As filed with the Securities and Exchange Commission on January 17, 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. 5
                                       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)


                       25 Health Sciences Drive, Suite 113
                          Stony Brook, New York 11790
                                 (631) 444-6862
              (Address and telephone number of principal executive
                    offices and principal place of business)


                     James Hayward, Chief Executive Officer
                           APPLIED DNA SCIENCES, INC.
                       25 Health Sciences Drive, Suite 113
                          Stony Brook, New York 11790
                                 (631) 444-6862
            (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)  Fee 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 JANUARY 17, 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  20,367,000  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 January 12,  2005,  was
$.25.

     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 _______, 2006.

     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                                                  31
Legal Proceedings                                                        31
Management                                                               33
Executive Compensation                                                   35
Certain Relationships and Related Transactions                           36
Security Ownership of Certain Beneficial Owners and Management           37
Description of Securities                                                38
Indemnification for Securities Act Liabilities                           39
Plan of Distribution                                                     40
Penny Stock                                                              41
Selling Stockholders                                                     42
Legal Matters                                                            46
Experts                                                                  46
Additional Information                                                   46
Index to Financial Statements                                            47



                               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 year ended September 30, 2005, we did not generate any revenues and
had a net loss of $52,610,380.  As a result of recurring  losses from operations
of $75,425,414 since our inception,  our auditors, in their report dated October
21,  2005,  have  expressed  substantial  doubt about our ability to continue as
going concern.

     Our principal  offices are located at 25 Health Sciences Drive,  Suite 113,
Stony Brook, New York 11790, and our telephone number is (631) 444-6862.  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

                                       1

                                                                   -    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 34.51% of our current outstanding stock.

Common stock to be outstanding after the offering................. Up  to   133,293,246 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  112,926,246  shares of  common  stock  outstanding  as of
January 13, 2006 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 $52,610,380 for the year ended September 30, 2005
and $19,358,259 for the year ended September 30, 2004. 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
$500,000 to fund our  anticipated  research and  development  operations for the
next twelve months,  depending on revenue from  operations.  Additional  capital
will  be  required  to  effectively  support  the  operations  and to  otherwise
implement  our  overall  business  strategy.  Even if we do  receive  additional
financing,  it may not be  sufficient  to  sustain or expand  our  research  and
development operations or continue our business operations.


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

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


     In their report dated October 21, 2005,  our  independent  auditors  stated
that our  financial  statements  for the year  ended  September  30,  2005  were
prepared  assuming  that we would  continue as a going  concern.  Our ability to
continue as a going  concern is an issue raised due to our  incurring net losses
of $75,425,414  during the period September 16, 2002 (date of inception) through
September 30, 2005. 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 increase the difficulty in meeting such goals
and there can be no assurances that such methods will prove successful.


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

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

                                       3


OUR ACQUIRED TECHNOLOGY HAS YET TO BE INDEPENDENTLY VALIDATED.

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

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

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

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

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

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

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

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

                                       4

     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.

     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.

                                       5


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

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

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

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

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

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

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

     o    Different or conflicting regulatory or legal requirements;

     o    foreign currency fluctuations; and

     o    diversion of significant time and attention of our management.

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

     Our success depends to a significant  extent upon the continued  service of
Dr. Jun-Jei Sheu, our Chairman of the Board of Directors, Dr. James Hayward, our
Chief  Executive  Officer and Dr.  Bejamin  Liang,  our  Secretary and Strategic
Technology  Development Officer. We do not have employment  agreements with Drs.
Sheu,  Hayward or Liang.  Loss of the  services of Drs.  Sheu,  Hayward or Liang
could have a material  adverse effect on our growth,  revenues,  and prospective
business. We do not maintain key-man insurance on the life of Drs. Sheu, Hayward
or Liang.  We are not aware of any named  executive  officer or director who has
plans to leave us or retire. In addition, in order to successfully implement and
manage our  business  plan,  we will be  dependent  upon,  among  other  things,
successfully   recruiting   qualified  managerial  and  sales  personnel  having
experience in business.  Competition for qualified individuals is intense. There
can be no assurance  that we will be able to find,  attract and retain  existing
employees  or  that  we will be able  to  find,  attract  and  retain  qualified
personnel on acceptable terms.

                                       6

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:


     Inksure - $1 million
     DNA Technologies, Inc. - $22.6 million
     November AG - $5.8 million


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

     o    Product performance, features and liability;
     o    Price;
     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.

                                       7

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

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

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

INTELLECTUAL PROPERTY LITIGATION COULD HARM OUR BUSINESS.

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

     If a third party claims an  intellectual  property  right to  technology we
use, we might need to  discontinue an important  product or product line,  alter
our products  and  processes,  pay license  fees or cease our affected  business
activities.  Although  we might under  these  circumstances  attempt to obtain a
license to this intellectual  property, we may not be able to do so on favorable
terms, or at all. We are currently not aware of any intellectual property rights
that are being  infringed nor have we received notice from a third party that we
may be infringing on any of their patents.

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

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

                                       8

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

ACCIDENTS RELATED TO HAZARDOUS MATERIALS COULD ADVERSELY AFFECT OUR BUSINESS.

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

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

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

WE ARE  OBLIGATED TO PAY  LIQUIDATED  DAMAGES AS A RESULT OF OUR FAILURE TO HAVE
THIS REGISTRATION  STATEMENT  DECLARED EFFECTIVE PRIOR TO JULY 15, 2005, AND THE
PAYMENT OF  LIQUIDATED  DAMAGES  WILL  EITHER  RESULT IN  DEPLETING  OUR WORKING
CAPITAL OR ISSUANCE OF SHARES OF COMMON STOCK WHICH WOULD CAUSE  DILUTION TO OUR
EXISTING SHAREHOLDERS.

     Pursuant to the terms of our private  placement  that closed in January and
February  2005,  if we did not have a  registration  statement  registering  the
shares underlying the convertible  notes and warrants  declared  effective on or
before July 15, 2005, we are obligated to pay  liquidated  damages in the amount
of 3.5% per month of the face amount of the notes, which equals $257,985,  until
the  registration  statement  is  declared  effective.   At  our  option,  these
liquidated damages can be paid in cash or restricted shares of our common stock.
We have  currently  decided to pay the  liquidated  damages due at this point in
common stock,  although any future payments of liquidated  damages could be made
in cash.  If we  decide  to pay the  liquidated  damages  in  cash,  we would be
required to use our limited  working capital and  potentially  raise  additional
funds. If we decide to pay the liquidated damages in shares of common stock, the
number of shares issued would depend on our stock price at the time that payment
is due. Based on the closing market prices of $0.66,  $0.58, $0.70, $0.49, $0.32
and $0.20 for our common stock on July 15, 2005, August 15, 2005,  September 15,
2005, October 17, 2005,  November 15, 2005 and December 15, 2005,  respectively,
we  issued  approximately  390,887,   444,802,  368,550,  526,500,  806,204  and
1,289,927 shares of common stock per month, respectively, in liquidated damages.
The issuance of shares upon payment of  liquidated  damages will have the effect
of further  diluting  the  proportionate  equity  interest  and voting  power of
holders of our common stock, including investors in this offering.

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 January 13, 2006,  we had  112,926,246  shares of common stock issued
and outstanding and outstanding warrants to purchase 37,081,967 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.

                                       9

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

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

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

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

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

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

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

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

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

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

     Disclosure also has to be made about the risks of investing in penny stocks
in both public  offerings  and in  secondary  trading and about the  commissions
payable to both the  broker-dealer  and the registered  representative,  current
quotations  for the  securities  and the rights  and  remedies  available  to an
investor  in  cases  of fraud in  penny  stock  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 9/30/04         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              $1.01    $0.58
                     September 30, 2005         $0.74    $0.48

                     Year Ended 9/30/06         High     Low

                     December 31, 2005 (1)      $0.58    $0.40
                     March 31, 2005 (1)         $0.37    $0.25

(1) As of January 13, 2006.

HOLDERS

     As of January 13, 2006,  we had  approximately  1,318 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


     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, 2005, 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, 2005.

     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 and       for Future Issuance
                            Warrants and Rights           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, 2005, 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.  As of December 31, 2005, a total of
9,000,000 shares have been issued from the Compensation Plan.

                                       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."

                                       13


PLAN OF OPERATIONS

SALES AND MARKETING

     Our revenues will come from three sources:

     1)   direct sales to manufacturer,
     2)   sales through our OEM relationships, and,
     3)   authentication (laboratory) services.

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

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

BUSINESS STRATEGY AND APPROACH

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

INTELLECTUAL PROPERTY DEVELOPMENT, PRODUCT OPERATIONS & Partnerships

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

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

     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.


                                       14

MANAGEMENT STRATEGY

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

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

CONSULTANT & ENFORCEMENT OPERATIONS

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

     o Passports
     o Green cards
     o Visas
     o Driver's licenses
     o Social Security cards
     o Student visas
     o Military ID's
     o Other important Identity cards and official documents

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

                                       15

     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

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

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

     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

     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 policies involve the most complex,  difficult and subjective
estimates and judgments:

     o    stock-based compensation
     o    fair value of intangible assets


                                       16

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".

FAIR VALUE OF INTANGIBLE ASSETS

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

     On July 12, 2005, we acquired certain intellectual  properties from Biowell
through an Asset  Purchase  Agreement in exchange  for 36 million  shares of our
restricted  common stock having an aggregate  fair value at the date of issuance
of $ 24,120,000.  The value of the acquired  intangible  assets was $ 9,430,900,
with the balance of the purchase price, or $14,689,100, charged to operations as
a cost of the transaction.

     The  identifiable  intangible  assets  acquired and their carrying value at
September 30, 2005 are:


                                                                                 Weighted
                           Gross      Accumulated                 Residual        Average
                         Carrying     Amortization       Net        Value      Amortization
                          Amount                                              Period (Years)
                        ------------ --------------- ------------ ----------- ----------------
                                                                        
Amortizable
Intangible Assets:
Intellectual Property   $9,430,900      $336,818       $9,094,082           -       7
Patents                     34,237        11,764           22,493           -       5

Total  Amortized
Identifiable             $9,465,137     $348,582       $9,116,575           -       6.99
                         ----------     --------       ----------           -       ----
Intangible Assets

     Total  amortization  expense  charged  to  operations  for the  year  ended
September 30, 2005 and 2004 were $346,825 and $1,756.

                                       17

     Estimated amortization expense as of September 30, 2005 is as follows:

         2006                       $  1,357,279
         2007                          1,357,279
         2008                          1,349,748
         2009                          1,347,271
         2010 and after                3,704,998
         Total                      $  9,116,575

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.
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.

                                       18

     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.

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 we transition from a development  stage enterprise to that of
an active growth stage company, although no assurances can be given that we will
generate any revenues from operations.

COSTS AND EXPENSES

     Selling,  general and  administrative  expenses for the twelve months ended
September  30, 2005  compared to 2004  increased  146% to $42.662  million  from
$17.342 million in the prior period. See a discussion of non cash items below on
the following Liquidity narrative.  Included within the $25.320 million increase
compared to the twelve  months ended  September  30, 2005 is $14.689  million in
expensed  intellectual  property  acquisition costs occurring during the quarter
ended September 30, 2005,  $4.714 million in fund raising and consultant  costs,
$3.960 million in ESOP  compensation  to employees,  $1.232 million in increased
salaries and wages due to higher  headcount,  $777,000 in penalty shares related
to the pending SB-2 registration,  $550,000 in higher royalty expense,  $255,000
in higher  facility rent as well as offsets of $857,000 in lower warrant expense
and other.

     Research and development  expenses increased $400,000 for the twelve months
ended  September 30, 2005  compared to 2004 from $239,000 to $639,000  primarily
due to increased independent testing costs.

     In  the  twelve  months  ended   September  30,  2005,   depreciation   and
amortization  increased  $353,000 for the period compared to 2004 from $3,000 to
$356,000.  In the quarter  ended  September  30, 2005,  the Company  capitalized
$9.431  million  related to an  intellectual  property asset  acquisition.  As a
result,  the Company recorded  amortization  expense  totaling  $336,000 for the
quarter ended September 30, 2005. The Company estimates a seven year useful life
that commenced during the fourth fiscal quarter of 2005.

     Total operating expenses increased to $43.657 million from $17.583 million,
or an  increase  of $26.074  million as a result of the  combination  of factors
listed above.

                                       19


     Other Income,  for the twelve months ended  September 30, 2005 increased to
$5,000 from $1,000 in the same period of 2004,  due  primarily  to the $3,000 of
licensing  fees  received from Biowell  during the quarter  ended  September 30,
2005.

     Interest expense,  for the twelve months ended September 30, 2005 increased
to $8.958 million from $1.776 million in the same period of 2004, an increase of
$7.182  million due to $5.116  million due to  increased  beneficial  conversion
feature  related to the sale of  convertible  debt and attached  warrants in the
year  ended  September  30,  2005.  In 2005,  the  Company  recorded  beneficial
conversion  feature for debt  totaling  $5.116  million  and $3.720  million for
warrants. The Company charged $121,000 to interest expense related to other debt
during the year ended September 30, 2005.

     Net loss for the twelve months ended September 30, 2005 increased to a loss
of  $52.610  million  from a loss of $19.358  million  in the prior  period as a
result of the combination of factors described above.

     In the quarter ended  September 30, 2005, the Company  exchanged 36 million
shares  of  stock  with a fair  market  value  of  $24.120  million  to  acquire
intellectual  property.  The Company capitalized $9.431 million as an intangible
asset and charged $336,000 to amortization  expense for the year ended September
30, 2005. The remaining $14.689 million was charged to operating expense.

LIQUIDITY AND CAPITAL RESOURCES

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

     In 2005, we completed  two sales of  convertible  debt.  The first sale for
$1.465 million was for $0.50 per share plus attached  warrants for $0.75,  while
the second sale for $7.371  million  was also for $0.50 per share plus  attached
warrants for $0.75.  Additional  private  sales raised  $243,000.  Of the $9.079
million in total  proceeds from the equity  sales,  we used the proceeds to fund
financing fees,  consultants  and public  reporting  costs,  salaries and wages,
royalties,  research  and  development,  facility  costs as well as and  general
working  capital  needs.  Proceeds  of $70,750  resulting  from the  exercise of
207,500 warrants occurred during the current period.

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

     As of September 30, 2005, we had a working  capital  deficit of $2,552,278.
For the year ended September 30, 2005, we generated a net cash flow deficit from
operating  activities of $9,116,000  consisting primarily of year to date losses
of $52,610,000.  Non cash equity adjustments  included $8,836,000 for beneficial
conversion  amortization,   $14,805,000  in  net  stock  issued  for  consulting
services,  $14,689,000 in stock issued for intellectual property,  $3,960,000 in
stock issued for ESOP shares,  $777,000 in penalty stock issued  pursuant to the
pending  SB-2  registration,  $956,000 for warrants  issued to  consultants  and
$(1,078,000) in cancelled shares for services previously rendered.  Finally, non
cash  depreciation  and  amortizations  totaled $350,000 and net liabilities and
other increased by $199,000.  Cash used in investing  activities totaled $4,000,
which was utilized for patent  expenses.  Cash provided by financing  activities
for  the  year  ended  September  30,  2005  totaled  $9,150,000  consisting  of
$9,079,000 in proceeds  from  subscribed  stock and 71,000 in exercised  options
proceeds.

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

     Exploitation  of  potential  revenue  sources  will be  financed  primarily
through the sale of securities  and  convertible  debt,  exercise of outstanding
warrants,  issuance of notes  payable and other debt or a  combination  thereof,
depending upon the transaction size, market conditions and other factors.

     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.

                                       20


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

     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. 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.  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.  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 was less than the  market  price of the common
stock at the time the secured  convertible  notes were issued,  we  recognized 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 $7,371,000 of secured  convertible notes were
issued

     In  connection  with  the  private  placement,  we  granted  the  investors
registration  rights.  Pursuant to the registration rights agreement,  if we did
not file the registration  statement by February 15, 2005, or if we did not have
the registration statement declared effective on or before July 15, 2005, we are
obligated to pay liquidated  damages in the amount of 3.5% per month of the face
amount of the notes, which equals $257,985,  until the registration statement is
declared effective.  At our option, these liquidated damages can be paid in cash
or restricted  shares of our common stock. We have currently  decided to pay the
liquidated  damages  due at this  point in common  stock,  although  any  future
payments of  liquidated  damages  could be made in cash. If we decide to pay the
liquidated  damages in cash,  we would be required  to use our  limited  working
capital  and  potentially  raise  additional  funds.  If we  decide  to pay  the
liquidated  damages in shares of common stock, the number of shares issued would
depend on our stock  price at the time that  payment  is due.  Based on  closing
market  prices of $0.66,  $0.58,  $0.70,  $0.49,  $0.32 and $0.20 for our common
stock on July 15, 2005, August 15, 2005,  September 15, 2005,  October 17, 2005,
November 15, 2005 and December 15, 2005,  respectively,  we issued approximately
390,887, 444,802, 368,550, 526,500, 806,204 and 1,289,927 shares of common stock
per month, respectively, in liquidated damages.

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

                                       21

     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.



                                       22



                                    BUSINESS

CORPORATE 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  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 were focused on research and  development  and the execution
of an exclusive license, as described further herein.

OVERVIEW

     Every living  organism has a unique  genetic  composition  (DNA code or DNA
sequence) that  determines the character and  composition of its cells.  Genetic
specificity is determined by the sequence of nucleotides in the organism's  DNA.
Our technical platform involves isolation of botanical genes that are fragmented
and then  reconstituted  to form unique "chimers" whose sequences are known only
to us. These  chimers are  stabilized  for use for hundreds of years by a unique
encapsulation  system that is compatible  with a broad universe of  chemistries.
This  adaptability  allows us to embed our unique DNA primers in  petroleum  and
petroleum derivatives, inks, dyes, laminates, glues, threads, textiles and other
materials.  Once embedded in a product, we offer proprietary methods to free the
unique  chimers from  encapsulation  and  embedment,  whereupon  the chimers are
detected  by  our  complimentary  primers  using  methods  well  established  in
molecular  biology.  Detection of the chimeric  sequence  unique to a particular
item allows us to authenticate its origination

     We provide a platform of  proprietary,  embedded DNA products  that protect
consumers,  corporations and governments  from  counterfeiting,  fraud,  piracy,
product diversion and unauthorized intrusion.  Our technologies are protected by
a broad array of  intellectual  property.  We offer a cost  effective  method to
detect,  deter,  interdict  and  prosecute  counterfeiting  enterprises..   This
technology can also be used to  authenticate  microchips and circuit boards that
contain them. The DNA AC (anti-counterfeit) biochip is a 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.  The biochip  acts like a  gatekeeper  to guard the access to the
device;  only once an authorized  user is verified,  can the device be accessed.
Without authentication, the device will not operate.

     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  consumers,  corporate and intellectual  property
from  counterfeiting  and fraud.  We intend to deliver our  products to a global
market  by  selling  directly  to  manufacturers,  and  via  strategic  business
development  agreements  with  recognized  leaders in the security  industry and
through collaborations with leading security consultancy companies.

     We believe that we have a very seasoned and  experienced  management  team.
Our combined executive team has extensive  professional  experience in the areas
of anti-counterfeiting technology,  microchip development,  printing, marketing,
IP development and exploitation,  and cross-corporate -license development.  Dr.
Hayward  is a  molecular  biologist  and  has  spent  20  years  commercializing
biotechnologies  and has successfully  developed several companies.  Dr. Sheu is
trained as a molecular  biologist  and has more than 10 years of  experience  in
developing and commercializing DNA related applications,  including DNA security
and DNA vaccines.  He has been a consultant  for many  well-known  biotechnology
companies  and he is the founder of Biowell  Technology  Inc.  Dr.  Liang is the
chief scientist involved in developing DNA security-related applications. He was
also a founding member of Biowell.

                                       23


AGREEMENT WITH HOLOGRAMMAS S.A. DE C.V. (HOLOMEX)

     On November  10,  2004,  we entered into a joint  product  development  and
marketing  agreement with Holomex,  pursuant to which we agreed to work together
to jointly develop products utilizing Holomex's  holographic packaging and label
products and our DNA security  products.  All products developed will be jointly
owned by the companies. All costs, expenses and revenues will be divided between
the parties as established on a product-by-product  basis. The agreement remains
in full  force and  effect  until such time as  patents  for  jointly  developed
products and their extensions  expire and/or as long as both parties continue to
produce and market the products, whichever is longer. Either party may terminate
the   agreement   upon  120  days   written   notice,   during  which  time  the
non-terminating  party has the right to purchase from the  terminating  part all
rights to the products and intellectual property jointly owned.

COOPERATIVE  RESEARCH AND DEVELOPMENT  AGREEMENT  (CRADA) WITH THE DEPARTMENT OF
ENERGY

     On September 2, 2004, we entered into a CRADA with Bechtel BWXT Idaho, LLC,
a national  laboratory  contractor  with the  Department  of Energy.  As allowed
pursuant to the CRADA, we received notice from the DOE that they have decided to
terminate  the CRADA,  effective  January 23, 2006.  The DOE  laboratories  have
provided third party detection and authentication of items which had been tagged
with embedded DNA sequences by us.

SUB-LICENSING AGREEMENT

     In July of 2003, we, 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:

                  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.

RECENT DEVELOPMENTS

     On July 15, 2005, we closed upon the stock purchase  agreement with Biowell
Technology  Inc., a Taiwan  corporation,  that was executed on January 28, 2005.
Pursuant to the agreement,  through our wholly-owned  subsidiary,  APDN (B.V.I.)
Inc.,  a British  Virgin  Islands  company,  we  acquired  all of the issued and
outstanding  shares  of  Rixflex  Holdings  Limited,  a British  Virgin  Islands
company.  Pursuant to an asset  purchase  agreement,  Biowell  Technology,  Inc.
transferred all of its intellectual property to Rixflex prior to our acquisition
of Rixflex. In exchange for all of the issued and outstanding shares of Rixflex,
we issued to the shareholders of Rixflex 36 million shares of our common stock.

                                       24

     The   intellectual   property  governs  the  use  of   plant-derived,   but
biosynthetically  modified DNA  sequences to identify  original  commercial  and
consumer products,  private and government  documents,  artwork and other items.
The  intellectual  property uses  synthetically  created DNA fragments that have
unique characteristics and one-of-a-kind sequences. Our proprietary DNA-embedded
biotechnology solutions protect these items from counterfeiting,  fraud, piracy,
product diversion and unauthorized  intrusions.  Our technologies are applicable
to a large  percentage of global trade.The  technologies  offer a cost effective
method  to  detect,   deter,   interdict  and  prosecute  global  counterfeiting
organizations.  Our platform may be  integrated  with  pre-existing  alternative
anti-counterfeit technologies,  such as inks, thread, labels, microchips, glues,
paints and holograms.  The  intellectual  property  defines methods that tag and
authenticate  the DNA fragments to ensure that the product has not been tampered
with or counterfeited.

     In  connection  with the closing with Biowell,  we  terminated  the license
agreement  that we had  previously  entered into with  Biowell in October  2002,
under  which  we had the  exclusive  right  to  sell,  market,  and  sub-license
Biowell's  technology  within the United  States,  the European  Union,  Canada,
Mexico, Colombia, Saudi Arabia and the United Arab Emirates.

     In  connection  with the closing  with  Biowell,  we entered into a license
agreement with Biowell, whereby we granted Biowell an exclusive license to sell,
market, and sub-license our products in selected Asian countries.  The exclusive
license for such selected territories is for an initial period of until December
31, 2010, and if Biowell meets its performance goals, the license agreement will
extend for an additional five year term. The license agreement gives Biowell the
initial  rights to future  anti-fraud  biotechnologies  we develop  and also new
applications  for  the  existing  technology  that  may  be  developed  for  the
marketplace  as long as the license  agreement  remains in effect.  In the event
that Biowell shall  sub-license  the products  within its  territories,  Biowell
shall pay us 50% of all fees,  payments or consideration or any kind received in
connection  with the  grant of the  sublicense.  Biowell  is  required  to pay a
royalty of 10% on all net sales made and is  required  to meet  certain  minimum
annual net sales in its various  territories.  The  territories  and minimum net
sales are as follows:

                                       25




                                                                                         
          -------------------------- ----------------------------------------------------------------------------
          COUNTRY                    MINIMUM ANNUAL NET SALES
                                     (US DOLLARS)
          -------------------------- -------------- --------------- -------------- -------------- ---------------
                                     YEAR 1         YEAR 2          YEAR 3         YEAR 4         YEAR 5
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          AUSTRALIA                  200,000        250,000         500,000        750,000        1,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          AFGHANISTAN                ZERO           25,000          50,000         100,000        100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          BANGLADESH                 ZERO           25,000          50,000         100,000        100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          BHUTAN                     ZERO           25,000          50,000         100,000        100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          BRUNEI                     ZERO           100,000         250,000        400,000        500,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          CAMBODIA                   ZERO           100,000         250,000        400,000        500,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          CHINA                      1,000,000      2,000,000       4,000,000      6,000,000      8,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          INDIA                      500,000        1,000,000       2,000,000      3,000,000      4,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          INDONESIA                  500,000        1,000,000       2,000,000      3,000,000      4,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          JAPAN                      500,000        1,000,000       2,000,000      3,000,000      4,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          SOUTH KOREA                250,000        500,000         1,000,000      2,000,000      4,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          LAOS                       ZERO           100,000         250,000        400,000        500,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          MALAYSIA                   ZERO           250,000         500,000        1,000,000      2,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          MYANMAR                    ZERO           25,000          50,000         100,000        100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          PAKISTAN                   ZERO           100,000         250,000        400,000        500,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          PHILIPPINES                100,000        250,000         500,000        750,000        1,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          SINGAPORE                  ZERO           100,000         250,000        400,000        500,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          SRI LANKA                  ZERO           25,000          50,000         100,000        100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          TAIWAN                     250,000        500,000         1,000,000      2,000,000      4,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          THAILAND                   250,000        500,000         1,000,000      2,000,000      4,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          VIETNAM                    250,000        500,000         1,000,000      2,000,000      4,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          UAE                        ZERO           25,000          50,000         100,000        100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          BAHRAIN                    ZERO           25,000          50,000         100,000        100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          CYPRUS                     ZERO           25,000          50,000         100,000        100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          IRAN                       ZERO           25,000          50,000         100,000        100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          IRAQ                       ZERO           25,000          50,000         100,000        100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          JORDAN                     ZERO           100,000         250,000        500,000        750,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          KUWAIT                     ZERO           100,000         250,000        500,000        750,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          LEBANON                    ZERO           25,000          50,000         100,000        100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          OMAN                       ZERO           100,000         250,000        500,000        750,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          QATAR                      ZERO           100,000         250,000        500,000        750,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          SAUDI ARABIA               ZERO           500,000         1,000,000      2,000,000      4,000,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          SYRIA                      ZERO           100,000         250,000        500,000        750,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          YEMEN                      ZERO           100,000         250,000        500,000        750,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------
          TOTAL                      3,800,000      9,625,000       19,800,000     33,600,000     52,100,000
          -------------------------- -------------- --------------- -------------- -------------- ---------------

     We have  subsequently  amended  the  license  agreement  to state  that any
country that has been identified by the U.S. State  Department as state sponsors
of  terrorism  or are subject to  economic  sanctions  administered  by the U.S.
Treasury  Department's  Office of Foreign Assets Control will not be a territory
under the license  agreement  until such time as that  country has been  removed
from such list of state  sponsors of  terrorism  and are not subject to economic
sanctions by the U.S. Treasury Department's Office of Foreign Assets Control. As
Syria and Iran are currently  recognized by the U.S.  State  Department as state
sponsors of terrorism and are subject to economic sanctions  administered by the
U.S. Treasury Department's Office of Foreign Assets Control, the sections of the
license agreement  concerning those countries shall be suspended until such time
as those countries have been removed from the list of the U.S. State  Department
as state sponsors of terrorism and are no longer  subject to economic  sanctions
administered by the U.S. Treasury Department's Office of Foreign Assets Control.

                                       26

     In  addition,   we  entered  into  a  consulting   agreement   with  Timpix
International  Limited  for the  consulting  services  of three  former  Biowell
employees,  Drs.  Jun-Jei  Sheu,  Ben Liang and  Johnson  Chen.  The  consulting
agreement is for the shorter of two years, or until all of the consultants  have
obtained a visa to work in the United States and execute  employment  agreements
with us.  Such  consulting  agreement  shall  automatically  renew  for one year
periods until  terminated.  Pursuant to the consulting  agreement,  we shall pay
$47,000  per month,  which is  apportioned  at $20,000  per month for Mr.  Sheu,
$15,000 per month for Mr. Liang and $12,000 per month for Mr. Chen. In the event
that either of Messrs.  Sheu,  Liang or Chen becomes employed by us, the monthly
consulting fee shall be reduced accordingly.  We have negotiated an agreement in
principle to restructure the Consulting Agreement, whereby, fees owed to Timplex
from July 2005 through  December  2005 will be waived,  and salaries for each of
the three consultants will be reduced starting January 1, 2006.

OUR PRODUCTS

     With our acquired  proprietary DNA  technologies  from Biowell,  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 ppm) and cannot be
analyzed unless proprietary primers and reagents are used.

     Easy to  Customize  -- We can tailor the DNA marker to meet the  customer's
product marking requirements to mark a product, a specific country or factory of
origin and all  associated  Quality  Assurance and shipping  documents.  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 advanced  DNA testing kits and  detection
devices,  a  fast  read-out  can  be  obtained  for  on-site  verification.  The
authentication process can be performed quickly.  Quantitative, or Real-time PCR
methods  can  produce  authentication  in less than 15  minutes  using  portable
devices. We are working to condense this time course.

     Low Cost and High  Accuracy  - Only a  minimal  amount  of DNA is needed to
provide forensic accuracy and proof of authenticity.  It is a cost effective and
secure method for authentication and t prevention of counterfeiting.

     Our technologies  enable  integration with other  technologies  that permit
line-of-sight instant verification (via DNA holograms) and forensic verification
in inks,  threads,  etc. We believe that these combined products will provide an
effective and timesaving deterrent against counterfeiters and smugglers.

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

DNA MARKERS

     Our   first   products   available   for   sales   directly   by   us   are
anti-counterfeiting  products  that have  already  been sold by Biowell to Asian
customers and have been tested in the  marketplace  prior to our  acquisition of
Biowell. These products have included DNA-embedded teabag labels, liquor labels,
food product labels and other DNA-ink-dependent products.

     Our second  product is a  DNA-encrypted  hologram.  The product is embedded
together  with  additional  security  features  and has been sold by Biowell for
application  to over  600  million  CD's  and  DVD's  as an  anti-counterfeiting
technology  deployed by the Government of the People's  Republic of China. As of
June 2005,  this product has been  established by the Government of China as the
new national standard for DNA-based  encryption and authentication.  Applied DNA
Sciences has also developed a DNA-encrypted hologram together with Holomex.


                                       27

     Our  third  anti-counterfeiting  product  is a DNA  Marker,  embedded  in a
bonding agent for thread that can be used to authenticate textile products.  The
DNA Marker can be applied to the finished garment,  bag, purse, shoe or domestic
household product (linens,  etc). 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 and luxury
fashion  accessory  manufacturers who suffer lost sales and product diversion 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 UV light to  laboratory
forensic analysis that  authenticates it to a certainty of 99.9999 percent.  The
efficacy  of the DNA Marker was tested  and  verified  by US Federal  Government
Laboratories  in late 2005.  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  with  detailed  DNA
analysis performed in a laboratory or on site using PCR methods.

     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 a "Q-tip"  embedded with a
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.  This ink can be embedded  into  special  tamper-proof  labels or
directly into  packaging,  lottery  tickets,  etc to enable  simple  on-the-spot
verification.  The  DNA-labels  represent  a "first"  in its  ability  to enable
consumers  to  validate  a  product  before   purchase,   ingestion,   etc.  The
implications  for the food,  beverage,  pharmaceutical  and other industries are
significant.




     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    Fine Art and Collectibles:  paintings,  artifacts,  antiques,  stamps,
          coins, documents, collectibles and memorabilia
     o    Others: lottery tickets,  inspection stamps, custom seals,  passports,
          visas, etc.

     Virtually any item that can be duplicated  now can be protected with any of
these DNA ink  applications.  The  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 paper or woven 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.

                                       28

DNA Microchips

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

     The DNA  chip  card is  intended  for both  authentication  of the card and
identification of an individual.  For that purpose, a specific DNA (group ID) is
assigned to a set of DNA chip cards,  along with an individual's  identification
information,  which  is  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 by the DNA chip card reader.

     The DNA chip uses botanical DNA, which is artificially re-constructed. Each
user group has 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's 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,  it 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 analog  signal upon  receiving a signal from a card reader and
send back an encoded signal to 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.

     The DNA  encrypted  microchip  won the  prize for Best New  Technology  for
Security Access at the Conference of the Security  Industry  Association held in
Washington DC in late 2004, 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 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, security access, ignitions, etc.)

INTELLECTUAL PROPERTY
---------------------

     Key to our success is ongoing  research  and  development.  We have over 12
patents  pending.  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.

                                       29

     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.

     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.


                                       30

                                 Patents Pending



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

                                                                                                          
------------------------------ --------------------------- --------------------------- --------------------------- -----------------
A Method of Utilizing          089108443                   Biowell (1)                 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 (1)                 March 10, 2000              Taiwan
Leakage-Prevention Apparatus
of Microcentrifuge)
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
Multiple Tube Structure for    089210575                   Biowell (1)                 June 20, 2000               Taiwan
Multiple in a Closed
Container
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
Method for Processing          89111477                    Biowell (1)                 June 12, 2000               Taiwan
Multi-PCR in Closed Vessel
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
Method for Mixing Nucleic      2002-294229                 Biowell (1)                 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 (1)                 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 (1)                 July 15, 2003               Taiwan
Giveback Funds by
Recognizing Plurality of       03150071.4                                              July 31, 2003               China
Objects
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
Anti-Counterfeit Chip          None                        Biowell (1)                 To be filed                 Taiwan
Recognizing Device
                                                                                                                   China
------------------------------ --------------------------- --------------------------- --------------------------- -----------------

------------------------------ --------------------------- --------------------------- --------------------------- -----------------
A System and Method for        60/463215                   Biowell (1)                 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

(1) All patent  applications filed by Biowell have either been assigned to us or
are in the process of being assigned to us.

                                       31

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
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.

EMPLOYEES

     As of January 1, 2006, we employ 5 full-time employees, of which two are in
management  and  three  are  sales &  marketing  executives.  We  expect  to add
approximately  10 scientists and technical staff in R&D and product  development
in the first half of 2006. Our recent  restructuring of management and staff has
resulted  in  terminations  and  relocations  of  certain   employees.   We  are
negotiating the final elements of our restructuring in early 2006. These actions
may cause  short-term  acrimony  with our  employees,  but we  believe  that our
relations with our current employees is good.

                                       32

                            DESCRIPTION OF PROPERTIES

     Presently,  we maintain our principal  office at 25 Health  Sciences Drive,
Suite 113,  Stony  Brook,  New York 11790.  We signed a lease for our office and
laboratory space located in the Long Island High Technology  Incubator  facility
located within the campus of the State  University of New York in Stony Brook in
November 2005. The laboratory and office space is provided to us for $50,000 per
year. 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.  We answered the
complaint on May 12, 2005,  denying Stern & Co.'s  allegations and we asserted a
number of  defenses.  This  action is in the early  stages of  discovery  and we
intend to vigorously defend this matter.

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

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

CRYSTAL  RESEARCH  ASSOCIATES,  LLC V. APPLIED DNA SCIENCES,  INC.,  DOCKET NO.:
L-7947-04

     On April 29,  2005,  Crystal  Research  Associates,  LLC obtained a default
judgment  against us for $13,000 in the Superior Court of New Jersey,  Middlesex
County. We intend to move to vacate the default judgment on various grounds.  We
dispute the allegations of the complaint and we intend to vigorously defend this
matter.

                                       33



                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

 Names:                     Ages     Titles:                  Board of Directors
 Jun-Jei Sheu                39     Chairman                  Director
 James Hayward               52     Chief Executive Officer
 Peter Brocklesby            52     President                 Director
 Lawrence Lee                44                               Director
 Ming-Hwa Benjamin Liang     42     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 - JUN-JEI SHEU

     On July 15, 2005,  Dr. Jun-Jei Sheu was appointed as a director and elected
Chairman by the board of directors.  Since  November 2000, Dr. Sheu has been the
Chairman of Biowell  Technology Inc.  Between November 2000 and August 2005, Dr.
Sheu was the CEO of Biowell  Technology  Inc. Dr. Sheu  received  his  Bachelors
degree in Biology from Fu-Jen Catholic University in 1988, his Masters degree in
Biology from Fu-Jen Catholic  University in 1990, his Ph.D in Life Sciences from
Intermural of Academia Sinica & National  Defense Medical Center in 1996 and his
MBA from South  Australia  University  in 2000.  Dr.  Sheu is also a director of
Biowell Technology (S) Pte Ltd., a Singapore company,  Biotechcard International
Pte (S) Ltd. a Singapore  company,  Yan Zhan Life Technology & Marketing Inc., a
Taiwanese company and Biowell  Technology  (Suzhou) Co. Ltd., a Chinese company,
all of which are biotechnology companies.

CHIEF EXECUTIVE OFFICER - JAMES HAYWARD

     On October 5, 2005,  the board of directors  appointed Dr. James Hayward as
our Acting Chief  Executive  Officer.  Since June 2004, Dr. Hayward has been the
Chairman of Evotope Biosciences, Inc., a drug development company based in Stony
Brook, New York.  Since 2001, Dr. Hayward has been a director of Q-RNA,  Inc., a
biotech company based in New York, New York.  Since 2000, Dr. Hayward has been a
General  Partner of Double D Venture  Fund, a venture  capital firm based in New
York,  New York.  Between  1990 and July 2004,  Dr.  Hayward  was the  Chairman,
President  and CEO of The  Collaborative  Group,  Ltd.,  a biotech and  consumer
product  company  based in Stony  Brook,  New York.  Dr.  Hayward  received  his
Bachelors  degree in Biology and Chemistry from the State University of New York
at Oneonta in 1976 and his Ph.D. in Molecular  Biology from the State University
of New York at Stony Brook in 1983.

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.

                                       34

     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.

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. 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.

SECRETARY AND STRATEGIC TECHNOLOGY DEVELOPMENT OFFICER - MING-HWA BENJAMIN LIANG

     Ming-Hwa  Bejamin Liang has been our  Secretary  and  Strategic  Technology
Development Officer since October 2005. Between May 1999 and September 2005, Mr.
Liang has been the director of research and development  for Biowell  Technology
Inc. Mr. Liang received his bachelors  degree in  Bio-Agriculture  from Colorado
State  University in 1989,  his Masters in  Horticulture  from the University of
Missouri at Columbia in 1991,  his Ph.D. in Plant Science from the University of
Missouri at Columbia in 1991 and his LL. M. in  Intellectual  Property  Law from
Shih Hsin University, Taiwan in 2004.

                                       35


                             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, 2005, 2004 and 2003 exceeded
$100,000:


-----------------------------------------------------------------------------------------------------------------------------
                                                 SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------------------------------
                                                                           Long-Term Compensation
------------------------------------------------------------------ ---------------------------------------- -----------------
                                     Annual Compensation                      Awards              Payouts
--------------------------- -------------------------------------- ----------------------------- ---------- -----------------
    Name and       Fiscal   Annual      Annual         Other       Restricted     Securities     LTIP          All Other
                                                      Annual          Stock       Underlying
    Principal                Salary      Bonus     Compensation      Awards      Options/SARs     Payouts     Compensation
    Position        Year       ($)        ($)           ($)            ($)            (#)           ($)           ($)
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                                                                                           
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
Peter               2005     162,750          0       83,719         480,000           0             0             0
Brocklesby,
President
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2004        0             0          0           31,903            0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2003        0             0          0              0              0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------

------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
Rob Hutchison,      2005          0           0       138,453           0              0             0             0
CEO
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2004     159,400          0          0           39,000            0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2003        0             0          0              0              0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------

------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
Lawrence C. Lee,    2005        0             0       202,000           0              0             0             0
CEO
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2004     150,000          0          0          2,017,500          0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2003     300,000          0          0              0              0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------

------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
John Barnett,       2005     152,000    100,000          0           599,000           0             0             0
Vice President
of Sales
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2004     87,908           0        6,478         18,899            0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2003        0             0          0           328,180           0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------

------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
Jaime Cardona,      2005     101,750    100,000          0           675,900           0             0             0
Employee
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2004     78,608           0        7,258         139,849           0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2003        0             0          0           31,250            0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------

------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
Adrian Butash,      2005     131,250          0       108,808        480,000           0             0             0
Executive Vice
President of
Marketing
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2004        0             0       21,200            0              0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2003        0             0          0              0              0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------

------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
Karin Klemm, COO    2005        0             0       187,884        480,000           0             0             0
& CFO
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2004        0             0       112,500           0              0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2003        0             0          0              0              0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------

------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
Paul Reep, Chief    2005     165,750          0        4,000         480,000           0             0             0
Technology
Officer
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2004     71,753           0       17,736         95,011            0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2003        0             0          0           39,900            0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------

------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
Michael Hill,       2005        0             0       230,000           0              0             0             0
Director
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2004        0             0          0           112,200           0             0             0
------------------ -------- ---------- ---------- ---------------- ------------ ---------------- ---------- -----------------
                    2003        0             0          0              0              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.

                                       36

                 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.

     On July 15,  2005,  we entered  into a  licensing  agreement  with  Biowell
Technology for the license of our intellectual  property. Dr. Sheu, our Chairman
of the Board of Directors, is the CEO of Biowell Technology.

     On July 15,  2005,  we entered  into a  consulting  agreement  with  Timpix
International Limited for the consulting services of three employees,  including
Dr. Sheu, our Chairman of the Board of Directors.  The  consulting  agreement is
for the shorter of two years,  or until all of the  consultants  have obtained a
visa to work in the United  States and execute  employment  agreements  with us.
Such consulting  agreement shall  automatically renew for one year periods until
terminated.  Pursuant  to the  consulting  agreement,  we shall pay  $47,000 per
month, of which $20,000 is apportioned per month for Dr. Sheu.


     On October 18, 2005,  Maureen Huppe, a shareholder,  obtained a judgment in
United States District Court, Los Angeles, California, against Lawrence Lee, one
of our  directors,  for short swing profits as a result of trading shares of our
stock.  Per the  judgment,  Mr. Lee is  obligated  to  reimburse  us $245,911 in
damages  plus legal fees.  In  addition,  we owe Mr. Lee $35,162 in  outstanding
accrued liabilities. In offsetting the outstanding liability against the pending
reimbursement, we anticipate proceeds of approximately $211,000 from Mr. Lee.


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

                                       37

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


     The following  table sets forth certain  information  regarding  beneficial
ownership of our common stock as of January 13, 2006:


     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.




------------------------------------------ -------------------- -------------------- -------------------- --------------------
  NAME AND ADDRESS OF BENEFICIAL OWNER       TITLE OF CLASS      NUMBER OF SHARES       PERCENTAGE OF        PERCENTAGE OF
                                                                     OWNED (1)         CLASS PRIOR TO         CLASS AFTER
                                                                                        OFFERING (2)         OFFERING (3)
------------------------------------------ -------------------- -------------------- -------------------- --------------------
                                                                                                  
------------------------------------------ -------------------- -------------------- -------------------- --------------------
Jun-Jei Sheu                               Common Stock               8,616,747 (4)           7.63%                6.46%
25 Health Sciences Drive, Suite 113
Stony Brook, New York 11790
------------------------------------------ -------------------- -------------------- -------------------- --------------------

------------------------------------------ -------------------- -------------------- -------------------- --------------------
James Hayward                              Common Stock                           0              0%                   0%
25 Health Sciences Drive, Suite 113
Stony Brook, New York 11790
------------------------------------------ -------------------- -------------------- -------------------- --------------------

------------------------------------------ -------------------- -------------------- -------------------- --------------------
Peter Brocklesby                           Common Stock               2,000,000 (5)           1.76%                1.49%
25 Health Sciences Drive, Suite 113
Stony Brook, New York 11790
------------------------------------------ -------------------- -------------------- -------------------- --------------------

------------------------------------------ -------------------- -------------------- -------------------- --------------------
Lawrence Lee                               Common Stock               4,260,000 (6)           3.75%                3.18%
25 Health Sciences Drive, Suite 113
Stony Brook, New York 11790
------------------------------------------ -------------------- -------------------- -------------------- --------------------

------------------------------------------ -------------------- -------------------- -------------------- --------------------
Benjamin Liang                             Common Stock                 230,000 (7)               *                    *
25 Health Sciences Drive, Suite 113
Stony Brook, New York 11790
------------------------------------------ -------------------- -------------------- -------------------- --------------------

------------------------------------------ -------------------- -------------------- -------------------- --------------------
All Officers and Directors                 Common Stock              15,106,747 (8)          13.19%               11.20%
As a Group (5 persons)
------------------------------------------ -------------------- -------------------- -------------------- --------------------

(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 January  13, 2006 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 112,926,246 shares issued and outstanding on January 13, 2006.

(3) Percentage based on 133,293,246 shares of common stock outstanding, assuming
all shares being registered in the offering are sold.

(4) Includes  315,859  shares owned by his wife and 254,354  shares owned by his
minor  children.  Also includes  7,003,052  shares owned by Biowell  Technology,
Inc., of which Dr. Sheu is deemed a beneficial owner.

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

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

(7) Includes 120,000 shares owned by his wife.

(8) Includes 1,600,000 shares underlying currently exercisable options.

                                       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 January 13, 2006,  there were  112,926,426  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 January 13, 2006,
there were no shares of preferred stock issued and outstanding.


OPTIONS

     There are  currently  options  outstanding  that  have  been  issued to our
officers,  directors  and employees to purchase  3,660,000  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  105,464 warrants  exercisable at $0.10 per share,
5,000 warrants  exercisable at $0.20 per share,  50,000 warrants  exercisable at
$0.50 per  share,  9,000,000  warrants  at $0.55 per share,  9,282,000  warrants
exercisable at $0.60 per share, 750,000 warrants exercisable at $0.70 per share,
55,000 warrants  exercisable at $0.75 per share, 100,000 warrants exercisable at
$1.00 per share and 62,503 warrants exercisable at $3.00 per share.


                                       39

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
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.


     In  connection  with  the  private  placement,  we  granted  the  investors
registration  rights.  Pursuant to the registration rights agreement,  if we did
not file the registration  statement by February 15, 2005, or if we did not have
the registration statement declared effective on or before July 15, 2005, we are
obligated to pay liquidated  damages in the amount of 3.5% per month of the face
amount of the notes, which equals $257,985,  until the registration statement is
declared effective.  At our option, these liquidated damages can be paid in cash
or restricted  shares of our common stock. We have currently  decided to pay the
liquidated  damages  due at this  point in common  stock,  although  any  future
payments of  liquidated  damages  could be made in cash. If we decide to pay the
liquidated  damages in cash,  we would be required  to use our  limited  working
capital  and  potentially  raise  additional  funds.  If we  decide  to pay  the
liquidated  damages in shares of common stock, the number of shares issued would
depend on our stock price at the time that payment is due.  Based on the closing
market prices of $0.66, $0.58, $0.70, $0.49 $0.32 and $0.20 for our common stock
on July 15, 2005, August 15, 2005, September 15, 2005 October 17, 2005, November
15, 2005 and December 15, 2005,  respectively,  we issued approximately 390,887,
444,802,  368,550,  526,500,  806,204 and  1,289,927  shares of common stock per
month, respectively, in liquidated damages.


                 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.

                                       41

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

                                       43

         -------------------------------------------------- --------------------------------------------------------
         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
Name of Selling Security Holder                Prior to Offering (1)                                           After Offering (1)
                                              Shares              Percentage         Shares Offered           Shares      Percentage
                                     (2)                                                                  (2)
------------------------------------ ------------------------------------------- ------------------------ --------------------------
                                                                                                                   
Allied International Fund                      1,237,500              1.10%              1,237,500                 0             *
AS Capital Partners                              100,000                  *            100,000 (3)                 0             *
Avonwoods Ltd.                                   800,000                  *            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              2.08%          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             *
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                  *          1,000,000 (3)                 0             *
Adrian Davidescu                                 400,000                  *            400,000 (3)                 0             *
Jacob and Linda Davidowitz JTWROS                800,000                  *            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             *
Susan Diamond                                      5,000                  *                  5,000                 0             *

                                       44

Joseph Digiacamo                                  50,000                  *             50,000 (3)                 0             *
Double U Master Fund                             800,000                  *            800,000 (3)                 0             *
Richard Durkee                                    27,000                  *                 27,000                 0             *
Asher Avishay Ephrathi                         1,040,230                  *          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              1.11%              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              1.11%              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                  *          1,000,000 (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 (10)                 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                  *            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             *
Houston Muthart                                  267,500                  *           267,500 (16)                 0             *


                                       45

Richard Neslund                                1,000,000                  *          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              1.06%          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              1.06%          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              2.90%         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                  *          1,000,000 (3)                 0             *
Jerry and Esther Soloman JTWROS                  800,000                  *            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              2.62%          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             *
Jessica Weinerman UTMGA                          250,000                  *                250,000                 0             *
Whalehaven                                     1,150,000              1.01%         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 January  13, 2006 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.

                                       46

(2) Percentage prior to offering is based on 112,926,426  shares of common stock
outstanding;  percentage after offering is based on 133,293,246 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.

(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.

                                       47

                                  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.

                                     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, 2005 and 2004 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 100 F Street, N.E., Washington D.C. 20549. Copies of such material
can be obtained  from the Public  Reference  Section of the SEC at 100 F Street,
N.E.,  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. 46

                                       48

                          INDEX TO FINANCIAL STATEMENTS

                           APPLIED DNA SCIENCES, INC.
                          INDEX TO FINANCIAL STATEMENTS
 



                                                                                       Page

                                                                                     
Report of Independent Registered Public Accounting Firm                                 F-1

Consolidated Balance Sheet as of September 30, 2005                                     F-2

Consolidated Statements of Losses for the years ended September 30, 2005 and 2004
and the period September 16, 2002 (date of inception) to September 30,  2005            F-3

Consolidated Statement of Stockholders' Equity (Deficiency) for the period
September 16, 2002 (date of inception) to September 30, 2005                            F-4-to F-13
                                                                                        
Consolidated Statements of Cash Flows for the years ended September 30, 2005 and
2004 and the period September 16, 2002 (date of inception) to September 30, 2005        F-14 

Notes to Consolidated Financial Statements                                              F-15 to F-42



                                       35



                    RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                          CERTIFIED PUBLIC ACCOUNTANTS

          REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2005 and the
related consolidated  statements of losses,  deficiency in stockholders' equity,
and cash flows for the years  ended  September  30, 2005 AND 2004 and the period
September  16,  2002 (date of  inception)  through  September  30,  2005.  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, 2005 and the results of its
operations  and its cash flows for the years ended  September 30, 2005 and 2004,
and the period September 16, 2002 (date of inception) through September 30, 2005
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

McLean, Virginia

October 21, 2005, except for Note J, as to which the date is November 30, 2005




                                       F-1





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




                                                                                          September 30, 2005
                                     ASSETS
                                                                                                   
Current Assets:
Cash                                                                                             $  31,190
Other Current Receivables                                                                           12,429
                                                                                               ------------
       Total Current Assets                                                                         43,619


Property, Plant and Equipment (Note A)                                                              12,750
Less: accumulated depreciation                                                                      (4,686)
                                                                                               ------------
       Total Property, Plant and Equipment                                                           8,064

Other Assets:
Deposits                                                                                            14,262

Intangible assets:

Patents (net of accumulated amortization of $11,764) (Note B)                                       22,493
Intellectual Property (net of accumulated amortization of $336,818) (Note B)                     9,094,082
                                                                                               ------------
       Total Other Assets                                                                        9,130,837
                                                                                               ------------
                                                                                               $ 9,182,520
                                                                                               ============
                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued liabilities                                                       $ 2,185,468
Note payable (Note C)                                                                              410,429
                                                                                               ------------
    Total  Current  Liabilities                                                                  2,595,897

Commitments and contingencies (Note I)

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, 2005                                   6
Common Stock, par value $0.001 per share; 250,000,000 authorized;
112,230,392 shares issued and outstanding at September 30, 2005                                    112,230
Additional paid in capital                                                                      81,879,801
Common stock subscribed                                                                             20,000
Deficit accumulated during development stage                                                   (75,425,414)
                                                                                               ------------
      Total stockholders' equity                                                                 6,586,623
      Total liabilities and stockholders' equity                                               $ 9,182,520
                                                                                               ============



           See accompanying notes to consolidated financial statements


                                      F-2




                           APPLIED DNA SCIENCES , INC.
                         ( A development stage company)
                        CONSOLIDATED STATEMENTS 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,
                                                              2005                  2004                    2005
                                                         ---------------        --------------      ----------------------
                                                                                                        
Operating expenses:                                                                                
    General and administrative                           $   42,662,152         $  17,341,563       $          63,483,689
     Research and Development                                   638,873               238,535                     877,408
   Depreciation and Amortization                                356,266                 3,161                     359,427
                                                         ---------------        --------------      ----------------------
      Total expenses                                         43,657,291            17,583,259                  64,720,524
                                                         ---------------        --------------      ----------------------
Loss from operations                                        (43,657,291)          (17,583,259)                (64,720,524)
                                                         ---------------        --------------      ----------------------
Other income(expense)                                             4,957                 1,385                      31,342
                                                                                                   
Interest (expense)                                           (8,958,046)           (1,776,385)                (10,736,232)
Income (taxes) benefit                                                -                     -                           -
                                                         ---------------        --------------      ----------------------
Net loss                                                 $  (52,610,380)        $ (19,358,259)      $         (75,425,414)
                                                         ===============        ==============      ======================
Basic and diluted loss per common share (Note H)         $        (0.82)        $       (0.93)                      (2.12)
                                                         ===============        ==============      ======================
Weighted average common shares outstanding                   63,905,259            20,819,700                  35,570,559
                                                         ===============        ==============      ======================


                         
           See accompanying notes to consolidated financial statements


                                      F-3

                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                               SEPTEMBER 30, 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       1,015           -            -          -           -       1,015
Cancellation of Common
stock in connection with
merger with Prohealth
Medical Technologies ,
Inc on October
21, 2002                          -           -    (100,000)        (10)     (1,000)           -          -           -      (1,010)
Issuance of common stock
in exchange for services
in October 2002 at $ 0.65
per share                         -           -     602,000          60      39,070            -          -           -      39,130
Issuance of common stock in
exchange for subscription
in November and December
2002 at $ 0.065 per share         -           -     876,000          88      56,852            -    (56,940)          -           -
Cancellation of  common
stock in January 2003
previously issued  in
exchange for consulting
services                          -           -    (836,000)        (84)    (54,264)           -     54,340           -          (8)
Issuance of common stock
in exchange for licensing
services valued
at $ 0.065 per share in
January  2003                     -           -   1,500,000         150      97,350            -          -           -      97,500
Issuance of common stock
in exchange
for consulting services
valued at $ 0.13 per share
in January  2003                  -           -     586,250          58      76,155            -          -           -      76,213
Issuance of common stock
in exchange
for consulting services
at $ 0.065 per
share in February  2003           -           -       9,000           1         584            -          -           -         585
Issuance of common stock
to Founders in exchange
for services valued at
$0.0001  per share in
March 2003                        -           -  10,140,000       1,014           -            -          -           -       1,014
Issuance of  common stock
in exchange for consulting
services valued at
$2.50 per share in March 2003     -           -      91,060          10     230,624            -          -           -     230,634



          See accompanying notes to consolidated financial statements


                                      F-4




                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
         CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                               SEPTEMBER 30, 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     428,798            -          -           -     428,819



          See accompanying notes to consolidated financial statements


                                      F-5


                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                               SEPTEMBER 30, 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     410,915            -          -           -     410,932
Common stock issued in
exchange for
options exercised at
$1.00 in August 2003              -           -      29,000           3      28,997            -          -           -      29,000
Common stock issued
in exchange for
consulting services
at approximately
$2.42 per share,
September 2003                    -           -     395,260          40     952,957            -          -           -     952,997
Common stock issued
in exchange  for
cash at $2.50 per
share-subscription
payable-September 2003            -           -      19,200           2      47,998      (48,000)         -           -           -
Common stock issued in
exchange for
cash at $2.50 per
share pursuant to
private placement
September 2003                    -           -       6,400           1      15,999            -          -           -      16,000
Common stock issued in
exchange for
options exercised at
$1.00 in  September 2003          -           -      95,000          10      94,991            -          -           -      95,001
Common stock subscription
receivable reclassification
adjustment                        -           -           -           -           -            -      2,600           -       2,600
Common Stock subscribed to
at $2.50 per share in
September 2003                    -           -           -           -           -      300,000          -           -     300,000
Net Loss for the year
ended September 30, 2003          -           -           -           -           -            -          -  (3,445,164) (3,445,164)
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
Balance at September 30,
2003                              -  $        -  17,811,082  $    1,781  $2,577,568   $  300,000 $        - $(3,456,776) $ (577,427)
                           ========= =========== =========== =========== ===========  ========== =========== =========== ===========


          See accompanying notes to consolidated financial statements


                                      F-6




                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                               SEPTEMBER 30, 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                 15,000          15                                                                                  15
Common stock issued in
exchange for consulting
services at
approximately $2.85 per
share, October 2003                                 287,439          29     820,389            -          -           -     820,418
Common stock issued in
exchange  for cash at
$2.50 per
share-subscription
payable-October 2003                                120,000          12     299,988     (300,000)         -           -           -
Common stock canceled
in October 2003,
previously issued for
services rendered  at
$2.50 per share                                    (100,000)        (10)   (249,990)           -          -           -    (250,000)
Common stock issued in
exchange for consulting
services at approximately
$3 per share,
November 2003                                       100,000          10     299,990            -          -           -     300,000
Common stock subscribed
in exchange for cash at
$2.50 per share pursuant
to private placement,
November, 2003                                      100,000          10     249,990            -          -           -     250,000
Common stock subscribed
in exchange for cash at
$2.50 per share pursuant
to private placement,
December, 2003                                        6,400           1      15,999            -          -           -      16,000
Common stock issued in
exchange for consulting
services at approximately
$2.59   per share,
December 2003                                     2,125,500         213   5,504,737            -          -           -   5,504,950
Common Stock subscribed to
at $2.50 per share in
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
Common stock issued in
exchange for consulting
 services at $3.05 per
share, Jan 2004                                       1,000         500       2,550            -          -           -       3,050
Common stock issued in
exchange for employee

services at $3.07 per
share, Feb 2004                                       6,283       3,142      16,147            -          -           -      19,289
Common stock issued in
exchange for consulting
services at $3.04 per
share, Mar 2004                                      44,740      22,370     113,640            -          -           -     136,010
Common Stock issued for
options exercised at
$1.00 per share in Mar
2004                                                 55,000      27,500      27,500            -          -           -      55,000
Common stock issued in
exchange for employee
services at $3.00 per
share, Mar 2004                                       5,443       2,722      13,623            -          -           -      16,345



          See accompanying notes to consolidated financial statements


                                      F-7




                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                               SEPTEMBER 30, 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      15,292            -          -           -      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       4,400      22,238            -          -           -      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      50,730            -          -           -     119,230
Common stock issued in
exchange for consulting
services at $1.15 per
share in May 2004                                    26,380      13,190      17,147            -          -           -      30,337
Common stock returned to
treasury at $0.065 per
share, Jun 2004                                      (5,000)     (2,500)      2,175            -          -           -        (325)


          See accompanying notes to consolidated financial statements

                                      F-8




                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                               SEPTEMBER 30, 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 consolidated financial statements


                                      F-9




                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                               SEPTEMBER 30, 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      (8,605)           -          -           -      37,645
Common stock issued in
exchange for consulting
services at $0.52 per
share in September 2004                           1,000,000     500,000      17,500            -          -           -     517,500
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 consolidated financial statements

                                      F-10


                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                               SEPTEMBER 30, 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 $0.68 per share
in October 2004                   -           -     200,000     100,000      36,000           -           -           -     136,000

Common stock returned
for shares previously
issued for services
rendered at $0.60
per share, October 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 consolidated financial statements.

                                      F-11



                                   APPLIED DNA
                                  SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                               SEPTEMBER 30, 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 $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   5,418,814           -           -           -   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


          See accompanying notes to consolidated financial statements

                                      F-12


                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                               SEPTEMBER 30, 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
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
                                                                                                  
Warrants exercised at
$0.10 per share in January
2005                              -           -      25,000      12,500      (10,000)          -          -           -        2,500

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

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

Common Stock issued in
settlement of debt at
$0.33 per share in January
2005                              -           -   2,399,012   1,199,503     (407,830)          -          -           -      791,673

Common Stock issued in
exchange for consulting
services at $1.30 per share
in January 2005                   -           -     315,636     157,818      252,509           -          -                  410,327

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

Warrants exercised at
$0.10 per share in February
2005                              -           -      20,000      10,000       (8,000)          -          -           -        2,000

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

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

Common Stock issued in
settlement of debt at
$0.40 per share in February
2005                              -           -   1,500,000     750,000     (150,000)          -          -           -      600,000

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

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

Common stock issued
pursuant to subscription
at $0.50 per share
in February 2005                  -           -     300,000     150,000            -           -          -           -      150,000

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


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

Common stock issued
pursuant to subscription
at $0.50 per share
in March 2005                     -           - 13,202,000   6,601,000             -           -          -           -    6,601,000

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

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

Common Stock issued in
exchange for consulting
services at $0.98 per share
in March 2005                     -           -  1,675,272     837,636       804,131           -          -                1,641,767

Common Stock issued in
exchange for consulting
services at $0.92 per share
in March 2005                     -           -     24,333      12,167        10,219           -          -                   22,386

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

Common stock issued
pursuant to subscription
at $0.50 per share
in March 2005                     -           -  1,240,000     620,000            -            -          -           -      620,000

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

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


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

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

Beneficial Conversion
discount relating to
Notes Payable in March
2005                             -           -           -           -     4,179,554           -          -           -    4,179,554

Beneficial Conversion
Feature relating to
Warrants in March 2005           -           -           -           -     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
in March 2005                    -           -           -           -       180,000           -          -           -      180,000



           See accompanying notes to consolidated financial statements


                                      F-13



                            APPLIED DNA SCIENCES, INC
                          (A development stage company)
          CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY, (DEFICIENCY)
          FOR THE PERIOD SEPTEMBER 16, 2002 (DATE OF INCEPTION) THROUGH
                               SEPTEMBER 30, 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 $0.80 per share
in April 2005                      -           -    160,000         160       127,840         -           -           -     128,000

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

Common Stock issued in
exchange for consulting
services at $0.75 per share
in April 2005                      -           -    850,000         850       636,650         -           -           -     637,500

Common Stock issued in
settlement of debt at
$0.33 per share in April
2005                              -           -     500,000         500      164,500          -           -           -     165,000

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

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

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

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

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

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

Warrants issued to consultants
and Employees during the quarter
ended June 30, 2005               -           -           -           -       849,046         -           -           -     849,046

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

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

Common Stock issued in
exchange for consulting
services at $0.60 per share
in July 2005                      -           -      640,000         640       383,360         -          -           -     384,000
Options exercised at
$0.48 per share in July
2005                              -           -   8,000,000       8,000     3,832,000          -          -            -  3,840,000

Common Stock issued in
exchange for consulting
services at $0.94 per share
in September 2005                 -           -     121,985         122     168,217           -           -           -     168,339

Options exercised at
$0.48 per share in August
2005                              -           -     250,000         250       119,750         -           -            -    120,000

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

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

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

Common Stock returned in
September 2005, previously
issued for services
rendered at $0.40 per share      -           -    (740,000)       (740)    (353,232)     56,000       1,000           -    (296,972)

Un-issued warrants cancelled
during the quarter
ended Sept 30, 2005               -           -          -           -     (287,440)          -           -           -    (287,440)

Net Loss                          -           -          -           -            -           -           - (52,610,380)(52,610,380)
                           --------- ----------- ----------- ----------- -----------  ---------- ----------- ----------- -----------
Balance as of September
30, 2005                     60,000  $        6 112,230,392   $ 112,230 $81,879,801    $ 20,000   $      - $(75,425,414)$ 6,586,623
                           ========= =========== =========== =========== ===========  ========== =========== =========== ===========


          See accompanying notes to consolidated financial statements

                                      F-14



                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENTS 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
                                                        2005                 2004                30, 2005
                                                     -------------     -------------         -------------
                                                                                           
Cash Flows from operating activities:

Net loss from operating activities                   $ (52,610,380)    $(19,358,259)         $(75,425,414)
Adjustments to reconcile net loss to net
cash (used in) operating
activities:

Depreciation and amortization                              350,107            3,161               353,268

Organizational expenses                                          -                -                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                             956,304        2,019,862             2,976,166
Amortization of beneficial conversion
feature                                                  8,836,000        1,625,000            10,461,000
Common stock issued:
 in exchange for
consultant services rendered                            14,805,128       10,105,382            27,202,860
 in exchange for intellectual property                  14,689,100                -            14,689,100
 ESOP shares                                             3,960,000                -             3,960,000
 Penalty shares pursuant to pending SB-2
Registration                                               776,529                -               776,529
Common stock canceled-previously issued for
services rendered                                       (1,078,270)        (285,575)           (1,363,845)
Changes in assets and liabilities:
 Other Current Assets                                      (12,429)               -               (12,429)
 Security Deposits                                           9,297          (23,559)              (14,262)
 Capital expenditures                                       16,757          (29,507)              (12,750)
Increase in-Other Assets                                         -                -               (13,890)
Increase (decrease) in:                                                                                 -
 Increase in due related parties                          (111,943)           20,000               40,753
 Accounts payable and accrued liabilities                  297,755         1,301,710            2,053,464
                                                     -------------     -------------         -------------
Net cash (used in) operating activities                 (9,116,045)      (3,121,785)          (12,740,950)

Cash flows from investing activities:
Payments for Patent Filing                                  (4,347)         (21,351)              (25,698)
                                                     -------------     -------------         -------------
Net cash (used in) investing activities                     (4,347)         (21,351)              (25,698)
Cash flows from financing activities:
Proceeds from sale of common stock, net of
cost                                                             -                -               432,000
Proceeds from subscription of common stock               9,079,000          124,000             9,204,000
Proceeds from sale of options                               70,750           87,000               311,750
Net advances from shareholders                                   -          (9,504)               100,088
Proceeds from loans                                              -        2,750,000             2,750,000
                                                     -------------     -------------         -------------
Net cash provided by financing activities                9,149,750        2,951,496            12,797,838
                                                     -------------     -------------         -------------
Increase (decrease) in cash and cash
equivalents                                                 29,358         (191,640)               31,190
Cash and cash equivalents, beginning of year                 1,832          193,471                     -
                                                     -------------     -------------         -------------
Cash and cash equivalents, end of year
                                                     $      31,190      $     1,832          $     31,190
                                                     ==============     ============         =============
Supplemental Information:
  Cash paid during the period for interest           $           -      $         -          $          -
  Cash paid during the year for taxes                            -                -                     -

  Non-cash disclosures:
Common stock issued for services
                                                     $  14,805,128      $10,105,382          $ 27,202,860
                                                     ==============     ============         =============
Common stock issued in exchange for intellectual
property                                             $   9,430,900      $         -          $  9,430,900
                                                     ==============     ============         =============
Common stock issued in exchange for
previously incurred debt                             $   3,109,533      $         -          $  3,109,533
                                                     ==============     ============         =============
Common stock issued for ESOP shares                  $   3,960,000      $         -          $  3,960,000
                                                     ==============     ============         =============
Common stock penalty shares issued pursuant to
Pending SB-2 registration                            $     776,529      $         -          $    776,529
                                                     ==============     ============         =============
Amortization of beneficial conversion
feature                                              $   8,836,000      $ 1,625,000          $ 10,461,000
                                                     ==============     ============         =============
Common stock canceled-previously issued for
services rendered                                    $  (1,078,270)     $  (285,575)         $ (1,363,845)
                                                     ==============     ============         =============
Preferred shares issued in exchange for
service at $25 per share in September 2004           $           -      $ 1,500,000          $  1,500,000
                                                     ==============     ============         =============
Warrants issued to consultants                       $     956,304      $ 2,019,862          $  2,976,166
                                                     ==============     ============         =============
Acquisition:
Common stock retained                                                   $         -          $      1,015
Assets acquired                                                                   -                  (135)
                                                                        -------------         -------------
Total consideration paid                                                $         -          $        880
                                                                        ============         =============
Organization expenses- note  issued in
exchange of  shares retired                                             $         -          $     88,500
                                                                        ============         =============


         See accompanying notes to consolidated financial statements

                                      F-15


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

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, 2005,  the Company has  accumulated  losses of
$75,425,414.

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-16


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

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,
2005 property and equipment consist of:

                                                         September
                                                         30, 2005
                                                       ------------
   Furniture                                           $    12,750
   Accumulated depreciation                                  4,686
                                                       ------------
   Net                                                 $     8,064

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.


                                      F-17


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

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
performance.  The information disclosed herein, materially represents all of the
financial information related to the Company's principal operating segment.

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. Fully diluted shares outstanding
were 112,230,392 and 23,981,054 for the years ended September 30, 2005 and 2004,
respectively.

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, 2005 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):


                                      F-18

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)



                                                                                For the Period
                                                                                September, 16
                                                                                2002 (Date of
                                              For The Year     For The          Year Inception
                                              ended Sept 30    ended Sept 30       through
                                                2005            2004             Sept 30,2005
                                             --------------  ---------------- ----------------
                                                                           
Net loss - as reported                     $   (52,610,380)  $   (19,358,259) $   (75,425,414)
Add: Total stock based employee
compensation expense as reported under
intrinsic value method ( APB No. 25)                  -                 -                -

Deduct: Total stock based employee
compensation expense as reported under
fair value method ( APB No. 123)                (1,406,350)                -       (1,406,350)
                                           ----------------  ---------------- ----------------
Net loss - Pro Forma                       $   (54,016,730)  $   (19,358,259) $   (76,831,764)
                                           ================  ================ ================
Net loss attributable to common
stockholders - Pro Forma                   $   (54,016,730)  $   (19,258,259) $   (76,831,764)
                                           ================  ================ ================

Basic (and assuming dilution) loss
per share - as reported                    $         (0.82)  $         (0.93) $         (2.12)
                                           ================  ================ ================
Basic (and assuming dilution) loss
per share - Pro Forma                      $         (0.85)  $         (0.93) $         (2.16)
                                           ================  ================ ================


LIQUIDITY

As shown in the accompanying  financial  statements,  the Company incurred a net
loss of  $75,425,414  during the period  September  16, 2002 (date of inception)
through  September 30, 2005.  The  Company's  current  liabilities  exceeded its
current assets by $2,552,278 as of September 30, 2005.

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.


                                      F-19


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

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  incurred
research and  development  expenses of  $638,873,  $238,535 and $877,408 for the
years ended  September 30, 2005,  September 30, 2004 and from September 16, 2002
(date of inception) through September 30, 2005, respectively.  On July 12, 2005,
the Company exchanged 36 million shares of stock with a value of $24,120,000 for
intellectual  property acquired from Biowell  Technology,  Inc.(see Note B). The
Company capitalized  $9,430,900 as an intangible asset and expensed  $14,689,100
to acquisition costs in the year ended September 30, 2005

RECLASSIFICATIONS

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

INTANGIBLE ASSETS

The Company amortized its intangible assets using the straight-line  method over
their  estimated  period of benefit.  The  estimated  useful for patents is five
years while intellectual property uses a seven year useful life. 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.

NEW ACCOUNTING PRONOUNCEMENTS

SFAS 123R. On March 31, 2004 the Financial  Accounting  Standards Board ("FASB")
issued its exposure draft, "Share-Based Payments", which is a proposed amendment
to SFAS 123.  The  exposure  draft  would  require all  share-based  payments to
employees,  including  grants of  employee  stock  options and  purchases  under
employee stock purchase  plans,  to be recognized in the statement of operations
based on their fair value.  The FASB issued the final  standard in December 2004
that is effective for small business issuers for annual periods  beginning after
December 15, 2005.  The Company has not yet assessed the impact of adopting this
new standard.


                                      F-20


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

SFAS 151. 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. 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.

SFAS 152. 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.

SFAS 153. 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 Nonmonetary  Transactions (" SFAS 153").  This statement
amends APB Opinion 29 to eliminate the exception  for  nonmonetary  exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance.  Under SFAS 153, if
a nonmonetary 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  nonmonetary  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.

NOTE B - ACQUISITION OF INTANGIBLE ASSETS

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

On July 12, 2005, the Company  acquired  certain  intellectual  properties  from
Biowell  Technology,  Inc.  ("Biowell")  through  an  Asset  Purchase  Agreement
("Agreement")  in exchange  for 36 million  shares of the  Company's  restricted
common  stock  having  an  aggregate  fair  value at the date of  issuance  of $
24,120,000. The value of the acquired intangible assets was $9,430,900, with the
balance of the purchase price,  or $14,689,100,  charged to operations as a cost
of the transaction.

The  identifiable  intangible  assets  acquired  and  their  carrying  value  at
September 30, 2005 are:

                                      F-21


                            APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE B - ACQUISITION OF INTANGIBLE ASSETS (continued)

                  
                                                                     Weighted
                                                                      Average
                   Gross                                            Amortization
                 Carrying      Accumulated                Residual     Period
                  Amount       Amortization    Net         Value      (Years)
               ------------- --------------- ------------ ---------- ----------
 Amortizable
 Intangible
 Assets:
 Intellectual
 Property       $9,430,900       $336,818      $9,094,082         -     7

 Patents            34,237         11,764          22,493         -     5
                ----------     ----------      ----------
 Total
 Amortized
 Identifiable
 Intangible      $9,465,137      $348,582      $9,116,575         -     6.99
                 ==========      ========      ==========         -
 Assets



Total  amortization  expense  charged to operations for the year ended September
30, 2005 and 2004 were $ 346,825 and $1,756 respectively.

Estimated amortization expense as of September 30, 2005 is as follows:

         2006                        $ 1,357,279
         2007                          1,357,279
         2008                          1,349,748
         2009                          1,349,271
         2010 and after                3,704,998
         Total                      $  9,116,575
                                    ============

NOTE C - NOTE PAYABLE

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



                                                                                
                                                                                       
  Note payable, unsecured, related party, payable from August 1, 2005,                 410,429
  right to convert to restricted stock in lieu of cash, rate of interest
  2%, 160,000 shares prior to October 31, 2005 or 180,000 shares after                ---------
  that date.  Since September 2005, the Company has made no payments and
  is now in default.
                                                                                        410,429
  Less: current portion                                                               ---------
                                                                                        410,429
  Note payable - long-term                                                            ---------
                                                                                             $-



NOTE D - RELATED PARTY TRANSACTIONS

On October 18, 2005, Maureen Huppe, a Company shareholder obtained a judgment in
Los Angeles County,  California  against Lawrence Lee,  director of the Company,
for short swing profits as a result of trading Company shares. Per the judgment,
Mr. Lee is  obligated to  reimburse  the Company  $245,911 in damages plus legal
fees.  In  addition,  the company  owes Mr. Lee $35,162 in  outstanding  accrued
liabilities.  In  offsetting  the  outstanding  liability  against  the  pending
reimbursement,  the company anticipates proceeds of approximately  $211,000 from
Mr. Lee.


                                      F-22


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK

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

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

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

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

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 I). The Company valued the shares issued at
approximately $ .065 per share,  which  represents the fair value of the license
received which did not differ materially from the value of the stock issued. The
Company charged the cost of the license to operations.

In 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.

                                   F-23

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK (continued)

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.

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.


                                      F-24

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK (continued)

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.

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

In 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


                                      F-25


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK (continued)

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.

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.

                                      F-26

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK (continued)

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.

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.


                                      F-27


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK (continued)

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.

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.


                                      F-28


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK (continued)

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.

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.


                                      F-29


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK (continued)

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.

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.

                                      F-30

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK (continued)

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.

In January 2005, we issued 25,000 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.

In January 2005, we retired $537,500 of convertible  notes payable for 1,628,789
shares of common  stock.  The Notes are  convertible  into  shares of our common
stock at a price of $0.33 per share.

In January 2005, we issued 17,500 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.

In January 2005, we retired $791,673 of convertible  notes payable for 2,399,012
shares of common  stock.  The Notes are  convertible  into  shares of our common
stock at a price of $0.33 per share.

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

In February  2005, we retired  $25,000 of  convertible  notes payable for 75,757
shares of common  stock.  The Notes are  convertible  into  shares of our common
stock at a price of $0.33 per share.

In February 2005, we issued 20,000 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.

In February 2005, we retired  $200,000 of convertible  notes payable for 606,060
shares of common  stock.  The Notes are  convertible  into  shares of our common
stock at a price of $0.33 per share.

In February 2005, we issued 45,000 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.

In February 2005, we retired $600,000 of convertible notes payable for 1,500,000
shares of common  stock.  The Notes are  convertible  into  shares of our common
stock at a price of $0.40 per share.

                                      F-31


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

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

In February,  2005, the Company issued 300,000 shares of common stock subscribed
for cash at $0.50 per share for a total of  $150,000  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 February, 2005, the Company issued 716,500 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.95 per share for a total of $680,675,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

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

In March,  2005, the Company issued 13,202,000 shares of common stock subscribed
for cash at $0.50 per share for a total of  $6,601,000  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 185,000 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$1.19 per share for a total of $220,150,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In March 2005, we issued 100,000 shares of common stock for options exercised at
$0.60  share.  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 1,675,272 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.98 per share for a total of  $1,641,767,  which  represents the fair value of
the  services  received  which did not differ  materially  from the value of the
stock issued.

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

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

In March,  2005, the Company issued  1,240,000 shares of common stock subscribed
for cash at $0.50 per share for a total of  $620,000  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 canceled shares previously issued within the quarter
for exchange of debt valued at $250,000.


                                      F-32


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK (continued)

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

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 2005 PPM.

In March,  2005,  the Company  granted an aggregate of 300,000  stock options to
employees  that vested  immediately.  The exercise  prices of the stock  options
granted  were below the fair value of the  Company's  common  stock at the grant
date.  Compensation  expense of $180,000 and $0 was charged to operations during
the period ended March 31, 2005 and 2004, respectively.

In April,  2005,  the Company  issued 160,000 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.80 per share for a total of $128,000,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In April, 2005, the Company issued 40,000 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $0.80
per  share  for a total of  $32,000,  which  represents  the  fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In April,  2005,  the Company  issued 850,000 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.75 per share for a total of $637,500,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In April 2005,  we retired  $165,000 of  convertible  notes  payable for 500,000
shares of common  stock.  The Notes are  convertible  into  shares of our common
stock at a price of $0.33 per share.

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

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

In April 2005,  the Company issued 50,000 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $0.68
per  share  for a total of  $34,000,  which  represents  the  fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.


                                      F-33


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK (continued)

In June  2005,  a  shareholder  returned  10,000  shares  previously  issued for
services valued at $5,000.

In June 2005, the Company  cancelled  300,000 stock options  previously  granted
valued at  $180,000.  In  accordance  with EITF  96-18 the  measurement  date to
determine fair value was the date at which a commitment  for  performance by the
counter party to earn the equity instrument was reached.  The Company valued the
shares  issued for  consulting  services at the rate which  represents  the fair
value of the services received which did not differ materially from the value of
the stock issued.

In July 2005,  the Company issued 157,000 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  $94,200,  which  represents  the  fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In July 2005, the Company issued 36 million shares in exchange for  intellectual
property at approximately $0.67 per share for a total of $24,120,000.

In July 2005,  the Company issued 640,000 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  $384,000,  which  represents  the fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In July 2005,  the Company  issued  8,000,000 S-8 shares to employees as part of
the Employee  Stock  Ownership  Plan (see note F). The Company valued the shares
issued  at  approximately  $0.48  per  share  for a total of  $3,840,000,  which
represents  the  fair  value  of the  services  received  which  did not  differ
materially from the value of the stock issued.

In July 2005,  the Company issued 121,985 shares of common stock in exchange for
consulting services. The Company valued the shares issued at approximately $0.94
per  share  for a total of  $168,339,  which  represents  the fair  value of the
services  received which did not differ  materially  from the value of the stock
issued.

In July 2005,  the Company  issued  250,000 S-8 shares to consultants as part of
the Employee  Stock  Ownership  Plan (see note F). The Company valued the shares
issued  at  approximately  $0.48  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.

In September  2005, the Company issued  814,158  penalty shares  pursuant to the
pending SB-2  registration  terms.  In  connection  with the  7,371,000  million
convertible  debt financing in the quarter ended March 30, 2005, the Company was
obligated to complete a stock  registration by July 2005. Since the registration
was not  effective  by July 2005,  the  Company  paid the  required  $257,985 of
liquidated  damages in shares of Company stock  accruing at the rate of 3.5% per
month on the face value of the Notes for the month of July and August 2005.  The
Company valued the shares issued at approximately $0.62 per share for a total of
$502,672.

In September  2005, the Company issued  391,224  penalty shares  pursuant to the
pending SB-2  registration  terms.  In  connection  with the  7,371,000  million
convertible  debt financing in the quarter ended March 30, 2005, the Company was
obligated to complete a stock  registration by July 2005. Since the registration
was not  effective  by July 2005,  the  Company  paid the  required  $257,985 of
liquidated  damages in shares of Company stock  accruing at the rate of 3.5% per
month on the face  value of the  Notes  for the  month of  September  2005.  The
Company valued the shares issued at approximately $0.70 per share for a total of
$273,857.

                                      F-34



                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE E - CAPITAL STOCK (continued)

In September 2005, the Company issued 185,000 shares of common stock in exchange
for consulting  services.  The Company valued the shares issued at approximately
$0.94 per share for a total of $173,900,  which represents the fair value of the
services  received which did not differ  materially  from the value of the stock
issued.

In September, 2005, the Company cancelled 740,000 shares previously issued for
services valued at $296,972.

In September, 2005, the Company cancelled un-issued warrants valued at $287,440.

NOTE F - STOCK OPTIONS AND WARRANTS

Warrants

The Company  issued  options and warrants  during the years ended  September 30,
2005 and 2004 for  consulting  and employee  services,  fees in connection  with
obtaining  financing and various other services.  The following table summarizes
the changes in options and warrants  outstanding  and the related prices for the
shares of the  Company's  common  stock issued to  shareholders  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                                        Warrants Exercisable
                                                 Weighted Average             Weighed                            Weighted
                              Number          Remaining Contractual           Average            Number          Average
    Exercise Prices         Outstanding             Life (Years)          Exercise Price       Exercisable   Exercise Price
    ---------------         -----------       ---------------------       --------------    -------------- ---------------------   
                                                                                                           
          $0.10                 105,464              3.79                 $      0.10             105,464      $     0.10
          $0.20                   5,000              3.13                 $      0.20               5,000      $     0.20
          $0.50                  50,000              4.02                 $      0.50              50,000      $     0.50
          $0.55               9,000,000              2.72                 $      0.55           9,000,000      $     0.55
          $0.60               9,282,000              3.63                 $      0.60           9,282,000      $     0.60
          $0.68               3,660,000              4.00                 $      0.68           3,660,000      $     0.68
          $0.70                 750.000              1.84                 $      0.70             750.000      $     0.70
          $0.75              17,727,000              4.00                 $      0.75          17,727,000      $     0.75
          $1.00                 100,000              1.04                 $      1.00             100,000      $     1.00
          $3.00                  62,503              0.25                 $      3.00              62,503      $     3.00
                            -----------                                                     --------------
                             40,741,967                                                        40,741,967




                                      F-35

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE F - STOCK OPTIONS AND WARRANTS (continued)


  Transactions involving warrants are summarized as follows:


                                                               Weighted Average Price
                                           Number of Shares          Per Share         

                                                                    
Balance, September 30, 2003                      383,500           $      1.38
                                             ------------          ------------
Granted                                        4,574,753                  0.58
Exercised                                        (88,000)                 1.00
Canceled or expired                                    -                     -
                                             ------------          ------------
Balance,  September 30, 2004                   4,870,253           $      0.63
                                             ------------          ------------
Granted                                       37,113,000                  0.67
Exercised                                       (207,500)                 0.34
Canceled or expired                           (1,033,786)                 0.65
                                             ------------          ------------
Balance, September 30, 2005                   40,741,967           $      0.67
                                             ------------          ------------


In July 2005,  the  Company  entered  into an  agreement  with  Trilogy  Capital
Partners,  Inc. and Joff Pollon  ("Trilogy"  and "Pollon") to provide  marketing
services to the Company for a term of one year,  and  terminable  thereafter  by
either  party  upon 30  days  prior  written  notice.  In  connection  with  the
agreement,  we agreed to pay Trilogy a monthly fee of $12,500.  The Company also
issued to Trilogy a warrant to purchase  7.5 million  shares of common  stock at
$0.55 per share and Pollon a warrant to purchase  1.5  million  shares of common
stock at $0.55 per share, exercisable for a period of three years from issuance.
The warrant contains a "cashless" exercise provision.  The shares underlying the
warrants contain  registration  rights.  The holder has contractually  agreed to
restrict its ability to convert or exercise  the warrants and receive  shares of
our common stock such that the number of shares of common stock held by it after
such  conversion  or  exercise  does  not  exceed  5% of  the  then  issued  and
outstanding shares of common stock. In the quarter ended September 30, 2005, the
Company  charged  $180,000 to operations for  compensatory  warrants  granted in
exchange for services per EITF 00-19. The difference  between the exercise price
and the in-the-money value at September 30, 2005 was recorded as an expense with
the difference booked as a current liability.

In the  quarter  ended  December  31,  2004,  the  Company  charged  $394,698 to
operations  for  compensatory  warrants  granted in exchange for  services.  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%.

In the quarter ended June 30, 2005, the Company  charged  $849,046 to operations
for compensatory warrants granted in exchange for services.  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 3.89%, a dividend  yield of 0% and volatility of 55.9%.  In the
quarter ended September 30, 2005, the Company reversed  $765,460 of compensatory
warrants  due to the  cashless  exercise  provisions.  Both the stock  price and
exercise  price  were  $0.60 as of June  30,  2005  resulting  in no  charge  to
operations  per EITF 00-19.  As of September 30, 2005, the stock price was lower
than the  exercise  price  with no  charge  to  expense.  In the  quarter  ended
September 30, 2005,  the Company  reclassified  3 million  warrants due to their
"cashless"  exercise  provision.  The Company  issued  warrants to directors and
advisors  to  purchase  3 million  shares of  common  stock at $0.60 per  share,
exercisable for a period of four years from issuance.  The shares underlying the
warrants contain  registration  rights. In the quarter ended September 30, 2005,
the Company  charged zero to operations  for  compensatory  warrants  granted in
exchange for services per EITF 00-19 since the $0.60 exercise price exceeded the
market price at September 30, 2005. As a result of this reclassification, in the
quarter  ended  September  30, 2005 the Company  reversed  $794,642 in intrinsic
value expense previously recorded in the quarter ended June 30, 2005.


                                      F-36

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE F - STOCK OPTIONS AND WARRANTS (continued)

During the three months ended March 31, 2005,  the Company  granted an aggregate
of 300,000  stock  options to directors  that vested  immediately.  The exercise
prices of the stock  options  granted were below the fair value of the Company's
common stock at the grant date.  Compensation expense of $180,000 was charged to
operations during the period ended March 30, 2005. In the quarter ended June 30,
2005, the Company  canceled the  unexercised  300,000 stock options and credited
expense for the previously  recorded  $180,000 in compensation.  In exchange for
the canceled  options,  the Company issued 50,000 warrants with a $0.50 exercise
price and a five year life during the quarter ended June 30, 2005.

During the quarter ended  September 30, 2005,  the Company  charged  $327,202 to
operations  for  compensatory  warrants  granted in exchange  for  services  for
warrants  issued in  December  2004.  The  estimated  value of the  compensatory
warrants  granted to employees in exchange for services was determined using the
Black-Scholes pricing model and the following assumptions: contractual term of 3
years, a risk free interest rate of 4.38%, a dividend yield of 0% and volatility
of 100.1%.

The  amount of the  expense  charged to  operations  for  compensatory  warrants
granted in exchange for services was $956,304 and $2,019,862,  respectively, for
the years ended September 30, 2005 and 2004.

On February 14, 2005, the Company  established an Employee Stock  Ownership Plan
(ESOP), authorizing 16 million shares for the future issuance of incentive stock
options,  non-statutory options and S-8 shares. Incentive options and S-8 shares
are issued at fair market value while  non-statutory  options are issued at 110%
of fair market  value.  3.660  million  shares were granted as  incentive  stock
options and vested as follows;  50% or 1.830 million  shares vesting on April 1,
2005,  25% vesting on July 1, 2005 and the  remaining  25% vesting on October 1,
2005.  No ESOP shares were  exercised as of June 30,  2005.  ESOP grants must be
exercised  within five (5) years.  Had the  Company  charged  these  warrants to
operations, the resulting expense would have totaled $1,406,350.

On July 28, 2005,  the Company  issued  8,250,000  S-8 shares to nine  employees
under the ESOP  resulting  in a  $3,960,000  charge to  expense.  Net  remaining
available ESOP shares total 4,090,000.

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, 2005, the Company has available for federal income tax purposes
a net operating loss carryforward of approximately $50,275,314,  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, 2005 are as follows:


                                      F-37

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE G- INCOME TAXES (continued)

                  Non current:
                  Net operating loss carryforward                  $17,596,000

                  Valuation allowance                              (17,596,000)
                                                                   ------------
                  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, 2005       September 30, 2004
                                                                          ------------------       ------------------
                                                                                                                   
Loss available for common shareholders                                    $     (52,610,380)       $     (19,358,259)
                                                                          ==================       ==================
Basic and fully diluted loss per share                                    $           (0.82)       $           (0.93)
                                                                          ==================       ==================
Weighted average common shares outstanding                                       63,905,259               20,819,700


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

NOTE I- COMMITMENTS AND CONTINGENCIES



                                      F-38

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE I- COMMITMENTS AND CONTINGENCIES (continued)

CONSULTING AGREEMENTS

On August 6, 2004 the Company  retained  Giuliani  Partners,  on a non-exclusive
basis,  to  provide  advice  and  assistance  to the  Company  regarding  issues
associated  with Applied DNA's  proprietary DNA embedded  security.  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 June 30, 2005 was $1,250,000.

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

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.  We answered the
complaint on May 12, 2005,  denying Stern & Co.'s  allegations and we asserted a
number of  defenses.  This  action is in the early  stages of  discovery  and we
intend to  vigorously  defend this  matter.  Management  believes  the  ultimate
outcome of this matter will not have a material  adverse effect on the Conpany's
consolidated financial position or results of operations.


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

Plaintiff Oceanic  Consulting,  S.A.  commenced this action on or about November
24, 2004 against us in the Supreme Court of the State of New York, County of New
York. Oceanic Consulting,  S.A. asserts a cause of action for breach of contract
based  upon  the  allegation  that we  failed  to make  payments  pursuant  to a
consulting agreement. Oceanic Consulting, S.A.also asserts a causes of action in
which it seeks  reimbursement  of its  expenses  and  attorneys'  fees.  Oceanic
Consulting, S.A. seeks damages in the amount of $137,500.00. Oceanic Consulting,
S.A.  moved for a default  judgment,  which we have  opposed  based upon Oceanic
Consulting,  S.A.'s  failure  to  properly  serve the  complaint  as well as our
meritorious defenses.  Thereafter,  Oceanic Consulting,  S.A. agreed to withdraw
its motion for a default  judgment and accepted service of our answer on May 23,
2005. We dispute the  allegations of the complaint.  This action is in the early
stages of discovery and we intend to vigorously  defend this matter.  Management
believes  the ultimate  outcome of this matter will not have a material  adverse
effect  on  the  Conpany's   consolidated   financial  position  or  results  of
operations.


CRYSTAL  RESEARCH  ASSOCIATES,  LLC V. APPLIED DNA SCIENCES,  INC.,  DOCKET NO.:
L-7947-04

On April 29, 2005, Crystal Research Associates, LLC obtained a default judgment
against us for $13,000 in the Superior Court of New Jersey, Middlesex County. We
intend to move to vacate the default judgment on various grounds. We dispute the
allegations of the complaint and we intend to vigorously defend this matter.

                                      F-39

                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE I- COMMITMENTS AND CONTINGENCIES (continued)

FRANCHISING AND DISTRIBUTION AGREEMENTS

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

In connection with the closing,  the Company terminated the October 2002 license
agreement  with  Biowell,  replacing  it with a new  Biowell  license  agreement
granting an exclusive  license in selected Asian countries for an initial period
through  December 31, 2010. If Biowell meets its performance  goals, the license
agreement extends for an additional five year term.  Sub-license payments due to
the Company are 50% for all fees, payments and consideration  received.  Biowell
is  required  to pay a royalty of 10% on all net sales made and is  required  to
meet certain  minimum  annual net sales in its various  territories.  Under this
agreements,  the  Company  recognized  $3,129 in  revenues  in this  year  ended
September 30, 2005.

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, 2005
and 2004 the Company has received the initial $0 and $25,000, 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. In November  2005, the Company  vacated
the Los Angeles  facility  to relocate to the new Stony Brook New York  address.
Lease  termination  costs are included in the Subsequent  Event  disclosure (see
Note J). Total lease rental  expenses for the years ended on September  30, 2005
and 2004, was $120,804 and $120,804, respectively.


                                      F-40


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004



NOTE I- COMMITMENTS AND CONTINGENCIES (continued)

Commitments for minimum rentals under non-cancelable lease at September 30, 2005
are as follows:


Year ended September 30,                            $     51,562
2006                                                       4,687
2007
                                                    -------------
                                                    $     56,249

EMPLOYMENT AND CONSULTING AGREEMENTS

The Company has employment  agreements  with some of the Company's  officers and
certain  employees.   These  employment  agreements  provide  for  salaries  and
benefits,  including  stock  options.  In June of 2005,  an Addendum was made to
several employment  agreements  providing defined commitments should the Company
terminate the employee with or without cause. It is the Company's  position that
the  form of  Addendum  was not  approved  by the  Board  of  Directors,  and is
therefore null and void, ab initio, as of the date that each one was executed by
an officer of the Company.

The Company has consulting  agreements  with two 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.

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


                                      F-41


                           APPLIED DNA SCIENCES, INC.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2005 AND 2004

NOTE J- SUBSEQUENT EVENTS

In November 2005,  the Company closed its Los Angeles  facility and relocated to
Stony Brook, New York. As part of the relocation, the Company terminated many of
its Los Angeles based employees,  sold excess office  furnishings and terminated
its  facility  lease.  In  anticipation  of  future  expenses   related  to  the
relocation,  the Company  established  a reserve for  severed  employees,  lease
termination and new office relocation expenses in the amount of $451,000.

In October 2005,  the Company  received a Notice of  Termination  from the Idaho
National Laboratory. The Notice gives APDN 90-day advance notice of termination.
The  effective  Termination  date  is  January  23,  2006.  We are  exploring  a
settlement and mutual release with the Idaho National Laboratory.


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,
2005, the Company incurred a loss of $75,425,414. 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-42



                                     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.



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. This issuance is considered exempt from registration
by reason of Section 4(2) of the Securities Act of 1933.

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.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

In  February  2003,  we issued  9,000  unregistered  shares  of common  stock to
consultants as  consideration  for services  rendered,  which we valued at $585.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

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. This
issuance is considered exempt from registration by reason of Section 4(2) of the
Securities Act of 1933.

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.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

In  March  2003,  we  issued  6,000  unregistered  shares  of  common  stock  to
consultants as  consideration  for services  rendered,  which we valued at $390.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

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.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

In April 2003, we issued 18,000  unregistered shares of common stock in exchange
for $18,000.  This issuance is considered  exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.

In  April  2003,  we  issued  9,000  unregistered  shares  of  common  stock  to
consultants as  consideration  for services  rendered,  which we valued at $585.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

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.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.


                                      II-2

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.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

In June 2003, we issued 50,000  unregistered  shares of common stock in exchange
for $50,000.  This issuance is considered  exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.

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.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

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.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

In July 2003, we issued 20,000  unregistered  shares of common stock in exchange
for $20,000.  This issuance is considered  exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.

In July 2003, we issued 10,000  unregistered  shares of common stock in exchange
for $10,000.  This issuance is considered  exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.

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.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

In August 2003, we issued 29,000 unregistered shares of common stock in exchange
for $29,000.  This issuance is considered  exempt from registration by reason of
Section 4(2) of the Securities Act of 1933..

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.
This issuance is considered  exempt from  registration by reason of Section 4(2)
of the Securities Act of 1933.

In September 2003, we sold 16 units at $4,000 a unit, for a total of $64,000, to
four  accredited  investors.  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.  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.

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.  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.

Between  October and December 2003, we sold 167.5 units for a total of $670,000,
to five accredited investors.  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.  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.

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.  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.


                                      II-3

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 a single  investor,  Jocar
Nominees, 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  accredited  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.

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.

                                      II-4

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.

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.

                                      II-5

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 accredited  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.

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.

                                      II-6

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 accredited 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.

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.

                                      II-7

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.

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

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

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

In July  2005,  we  issued  157,000  shares  of  common  stock in  exchange  for
consulting  services.  We valued the shares  issued at  approximately  $0.60 per
share for a total of $94,200,  which  represents  the fair value of the services
received  which did not differ  materially  from the value of the stock  issued.
Such issuances were  considered  exempt from  registration  by reason of Section
4(2) of the Securities Act of 1933.

In July 2005, we issued 36 million shares in exchange for intellectual  property
at approximately $0.67 per share for a total of $24,120,000.

In July  2005,  we  issued  640,000  shares  of  common  stock in  exchange  for
consulting  services.  We valued the shares  issued at  approximately  $0.60 per
share for a total of $384,000,  which  represents the fair value of the services
received which did not differ materially from the value of the stock issued.

In July  2005,  we  issued  121,985  shares  of  common  stock in  exchange  for
consulting  services.  We valued the shares  issued at  approximately  $0.94 per
share for a total of $168,339,  which  represents the fair value of the services
received  which did not differ  materially  from the value of the stock  issued.
Such issuances were  considered  exempt from  registration  by reason of Section
4(2) of the Securities Act of 1933.

In September 2005, we issued 814,158 penalty shares pursuant to the pending SB-2
registration  terms. In connection with the 7,371,000  million  convertible debt
financing in the quarter ended March 30, 2005,  we were  obligated to complete a
stock  registration by July 2005.  Since the  registration  was not effective by
July 2005, we paid the required $257,985 of liquidated  damages in shares of our
stock  accruing at the rate of 3.5% per month on the face value of the notes for
the month of July and August 2005. We valued the shares issued at  approximately
$0.62 per share for a total of $502,672.  Such issuances were considered  exempt
from registration by reason of Section 4(2) of the Securities Act of 1933.

In September 2005, we issued 391,224 penalty shares pursuant to the pending SB-2
registration  terms. In connection with the 7,371,000  million  convertible debt
financing in the quarter ended March 30, 2005,  we were  obligated to complete a
stock  registration by July 2005.  Since the  registration  was not effective by
July 2005, we paid the required $257,985 of liquidated  damages in shares of our
stock  accruing at the rate of 3.5% per month on the face value of the Notes for
the month of September 2005. We valued the shares issued at approximately  $0.70
per share for a total of $273,857.  Such issuances were  considered  exempt from
registration by reason of Section 4(2) of the Securities Act of 1933.

In  September  2005,  we issued  185,000  shares of common stock in exchange for
consulting  services.  We valued the shares  issued at  approximately  $0.94 per
share for a total of $173,900,  which  represents the fair value of the services
received  which did not differ  materially  from the value of the stock  issued.
Such issuances were  considered  exempt from  registration  by reason of Section
4(2) of the Securities Act of 1933.

     * 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 disclosed  above,  we have not employed any  underwriters in
connection with any of the above transactions.

     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-8

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-9

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 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.

10.6      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.

10.7      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.

10.8      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.

10.9      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.

10.10     Amendment to the License  Agreement,  dated as of November 2, 2004, by
          and between Applied DNA Sciences,  Inc. and Biowell  Technology  Inc.,
          filed as an exhibit to the  registration  statement on Form SB-2 filed
          with the  Commission  on June  16,  2005 and  incorporated  herein  by
          reference.

10.11     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.

10.12     Joint   Product  Development  and  Marketing  Agreement,  dated  as of
          November  10,  2004,  by and between  Applied DNA  Sciences,  Inc. and
          Hologrammas  S.A.  de C.V.,  filed as an exhibit  to the  registration
          statement on Form SB-2 filed with the  Commission  on October 28, 2005
          and incorporated herein by reference.


10.13     Cooperative Research and Development Agreement,  dated as of September
          2, 2004, by and between  Applied DNA  Sciences,  Inc. and Bechtel BWXT
          Idaho, LLC, filed as an exhibit to the registration  statement on Form
          SB-2 filed with the  Commission  on October 28, 2005 and  incorporated
          herein by reference.


10.14     Amendment to the Cooperative Research and Development Agreement, dated
          as of March 24, 2005, by and between  Applied DNA  Sciences,  Inc. and
          Battelle  Energy  Alliance,  LLC,  filed as an exhibit to the  current
          report  on Form 8-K filed  with  the  Commission  on May 10,  2005 and
          incorporated herein by reference.

10.15     Stock Purchase Amendment Agreement,  dated as of July 12, 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 July 21, 2005 and incorporated herein by reference.

10.16     License  Agreement,  dated as of July 12, 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 July
          21, 2005 and incorporated herein by reference.


10.17     Amendment to the License  Agreement,  dated as of October 10, 2005, by
          and between Applied DNA Sciences,  Inc. and Biowell Technology,  Inc.,
          filed as an exhibit to the  registration  statement on Form SB-2 filed
          with the  Commission  on October 28, 2005 and  incorporated  herein by
          reference.

10.18     Consulting  Agreement,  dated  as of July  12,  2005,  by and  between
          Applied DNA Sciences,  Inc. and Timpix International Limited, filed as
          an exhibit to the current report on Form 8-K filed with the Commission
          on July 21, 2005 and incorporated herein by reference.

10.19     Letter  of  Engagement,  dated as of June  20,  2005,  by and  between
          Applied DNA Sciences,  Inc. and Trilogy Capital Partners,  Inc., filed
          as an  exhibit  to the  current  report  on Form  8-K  filed  with the
          Commission on July 21, 2005 and incorporated herein by reference.

21.1      List of Subsidiaries

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-10

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-11


                                   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 January 17, 2006.

                           APPLIED DNA SCIENCES, INC.



                        By: /s/ JAMES HAYWARD
                            -----------------
                            James Hayward, Chief Executive  Officer (Principal
                            Executive Officer, Principal Financial Officer and
                            Principal Accounting Officer)


     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/ JAMES HAYWARD         Chief Executive Officer,             January 17, 2006
---------------------     Principal Financial Officer
    James Hayward         and Principal Accounting Officer


/s/ JUN-JEI SHEU          Chairman of the Board of Directors   January 17, 2006
---------------------
    Jun-Jei Sheu

/s/ PETER BROCKLESBY      Director                             January 17, 2006
---------------------
    Peter Brocklesby

/s/ LAWRENCE LEE          Chief Technology Strategist          January 17, 2006
---------------------     and Director
    Lawrence Lee


                                     II-12