<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>3
<FILENAME>filename3.txt
<TEXT>
                           Fulbright & Jaworski l.l.p.
                   A Registered Limited Liability Partnership
                          666 Fifth Avenue, 31st Floor
                          New York, New York 10103-3198
                                www.fulbright.com

Merrill M. Kraines                           direct dial:         (212) 318-3261
Partner                                      telephone:           (212) 318-3000
mkraines@fulbright.com                       facsimile:           (212) 318-3400


45737318.2
                                 April 17, 2006



VIA EDGAR AND FEDERAL EXPRESS

Mr. Jeffrey P. Riedler
Assistant Director
U.S. Securities and Exchange Commission
Division of Corporation Finance
100 F
Street, N.E.
Mail Stop 3561
Washington, D.C.  20549-3561

         Re:      Applied DNA Sciences, Inc.
                  Registration Statement on Form SB-2
                  Filed January 15, 2005
                  File No. 333-122848

Dear Mr. Riedler:

     On behalf of Applied DNA Sciences,  Inc. (the "Company"),  we hereby submit
to you  Amendment No. 7  ("Amendment  No. 7") to the Company's  above-referenced
Registration Statement on Form SB-2 (the "Registration  Statement"),  reflecting
changes made in response to the Staff's comment letter dated January 26, 2006.


     All  responses to the  comments  set forth in this letter are  submitted on
behalf of the Company at its request.  All responses to the accounting  comments
were prepared by the Company in consultation with its independent auditors.  The
following numbered  paragraphs,  which correspond to the numbered  paragraphs of
the January 26, 2006 comment  letter and which  include  specific  references to
Amendment  No. 7, set forth the  Company's  responses  to the Staff's  comments.
Copies of your letter and a marked copy of Amendment  No. 6 to the  Registration
Statement are being provided  supplementally with a copy of this letter for your
convenience.

General

1.        Prior to requesting acceleration for effectiveness,  please amend your
          Form  10-KSB  for the year  ended  September  30,  2004 and your Forms
          10-QSB for the quarters  ended  December 31, 2004,  March 31, 2005 and
          June 30, 2005, as applicable, to comply with our comments on your Form
          SB-2.
<PAGE>
Mr. Jeffrey P. Riedler
U.S. Securities and Exchange Commission
Division of Corporation Finance
April 17, 2006
Page 2

          Response:
          --------

          Prior to requesting  acceleration of  effectiveness,  the Company will
          amend its Form  10-KSB for the year ended  September  30, 2004 and its
          Forms 10-QSB for the quarters ended December 31, 2004,  March 31, 2005
          and June 30, 2005, as applicable,  to comply with your comments on the
          Registration Statement.

2.        Prior to requesting  acceleration for  effectiveness,  please refer to
          Item  310(g)  of  Regulation  S-B and  consider  whether  you  need to
          include, in an amended registration  statement on Form SB-2, unaudited
          financial statements for the quarter ended December 31, 2005.

          Response:
          --------

          The Company has reviewed  Item 310(g) of  Regulation  S-B and included
          unaudited  financial  statements  for the quarter  ended  December 31,
          2005.

Notes to Consolidated Financial Statements
-------------------------------------------

Note B- Acquisition of Intangible Assets, page F-26
---------------------------------------------------

3.        Please revise your disclosure to include further detail  regarding the
          intellectual   property  assets  that  you  acquired  in  the  Biowell
          transaction;  that is,  specify what you acquired and how you ascribed
          the value of $9.4 million to those assets. Please also clarify why you
          believe  the  amount  does  not  represent   in-process  research  and
          development.  Additionally,  please  tell  us how you  determined  the
          useful life of the intellectual property, correlating your response to
          paragraph  11 of  SFAS  No.  142.  Finally,  please  provide  us  with
          additional   information   regarding  the  $14.7  million   charge  to
          operations and address whether that charge relates to your acquisition
          of  in-process  research  and  development,  in which  case you should
          revise your statement of operations accordingly.

          Response:
          --------

          The  Company  has revised its  disclosure  to include  further  detail
          regarding  the  intellectual  property  assets that it acquired in the
          Biowell  transaction,  that  is,  it has  specified  those  assets  it
          acquired  and  explained  how it ascribed the value of $9.4 million to
          those assets.  The Company has clarified in this new disclosure why it
          believes  this  amount  does not  represent  in-process  research  and
          development.   The   Company   supplementally   advises  you  that  in
          determining  the useful life of the  acquired  intangible  asset,  the
          Company  considered the applicable  factors described in SFAS no. 142,
          paragraph 11. These factors included:

               o    The  Company's  principal  business  will be to  market  the
                    proprietary  DNA  anti-counterfeit  technology to commercial
                    and industrial users.
<PAGE>
Mr. Jeffrey P. Riedler
U.S. Securities and Exchange Commission
Division of Corporation Finance
April 17, 2006
Page 3

               o    Review  of the  range  of  useful  lives  assigned  to trade
                    secrets by other registrants(1)

               o    The current  limited  competion  from  similar  products and
                    technology in the anti- counterfeiting industry

          While there are no legal,  regulatory or contractual factors that will
          limit the useful life of the  technology  to the Company,  the Company
          believes  the  asset's  useful  life of 7 years  is  conservative  and
          commensurate  with  industry  standards.  The  amortization  period is
          management's  best  estimate  of  its  useful  life,  based  upon  its
          projection of when the expected  benefits  provided by the  technology
          will be  consumed  or  otherwise  used up. The asset will be  reviewed
          annually for impairment under SFAS no. 144.  Accordingly,  the Company
          believes its policy accounting for determining the useful lives of its
          intangible  assets is reasonable and complies with current  accounting
          principles generally accepted in the US.

               With respect to the $14.7 million charge to  operations,  in July
          2005,  and prior to any  appraisal  review,  the Company  exchanged 36
          million shares with a market value of $0.67 per share or $24.1 million
          for the  intellectual  property.  After  completing  the  appraisal in
          December  2005,  we compared the  discounted  cash flow result of $9.4
          million to the $24.1 million  value with the  resulting  $14.7 million
          balance  charged  to  General  and  Administrative   expense.  In  our
          September 30, 2005 10-KSB, we disclosed the results of the transaction
          in Note B on page F-22. As a result of this economic event,  there was
          no in-process research and development component.

Note E- Capital Stock, page F-39
--------------------------------

4.   Per the  disclosure  herein  and on page 27, we note that the 15.1  million
     warrants  issued in  conjunction  with your  January/February  2005  $7.371
     million  convertible  notes offering are subject to a  registration  rights
     agreement,  pursuant  to  which  you are  currently  incurring  liquidating
     damages. Please explain your basis for recording the warrants with an entry
     to  additional  paid in capital.  Note  paragraph 14 -18 of EITF No. 00-19,
     which discuss the accounting  treatment when a contract is not permitted to
     be settled in  unregistered  shares.  Given the  penalties  outlined in the
     registration rights agreement, it appears the warrants should be classified
     as a liability  under EITF No.  00-19 at fair value,  with  changes in fair
     value recorded in earnings; that is, similar to a derivative under SFAS No.
     133.

<PAGE>
Mr. Jeffrey P. Riedler
U.S. Securities and Exchange Commission
Division of Corporation Finance
April 17, 2006
Page 4

     Response:
     --------

     The Company supplementally advises you that Section 2.2 of the registration
     rights agreement to which you refer,  which was filed as Exhibit 4.4 to its
     Current  Report on Form 8-K,  filed on January 28, 2005,  provides that the
     penalties  can be paid in cash or stock,  solely at the  discretion  of the
     Company. Because these contractual penalties may be settled in unregistered
     shares,  the  Company  believes  the fair value of the  warrants  have been
     correctly classified as additional paid in capital and permanent equity(2).

5.   Additionally  please discuss the registration rights agreement in the notes
     to  your  consolidated   financial   statements  and  clearly  outline  its
     requirements.  Discuss the potential  amount of damages  possible under the
     contract,  including whether any cap exists to limit such damages,  and the
     details of the  investors'  option to have such damages  settled in shares.
     Please  specify the financial  statement line items where you have reported
     the approximately $777,000 damages that you appear to have recorded through
     September 30, 2005.

     Response:
     --------

     The Company has revised its disclosure to discuss the  registration  rights
     agreement  and  further  outline  its  requirements  in  the  notes  to its
     consolidated  financial  statements  and elsewhere  throughout the document
     where  appropriate.  Specifically,  the  Company  has  disclosed  that  the
     registration  rights  agreement  provides it will pay the  investors in the
     January/February 2005 offering $257,985 per month after June 15, 2005 until
     the  Registration  Statement  is  declared  effective,  that the  agreement
     provides  no  express  cap to limit  these  damages,  and that the  Company
     believes that this liquidated  damages  provision is no longer  enforceable
     because  the   availability  of  Rule  144  makes  the  provision   grossly
     inconsistent with actual damages.  The Company  supplementally  advises the
     staff that the registration rights agreement does not provide the investors
     an option to have such damages  settled in shares,  and that the Company is
     currently  soliciting  the waiver and release  from these  investors of all
     such  damages  beyond the  amounts it has  already  settled in shares.  The
     Company further advises you that it reported the approximately  $777,000 of
     such  damages  recorded  through  December  31,  2005 under the General and
     administrative line item of Operating Expenses.

Note F- Stock Options and Warrants, page F-41
----------------------------------------------

6.   We note your response to comment 10 per our letter dated  November 8, 2005,
     as well as the  relevant  disclosure  outlining  the  Trilogy  transaction.
     Please provide us with your detailed analysis that led you to conclude that
     the  warrants  issued  qualify as  derivative  instruments  that  should be
     accounted for under SFAS No. 133, including your detailed  assessment under
     EITF No. 00-19.  Additionally,  please  specify  exactly how you valued and

<PAGE>
Mr. Jeffrey P. Riedler
U.S. Securities and Exchange Commission
Division of Corporation Finance
April 17, 2006
Page 5

     recorded  the  derivative   liability  in  your  June  30,  2005  financial
     statements,  that is, what fair value  methodology  you are utilizing under
     SFAS No. 133; and please  specify where in your statement of operations you
     have reported the mark-to-market expense that you have recorded to date.

     Response:
     --------

     The Company  supplementally  advises  you that it  concluded  the  warrants
     issued  in the  transaction  involving  Trilogy  and  Pollon  qualified  as
     derivative  instruments  because it erroneously  assumed the warrants could
     only be settled with  registered  common  stock of the  Company.  While the
     warrant   agreements  for  these  warrants   provide  certain   "piggyback"
     registration  rights to the  holder,  they may be settled  in  unregistered
     shares of the Company's  common stock, so these warrants are not derivative
     instruments.

          The Company  erroneously  valued these  warrants  using the  intrinsic
     method and charged  $180,000 to operations  during the year ended September
     30, 2005,  with a  corresponding  increase to  additional  paid in capital.
     Utilizing the fair value method,  the charge to operations  would have been
     approximately  $1,700,000,  or an  additional  increase  in the  charge  to
     operations  of  $1,520,000,  or 2.9% of the Company's net loss for the year
     ended September 30, 2005,  which the Company  believes is immaterial to the
     financial statements taken as a whole.  Separately,  subsequent to the date
     of the financial  statements and the filing of the Registration  Statement,
     the Company's new management has determined the issuance of the warrants to
     Trilogy and Pollen were not authorized by the Company's Board of Directors.
     Accordingly,  the  Company  intends  not to  honor  the  warrants  and  has
     undertaken  all necessary  efforts to cancel the warrants.  The Company has
     revised  its  disclosure  in  Note F to  reflect  these  facts.  Due to the
     immaterial amount involved,  the Company respectfully  requests that it not
     be  required  to make any  adjustment  to the  reported  debt  discount  of
     $180,000 to the charge to operations.

          The  Company  recorded  the  mark-to-market   charge  to  General  and
     administrative line item of Operating expense on the Consolidated Statement
     of Losses.  As indicated in the Company's  letter to you, dated January 18,
     2006,  with respect to Comment 11 in your letter,  dated  November 8, 2005,
     the mark to market  requirement  for the 9  million  warrants  indicated  a
     $450,000  impact to  operations  ($0.60 June 30, 2005 market price less the
     $0.55 exercise price times the 9 million  warrants).  Offsetting  this item
     are the 3 million  cashless  Directors and Advisor  warrants.  In September
     2005,  we reversed the  previously  recorded  $794,642 in  intrinsic  value
     recorded in the quarter  ended June 30, 2005.  The net $344,642  benefit to
     June 2005  operations  represents  only 0.6% of the cumulative loss through
     June 30, 2005. Given the immaterial effect on the financial statements,  we
     respectfully  request  that  the  Company  not  be  required  to  make  any
     adjustment arising from this comment.


<PAGE>
Mr. Jeffrey P. Riedler
U.S. Securities and Exchange Commission
Division of Corporation Finance
April 17, 2006
Page 6

7.   Additionally,  please discuss the registration  rights agreement related to
     the  Trilogy  transaction  in the  notes  to  your  consolidated  financial
     statements and clearly outline its requirements and the related damages you
     may incur,  if any. Please address whether the investors have the option to
     have such damages settled in shares.

     Response:
     --------

     The  Company  has  disclosed  its grant of  registration  rights to Trilogy
     Capital Partners in its engagement letter with Trilogy and has outlined its
     requirements  and the  related  damages  it may  incur in the  notes to its
     consolidated financial statements and elsewhere throughout the registration
     statement where appropriate.  The Company  supplementally  advises you that
     the  engagement  letter  provides  that  the  Company  will  file a  resale
     registration  statement  with  respect  to shares  underlying  the  Trilogy
     warrant no later  than  September  19,  2005 and does not  provide  for any
     liquidated  damages or  penalties to be paid by the Company to Trilogy as a
     result of the  failure  of the  Company  to timely  file this  registration
     statement.  Accordingly  the  Company  has  accounted  for the value of the
     warrants as permanent equity in accordance with EITF 00-19.

8.   Please  provide us with  detailed  analysis  supporting  your  reversal  of
     $765,460 and $794,642 in expense related to "compensatory  warrants," which
     you state was done pursuant to the  provisions  of EITF No.  00-19.  Please
     include  your  assessment  of the  accounting  treatment  for  each  of the
     underlying  issuances and tell us how you came to the conclusion that there
     should be no charge to your  statement of operations for those warrants for
     the  period  ended June 30,  2005 and  September  30,  2005.  Outline  your
     correlation  to EITF No. 00-19,  as it appears you are basing your periodic
     valuation  on the  intrinsic  value of the warrants  issued.  You should be
     designating  fair value according to an acceptable  methodology  under SFAS
     No. 133.

     Response:
     --------

     The Company  supplementally  advises you that  Footnote F in the  Company's
     Form 10-KSB  filed  January 12, 2006  incorrectly  described  the  $794,642
     adjustment  twice.  The Company has revised the disclosure in Footnote F to
     correct this typographical error.

9.   Please provide us with additional  information  regarding the  registration
     rights agreement  related to the 3 million warrants issued to directors and
     advisors  and  revise  the  disclosure  in the  notes to your  consolidated
     financial  statements.  Specify when you issued these  warrants and address
     the appropriate accounting under EITF No. 00-19, considering the accounting
     treatment  when a contract is not  permitted to be settled in  unregistered
     shares.

     Response:
     --------

     The  Company  supplementally  advises  you that  though it may  include the
     shares  underlying  these  warrants  to  purchase  3  million  shares  in a
     subsequent  registration  statement,  these  warrants  may  be  settled  in
     unregistered shares.

<PAGE>
Mr. Jeffrey P. Riedler
U.S. Securities and Exchange Commission
Division of Corporation Finance
April 17, 2006
Page 7


10.  Please provide us with  additional  information  regarding your  accounting
     policy with respect to your ESOP. Address the terms of the ESOP and how you
     have recognized  compensation  cost in your statement of operations for the
     applicable reporting periods. Please cite the authoritative literature that
     supports your treatment.

     Response:
     ---------

     The Company  supplementally  advises you that all equity instruments issued
     under the ESOP to both employees and non-employees have been fair valued in
     accordance  with FAS 123 R and charged to operations.  All qualified  stock
     options issued to employees have been disclosed in the Company's  pro-forma
     information as required under FAS 123R.

Form 10-QSB/A No.2 for the Fiscal Quarter Ended March 31, 2005
---------------------------------------------------------------

General
-------

11.  As  acknowledged  in your  response  to  comment  12 per our  letter  dated
     November  8,  2005,  please  amend  your  March  31,  2005  Form  10-QSB to
     appropriately present the financial statements as "restated" and to provide
     the  related   footnote   disclosure  in   accordance   with  APB  No.  20.
     Additionally, please revise the net loss per share amounts on page F-66.

     Response:
     --------

     Prior to requesting acceleration for effectiveness,  the Company will amend
     its March 31,  2005 Form  10-QSB to  appropriately  present  the  financial
     statements as  "restated"  and provide the related  footnote  disclosure in
     accordance with APB No. 20.

Notes to Unaudited Condensed Consolidated Financial Statements
--------------------------------------------------------------

Note B- Capital Stock, page 25
------------------------------'

12.  We acknowledge your response to comment 13 per our letter dated November 8,
     2005. We reiterate our initial  request that you provide us with additional
     information that  specifically  correlates the $29 million  restatement for
     the period ended March 31, 2005 to the individual  transactions outlined in
     Note B to your unaudited condensed consolidated  financial statements.  The
     information  in  Note  B  does  not  correlate  to  that  provided  as  the
     restatement  detail in Exhibit B to your response  letter dated October 28,
     2005 and we again request that you clarify this apparent discrepancy.

     Response:
     --------

     Please  see  attached  hereto as  Exhibit  A the  original  March 31,  2005
     restatement and the debt for equity adjustment totaling $1.4M. As described
     in our response dated January 18, 2006, we incorrectly  charged  operations
     for $1.4M this debt for equity item.

<PAGE>
Mr. Jeffrey P. Riedler
U.S. Securities and Exchange Commission
Division of Corporation Finance
April 17, 2006
Page 8


13.  Additionally,  your response to comment 13 indicates that you have recently
     revised the amount of your restatement for the period ended March 31, 2005,
     from $2.9  million to $1.5  million.  Please  provide us with the  detailed
     calculation  that outlines the $1.4 million  "overstatement"  that you have
     recently  uncovered and correlate that  information to the specific related
     transaction  in  Note  B  to  your  March  31,  2005  unaudited   condensed
     consolidated financial statements.

     Response:
     --------

     The  Company  supplementally  advises you that in the  restatement  for the
     period  ended March 31,  2005,  we  incorrectly  included  $1.4  million as
     compensation  expense.  This  transaction  was actually debt  exchanged for
     shares  with  no  compensation  impact  to  operations.  As  a  result,  we
     overstated  loss  from  operations  by  $1.4  million,  a  2.8%  impact  to
     cumulative loss through March 31, 2005 and a 1.8%  overstatement  effect to
     cumulative  loss through  September 30, 2005.  Note B of the Company's Form
     10-QSB,  filed May 23, 2005  included  the  1,500,000  shares  within the 3
     million  shares  valued at $0.86 per share.  In Footnote E to the financial
     statements in the Company's Form 10-KSB filed January 12, 2006,  page F-32,
     we expanded our disclosure to separately list the 1.5 million shares at the
     proper $0.40 per share value.  Given the immaterial effect on our financial
     statements, we respectfully request the Company not be required to make any
     adjustment arising from this comment.

Form 10-QSB for the Fiscal Quarter Ended June 30, 2005
------------------------------------------------------

Statements of Cash Flows, page 17
---------------------------------


14.  We acknowledge  your response to comment 8 per our letter dated November 8,
     2005.  Please  provide  us with the  specific  detail  regarding  your $2.9
     million  reclassification of cash used in financing activities to cash used
     in  operating  activities,  as the  origin of the  reclassification  is not
     readily  apparent from your response.  Additionally,  please  reconcile the
     line  item  "common  stock  issued  in  exchange  for  consultant  services
     rendered" of $15.4 million to the corresponding  statement of shareholders'
     deficit for the nine months ended June 30,  2005,  as we are unable to come
     to your total. Please also provide us with a similar reconciliation of that
     line item for the September, 2005 cash flow statement.

     Response:
     --------

     The Company  supplementally  advises you that it has  attached as Exhibit B
     hereto the detail  supporting  the revised June 30, 2005 and  September 30,
     2005 common stock issued in exchange for consultant  services and cash flow
     reconciliation.

<PAGE>
Mr. Jeffrey P. Riedler
U.S. Securities and Exchange Commission
Division of Corporation Finance
April 17, 2006
Page 9


     If you have any  additional  comments  or  questions,  please  feel free to
contact the undersigned at (212) 318-3261 or Joe Daniels at (212) 318-3322.


                                                     Very truly yours,

                                                     /s/ Merrill M. Kraines
                                                     ----------------------
                                                     Merrill M. Kraines



Enclosures

cc:      Mr. John Krug, Senior Staff Attorney
         Mary Mast, Senior Accountant
         Amy Bruckner, Staff Accountant
         James A. Hayward, Applied DNA Sciences, Inc.


<PAGE>
<TABLE>
<CAPTION>
                                    EXHIBIT A


DNA Sciences, Inc.
Amendment No. 7 to Registration Statement on Form SB-2
File No. 333-122848
Exhibit A to letter in response to SEC comment letter, dated January 26, 2006
March 31, 2005 Services in Exchange for Shares Restatement

                                         Share Price         Shares            Share Value          Dollar
    Date           Name     Purpose   Original    Market     Issued      Original      Market     Difference
----------- --------------- --------- --------- ---------- ----------- ------------ ------------ -------------
<S>            <C>             <C>      <C>        <C>         <C>          <C>         <C>           <C>
 01/21/2005 Cataneo         Services     0.50     1.30       315,636     157,818      410,327         252,509
 02/04/2005 Lee             Services     0.40     1.31     1,500,000     600,000    1,965,000       1,365,000
 02/10/2005 Allied          Services     0.50     1.17        17,236       8,618       20,166          11,548
            International
 02/22/2005 DePalo          Services     0.50     0.95       716,500     358,250      680,675         322,425
 02/22/2005 Kareem          Services     0.33     0.95        10,500       3,465        9,975           6,510
 03/03/2005 Barnett         Services     0.60     1.19       100,000      60,000      119,000          59,000
 03/03/2005 Cardona         Services     0.60     1.19        85,000      51,000      101,150          50,150
 03/14/2005 Blakely         Services     0.50     0.98     1,675,272     837,636    1,641,767         804,131
 03/14/2005 Virtual Legal   Services     0.50     0.92        24,333      12,167       22,386          10,220
 03/29/2005 Cardona         Services     0.60     0.99        15,000       9,000       14,850           5,850
 03/31/2005 Stonegate       Services     0.50     0.89        10,000       5,000        8,900           3,900
                                                           ----------- ------------ ------------ -------------
Original March 31, 2005 Restatement                        4,469,477   2,102,954    4,994,196       2,891,242
Debt for equity adjustments
02/04/2005    Lee     Debt for equity    0.40     0.40     1,500,000     600,000    1,965,000               -

                                                           Difference for Lee debt for equity      (1,365,000)
                                                                                                 -------------
                                                           Revised Restatement Total                1,526,242
                                                                                                 =============
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                    EXHIBIT B

                                                                                                        For the          For the
                                                                                                    period September     period
                                                                                                   16, 2002 (date of    September
APDN Cash Flow Reconciliation                                                                         inception)     16, 2002 (date
                                      Difference     Per actual      For The Nine Months Ended         through        of Inception
                                                      June 10-Q              June 30,                  Sept 30,     through Sept 30,
Cash flows from operating activities:                                    2005             2004            2005             2004
                                                                         ----             ----            ----             ----

<S>                                        <C>           <C>            <C>                <C>             <C>             <C>
Net loss from operating activities               -      (31,819,266)  $ (31,819,266)  $  (19,358,259)  $ (54,634,300)  (22,815,034)
Adjustments to reconcile net
 loss to net cash                                -                                                                 -
provided by (used in) operating
 activities:
Depreciation                                     -           15,187          15,187            3,161          18,348         3,161
Organizational Expenses                          -                                                            88,500        88,500
Preferred Shares in exchange
 for service at $25                              -                                -        1,500,000       1,500,000     1,500,000
per share issued September 2004
Warrants issued to consultants                   -        1,243,744       1,243,744        2,019,862       3,263,606     2,019,862
Amortization of beneficial
 conversion feature                              -        8,836,000       8,836,000        1,625,000      10,461,000     1,625,000

Common stock issued in exchange
 for consultant                                     A                    13,253,227       10,105,382      25,650,959    12,397,732
services rendered
Debt exchanged for stock                            B                     4,474,533                        4,474,533
Balance change in conv
 debt/note payable                                  B                    (2,313,500)                      (2,313,500)
                                                                      --------------  ---------------  --------------
                                        (2,942,533)      12,471,727      15,414,260       10,105,382      27,811,992
Common stock canceled-previously
 issued for                                 39,200  C      (642,098)       (681,298)        (285,575)       (966,873)     (285,575)
services rendered

Changes in Assets and Liabilities:
Payments for security deposits              33,291  I                       (33,291)         (23,559)        (56,850)      (23,559)
Capital expenditures                             0                               (0)         (29,507)        (29,507)      (29,507)
Increase in-Other Assets                         -                                -                -         (13,890)      (13,890)
Increase (decrease) in due
 related parties                                 -          (20,631)        (20,631)          20,000         132,065       152,696
Accounts payable and accrued
 liabilities                               (73,722) D      (983,197)       (909,475)       1,301,710         846,234     1,755,709
Cash disbursed in excess of
 available funds                                 -                                -                -               -             -
                                                                      --------------  ---------------  -------------- ------------

Net cash provided by (used in)
 operating                              (2,943,764) H   (10,898,534)     (7,954,770)      (3,121,785)    (11,579,675)   (3,624,905)
activities                                                                                                                       -

Cash flows from investing
 activities:
Security deposits                          (33,291) I       (33,291)
Payments for Patent Filing                       -           (4,347)         (4,347)         (21,351)        (25,698)      (21,351)
                                                                      --------------  ---------------  -------------- ------------
Net cash provided by (used in)
investing                                  (33,291) I       (37,638)         (4,347)         (21,351)        (25,698)      (21,351)
activities                                                                                                                       -

Cash flows from financing
 activities:
Proceeds from sale of common
 stock, net of costs                     8,141,055  E     8,141,055               -                          432,000       432,000
Proceeds from subscription of
 common stock                           (6,739,000) F     2,340,000       9,079,000          124,000       9,204,000       125,000
Proceeds from notes converted
 to stock                                1,575,000  G     1,575,000               -                -               -
Proceeds from sale of options
 & warrants                                      -           70,750          70,750           87,000         311,750       241,000
Proceeds from loans                              -                                -        2,750,000       2,750,000     2,750,000
Advances from shareholders                       -                                -           (9,504)        100,088       100,088

                                     -------------------------------------------------------------------------------- ------------
Net cash provided by (used in)
 financing                               2,977,055  H    12,126,805       9,149,750        2,951,496      12,797,838     3,648,088
activities
                                                                                                                                 -
Net increase (decrease)
 in cash and cash                        1,190,633       1,190,633         (191,639)      1,192,465            1,832
equivalents
Cash and cash equivalents
 at beginning of period                      1,832           1,832          193,471               -                -
Cash and cash equivalents
 at end of period                    $   1,192,465   $   1,192,465   $        1,832   $   1,192,465     $      1,832
                                                     ==============  ==============  ===============  ==============  ============
</TABLE>

<PAGE>

H -       overall  understatement  of  ($2.942M)  equals  the  overstatement  of
          $2.977M  from  financing.  Remaining  diff  of  $35K  due to  A/P  and
          cancelled shares

A-        shares for  services  per above model of  $13.253M  differ from actual
          10-Q of $12.472M (cell D16) by $781K. Q-3 services of $831K was missed

B-        to make the cash flow tie,  debt  exchanged for shares (row 14) should
          ideally  match  the  change  in debt on the  balance  sheet  (row 15).
          Current  result is $2.11M more value in debt for  shares.  Larry Lee's
          debt was  improperly  classified as shares for services.  Changing the
          June  share  value from $1.31  (presumed  mkt price) to debt  exchange
          price of $0.40 reduces row 21 by $1.365M, leaving a $746 excess to the
          balance sheet change on row 15

C -       cancelled  shares for Q-3  apparently  missed - see Q-3  linkage to SH
          Equity detail

D -       reconciling balance applied to AP

E -       proceeds net of fees - this was incorrect since fees already  included
          in the net loss.  In addition the $8.141M  ignored the Q-1 proceeds of
          $1.590M

F -       improperly included a $750K debt for equity amount

G -       wrongly included a change in debt from the balance sheet

I -       Security classification changed




(1) Chase Corp. Form 2005 10K (15 year useful life); Transdigm, Inc. 2005 10K
(10 year useful life); Moodys, Inc. (indefinite life) (2) EITF 00-19, paragraph
14
</TEXT>
</DOCUMENT>
