warrants"). The Notes are convertible into shares of our
common stock at a price of $2.50 per share.

The Company  accounted for the warrants and notes payable in accordance with APB
No. 14,  "Accounting  for  Convertible  Debt and Debt Issued with Stock Purchase
Warrants"  ("APB  14").  APB 14  requires  a portion  of the  proceeds  from the
issuance of debt securities  with detachable  stock warrants be allocated to the
warrants and treated as paid-in  capital.  Any resulting  discount or premium on
the notes payable  should be recorded and amortized  over the life of the notes.
The Company used the Black-Scholes  model to determine the value of the warrants
issued to the  noteholders.  Under  the  Black-Scholes  model,  the value of the
warrants are  determined by taking the  difference  between  acquiring the stock
outright and the present  value of paying the exercise  price on the  expiration
day. As a result,  the Company valued the warrants at $177,638.  This amount was
recorded as paid-in capital and the resulting  discount on the notes payable was
recorded and is being  amortized  using the interest method over the life of the
notes.  The debt  discount  attributed is amortized  over the Bridge  Offering's
earliest maturity period of 9 months from the date of issue as interest expense.

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 Bridge Offering note. 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  $122,362  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 Bridge  Offering.  The debt  discount  attributed  to the
beneficial  conversion feature is amortized over the Bridge Offering's  earliest
maturity period of 9 months from the date of issue as interest expense.

The  Company  valued the  beneficial  conversion  of the notes and  warrants  in
accordance  with  EITF  00-27  using  the  Black-Scholes  pricing  model and the
following assumptions:

o contractual terms of 5 years 
o an average risk free interest rate of 4.25% 
o a dividend yield of 0.00% 
o volatility of 42.0%.

In  September  2004,  the Company  re-priced  the $3.20  warrants to $0.60 as an
inducement  to  convertible  note  holders  as  the  Company  sought  additional
financing.  The  Company  recorded a charge of  $371,850 to earning for the year
ended September 30, 2004.

                                      F-30

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE G- INCOME TAXES

The Company has adopted Financial Accounting Standard No. 109 which requires the
recognition of deferred tax  liabilities  and assets for the expected future tax
consequences of events that have been included in the financial statement or tax
returns.  Under this method,  deferred tax liabilities and assets are determined
based on the difference between financial statements and tax bases of assets and
liabilities  using  enacted  tax  rates in  effect  for the  year in  which  the
differences  are  expected to reverse.  Temporary  differences  between  taxable
income  reported for  financial  reporting  purposes and income tax purposes are
insignificant.

At September 30, 2004, the Company has available for federal income tax purposes
a net operating loss carryforward of approximately $22,815,034,  expiring in the
year 2023,  that may be used to offset future  taxable  income.  The Company has
provided a valuation  reserve  against the full amount of the net operating loss
benefit,  since in the opinion of management  based upon the earnings history of
the Company,  it is more likely than not that the benefits will not be realized.
Due to  significant  changes in the Company's  ownership,  the future use of its
existing net operating losses may be limited.

Components of deferred tax assets as of September 30, 2003 are as follows:

Non current:
Net operating loss carryforward
                                                   $  7,985,000
Valuation allowance                                  (7,985,000)
                                                   -------------
Net deferred tax asset                             $          -
                                                   =============

NOTE H-LOSSES PER SHARE

The following  table  presents the  computation  of basic and diluted losses per
share:


                                                            For the Year Ended      For the Year Ended
                                                            September 30, 2004      September 30, 2003
                                                             ------------------     ------------------
                                                                                                 
Loss available for common shareholders                          $ (19,358,259)         $  (3,445,164)
                                                             ==================     ==================
Basic and fully diluted loss per share                          $       (0.93)         $       (0.27)
                                                             ==================     ==================
Weighted average common shares outstanding                         20,819,700             12,955,358
                                                             ==================     ==================


Net loss per share is based upon the weighted  average of shares of common stock
outstanding

                                      F-31

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE I- COMMITMENTS AND CONTINGENCIES

Licensing Agreement

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

Year ending                   Minimum purchase orders    Alternative Minimum
 October 8,                                                Royalty Payable
   2004                                 $300,000              $100,000
   2005                                  360,000                     -
   2006                                  432,000                     -
   2007                                  518,400                     -

Consulting Agreement

GP has been engaged, on a non-exclusive  basis, to provide advice and assistance
to the Company  regarding issues  associated with Applied DNA's  proprietary DNA
embedded  security  solutions.   GP  will  assist  the  Company  with  strategic
positioning  and  enhancement  of the  Company's  business,  and will assist the
Company in the development of domestic and  international  marketing  strategies
for the Company's DNA products and services.  The term of the  engagement is one
year from the effective  date,  with  automatic one year renewals  unless either
party expresses,  in writing,  an intention not to renew within 60 days prior to
the  expiration  of the term.  We follow  the  policy of  charging  the costs of
consulting services expenses incurred.

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

All  promotional  materials of the Company,  on a going forward  basis,  will be
submitted  to GP for  its  review,  including  all  advertising,  written  sales
promotion,  press releases,  news clippings and other publicity matters relating
to GP's engagement and the strategic relationship created.

The  Company  has  agreed  to  maintain   confidentiality  with  regard  to  its
relationship  with  GP,  wherever  appropriate,  and  has  indemnified  GP,  its
controlling persons,  respective partners,  shareholders,  directors,  officers,
employees,  agents,  affiliates and  representatives and will hold them harmless
against any actions,  judgments,  claims,  etc. The Agreement,  in its entirety,
will be filed  with the  Company's  10-KSB  in  accordance  with SEC  regulatory
requirements.

                                      F-32

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE I- COMMITMENTS AND CONTINGENCIES (continued)

Franchising and Distribution Agreements

The  Company  has  entered  into  a  Distribution   and  Franchising   Agreement
("Franchise  Agreement")  in  July  2003.  Under  the  terms  of  the  Franchise
Agreement,  the  franchisee is obligated to pay the Company  $3,000,000  payable
$25,000 upon execution of the Franchise  Agreement and the balance of $2,975,000
payable  over five (5) years with  interest  accruing at 8% per annum.  Payments
under the  Franchise  Agreement  are subject to  franchisee's  net  profits,  as
defined, under the Franchise Agreement. During the year ended September 30, 2004
and 2003 the Company has received the initial $25,000 and $0, as installment and
has  recognized  the  receipt  as other  income  in the  accompanying  financial
statements.

Operating Lease Commitments

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.  Total lease  rental  expenses for the
years  ended  on  September  30,  2004  and  2003,  was  $120,804  and  $38,725,
respectively.

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

Year ended September 30,
2005                                          $   139,308
2006                                              143,977
2007                                               12,031
                                              -----------
                                              $   295,316

Employment and Consulting Agreements

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

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

The  Company has  consulting  agreements  with  outside  contractors  to provide
marketing and financial  advisory  services.  The Agreements are generally for a
term of 12 months from inception and renewable  automatically  from year to year
unless either the Company or consultant  terminates  such  engagement by written
notice.

                                      F-33

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003

NOTE J- SUBSEQUENT EVENTS

On October 31, 2004,  the Company  defaulted on a note held by a former  company
officer and  director in the amount of $88,500  (See Note C), and in  accordance
with the default,  the  noteholder  has the right,  at any time without  further
notice,  to demand that his  outstanding  note be converted  back into 7,500,000
shares. On December 28, 2004, the noteholder made his demand for the issuance of
7,500,000  shares of common  stock.  The  Company  is  currently  negotiating  a
settlement of this matter with the noteholder.

In October 2004,  the Company  granted  3,036,000  common stock  warrants to the
Company's  Directors  and  certain  advisors  as  additional   compensation  for
services.  The warrants have excise prices  between $.50 and $1.00 per share and
expire in periods raging from 3 to 5 years.

In January  2005,  the Company  arranged a $6 million  private  placement  of 12
million shares at $0.50 per share along with 12 million  attached  warrants with
an exercise  price of $0.75 that expires in 5 years.  As of January 10, 2005, $4
million of the $6 million has been subscribed.

In January 2005,  holders of 1,625,000 of convertible  notes payable  elected to
convert their notes to common stock at $.33 per share (See Note F).

NOTE K - GOING CONCERN

The  accompanying  financial  statements  have been  prepared on a going concern
basis,  which  contemplates  the  realization of assets and the  satisfaction of
liabilities  in the  normal  course of  business.  As shown in the  accompanying
financial  statements during the period September 16, 2002 through September 30,
2004, the Company incurred a loss of $22,815,034. In addition, the Company has a
deficiency in stockholder's equity of $4,706,508. These factors among others may
indicate  that the Company  will be unable to continue as a going  concern for a
reasonable period of time.

The  Company's  existence  is  dependent  upon  management's  ability to develop
profitable  operations.  Management is devoting substantially all of its efforts
to developing DNA embedded biotechnology security solutions in the United States
and there can be no assurance  that the  Company's  efforts will be  successful.
However,  the planned  principal  operations have not commenced and no assurance
can be given that management's  actions will result in profitable  operations or
the resolution of its liquidity  problems.  The  accompanying  statements do not
include  any  adjustments  that might  result  should  the  Company be unable to
continue as a going concern.

In order to  improve  the  Company's  liquidity,  the  Company's  management  is
actively pursing additional equity financing through discussions with investment
bankers and private  investors.  There can be no  assurance  the Company will be
successful in its effort to secure additional equity financing. 

                                      F-34

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



                                    ASSETS
                                                                                                March 31, 2005
                                                                                             ------------------
                                                                                                        
Current assets:

Cash and Equivalents                                                                         $       2,975,017
                                                                                             ------------------
Total Current Assets                                                                                 2,975,017

Property, Plant and Equipment - Net                                                                     22,134
Deposits and Prepaid Expenses                                                                           47,500
Patent Filing - Net                                                                                     26,441

                                                                                             ------------------

Total Assets                                                                                       $ 3,071,092
                                                                                             ==================
                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts Payable and Accrued Liabilities                                                           $ 1,653,709
Accrued Liabilities Due Related Parties                                                                122,163
Due to Related Parties                                                                                  91,312
Note Payable                                                                                           425,000
                                                                                             ------------------
Total Current Liabilities                                                                            2,292,184

Commitments and contingencies

Stockholders' Equity:
Preferred Stock, par value $.001 per share; 10,000,000 shares authorized;
 60,000 issued and outstanding                                                                               6
Common Stock, par value $.001 per share; 250,000,000 shares authorized; 66,755,267 shares
 issued and outstanding                                                                                 66,755
Common Stock Subscription                                                                             (880,000)
Additional Paid-In-Capital                                                                          50,562,133
Accumulated Deficit                                                                                (48,969,986)
                                                                                             ------------------
                                                                                                       778,908
                                                                                             ------------------
Total Liabilities and Deficiency in Stockholders' Equity                                     $       3,071,092
                                                                                             ==================


    See accompanying notes to unaudited consolidated financial statements

                                      F-35

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




                                                                                                                 September 16, 2002,
                                      For The Three Months Ended March 31   For The Six Months Ended March 31    (Date of Inception)
                                                                                                                        through
                                              2005              2004            2005               2004             March 31, 2005
                                         --------------    --------------   --------------    --------------        --------------
Operating expenses:
                                                                                                                  
Selling, general and administrative      $   6,150,046     $   1,909,050      $16,942,967     $   9,316,900            38,003,040
Depreciation and amortization                    7,306               351           12,027               703                15,188
                                         --------------    --------------   --------------    --------------        --------------
Total operating expenses                     6,157,352         1,909,501       16,954,994         9,317,603            38,018,228

Operating loss                              (6,157,352)       (1,909,501)     (16,954,994)       (9,317,603)          (38,018,228)

Other Income (expense)                           3,100               700            3,415             1,385                29,800
Interest (expense)                          (7,635,563)         (527,838)      (9,203,372)         (662,912)          (10,981,558)
Income (taxes) benefit                               -                 -                -                 -                     -
                                         --------------    --------------   --------------    --------------        --------------

Net loss                                 $ (13,789,815)    $  (2,436,638)   $ (26,154,951)    $  (9,979,130)        $ (48,969,986)
                                         ==============    ==============   ==============    ==============        ==============
                                                                                                                                -
Loss per common share
(basic and assuming dilution)                  $ (0.26)    $       (0.12)   $       (0.65)    $       (0.51)              $ (1.81)
                                         ==============    ==============   ==============    ==============        ==============

Weighted average shares outstanding         53,044,883        20,700,599       40,082,628        19,575,190            27,017,824
                                         ==============    ==============   ==============    ==============        ==============


 See accompanying notes to unaudited condensed consolidated financial statements

                                      F-36



                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                                 MARCH 31, 2005


                                                                                                                Deficit
                                                                           Additional                           Accumulated
                                      Preferred                            Paid in     Common      Stock        During
                           Preferred  Shares       Common    Common Stock  Capital     Stock       Subscription Development
                           Shares     Amount       Shares      Amount      Amount      Subscribed  Receivable   Stage        Total
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
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       1,018           -            -          -           -       1,000
Cancellation of Common
stock in connection with
merger with Prohealth
Medical Technologies ,
Inc on October
21, 2002                          -           -    (100,000)         10      (1,000)           -          -           -      (1,000)
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           -           -
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           9     230,625            -          -           -     230,634


See accompanying notes to unaudited condensed consolidated financial statements

                                      F-37



                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                                 MARCH 31, 2005
                                   (Continued)

                                                                                                              Deficit
                                                                        Additional                            Accumulated
                                     Preferred                           Paid in       Common    Stock        During
                          Preferred    Shares   Common Common   Stock    Capital       Stock     Subscription Development
                            Shares     Amount       Shares     Amount    Amount       Subscribed Receivable   Stage        Total
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
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     428,797            -          -           -     428,818


See accompanying notes to unaudited condensed consolidated financial statements

                                      F-38

                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                                 MARCH 31, 2005
                                   (Continued)



                                                                                                              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
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
                                                                                                  
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     410,913            -          -           -     410,931
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            -          -           -      95,000
Common stock subscription
receivable reclassification
adjustment
Common Stock subscribed to
at $2.50 per share in
September 2003                                            -           -           -            -      2,600           -       2,600



Net Loss for the year
ended September 30, 200                                   -           -           -      300,000          -           -     300,000

Balance at September 30,
2003                              -           -           -           -           -            -          -  (3,445,164) (3,445,164)
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
                                  -  $        -  17,811,082  $    1,781  $2,577,568   $300,000   $       -  $(3,456,776) $ (577,427)
                           ========= =========== =========== =========== ===========  ========== =========== =========== ===========


See accompanying notes to unaudited condensed consolidated financial statements

                                      F-39



                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                                 MARCH 31, 2005
                                   (Continued)



                                                                                                              Deficit
                                                                          Additional                          Accumulated
                                      Preferred                             Paid in  Common      Stock        During
                           Preferred   Shares     Common     Common Stock   Capital  Stock       Subscription Development
                           Shares      Amount    Shares        Amount       Amount   Subscribed  Receivable   Stage        Total
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
                                                                                                 
Preferred shares issues
in exchange for services
at $25.00 per share,
October 2003                   1500          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
December 2003                                             -           -           -      104,000          -           -     104,000
Beneficial conversion
feature relating
to notes payable                                          -           -   1,168,474            -          -           -   1,168,474


                                      F-40

                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                                 MARCH 31, 2005
                                   (Continued)


                                                                                                              Deficit
                                                                          Additional                          Accumulated
                                      Preferred                             Paid in  Common      Stock        During
                           Preferred   Shares     Common     Common Stock   Capital  Stock       Subscription Development
                           Shares      Amount    Shares        Amount       Amount   Subscribed  Receivable   Stage        Total
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------

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
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            -          -           -      19,288
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            -          -           -      16,344


See accompanying notes to unaudited condensed consolidated financial statements

                                      F-41




                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                                 MARCH 31, 2005
                                   (Continued)

                                                                                                               Deficit
                                                                           Additional                          Accumulated
                                     Preferred                             Paid in    Common     Stock         During
                           Preferred Shares      Common     Common Stock   Capital    Stock      Subscription  Development
                           Shares    Amount      Shares       Amount       Amount     Subscribed Receivable    Stage        Total
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
                                                                                                 
Common stock issued in
exchange for employee
services at $3.15 per
share, Mar 2004                                       5,769       2,885      15,293            -          -           -      18,177
Preferred shared
converted to common
shares for consulting
services at $3.00 per
share, Mar 2004               (5000)         (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       4,403      22,236            -          -           -      26,639
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,
Apr 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        (4000)         (4)     100,000      50,000      51,250            -          -           -     101,246
Common stock issued per
subscription May 2004                                10,000       5,000      (4,000)           -     (1,000)          -           -
Common stock issued in
exchange for consulting
services at $0.86 per
share in May 2004                                   137,000      68,500      50,913            -          -           -     119,413
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)


See accompanying notes to unaudited condensed consolidated financial statements

                                      F-42



                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                                 MARCH 31, 2005
                                   (Continued)




                                                                           Deficit
                                                                           Additional                          Accumulated
                                       Preferred                           Paid in    Common     Stock         During
                            Preferred  Shares     Common     Common Stock  Capital    Stock      Subscription  Development
                            Shares     Amount     Shares        Amount     Amount     Subscribed Receivable    Stage        Total
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
                                                                                                    
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                   (2000)         (2)     50,000      25,000      (5,500)           -          -           -      19,498


See accompanying notes to unaudited condensed consolidated financial statements

                                      F-43



                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                                 MARCH 31, 2005
                                   (Continued)


                                                                         Deficit
                                                                         Additional                           Accumulated
                                     Preferred                           Paid in      Common     Stock        During
                           Preferred Shares      Common     Common Stock Capital      Stock      Subscription Development
                           Shares    Amount      Shares       Amount     Amount       Subscribed Receivable   Stage        Total
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
                                                                                                  
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      (8,787)           -          -           -      37,463
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
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                          (4000)         (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
Warrants issued to
consultants in the
fourth quarter 2004                                                       2,019,862                                       2,019,862


Net Loss                                                  -           -           -            -          - (19,358,259)(19,358,259)
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
September 30, 2004           60,000           6  23,981,054  11,990,527   6,118,993            -     (1,000)(22,815,034) (4,706,508)
                           ========= =========== =========== =========== ===========  ========== =========== =========== ===========


See accompanying notes to unaudited condensed consolidated financial statements

                                      F-44



                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                                 MARCH 31, 2005


                                                                                                              Deficit
                                                                          Additional                          Accumulated
                                      Preferred                           Paid in     Common       Stock      During
                           Preferred  Shares      Common     Common Stock Capital     Stock     Subscription  Development
                            Shares    Amount      Shares        Amount    Amount      Subscribed  Receivable  Stage        Total
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
                                                                                                 
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)   (107,298)           -          -           -    (642,098)

Common stock issued
in exchange for
consulting services at
$0.60 per share in
October 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 by noteholders
at $0.50 per share
in October 2004                   -           -     532,500     266,250           -            -          -           -     266,250

Common Stock issued
pursuant to subscription
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 by noteholders
at $0.45 per share
in October 2004                   -           -     315,000     157,500     (15,750)           -          -           -     141,750

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


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

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

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


See accompanying notes to unaudited condensed consolidated financia lstatements

                                      F-45

                             APPLIED DNA SCIENCES,
                                       INC
                          (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                                 MARCH 31, 2005



                                                                                                              Deficit
                                                                          Additional                          Accumulated
                                      Preferred                           Paid in     Common     Stock        During
                           Preferred  Shares      Common    Common Stock  Capital     Stock      Subscription Development
                           Shares     Amount      Shares        Amount    Amount      Subscribed Receivable   Stage        Total
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
                                                                                                      
Common Stock issued in
exchange for employee
services at $0.60 share
in November 2004                  -           -      60,000      30,000        6,000      (4,000)         -           -      32,000

Beneficial Conversion
discount relating to
Notes Payable                     -           -           -           -      936,541           -          -           -     936,541

Beneficial Conversion
Feature relating to
Warrants                          -           -           -           -      528,459           -          -           -     528,459

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
exchange for consulting
services at $1.44 share
in December 2004                  -           -   5,796,785   2,898,393    5,418,815           -          -           -   8,317,207

Common stock issued
pursuant to subscription
at  $0.50 per share in
December 2004                     -           -   2,930,000   1,465,000            -    (125,000)         -           -   1,340,000

Warrants issued to
consultants in
Dec. 2004                         -           -     394,698                                         394,698

Net Loss                          -           -           -           -            -           -          - (12,365,136)(12,365,136)
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
                             60,000           6  40,848,239  20,424,120   10,863,008    (879,000)    (1,000)(35,180,171) (4,773,037)
Warrants exercised at
$0.10 share during the
three months ended
March 31, 2005                    -           -     107,500      53,750      (43,000)          -          -           -      10,750

Common Stock issued in
settlement of debt at
$0.33 share during the
three months ended
March 31, 2005                    -           -   4,998,551   2,499,276     (849,754)          -          -           -   1,649,522

Common Stock issued in
settlement of debt at
$0.50 share during the
three months ended
March 31, 2005                    -           -   3,000,000   1,500,000     (300,000)          -          -          -    1,200,000

Common Stock issued in
exchange for consulting
services at $0.50 share
during the three months
ended March 31, 2005              -           -   2,758,977   1,379,489            -           -          -           -   1,379,489

Common stock issued
pursuant to subscription
at  $0.50 per share
during the three months
ended March 31, 2005              -           -  14,742,000   7,371,000            -           -          -           -   7,371,000

                                      F-46

                             APPLIED DNA SCIENCES,
                                       INC
                          (A development stage company)
     CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                                 MARCH 31, 2005

Common Stock issued in
exchange for consulting
services at $0.60 share
during the three months
ended March 31, 2005              -           -     200,000     100,000       20,000           -          -           -     120,000

Warrants exercised at
$0.60 share during the
three months ended
March 31, 2005                    -           -     100,000      50,000       10,000           -          -            -     60,000

Adjust common stock par
value from $0.50 to
$0.001 per share, per
amendment of articles
dated March 2005                  -           -           - (33,310,879)  33,310,879           -          -           -           -

Beneficial Conversion
discount relating to
Notes Payable                     -           -           -           -    4,179,554           -          -           -   4,179,554

Beneficial Conversion
Feature relating to
Warrants                          -           -           -           -    3,191,446           -          -           -   3,191,446

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


Net Loss                          -           -           -           -            -           -          - (13,789,815)(13,789,815)
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
Balance as of March
31, 2005                     60,000  $        6   66,755,267 $   66,755  $50,562,133  $ (879,000)$   (1,000)$(48,969,986)$   778,908
                           ========= =========== =========== =========== ===========  ========== =========== =========== ===========

 See accompanying notes to unaudited condensed consolidated financial statements


                                      F-47

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



                                                                                                                  For the period
                                                                                                                September 16, 2002
                                                                                                                (date of inception)
                                                                                  For The Six Months Ended           through
                                                                                         March 31,                   March 31,
                                                                                    2005            2004              2005
                                                                                ------------   ------------         ------------
                                                                                                                    
Cash flows from operating activities:
Net Cash Provided by (Used In) Operating Activities ......................       $(5,312,827)   $(1,808,549)        $(8,884,666)

Cash Flows From Investing Activities:
Net Cash (Used In) Investing Activities ..................................           (28,288)       (53,066)           (102,705)

Cash Flows From Financing Activities:
Net Cash (Used In)Provided by Financing Activities........................         8,314,300      1,866,351          11,962,388
                                                                                ------------   ------------         ------------
Net increase (decrease) in cash and cash equivalents                               2,973,185          4,736           2,975,017

Cash and cash equivalents at beginning of period .........................             1,832        193,471                  --
                                                                                ------------   ------------         ------------
Cash and cash equivalents at the end of period............................       $ 2,975,017    $   198,207         $ 2,975,017
                                                                                ============   ============         ============


 See accompanying notes to unaudited condensed consolidated financial statements



                                      F-48


                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)


NOTE A - SUMMARY OF ACCOUNTING POLICIES

General

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

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

Business and Basis of Presentation

On  September  16,  2002,  Applied  DNA  Sciences,   Inc.  (the  "Company")  was
incorporated  under  the laws of the  State of  Nevada.  The  Company  is in the
development stage, as defined by Statement of Financial Accounting Standards No.
7 ("SFAS No. 7") and its efforts have been principally devoted to developing DNA
embedded  biotechnology  security  solutions in the United States.  To date, the
Company has generated  nominal  sales  revenues,  has incurred  expenses and has
sustained  losses.  Consequently,  its  operations  are subject to all the risks
inherent in the establishment of a new business enterprise.  For the period from
inception  through  March  31,  2005,  the  Company  has  accumulated  losses of
$48,969,986.

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.

Stock Based Compensation

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

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

                                      F-49

                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)


                                                                                For the Period
                                                                                September 16,
                                                                                2002 (Date of
                                            For The Three     For The Three     Inception)
                                            Months ended      Months ended      through
                                            March 31,         March 31,         March 31,
                                            2005              2004              2005
                                            --------------    ------------     -------------
                                                                                
Net loss - as reported                      $ (13,789,815)    $(2,436,638)    $ (48,969,986)
Add: Total stock based employee
compensation expense as reported under
intrinsic value method (APB. No. 25)                    -               -                 -

Deduct: Total stock based employee
compensation  expense as reported under
fair value based method (SFAS No. 123)                  -               -                 -
                                            --------------    ------------     -------------
Net loss - Pro Forma                        $ (13,789,815)    $(2,436,638)    $ (48,969,986)
                                            ==============    ============    ==============
Net loss attributable to common
stockholders - Pro forma                    $ (13,789,815)    $(2,436,638)    $ (48,969,986)
                                            ==============    ============    ==============

Basic (and assuming dilution) loss
per share - as reported                     $       (0.26)    $     (0.12)    $       (1.81)
                                            ==============    ============    ==============
Basic (and assuming dilution) loss
per share - Pro forma                       $       (0.26)    $     (0.12)    $       (1.81)
                                            ==============    ============    ==============

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.

NOTE B - CAPITAL STOCK

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

                                      F-50

                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE B - CAPITAL STOCK (continued)

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 (see Note
B).

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

In October 2002 the Company  issued  602,000  shares of common stock in exchange
for  services  valued at $0.065 per  share.  In  accordance  with EITF 96-18 the
measurement  date to determine fair value was in October 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
$0.065 per share,  which presents the fair value of the services  received which
did not differ materially from the value of the stock issued.

In November and December 2002, the Company issued 876,000 shares of common stock
in exchange for subscription at $ 0.065 per share. In accordance with EITF 96-18
the  measurement  date to determine fair value was in October 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  $0.065 per share,  which  presents the fair value of the services
received which did not differ materially from the value of the stock issued.

In January 2003, the Company  canceled 836,000 shares of common stock previously
issued in exchange for consulting services.

In January 2003, the Company issued 1,500,000 shares of common stock in exchange
for  a  licensing   agreement  .  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 January 2003,  the Company  issued 586,250 shares of common stock in exchange
for consulting  services.  In accordance with EITF 96-18 the measurement date to
determine  fair  value  was in  October  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  $0.13 per
share,  which  presents  the fair value of the services  received  which did not
differ materially from the value of the stock issued.

In February  2003,  the Company  issued 9,000 shares of common stock in exchange
for consulting  services.  In accordance with EITF 96-18 the measurement date to
determine  fair  value  was in  October  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  $0.065 per
share,  which  presents  the fair value of the services  received  which did not
differ materially from the value of the stock issued.

                                      F-51

                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE B - CAPITAL STOCK (continued)

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 March 2003,  the Company issued 91,060 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $2.53
per share,  which  represents the fair value of the services  received which did
not differ materially from the value of the stock issued.

In March 2003,  the Company  issued 6,000 shares of common stock in exchange for
consulting  services.  The  Company  valued the shares  issued at  approximately
$0.065 per share, which represents the fair value of the services received which
did not differ materially from the value of the stock issued. In March 2003, the
Company received  subscription for 18,000 shares of common stock in exchange for
cash at $1 per share.

On April 1, 2003,  the Company issued 860,000 shares of common stock in exchange
for consulting  services provided to the Company.  In accordance with EITF 96-18
the  measurement  date to determine fair value was in October 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  $0.065 per share,  which  presents the fair value of the services
received which did not differ materially from the value of the stock issued.

On April 9, 2003,  the Company  issued 18,000 shares of common stock in exchange
for previously  issued  options to purchase the Company's  common stock at $1.00
per share.

On April 9, 2003,  the Company  issued  9,000 shares of common stock in exchange
for consulting  services provided to the Company.  In accordance with EITF 96-18
the  measurement  date to determine fair value was in October 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  $0.065 per share,  which  presents the fair value of the services
received which did not differ materially from the value of the stock issued.

On April 23, 2003,  the Company  issued 5,000 shares of common stock in exchange
for consulting  services provided to the Company.  The Company valued the shares
issued at approximately  $2.50 per share, which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

On June 12, 2003,  the Company issued 10,000 shares common stock in exchange for
consulting  services  provided to the  Company.  The  Company  valued the shares
issued at approximately $ 2.50 per share, which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

On June 17 2003,  the Company  issued  50,000 shares of common stock in exchange
for cash at $1.00 per share.


                                      F-52


                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE B - CAPITAL STOCK (continued)

On June 30, 2003,  the Company issued 270,000 shares of common stock in exchange
for consulting  services provided to the Company.  In accordance with EITF 96-18
the  measurement  date to determine fair value was in October 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  $0.065 per share,  which  presents the fair value of the services
received which did not differ materially from the value of the stock issued.

On June 30, 2003, the Company  received  $10,000 as subscription  for options to
purchase the Company's common stock at $1.00 per share.

In June, 2003, the Company received $48,000 in connection with a subscription to
purchase the Company's common stock pursuant to a private placement.

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

In July 2003 the Company  issued  213,060  shares of common stock for consulting
services  provided  to the  Company.  The  Company  valued the shares  issued at
approximately $ 2.01 per share,  which represents the fair value of the services
received which did not differ materially from the value of the stock issued.

In July 2003,  the Company  canceled  24,000 shares of common stock,  previously
issued for services valued at $2.50 per share.

In July 2003, the Company  received  $20,000 in exchange for  previously  issued
options to purchase the Company's common stock at $1.00 per share.

In July  2003,  the  Company  issued  10,000  shares  of  common  stock for cash
previously subscribed at $1.00 per share.

In August 2003,  the Company  issued  172,500 shares of common stock in exchange
for consulting  services provided to the Company.  The Company valued the shares
issued at approximately $ 2.38 per share, which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued

In August 2003, the Company received  $29,000 in exchange for previously  issued
options to purchase the Company's common stock at $1.00 per share.


                                      F-53

                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE B - CAPITAL STOCK (continued)

In September 2003, the Company issued 395,260 shares of common stock in exchange
for consulting  services provided to the Company.  The Company valued the shares
issued at approximately $ 2.42 per share, which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

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

In  September  2003,  the Company  issued 6,400 shares of common stock issued in
exchange for cash at $2.50 per share pursuant to private placement.

In September  2003,  the Company  received  $95,000 in exchange  for  previously
issued options to purchase the Company's common stock at $1.00 per share.

In  September  2003,  the  Company  received   $300,000  in  connection  with  a
subscription  to  purchase  the  Company's  common  stock  pursuant to a private
placement.

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 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.

In October 2003,  the Company  issued 287,439 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$2.85 per share for a total of $820,418,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In October 2003,  the Company  issued  120,000 shares of common stock for shares
previously subscribed at $2.50 per share in September 2003. In October 2003, the
Company canceled  100,000 shares of common stock  previously  issued in exchange
for services at $2.50 per share.

In November 2003, the Company issued 100,000 shares of common stock in exchange
for consulting services. The Company valued the shares issued at approximately
$3.00 per share, 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 sold 100,000 shares of common stock subscribed for
cash at $2.50 per share pursuant to private placement.

In December 2003,  the Company sold 6,400 shares of common stock  subscribed for
cash at $2.50 per share pursuant to private placement.


                                      F-54

                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE B - CAPITAL STOCK (continued)

In  December  2003,  the  Company  issued  2,125,500  shares of common  stock in
exchange for  consulting  services.  . The Company  valued the shares  issued at
approximately  $2.59 per share,  which represents the fair value of the services
received which did not differ materially from the value of the stock issued.

In December 2003, the Company  received  $104,000 in exchange for a common stock
subscription at $2.50 per share pursuant to private placement.

In January 2004, the Company issued 41,600 shares of common stock at $2.50 share
pursuant to a subscription made on December 2003.

In January 2004,  the Company  issued 13,040 shares of common stock at $2.95 per
share in exchange for consulting services valued at $38,468.

In January 2004,  the Company issued 123,000 shares of common stock at $2.60 per
share in exchange for consulting services valued at $319,800.

In January  2004,  the Company  issued 1,000 shares of common stock at $3.05 per
share in exchange for consulting services valued at $3,050.

In February  2004,  the Company issued 6,283 shares of common stock at $3.07 per
share in exchange for employee services valued at $19,288.

In March 2004,  the Company  issued  44,740  shares of common stock at $3.04 per
share in exchange for consulting services valued at $136,010.

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

In March 2004,  the Company  issued  5,443  shares of common  stock at $3.00 per
share in exchange for employee services valued at $16,344.

In March 2004,  the Company  issued  5,769  shares of common  stock at $3.15 per
share in exchange for employee services valued at $18,177.

In March 2004, the Company  converted 5,000 preferred shares into 125,000 shares
of common stock at $3.00 per share in exchange for employee  services  valued at
$375,000.

In March 2004,  the Company  issued  8,806  shares of common  stock at $3.03 per
share in exchange for employee services valued at $26,639.

In April 2004,  the Company  issued  22,500  shares of common stock at $0.10 for
subscription of warrants to be exercised.

In April 2004,  the Company  issued  9,860  shares of common  stock at $2.58 per
share in exchange for employee services valued at $25,441.


                                      F-55

                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE B - CAPITAL STOCK (continued)

In April 2004,  the Company  issued  11,712  shares of common stock at $2.35 per
share in exchange for consulting services valued at $27,523.

In April 2004,  the Company  issued  367,500 shares of common stock at $1.50 per
share in exchange for consulting services valued at $551,250.

In April 2004,  the Company  retired  50,000  shares of common stock  previously
issued for consulting services at $0.065 per share or $3,250.

In May 2004, the Company converted 4,000 preferred shares into 100,000 shares of
common stock at $1.01 per share in exchange for  consulting  services  valued at
$101,250.

In May 2004, the Company issued 10,000 shares of common stock at $0.10 per share
in a stock subscription for $1,000.

In May 2004,  the Company  issued  137,000  shares of common  stock at $0.86 per
share in exchange for consulting services valued at $119,233.

In May 2004, the Company issued 26,380 shares of common stock at $1.15 per share
in exchange for consulting services valued at $30,337.

In June 2004, the Company retired 5,000 shares of common stock previously issued
for consulting services at $0.065 per share or $325.

In June 2004,  the Company  issued  270,500  shares of common stock at $0.67 per
share in exchange for consulting services valued at $180,560.

In June 2004, the Company issued 8,000 shares of common stock at $0.89 per share
in exchange for consulting services valued at $7,120.

In June 2004,  the Company  issued  50,000  shares of common stock at $0.645 per
share in exchange for consulting services valued at $32,250.

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 July 2004,  the Company  issued  100,000  shares of common stock at $0.54 per
share in exchange for consulting services valued at $54,000.

In July 2004, the Company issued 5,000 shares of common stock at $0.72 per share
in exchange for consulting services valued at $3,600.

In July 2004,  the Company  issued  100,000  shares of common stock at $0.47 per
share in exchange for consulting services valued at $47,250.


                                      F-56

                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE B - CAPITAL STOCK (continued)

In August 2004, the Company  converted 2,000 preferred shares into 50,000 shares
of common stock at $0.39 in exchange for consulting services valued at $19,500.

In August 2004,  the Company  issued  100,000 shares of common stock at $0.39 in
exchange for consulting services valued at $39,000.

In August 2004,  the Company  issued  100,000 shares of common stock at $0.50 in
exchange for consulting services valued at $50,250.

In August 2004,  the Company  issued  200,000 shares of common stock at $0.56 in
exchange for consulting services valued at $112,500.

In September 2004, the Company issued  1,000,000 shares of common stock at $0.52
in exchange for consulting services valued at $517,500.

In September  2004, the Company issued 45,000 shares of common stock at $0.50 in
exchange for consulting services valued at $22,288.

In September 2004, the Company  converted  4,000  preferred  shares into 100,000
shares of common stock at $0.41 in exchange for  consulting  services  valued at
$54,000.

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

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

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

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

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

In October 2004,  the Company  issued 532,500 shares of common stock to existing
noteholders.  The Company  valued the shares issued at  approximately  $0.50 per
share for a total of $266,250.

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


                                      F-57


                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE B - CAPITAL STOCK (continued)

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

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

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

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

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

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

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

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

In  December  2004,  the  Company  issued  5,796,785  shares of common  stock in
exchange  for  consulting  services.  The  Company  valued the shares  issued at
approximately  $1.44 per share for a total of $8,317,207,  which  represents the
fair value of the services  received  which did not differ  materially  from the
value of the stock issued.

In December 2004, the Company issued 2,930,000 shares of common stock subscribed
for cash at $0.50 per share pursuant to the exercise terms of a promissory  note
payable.


                                      F-58

                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE B - CAPITAL STOCK (continued)

During the three months ended March 31, 2005, we issued 107,500 shares of common
stock for warrants  exercised at $0.10 share. This issuance is considered exempt
under  Regulation  D of the  Securities  Act of 1933 and  Rule  506  promulgated
thereunder.

During  the three  months  ended  March  31,  2005,  we  retired  $1,649,522  of
convertible  notes payable for 4,998,551  shares of common stock.  The Notes are
convertible into shares of our common stock at a price of $0.33 per share.

During  the three  months  ended  March 31,  2005,  we  retired $  1,200,000  of
convertible  notes payable for 3,000,000  shares of common stock.  The Notes are
convertible into shares of our common stock at a price of $0.50 per share.

During the three  months  ended March 31,  2005,  the Company  issued  2,758,977
shares of common stock in exchange for consulting  services.  The Company valued
the shares issued at  approximately  $0.50 per share for a total of $ 1,379,489,
which  represents  the fair value of the services  received which did not differ
materially from the value of the stock issued.

During the three months ended March 31, 2005,  the Company issued 200,000 shares
of common  stock in exchange for  consulting  services.  The Company  valued the
shares issued at  approximately  $0.60 per share for a total of $120,000,  which
represents  the  fair  value  of the  services  received  which  did not  differ
materially from the value of the stock issued.

During the three  months  ended March 31, 2005,  the Company  issued  14,742,000
shares of common stock  subscribed  for cash at $0.50 per share for a total of $
7,371,000  pursuant to the exercise  terms of a promissory  note  payable.  This
issuance is considered  exempt under  Regulation D of the Securities Act of 1933
and Rule 506 promulgated thereunder.

In March 2005, the Company issued 100,000 shares of common stock in exchange for
services.  The Company valued the shares issued at approximately $0.60 per share
for a total  of $  60,000,  which  represents  the fair  value  of the  services
received which did not differ materially from the value of the stock issued.

The Company recognized an imbedded beneficial  conversion feature present in the
January/February Offering note ("January/February PPM"). 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
4,179,554 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 Bridge  Offering.  The debt discount  attributed  to the  beneficial
conversion  feature was fully  amortized over the fiscal first quarter period as
interest expense.

The Company  recognized the value  attributable to the warrants in the amount of
$3,191,446   to  additional   paid  in  capital  and  a  discount   against  the
January/February PPM.

During the three months ended March 31, 2004,  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.


                                      F-59


                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE B - CAPITAL STOCK (continued)

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.

NOTE C - 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.


                                    Warrants Outstanding                                      Exercisable
                                         Remaining          Weighted          Weighted          Weighted
                         Number         Contractual         Average           Average           Average
 Exercise Prices      Outstanding       Life (Years)     Exercise Price     Exercisable      Exercise Price
 ---------------      -----------     --------------     --------------     -----------      --------------
                                                                                  
        $0.10           105,464              4.29             $0.10           105,464             $0.10
        $0.50            50,000              4.52             $0.50            50,000             $0.50
        $0.60         6,222,750              4.04             $0.60         6,222,750             $0.60
        $0.70           750,000              2.34             $0.70           750,000             $0.70
        $0.75        17,672,000              4.53             $0.75        17,672,000             $0.75
        $1.00           386,000              0.54             $1.00           386,000             $1.00
        $3.00            62,503              0.75             $3.00            62,503             $3.00
                  --------------                                        --------------
                     25,248,717                                            25,248,717
                  ==============                                        ==============

Transactions involving warrants are summarized as follows:

                                                       Number of Shares          Weighted Average
                                                                                  Price Per Share
       Outstanding at September 30, 2004                      4,870,253                 $   0.63
          Granted                                            20,708,000                     0.73
          Exercised                                            (329,536)                    0.25
          Canceled or expired                                         -                        -
                                                          --------------           --------------
       Outstanding at March 31, 2005                         25,248,717                 $   0.72
                                                          ==============           ==============

The estimated value of the  compensatory  warrants  granted to  non-employees in
exchange  for  services  and  financing   expenses  was  determined   using  the
Black-Scholes pricing model and the following assumptions: contractual term of 2
to 5 years,  a risk free  interest  rate of 4.25%,  a  dividend  yield of 0% and
volatility  of 22.9%.  The  amount of the  expense  charged  to  operations  for
compensatory warrants granted in exchange for services was $ 394,698 for the six
months ended March 31, 2005.

The  following  table  summarizes  the  changes in options  outstanding  and the
related  prices  for  the  shares  of  the  Company's  common  stock  issued  to
shareholders at March 31, 2005.


                                      F-60


                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE C - STOCK OPTIONS AND WARRANTS (continued)



               Options Outstanding                                   Options Exercisable
               -------------------                                   -------------------
                          Weighted Average
Exercise      Number    Remaining Contractual  Weighed Average    Number     Weighted Average
 Prices    Outstanding      Life (Years)       Exercise Price   Exercisable   Exercise Price
 ------    -----------      ------------       --------------   -----------   --------------
                                                                         
$   0.60      300,000           2.00           $        0.60       300,000    $        0.60
           -----------          -----          --------------   -----------   --------------
              300,000           2.00           $        0.60       300,000    $        0.60
           ===========          =====          ==============   ===========   ==============

Transactions involving the Company's options issuance are summarized as follows:

                           Number of Weighted Average
                             Shares Price Per Share
                                          -----------     -----------
Outstanding at October 1, 2004                     -               -
   Granted                                   300,000            0.60
   Exercised                                       -               -
   Canceled or expired                            --              --
                                          -----------     -----------
Outstanding at March 31, 2005                300,000      $     0.60
                                          ===========     ===========

During the three months ended March 31, 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.

NOTE D- COMMITMENTS AND CONTINGENCIES

Registration of Securities

In connection  with is private  placement of  convertible  debt, the Company was
obligated to file a  registration  statement  with the  Securities  and Exchange
Commission registering the underlying the Company's shares of common stock on or
before  February 15, 2005.  In  addition,  the Company is subject to  liquidated
damages, payable at the Company's option in cash or common stock of the Company,
in an amount equal to Three and a Half Percent  (3.5%) or an estimated  $257,985
per month or part thereof that the registration is not declared effective within
120 days of February 15, 2005

Consulting Agreements

On August 6, 2004 the Company  retained  Giuliani  Partners,  on a non-exclusive
basis,  to  provide  advice  and  assistance  to the  Company  regarding  issues
associated  with Applied DNA's  proprietary DNA embedded  security.  On April 8,
2005 the Company terminated the agreement with Giuliani  Partners,  whereby both
parties agreed to discharge,  waive and release one another from all obligations
under the consulting  agreement.  Total  compensation  paid to Giuliani Partners
through March 31, 2005 was $1,250,000.


                                      F-61

                            APPLIED DNA SCIENCES, INC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
                                 MARCH 31, 2005
                                   (UNAUDITED)

NOTE D- COMMITMENTS AND CONTINGENCIES (continued)

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

Litigation

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

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

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

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

NOTE E- SUBSEQUENT EVENTS

The Company has entered into an  agreement  as amended  with Biowell  Technology
Inc.,  a company  formed under the laws of Taiwan  ("Biowell"),  to acquire from
Biowell  certain  intellectual   property  and  other  assets  in  exchange  for
approximately  36,000,000  shares of the Company's  restricted common stock. The
consummation  of the transaction is subject to a number of terms and conditions,
including, but not limited to, approval by Biowell shareholders.


                                      F-62

                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     Our Articles of  Incorporation,  as amended,  provide to the fullest extent
permitted  by Nevada law,  our  directors  or officers  shall not be  personally
liable to us or our  shareholders  for damages for breach of such  director's or
officer's  fiduciary  duty.  The effect of this  provision  of our  Articles  of
Incorporation,  as  amended,  is to  eliminate  our right  and our  shareholders
(through  shareholders'  derivative  suits on behalf of our  company) to recover
damages  against a director or officer for breach of the fiduciary  duty of care
as a director or officer (including breaches resulting from negligent or grossly
negligent  behavior),  except under certain  situations  defined by statute.  We
believe that the indemnification provisions in its Articles of Incorporation, as
amended,  are necessary to attract and retain qualified persons as directors and
officers. In addition, we have entered into indemnification  agreements with our
officers and directors.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors,  officers and controlling  persons of the
registrant pursuant to the foregoing  provisions,  or otherwise,  the registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore,  unenforceable. In the event that a claim for indemnification
against such  liabilities  (other than the payment by the registrant of expenses
incurred or paid by a director,  officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director,  officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been  settled by  controlling  precedent,  submit to a court of  appropriate
jurisdiction the question whether such  indemnification  by it is against public
policy as  expressed  in the  Securities  Act and will be  governed by the final
adjudication of such issue.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The following  table sets forth an itemization  of all estimated  expenses,
all of which we will pay, in connection  with the issuance and  distribution  of
the securities being registered:

NATURE OF EXPENSE AMOUNT


SEC Registration fee                $  6,577.59
Accounting fees and expenses          10,000.00*
Legal fees and expenses               40,000.00*
Miscellaneous                          3,422.41
                                    -----------
                            TOTAL    $60,000.00*
                                    ===========

* Estimated.

                                      II-1

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

On September 16, 2002, our  predecessor  issued 100,000  unregistered  shares of
common stock to its founders in exchange for services rendered,  which we valued
at $1,000.

On October 21, 2002, we issued 10,178,352 unregistered shares of common stock in
connection with the merger with Applied DNA Sciences,  Inc. We valued the shares
at $1,018.  Our  predecessor  cancelled the  previously  issued and  outstanding
100,000 shares of common stock in October, 2002.

In  October  2002,  we issued  602,000  unregistered  shares of common  stock to
consultants as consideration for services rendered, which we valued at $39,130.

In  October  2002,  we issued  876,000  unregistered  shares of common  stock in
connection with a subscription agreement, which we valued at $56,940.

In January  2003,  we issued  1,500,000  unregistered  shares of common stock to
Biowell Technology,  Inc. as consideration for technology  licensing  agreement,
which we valued at $97,500.

In  January  2003,  we issued  586,250  unregistered  shares of common  stock to
consultants as consideration for services rendered, which we valued at $76,213.

In  February  2003,  we issued  9,000  unregistered  shares  of common  stock to
consultants as consideration for services rendered, which we valued at $585.

In March 2003, we issued 10,140,000  unregistered  shares of common stock to its
Founders as consideration for services rendered, which we valued at $1,014.

In  March  2003,  we  issued  91,060  unregistered  shares  of  common  stock to
consultants as consideration for services rendered, which we valued at $230,634.

In  March  2003,  we  issued  6,000  unregistered  shares  of  common  stock  to
consultants as consideration for services rendered, which we valued at $390.

In March  2003,  we  issued  860,000  unregistered  shares  of  common  stock to
consultants as consideration for services rendered, which we valued at $55,900.

In April 2003, we issued 18,000  unregistered shares of common stock in exchange
for $18,000.

In  April  2003,  we  issued  9,000  unregistered  shares  of  common  stock  to
consultants as consideration for services rendered, which we valued at $585.

In  April  2003,  we  issued  5,000  unregistered  shares  of  common  stock  to
consultants as consideration for services rendered, which we valued at $12,500.

In  June  2003,  we  issued  10,000  unregistered  shares  of  common  stock  to
consultants as consideration for services rendered, which we valued at $25,000.

In June 2003, we issued 50,000  unregistered  shares of common stock in exchange
for $50,000.

In June  2003,  we  issued  270,000  unregistered  shares  of  common  stock  to
consultants as consideration for services rendered, which we valued at $17,550.

In July  2003,  we  issued  213,060  unregistered  shares  of  common  stock  to
consultants as consideration for services rendered, which we valued at $428,818.

In July 2003, we issued 20,000  unregistered  shares of common stock in exchange
for $20,000.

In July 2003, we issued 10,000  unregistered  shares of common stock in exchange
for $10,000.

                                      II-2

In  August  2003,  we issued  172,500  unregistered  shares  of common  stock to
consultants as consideration for services rendered, which we valued at $410,930.

In August 2003, we issued 29,000 unregistered shares of common stock in exchange
for $29,000.

In September  2003,  we issued  395,260  unregistered  shares of common stock to
consultants as consideration for services rendered, which we valued at $952,997.

In September  2003,  we sold 16 units at $4,000 a unit,  for a total of $64,000.
Each Unit  consisted  of 1,600  shares of our Common Stock plus 500 Common Stock
Purchase  Warrants,  exercisable for a period of two years at a price of $3.50 a
share.

The  Warrants  are  exercisable  on a one for one basis at an exercise  price of
$3.50 per share for a two year  exercise  period from the date of  issuance.  In
September,  2003,  we issued  95,000  unregistered  shares  of  common  stock in
exchange for $95,000.

Between  October and December 2003, we sold 167.5 units for a total of $670,000.
Each Unit  consisted  of 1,600  shares of our Common Stock plus 500 Common Stock
Purchase  Warrants,  exercisable for a period of two years at a price of $3.50 a
share.

From November through December 2003, we sold 23.25 units to accredited investors
at a price of $50,000 per Unit for a total of $1,162,500.  Each Unit consists of
(i) a $50,000  Principal  Amount 10% Secured  Convertible  Promissory Note, (ii)
warrants to purchase 50,000 shares of our common stock, exercisable for a period
of five  years at a price of $3.20  per share and  (iii)  warrants  to  purchase
10,000 shares of our common stock,  exercisable  for a period of five years at a
price of $0.10 per share.  The Notes are  convertible  into shares of our common
stock at a price of $2.50 per share.

From October 7 through to October 30, 2003, we issued a total of 255,439  shares
of our Common Stock to eight consultants for their marketing, investor relations
and advisory  services.  These issuances are considered exempt from registration
by reason of the Section 4(2) of the Securities Act of 1933.

On October 9, 2003, we issued  120,000 shares to an investor in our 2003 Private
Placement of Units for total  proceeds of $300,000.  This issuance is considered
exempt from registration by reason of Section 4(2) of the Securities Act of 1933
as well as Regulation D of the Act, and Rule 506 promulgated thereunder.

In October  2003,  the Company  issued 32,000 shares of common stock in exchange
for previously issued  non-compensatory  warrants  exercised at $1.00 per share.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

On November 3, 2003, we issued  100,000 shares to an employee as a signing bonus
and for sales  and  marketing  services  in lieu of  salary.  This  issuance  is
considered  exempt from registration by reason of Section 4(2) of the Securities
Act of 1933.

From  November 18, 2003 through  December 5, 2003,  we issued a total of 106,400
shares of our Common Stock to two  investors  in our 2003  Private  Placement of
Units for total proceeds of $266,000. These issuances are considered exempt from
registration  by reason of Section 4(2) of the Securities Act of 1933 as well as
Regulation D of the Act, and Rule 506 promulgated thereunder.

From  December 5, 2003 through  December 24, 2004,  we issued a total of 275,500
shares of our Common  Stock to  consultants  and  employees  for their  investor
relations,   sales,  marketing  and  advisory  services.   These  issuances  are
considered  exempt  from  registration  by  reason  of the  Section  4(2) of the
Securities Act of 1933.

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

In January 2004,  the Company issued a total of 41,600 shares of Common Stock at
$2.50 per share in fulfillment of a stock  subscription made in December 2003 to
various  consultants  in  exchange  for  administrative,   marketing,  financial
advisory and legal consulting  services.  These issuances are considered  exempt
from registration by reason of Section 4(2) of the Securities Act of 1933.

                                      II-3

To conserve capital, in February 2004, the Company issued 6,283 shares of Common
Stock  to  employees  in  lieu of  their  cash  salaries.  Such  issuances  were
considered  exempt from registration by reason of Section 4(2) of the Securities
Act of 1933.

In March 2004,  the Company issued 44,740 shares of Common Stock in exchange for
consulting services.  Such issuances were considered exempt from registration by
reason of Section 4(2) of the Securities Act of 1933.

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

In March 2004, the Company issued 125,018 shares of Common Stock in exchange for
employee  services.  Such issuances were considered  exempt from registration by
reason of Section 4(2) of the Securities Act of 1933.

In March  2004,  the  Company  issued  22,500  of  common  stock  at  $0.10  for
subscription  of warrants to be exercised.  This  issuance is considered  exempt
under  Regulation  D of the  Securities  Act of 1933 and  Rule  506  promulgated
thereunder, as well as Section 4(2) of the Act.

In March 2004,  the Company  issued  5,443 of common stock at $3.00 per share in
exchange for employee services valued at $16,344.

In March 2004,  the Company  issued  5,769 of common stock at $3.15 per share in
exchange for employee services valued at $18,177.

In March 2004,  the Company  issued  8,806 of common stock at $3.03 per share in
exchange for employee services valued at $26,639.

In April 2004,  the Company  issued  22,500  shares of common stock at $0.10 for
subscription of warrants to be exercised.

In April 2004,  the Company  issued  9,860  shares of common  stock at $2.58 per
share in exchange for employee services valued at $25,441.

In April 2004,  the Company  issued  11,712  shares of common stock at $2.35 per
share in exchange for consulting services valued at $27,523.

In April 2004,  the Company  issued  367,500 shares of common stock at $1.50 per
share in exchange for consulting services valued at $551,250.

In April 2004,  the Company  retired  50,000  shares of common stock  previously
issued for consulting services at $0.065 per share or $3,250.

In May 2004,  the Company  issued  100,000  shares of common  stock at $1.01 per
share in exchange for consulting services valued at $101,250.

In May 2004, the Company issued 10,000 shares of common stock at $0.10 per share
in a stock subscription for $1,000.

In May 2004,  the Company  issued  137,000  shares of common  stock at $0.86 per
share in exchange for consulting services valued at $119,413.

In May 2004, the Company issued 26,380 shares of common stock at $1.15 per share
in exchange for consulting services valued at $30,337.

In June 2004, the Company retired 5,000 shares of common stock previously issued
for consulting services at $0.065 per share or $325.

In June 2004,  the Company  issued  270,500  shares of common stock at $0.67 per
share in exchange for consulting services valued at $180,560.

In June 2004, the Company issued 8,000 shares of common stock at $0.89 per share
in exchange for consulting services valued at $7,120.

In June 2004, the Company issued 50,000 shares of common stock at $0.64 1/2 per
share in exchange for consulting services valued at $32,250.

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.

On June 30,  2004,  we issued  50,000  shares of our common stock to an investor
relations firm as compensation for services performed on our behalf.

                                      II-4

On July 23, 2004 and August 2, 2004,  we issued an aggregate of 55,000 shares of
our  common  stock to our legal  counsel  as  compensation  for  legal  services
performed on our behalf.

From July through  September 2004, we issued an aggregate of 1,550,000 shares of
our  common  stock to  certain  of our  officers,  directors  and  employees  as
compensation for services performed on our behalf.

On September 21, 2004, we issued  100,000 shares of our common stock pursuant to
a conversion by one of the holders of our convertible preferred stock.

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

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

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

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

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

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

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

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

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

On January 4, 2005 we issued  25,000  shares  related to warrant  exercises  for
which  we  received   $2,500.   Such  issuances  were  considered   exempt  from
registration by reason of Section 4(2) of the Securities Act of 1933.

On January 10, 2005, we issued  1,628,789  shares in exchange for debt valued at
$537,500.  Such issuances were considered  exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.

On January 10, 2005, we issued 17,500  shares  related to warrant  exercises for
which  we  received   $1,750.   Such  issuances  were  considered   exempt  from
registration by reason of Section 4(2) of the Securities Act of 1933.

On January 21, 2005, we issued  2,399,012  shares in exchange for debt valued at
$791,674.  Such issuances were considered  exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.

On January 21, 2005,  we issued  315,636  shares in exchange for legal  services
valued at $157,818.  Such issuances were considered  exempt from registration by
reason of Section 4(2) of the Securities Act of 1933.

On  February 1, 2005,  we issued  75,757  shares in exchange  for debt valued at
$25,000.  Such issuances were considered  exempt from  registration by reason of
Section 4(2) of the Securities Act of 1933.

On February 3, 2005 we issued  20,000  shares  related to warrant  exercises for
which  we  received   $2,000.   Such  issuances  were  considered   exempt  from
registration by reason of Section 4(2) of the Securities Act of 1933.

On February 4, 2005,  we issued  606,060  shares in exchange  for debt valued at
$200,000.  Such issuances were considered  exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.

                                      II-5

On February 4, 2005 we issued  45,000  shares  related to warrant  exercises for
which  we  received   $4,500.   Such  issuances  were  considered   exempt  from
registration by reason of Section 4(2) of the Securities Act of 1933.

On February 4, 2005, we issued  1,500,000  shares in exchange for debt valued at
$600,000.  Such issuances were considered  exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.

On February  10,  2005,  we issued  278,433  shares in exchange  for debt valued
at$91,883.  Such issuances were considered exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.

On February 10, 2005, we issued 17,236 shares in exchange for financial advisory
services  valued  at  $8,618.   Such  issuances  were  considered   exempt  from
registration by reason of Section 4(2) of the Securities Act of 1933.

On February 10, 2005, we issued 300,000  shares related to the  January/February
PPM subscription for which we received $150,000.  Such issuances were considered
exempt from  registration  by reason of Section  4(2) of the  Securities  Act of
1933.

On  February  22,  2005,  we issued  716,500  shares in exchange  for  financial
advisory services valued at $358,250. Such issuances were considered exempt from
registration by reason of Section 4(2) of the Securities Act of 1933.

On February 22, 2005,  we issued  10,500  shares  related to the  repricing of a
previous financing valued at $3,465.  Such issuances were considered exempt from
registration by reason of Section 4(2) of the Securities Act of 1933.

To obtain funding for our ongoing  operations,  we conducted a private placement
offering  in January  and  February  2005,  in which we sold  $7,371,000  of 10%
Secured  Convertible   Promissory  Notes  to  61  investors.   The  10%  Secured
Convertible  Promissory  Notes  automatically  convert into shares of our common
stock,  at a price of $0.50 per  share,  upon the  filing  of this  registration
statement.  In connection with the private  placement  offering,  we have issued
15,242,000 warrants. The warrants are exercisable until five years from the date
of issuance at a purchase price of $0.75 per share.  This issuance is considered
exempt under Regulation D of the Securities Act of 1933 and Rule 506 promulgated
thereunder.

On March 3, 2005,  we issued  185,000  shares in exchange for employee  services
valued at $111,000.  Such issuances were considered  exempt from registration by
reason of Section 4(2) of the Securities Act of 1933.

On March 8, 2005 we issued 100,000 shares related to warrant exercises for which
we received $60,000.  Such issuances were considered exempt from registration by
reason of Section 4(2) of the Securities Act of 1933.

On March 14, 2005, we issued 1,675,272 shares in exchange for financial advisory
services  valued  at  $837,636.  Such  issuances  were  considered  exempt  from
registration by reason of Section 4(2) of the Securities Act of 1933.

On March 18, 2005, we issued 24,333 shares in exchange for legal services valued
at $12,167. Such issuances were considered exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.

On March 29, 2005,  we issued  15,000  shares in exchange for employee  services
valued at $9,000.  Such issuances were  considered  exempt from  registration by
reason of Section 4(2) of the Securities Act of 1933.

On March 31, 2005, we issued  1,240,000  shares related to the  January/February
PPM subscription for which we received $620,000.  Such issuances were considered
exempt from  registration  by reason of Section  4(2) of the  Securities  Act of
1933.

On March 31, 2005, we issued  1,500,000  shares related to the  January/February
PPM subscription for which we received $600,000.  Such issuances were considered
exempt from  registration  by reason of Section  4(2) of the  Securities  Act of
1933.

On March 31, 2005, we issued  10,000  shares in exchange for financial  advisory
services  valued  at  $5,000.   Such  issuances  were  considered   exempt  from
registration by reason of Section 4(2) of the Securities Act of 1933.

                                      II-6

On April 6, 2005,  we issued  40,000  shares in exchange for  employee  services
valued at $20,000.  Such issuances were considered  exempt from  registration by
reason of Section 4(2) of the Securities Act of 1933.

On April 6, 2005, we issued  160,000  shares in exchange for financial  advisory
services  valued  at  $80,000.   Such  issuances  were  considered  exempt  from
registration by reason of Section 4(2) of the Securities Act of 1933.

On April 13,  2005,  we issued  500,000  shares  related to the  repricing  of a
previous  financing  valued at $165,000.  Such issuances were considered  exempt
from registration by reason of Section 4(2) of the Securities Act of 1933.

On April 13, 2005, we issued 850,000  shares in exchange for financial  advisory
services  valued  at  $425,000.  Such  issuances  were  considered  exempt  from
registration by reason of Section 4(2) of the Securities Act of 1933.

On April 13, 2005, we retired  10,000 shares  previously  issued in exchange for
financial  advisory  services valued at $34,200.  Such issuances were considered
exempt from  registration  by reason of Section  4(2) of the  Securities  Act of
1933.

On April 25,  2005,  we issued  75,758  shares in  exchange  for debt  valued at
$25,000.  Such issuances were considered  exempt from  registration by reason of
Section 4(2) of the Securities Act of 1933.

On April 29, 2005, we issued  50,000  shares in exchange for financial  advisory
services  valued  at  $25,000.   Such  issuances  were  considered  exempt  from
registration by reason of Section 4(2) of the Securities Act of 1933.

On May 19, 2005 we issued 185,000 shares related to warrant  exchanges valued at
$111,000.  Such issuances were considered  exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.

     * All of the above  offerings and sales were deemed to be exempt under rule
506 of Regulation D and Section 4(2) of the  Securities Act of 1933, as amended.
No advertising or general  solicitation was employed in offering the securities.
The  offerings and sales were made to a limited  number of persons,  all of whom
were  accredited  investors,  business  associates  of Applied  DNA  Sciences or
executive  officers of Applied DNA  Sciences,  and  transfer was  restricted  by
Applied DNA Sciences in accordance  with the  requirements of the Securities Act
of 1933. In addition to representations by the above-referenced persons, we have
made independent  determinations that all of the  above-referenced  persons were
accredited or sophisticated  investors,  and that they were capable of analyzing
the  merits  and  risks  of  their  investment,  and that  they  understood  the
speculative nature of their investment. Furthermore, all of the above-referenced
persons were  provided  with access to our  Securities  and Exchange  Commission
filings.

     Except as expressly set forth above,  the  individuals and entities to whom
we issued securities as indicated in this section of the registration  statement
are unaffiliated with us.

                                      II-7

ITEM 27. EXHIBITS.

     The following  exhibits are included as part of this Form SB-2.  References
to "the Company" in this Exhibit List mean Applied DNA Sciences,  Inc., a Nevada
corporation.

Exhibit No.       Description

2.1       Articles  of  Merger  of  Foreign  and  Domestic  Corporations,  filed
          December  19,  1998 with the Nevada  Secretary  of State,  filed as an
          exhibit to the annual report on Form 10-KSB filed with the  Commission
          on December 29, 2003 and incorporated herein by reference.

3.1       Articles of Incorporation of DCC Acquisition Corporation,  filed April
          20, 1998 with the Nevada  Secretary  of State,  filed as an exhibit to
          the annual report on Form 10-KSB filed with the Commission on December
          29, 2003 and incorporated herein by reference.

3.2       Articles of Amendment of Articles of  Incorporation of DCC Acquisition
          Corp.  changing  corporation name to ProHealth  Medical  Technologies,
          Inc.

3.3       Certificate of  Designations,  Powers,  preferences  and Rights of the
          Founders' Series of Convertible  Preferred Stock,  filed as an exhibit
          to the  annual  report on Form  10-KSB  filed with the  Commission  on
          December 29, 2003 and incorporated herein by reference.

3.4       Articles of  Amendment  of Articles  of  Incorporation  of Applied DNA
          Sciences, Inc. increasing the par value of the company's common stock,
          filed on December 3, 2003 with the Nevada Secretary of State, filed as
          an  exhibit  to the  annual  report  on Form  10-KSB  filed  with  the
          Commission on December 29, 2003 and incorporated herein by reference.

3.5       By-Laws  of Applied  DNA  Sciences,  Inc.,  filed as an exhibit to the
          annual report on Form 10-KSB filed with the Commission on December 29,
          2003 and incorporated herein by reference.

4.1       Form of  Subscription  Agreement,  filed as an exhibit to the  current
          report on Form 8-K filed with the  Commission  on January 28, 2005 and
          incorporated herein by reference.

4.2       Form of 10% Secured  Convertible  Promissory Note, filed as an exhibit
          to the current report on Form 8-K filed with the Commission on January
          28, 2005 and incorporated herein by reference.

4.3       Form of Warrant  Agreement,  filed as an exhibit to the current report
          on Form  8-K  filed  with  the  Commission  on  January  28,  2005 and
          incorporated herein by reference.

4.4       Registration  Rights  Agreement,  dated January 28, 2005,  between the
          Company  and  Vertical  Capital  Partners,  Inc.,  on  behalf  of  the
          investors, filed as an exhibit to the current report on Form 8-K filed
          with the  Commission  on January 28, 2005 and  incorporated  herein by
          reference.

4.5       Security  Agreement,  dated January 28, 2005,  between the Company and
          Vertical Capital Partners, Inc., on behalf of the investors,  filed as
          an exhibit to the current report on Form 8-K filed with the Commission
          on January 28, 2005 and incorporated herein by reference.

5.1       Sichenzia Ross Friedman  Ference LLP Opinion and Consent,  filed as an
          exhibit  to the  registration  statement  on Form SB-2  filed with the
          Commission on February 15, 2005 and incorporated herein by reference.

10.1      Exclusive  License  Agreement  between  Biowell  Technology  Corp. and
          Applied DNA Sciences,  Inc.  executed on October 8, 2002,  filed as an
          exhibit  to the  registration  statement  on Form SB-2  filed with the
          Commission on February 15, 2005 and incorporated herein by reference.

10.2      Sub-License  Agreement with G. A. Corporate  Finance Ltd.  Applied DNA
          Sciences,  Inc.,  executed on July 29, 2003,  as amended,  filed as an
          exhibit to the current report on Form 8-K filed with the Commission on
          September 29, 2003 and incorporated herein by reference.

10.3      Indemnification  Agreement  with Larry Lee, filed as an exhibit to the
          registration  statement  on Form SB-2  filed  with the  Commission  on
          February 15, 2005 and incorporated herein by reference.

                                      II-8

10.4      Indemnification Agreement with Robin Hutchison, filed as an exhibit to
          the  registration  statement on Form SB-2 filed with the Commission on
          February 15, 2005 and incorporated herein by reference.

10.5      Indemnification  Agreement  with Michael Hill,  filed as an exhibit to
          the  registration  statement on Form SB-2 filed with the Commission on
          February 15, 2005 and incorporated herein by reference.

10.6      Indemnification  Agreement with Peter Brocklesby,  filed as an exhibit
          to the  registration  statement on Form SB-2 filed with the Commission
          on February 15, 2005 and incorporated herein by reference.

10.7      Indemnification  Agreement with Adrian Botash,  filed as an exhibit to
          the  registration  statement on Form SB-2 filed with the Commission on
          February 15, 2005 and incorporated herein by reference.

10.8      Indemnification Agreement with Karin Klemm, filed as an exhibit to the
          registration  statement  on Form SB-2  filed  with the  Commission  on
          February 15, 2005 and incorporated herein by reference.

10.9      Indemnification  Agreement  with Ron Erickson,  filed as an exhibit to
          the  registration  statement on Form SB-2 filed with the Commission on
          February 15, 2005 and incorporated herein by reference.

10.10     Giuliani Partners Strategic Marketing Partnership Agreement,  filed as
          an exhibit to the  registration  statement on Form SB-2 filed with the
          Commission on February 15, 2005 and incorporated herein by reference

10.11     Stock Purchase Agreement, dated as of January 28, 2005, by and between
          Applied DNA Sciences,  Inc. and Biowell Technology,  Inc., filed as an
          exhibit to the current report on Form 8-K filed with the Commission on
          February 2, 2005 and incorporated herein by reference.

10.12     Investment Advisory  Agreement,  dated as of February 14, 2005, by and
          between  Applied DNA Sciences,  Inc. and First London  Finance,  Ltd.,
          filed as an exhibit to the  registration  statement on Form SB-2 filed
          with the  Commission on February 15, 2005 and  incorporated  herein by
          reference.

10.13     Amendment to the License  Agreement,  dated as of November 2, 2004, by
          and between Applied DNA Sciences, Inc. and Biowell Technology Inc.

10.14     Termination  Agreement,  dated as of April 11,  2005,  by and  between
          Applied DNA  Sciences,  Inc. and Giuliani  Partners  LLC,  filed as an
          exhibit to the current report on Form 8-K filed with the Commission on
          April 20, 2005 and incorporated herein by reference.

23.1      Consent of Russell Bedford Stefanou Mirchandani LLP (filed herewith).

23.2      Consent of legal counsel (see Exhibit 5.1), filed as an exhibit to the
          registration statement on Form SB-2 filed with the Commission on April
          29, 2005 and incorporated herein by reference.

                                      
                                      II-9

ITEM 28. UNDERTAKINGS.

The undersigned registrant hereby undertakes to:

(1) File,  during  any  period  in which  offers  or sales  are  being  made,  a
post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Securities Act");

(ii)  Reflect  in the  prospectus  any facts or events  which,  individually  or
together,  represent a fundamental change in the information in the registration
statement.  Notwithstanding the foregoing, any increase or decrease in volume of
securities  offered (if the total dollar value of the  securities  offered would
not exceed that which was registered) and any deviation from the low or high end
of the  estimated  maximum  offering  range  may be  reflected  in the  form  of
prospectus  filed  with  the  Commission  pursuant  to  Rule  424(b)  under  the
Securities Act if, in the aggregate,  the changes in volume and price  represent
no more than a 20% change in the maximum  aggregate  offering price set forth in
the  "Calculation  of  Registration  Fee"  table in the  effective  registration
statement, and

(iii) Include any  additional  or changed  material  information  on the plan of
distribution.

(2)  For   determining   liability   under  the   Securities   Act,  treat  each
post-effective  amendment  as a new  registration  statement  of the  securities
offered,  and the offering of the securities at that time to be the initial bona
fide offering.

(3) File a  post-effective  amendment  to remove  from  registration  any of the
securities that remain unsold at the end of the offering.

(4) For purposes of determining  any liability  under the Securities  Act, treat
the  information  omitted  from  the  form of  prospectus  filed as part of this
registration  statement  in reliance  upon Rule 430A and  contained in a form of
prospectus  filed by the registrant  pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this  registration  statement as of the time
it was declared effective.

(5)  For  determining  any  liability  under  the  Securities  Act,  treat  each
post-effective   amendment   that  contains  a  form  of  prospectus  as  a  new
registration statement for the securities offered in the registration statement,
and that  offering  of the  securities  at that  time as the  initial  bona fide
offering of those securities.

     Insofar as indemnification for liabilities arising under the Securities Act
may  be  permitted  to  directors,  officers  and  controlling  persons  of  the
registrant pursuant to the foregoing  provisions,  or otherwise,  the registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

     In the event  that a claim for  indemnification  against  such  liabilities
(other than the  payment by the  registrant  of  expenses  incurred or paid by a
director,  officer or  controlling  person of the  registrant in the  successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling  person in connection with the securities being  registered,  the
registrant  will,  unless in the  opinion  of its  counsel  the  matter has been
settled by controlling precedent,  submit to a court of appropriate jurisdiction
the question  whether such  indemnification  by it is against  public  policy as
expressed in the Securities  Act and will be governed by the final  adjudication
of such issue.


                                     II-10

                                   SIGNATURES

     In accordance  with the  requirements  of the  Securities  Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the  requirements  of filing on Form SB-2 and  authorizes  this  registration
statement  to be signed on its  behalf  by the  undersigned,  in the City of Los
Angeles, State of California, on June 16, 2005.

                           APPLIED DNA SCIENCES, INC.




                          By: /s/ ROB HUTCHISON
                          ---------------------------------------
                          Rob Hutchison,  Chief Executive Officer,  
                          Principal  Executive Officer and Chairman 
                          of the Board of Directors


                          By: /s/ KARIN KLEMM
                          ---------------------------------------
                          Karin  Klemm, Interim Chief Financial 
                          Officer, Principal Financial Officer, 
                          Principal Accounting Officer and Secretary

     In accordance  with the  requirements  of the Securities Act of 1933,  this
registration statement was signed by the following persons in the capacities and
on the dates stated.



SIGNATURE                                            TITLE                                DATE

                                                                                      
/s/ ROB HUTCHISON                           Chief Executive Officer and                 June 16, 2005
--------------------------------            Chairman of the Board of Directors
    Rob Hutchison

/s/ PETER BROCKLESBY                        President and Director                      June 16, 2005
--------------------------------
    Peter Brocklesby

/s/ LAWRENCE LEE                            Chief Technology Strategist                 June 16, 2005
--------------------------------            and Director
    Lawrence Lee

/s/ MICHAEL HILL                            Director                                    June 16, 2005
--------------------------------
    Michael Hill

/s/ RON ERICKSON                            Director                                    June 16, 2005
--------------------------------
    Ron Erickson


                                      II-11