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

                                   FORM 10-KSB

 [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934 For the fiscal year ended December 31, 2004

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                 THE SECURITIES EXCHANGE ACT OF 1934

                        Commission file number: 0-14266

                         UNIVERSAL DETECTION TECHNOLOGY
                 (Name of small business issuer on its charter)

                  CALIFORNIA                               95-2746949
       (State or other jurisdiction of                  (I.R.S. Employer
         incorporation or organization               Identification Number)

                         9595 WILSHIRE BLVD., SUITE 700
                         BEVERLY HILLS, CALIFORNIA 90212
          (Address, Including Zip Code of Principal Executive Offices)

                                 (310) 248-3655
                           (Issuer's telephone number)

         Securities registered under Section 12(b) of the Exchange Act:
                                      NONE
         Securities registered under Section 12(g) of the Exchange Act:
                           COMMON STOCK, NO PAR VALUE
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [x] No[ ]

Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [x]

State issuer's revenues for its most recent fiscal year:  $25,000

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days: Based on the closing sale price on the
OTC Bulletin Board on March 7, 2005, the aggregate market value of the
registrant's common stock held by non-affiliates was approximately $11,968,118.
For purposes of this computation, all directors and executive officers of the
registrant are considered to be affiliates of the registrant. This assumption is
not to be deemed an admission by the persons that they are affiliates of the
registrant.


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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 48,355,120 as of March 7, 2005.

Transitional Small Business Disclosure Format (Check one):       Yes[ ] No[x]


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                                TABLE OF CONTENTS



ITEM 1.  DESCRIPTION OF BUSINESS...............................................1

ITEM 2.  DESCRIPTION OF PROPERTY.............................................. 9

ITEM 3.  LEGAL PROCEEDINGS....................................................10

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................10

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS............10

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............11

ITEM 7.  FINANCIAL STATEMENTS.................................................24

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.................................................24

ITEM 8A. CONTROLS AND PROCEDURES..............................................24

ITEM 8B. OTHER INFORMATION....................................................24


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT...................25

ITEM 10. EXECUTIVE COMPENSATION...............................................27

ITEM 11. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS..........................................29

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................31


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                                     PART I


ITEM 1. DESCRIPTION OF BUSINESS


GENERAL

     We are engaged in the research and development of bio-terrorism detection
devices. In August 2002, we entered into a Technology Affiliates Agreement with
JPL, to develop technology for our bio-terrorism detection equipment. Under the
Technology Affiliates Agreement, JPL developed its proprietary bacterial spore
detection technology and integrated it into our existing aerosol monitoring
system, resulting in a product which we refer to as the Anthrax Smoke Detector.
The Anthrax Smoke Detector is designed to provide continuous unattended
monitoring of airborne bacterial spores in large public places, with real-time
automated alert functionality. The Anthrax Smoke Detector combines a bioaerosol
capture device with a chemical test for bacterial spores that we believe will
provide accurate results in a timely fashion. Our system is designed to function
fully automated and at a low cost compared to existing technologies. We unveiled
the first functional prototype of our Anthrax Smoke Detector at a press
conference on May 6, 2004, and received our first purchase order in the third
quarter of 2004. We continue to engage in simulated tests to further enhance the
functionality of our device and in 2005 we hope to conduct field tests in
different environments and conditions in order to obtain empirical date to
improve the overall design and functionality of our product.

     Our core business for over 20 years was the design, manufacture, marketing
and sale of automated continuous air monitoring instruments used to detect and
measure various types of air pollution, such as acid rain, ozone depletion and
smog episodes. We also supplied computer-controlled calibration systems that
verified the accuracy of our instruments, data loggers to collect and manage
pollutant information, and our reporting software for remote centralized
applications. In January 1998, because of intense competitive price pressures,
we focused all of our marketing efforts to the then perceived world's largest
market The People's Republic of China. In 1999, we signed a $5.1 million
contract with China, which we completed essentially in a five month schedule
ending November 1999. Principally due to this contract, and to a lesser extent
sales of our product in the United States, we recognized revenues of $ 7,314,975
in 1999, $3,636,622 in 2000 and $2,393,681 in 2001, despite incurring operating
losses in each of those periods. The operating losses primarily were due to the
large employee staff we were required to maintain to handle the orders for
product from China, which were unpredictable. We believed that until we reached
a "steady-state" flow of revenue from China, which we never realized, we would
experience a monthly operating loss for portions of each year. In addition,
significant delays between subsequent projects continued to result in
substantial operating losses for us which in turn resulted in abnormally high
costs to obtain working capital. Repeated attempts to obtain working capital
funding, regardless of higher financial costs, failed. As our operating and
viability condition declined, our additional attempts at financing required an
improved balance sheet, and we were unable to secure sufficient financing.
Management determined that our pursuit of the China market was not viable, and
began to consider alternative strategic options.

     In September 2001, we retained entirely new management. At that same time,
the members of the Board of Directors resigned and new members were appointed.
In the first quarter of 2002, management recommended to the Board, and the Board
approved a change to our strategic direction. In March 2002, we sold our sole
operating subsidiary and began to retool one of our existing air monitoring
instruments to develop the Anthrax Smoke Detector.

     Universal Detection Technology is a California corporation and was
incorporated on December 24, 1971.



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<PAGE>


INDUSTRY BACKGROUND

     The attacks of September 11, 2001, and the subsequent spread of and
potential future threat of anthrax spores have created a new sense of urgency in
the public health systems across the world, and especially in the United States.
During the 2001 anthrax attacks in the United States, emergency response
personnel, clinicians, laboratories, and public health officials were
overwhelmed by requests for evaluation of suspicious powders and by calls from
patients concerned about exposures to bio-terrorism agents. Systems designed to
detect bio-terrorism agents in clinical and environmental samples have become
essential components of responses to both hoaxes and actual bio-terrorism
events. First responders and public health officials require sensitive and
specific detection systems that can identify bio-terrorism agents early enough
to take actions that limit their spread.

     The United States government has responded to this urgent need for
preparedness against terrorism by establishing the Department of Homeland
Security. The Department of Homeland Security is intended to unite much of the
federal government's effort to secure the homeland, with the primary goal being
an America that is stronger, safer, and more secure. The primary mission of the
Department is to, among other things:

     o    prevent terrorist attacks within the United States;

     o    reduce the vulnerability of the United States to terrorism; and

     o    minimize the damage, and assist in the recovery, from terrorist
          attacks that do occur within the United States.

     For fiscal 2004, the Department allocated $350 million in new funding for
research, development, testing, and evaluation capabilities. According to the
Department, these funds are targeted to promote innovative, high payoff
capabilities through the Homeland Security Advanced Research Projects Agency, as
well as focused efforts to rapidly evaluate and prototype near-term technologies
available from the private sector. We may retain an outside consultant
specialized in government grants, to screen the applicable grants for us. At
this time, we have not received any portion of these grants, and cannot assure
you that we will submit applications for or receive any portion in the future.

     The private sector also has responded to the need for preparedness against
bio-terrorism. A number of companies have developed or are in the process of
developing various methods to detect harmful pathogens in the air through
genetic analysis, including DNA or RNA analysis. In recent years, significant
advances in molecular biology have led to the development of increasingly
efficient and sensitive techniques for detecting and measuring the presence of a
particular genetic sequence in a biological sample. Genetic testing involves
highly technical procedures, including:

     o    SAMPLE PREPARATION - procedures that must be performed to isolate the
          target cells and to separate and purify their nucleic acids;

     o    AMPLIFICATION - a chemical process to make large quantities of DNA
          from the nucleic acids isolated from the sample; and

     o    DETECTION - the method of determining the presence or absence of the
          target DNA or RNA, typically through the use of fluorescent dyes.


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<PAGE>


     Existing technologies for determining the genetic composition of a cell or
organism generally face the following limitations:

     o    REQUIRE SKILLED TECHNICIANS AND SPECIAL LABORATORIES. Currently
          available methods and systems for genetic analysis require skilled
          technicians in a controlled laboratory setting, including, in many
          cases, separate rooms to prevent contamination of one sample by
          another. Some progress has been made to automate this process.

     o    LARGE AND INFLEXIBLE EQUIPMENT. Most currently available genetic
          analysis equipment is large and inflexible and requires a technically
          complex operating environment. New designs are attempting to address
          miniaturization of equipment.

     o    TIMELINESS OF RESULT. Current sample preparation, amplification and
          detection technologies rely on processes that often require hours to
          complete, rendering results that may not be timely enough to be
          medically useful. Some new instruments are attempting to reduce
          analysis times.

     o    SENSITIVITY CONSTRAINTS. Some existing technologies accept and process
          only very small sample volumes, forcing laboratory technicians to
          spend significant effort in concentrating larger samples in order to
          obtain the required level of sensitivity for detecting and measuring
          the presence of a genetic sequence.

     o    LACK OF INTEGRATION. We believe that current amplification and
          detection systems do not fully automate and integrate sample
          preparation into their processes in a manner that can be useful in a
          non-laboratory setting in a cost effective fashion.

     o    OPERATIONAL COST. The operating costs for existing technologies can be
          extremely high, making the implementation of the device
          cost-prohibitive.

     o    FALSE POSITIVES. Most existing technologies are susceptible to false
          positive results, which can have significant social and economic
          consequences.

     Currently, the two most commonly used methods for genetic testing are
microbial culture and Polymerase Chain Reaction, commonly referred to as PCR.
With microbial culture, a sample from the environment is placed into a small
laboratory dish containing a nutrient rich media. The microbial culture is
allowed to grow for a specified period of time, usually between 24-48 hours. The
sample is then examined and a determination is made as to whether an organism is
present in the sample. Although highly accurate, the disadvantages of microbial
cultures are the time required to determine the presence of an organism and the
need for a laboratory and an expertise in culture preparation and analysis. PCR
has been one of the most promising methods for an automated anthrax detection
system. PCR amplifies DNA targets of choice, such as gene sequences encoded for
the anthrax toxins to detectable levels. PCR is very sensitive and is able to
detect very small amounts of DNA. But, the PCR process typically requires about
three to eight hours to complete, plus an additional three hours for sample
preparation time, which must usually be performed by a trained technician. Some
developments have been made to automate the PCR process and reduce the analysis
time.

     We believe that the principal desired characteristics of an anthrax
detection system are sustained, online operation with minimal maintenance,
minimal susceptibility to false alarms, and low operating costs. These
attributes require that we address the limitations inherent in most current
technologies with a product that can operate as a stand alone detection device.



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<PAGE>


OUR SOLUTION

     Our Anthrax Smoke Detector combines a bioaerosol capture device with a
chemical test for bacterial spores that we believe will accurately detect a
potential anthrax attack in a timely fashion. Our system is designed to function
as a first line of defense to detect a potential anthrax attack, on a fully
automated basis and at a low cost compared to existing technologies. Only upon
actual detection of a possible attack would first responders implement the more
expensive tests such as immunoassay or DNA testing techniques to verify the
identity of the detected spores. We believe our device, coupled with a testing
device to be used only in the event of actual detection, is significantly less
expensive than the existing competing technologies that are used to detect and
test for a possible anthrax attack. This is true in large part because our
device does not require the constant presence of experts or any continuous
testing mechanism for anthrax, both of which substantially increase cost.

COMPANY PRODUCTS

     We have expended all of our research and development efforts towards the
design and testing of the Anthrax Smoke Detector. This instrument consists of
four components:

     o    an air sampler for aerosol capture, which collects aerosolized
          particles on a meshed glass fiber tape,

     o    thermal lysis for releasing the dipicolinic acid from the spores,

     o    reagent delivery via syringe pump, and

     o    a lifetime gated luminescence detection of the terbium-dipicolinate
          complex.

     The device is designed to continuously monitor the air and measure the
concentration of airborne bacterial spores every 15 minutes, or each testing
interval. The testing intervals are adjustable to respond to varying client
needs. Bacterial spores are captured on the glass fiber tape. Next, thermal
lysis "pops" the spores, releasing a chemical from inside the endospore called
dipicolinic acid, which is unique to bacterial spores. Then, a syringe pump
adds a drop of terbium containing solution to the tape on the location where the
endospores were lysed. Finally, a lifetime gated photometer measures the
resultant terbium dipicolinate luminescence intensity, which is proportional to
the bacterial spore concentration in the tape. A large change in endospore
concentration is a strong indication of an anthrax attack, because endospores
are the means by which anthrax travels.

     Pursuant to our development plan, if an increase in spore concentration is
detected, an alarm will sound notifying both a building's internal security as
well as local emergency services through the device's landline or wireless
networking capability. The system can be adjusted to ensure that the maximum
time it takes to detect, and generate an alarm in response to, a release of
bacterial spores is approximately 15 minutes, which we believe will be adequate
to substantially reduce the likelihood of widespread contamination. This
response time also provides adequate time to begin antibiotic treatment prior to
the onset of symptoms which can arise within two to three days if left
untreated. The system is designed for constant and unattended monitoring of
spaces such as public facilities and commercial buildings.

     JPL's detection technology is designed to sound an alarm only when it
detects a significant increase in spore count. Natural background fluctuation of
airborne endospores are very low, approximately 0.1 to 1 spore per liter of air,
compared to an anthrax attack which would result in a concentration swing many
orders of magnitude greater than background levels. Also, our device does not
detect spores from other microorganisms, such as fungi and molds, and
discriminates against detecting


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<PAGE>


aerosol components such as dust. In addition, upon installation of the device,
we expect to operate it for seven to ten days to measure the natural
concentrations of bacterial spores in the area in which the device operates, so
that the triggering threshold of that device will be set at an appropriate level
for that environment.

     Significantly, it is only upon detection of a substantial increase in spore
count, that our device is triggered and the sample collected is tested. In
contrast, existing competing technologies require testing of ambient air samples
continuously, which is very expensive, both because of the expert personnel
required and the costs of the continuous immunoassay or DNA testing. In
addition, we believe that these competing technologies are more likely to result
in false positives due to the volume of tests performed. In contrast, the
Anthrax Smoke Detector is designed so that testing occurs only following an
actual detection of substantially increased spore count, which significantly
reduces the number of overall tests performed. Also, generally an increase in
spore count, whether anthrax or benign, is unusual, and arises as a result of
intentional conduct, which may be important to investigate even if the spores
released ultimately were not harmful. False positive results are problematic not
only for the obvious reason relating to their level of accuracy, but also
because of the cost and consequences resulting from a false alarm. On one
occasion, a false anthrax alarm shut down 11 postal facilities in the Washington
D.C. area.

     The Anthrax Smoke Detector is designed to function as a stand-alone product
to detect a likely Anthrax threat, but does not provide a testing mechanism for
samples collected that trigger the device. We believe that the device will
function well as a complement to an existing bio-terrorism detection device in
places such as public buildings and stadiums. For example, we believe that the
Anthrax Smoke Detector would function well as a front-end monitor to a PCR-based
device. In the case that our device detects a substantial increase in spore
count, the PCR-based device would be employed to test the sample collected.

GOVERNMENTAL APPROVAL

     We are not presently aware of any governmental agency approval required for
the Anthrax Smoke Detector before we can sell it in the United States. We cannot
assure you that the Anthrax Smoke Detector is not subject to or will not become
subject to governmental approval. To the extent that any governmental approval
is required in the future, we intend to obtain all required approvals consistent
with applicable law. We cannot assure you that future governmental regulation
will not adversely affect our ability to successfully commercialize a viable
product.

MARKETING AND SALES

     We primarily are focused on research and development and testing of our
bio-terrorism product. However, we are in the process of developing our sales
and marketing plan which may include strategic partnership agreements, retention
of an in-house staff or consultants, or a combination of the foregoing. In
August 2004, we reached an oral agreement in principal with KAL Consultants,
Inc. pursuant to which it will assist us with marketing and sales efforts. We
made an initial payment to KAL Consultants and it commenced services to us
consisting principally of arranging meetings with potential buyers of our
device, including Global Baggage Protection Systems, which is doing business as
Secure Wrap.

     Our marketing and sales plan also includes expending extensive efforts
aimed at creating brand recognition and brand loyalty for our company and for
our product. We expect that the plan will include our active and regular
presence in national and international defense related exhibitions, use of print
and motion picture promotional material, and interviews on national and
international media.

     In the third quarter of 2004, we received our first purchase order for a
minimum of one and up to 10 Anthrax detection devices. The purchase order was
made by Secure Wrap. The sales price to Secure


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<PAGE>


Wrap reflects a discount not to exceed 15% of the lower end of our expected
price range for the device. The purchase order is contingent upon Secure Wrap's
satisfaction of the first unit shipped to it, which we shipped in March 2005.
Secure Wrap may accept or return the device within 90 days. If Secure Wrap
accepts the detection device, the purchase order calls for us to ship one device
every two months over the next 18 months.

     In the first quarter of 2005, we received an additional purchase order from
Secure Wrap for one unit for installation at its site at the Miami International
Airport. We expect to ship this unit in the second quarter of 2005. We currently
are working with Secure Wrap to complete an appropriate response plan which we
expect to conclude prior to shipment. Following approval of the response plan by
Secure Wrap, the device will be installed at MIA. The purchase order calls for
payment following installation.

     We expect to offer for sale the existing version of our detection device at
a price range of $75,000 to $100,000 per device. However, depending upon market
reaction, our costs of production, the timeliness that we receive orders, and
additional factors, our price range may increase or decrease. In addition, we
may offer successive versions of our device, if any, at an increased or
decreased price point depending upon the features, performance and other
relevant factors of the particular version.

MANUFACTURING

     Currently, we do not have any manufacturing or distribution capabilities.
We have been in discussions with a third-party contractor, Met One Instruments,
regarding the manufacturing of our Anthrax Smoke Detector. Met One assembled our
first commercial prototype and has indicated to us that it will be capable of
producing between 50 to 100 units per month.

RESEARCH AND DEVELOPMENT

     We intend to focus substantially all of our efforts and resources to the
development, testing, and commercialization of our Anthrax Smoke Detector.
During the fiscal year ended December 31, 2004, we incurred $20,000 of research
and development expenses related to the use of our finished goods inventory in
our research and development efforts. Under our agreement with JPL, we were
required to pay the entire estimated cost of $249,000 in advance of JPL
commencing its research and development work. If these funds are depleted, we
may be required to provide additional funds in advance of further work by JPL.
Representatives of JPL have informed us that JPL expects to complete the
project, without requiring additional funds from us, during the first quarter of
fiscal 2005.

     We spent $20,000, $199,000 and $82,000 on research and development for the
years ended December 31, 2004, 2003 and 2002, respectively. We paid the
substantial majority of these amounts ($169,000 in fiscal 2003 and $80,000 in
fiscal 2002) to JPL under the Technology Affiliates Agreement. The $20,000 and
additional $30,000 of research and development expenses incurred in 2004 and
2003, respectively, related to equipment allocated out of finished goods
inventory for testing at JPL. The remaining $2,000 of research and development
expenses incurred in 2002 was payment for the option to license all of the
technology developed under the Technology Affiliates Agreement.

TESTING

     We hope to commence field testing of devices in different environments and
conditions in 2005 and to use the empirical data gained from the testing to
further improve the design and functionality of our product. We are engaged in
discussions with Rutgers University to perform our field testing. The Center for
Advanced Infrastructure and Transportation at Rutgers University was given an
initial (Phase I) grant from the National Science Foundation to conduct a
preliminary study on methods to protect the nation's transportation
infrastructure against a potential airborne biological attack. Rutgers
identified us


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as a partner in this project. At this time, Rutgers has applied for a Phase II
grant from the National Science Foundation. Rutgers would use the proceeds from
this grant to implement its site-specific emergency management response
protocol. Rutgers orally has agreed to incorporate our bio-detection technology
in its response protocol. Rutgers has informed us that it intends to select a
facility managed by the NY/NJ Port Authority to run simulated tests. Rutgers
will manage all details relating to the implementation of the program. We cannot
assure you that Rutgers will received the Phase II grant this year, or at all,
or that Rutgers will include our device in its response protocol.

     We also seek to negotiate arrangements with operators of large venues to
install our devices and allow us to collect, analyze and otherwise use the data
collected to improve the functionality of our device. We expect that collected
samples will provide valuable scientific data about background bacterial spore
levels in the air. We intend to use the data to closely monitor and study the
performance of the machine in a non-controlled setting. Under this program, we
have devices installed, and are collecting samples, at the Miami International
Airport, and a major hotel in Orange County, California.

EMPLOYEES

     As of December 31, 2004, we had a total of six full-time employees. We also
employ outside consultants from time to time to provide various services. None
of our employees are represented by a labor union. We consider our employee
relations to be good.

SCIENTIFIC ADVISORY BOARD

     We are building a Scientific Advisory Board and to date have assembled two
scientific advisors with demonstrated expertise in fields related to molecular,
chemical and medical pharmacology and hepatic science. These advisors are not
members of our Board of Directors. The role of our Scientific Advisory Board
principally is to meet periodically with our Chief Executive Officer and certain
of our consultants and members of JPL to discuss our present and long-term
research and development activities, provide input and evaluation of our overall
product line, assist and consult on our strategic direction, and introduce us to
business relationships, industry contacts, and other strategic relationships
that may be of value to us. Scientific Advisory Board members include: Leonard
Makowka, M.D., Ph.D., a distinguished clinical surgeon, transplantation
specialist and medical researcher, recognized as one of the world's leading
authorities in hepatic science (study relating to the liver), and Louis Ignarro,
Ph.D., Distinguished Professor of Pharmacology, University of California at Los
Angeles School of Medicine. As medical doctors, both of these individuals are
knowledgeable on the properties of bacterial spores, including Anthrax, how
these spores operate in our environment, and their effect on the human body,
which has been valuable in the overall development of our Anthrax Smoke
Detector.

     In August 2003, we began paying Dr. Makowka a monthly consulting fee of
$5,000. We also issued 475,000 shares of our common stock to Dr. Makowka as
compensation for his services. These shares were valued at $85,000, the market
value of our common stock on the date issued. To date, Dr. Ignarro has received
warrants to purchase 200,000 shares of our common stock immediately exercisable
at $0.25 per share, valued at $31,438, as compensation for his services.

COMPETITION

     We face intense competition from a number of companies that offer products
in our targeted application areas. Our competitors may offer or be developing
products superior to ours. From time to time, we have been required to reduce
our research efforts while we seek to raise additional funds. Our competitors
may be significantly better financed than us. There are various technological
approaches available to our competitors and us that may be applicable to the
detection of pathogens in the air, and the feasibility and effectiveness of
these techniques has yet to be fully evaluated or demonstrated.



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     Several companies provide or are in the process of developing instruments
for detection of bio-terrorism agents. Centrex, Inc., a publicly traded company,
owns the exclusive worldwide license to develop, manufacture, and market a
system for detecting microbial contamination in air, food and water. Centrex is
seeking to develop and market an automated fully integrated system which enables
rapid detection of harmful pathogens in the air by recognizing the unique DNA
(or RNA) fingerprint of the organism, whether bacteria or virus. Its planned
product is designed to be a system that automatically collects samples, prepares
the DNA, performs the analysis rapidly, and communicates results to the
end-user, via specially integrated software, with a goal to produce test results
within 30 minutes after a sample is collected.

     Similarly, Cepheid, a publicly traded company, focuses on the detection and
analysis of DNA in samples such as blood, urine, cell cultures, food and
industrial air and water. According to public disclosures of Cepheid, Northrop
Grumnan is developing a Biohazard Detection System that consists of a detection
system (GeneXpert(R)) manufactured by Cepheid. This detection system offers
rapid (about one hour) and sensitive detection of specific gene sequences
present in Bacillus anthracis, the causative agent for anthrax. According to
news releases of Cepheid, the Biohazard Detection System has been installed at
over 35 U.S. Postal Service mail sorting facilities throughout the United
States.

     Cellomics, Inc. has developed a system that utilizes living cells for the
detection, classification, and identification of chemical and biological warfare
threat agents such as anthrax and botulinum neurotoxin. Smiths Detection, a
privately held U.K. company, has developed an automated biological agent
detector that simultaneously detects up to eight different agents using
Immuno-ligand Assay chemistries. This device is an on-demand, portable system
that identifies specific biological agents and their concentration levels.

     We believe that the primary competition for the Anthrax Smoke Detector is
PCR-based methods. However, the complexity of PCR makes automated implementation
extremely expensive. We believe that the Anthrax Smoke Detector operating costs
will be substantially less than PCR-based methods. Thus, we expect to be
competitive with companies offering these PCR methods. Moreover, we believe the
two technologies are synergistic and may be employed in concert. In order to
compete against vendors of PCR-based methods, we will need to demonstrate the
advantages of our products over alternative existing technologies and products
and the potential cost advantages of our products relative to these conventional
technologies and products.

     We also expect to encounter intense competition from a number of
established and development-stage companies that continually enter the
bioterrorism detection device market. Our competitors may succeed in developing
or marketing technologies and products that are more effective or commercially
attractive than our potential products or that render our technologies and
potential products obsolete. As these companies develop their technologies, they
may develop proprietary positions that prevent us from successfully
commercializing our products.

INTELLECTUAL PROPERTY

     On September 30, 2003, we entered into a license agreement with Caltech
whereby we received licenses to produce, provide and sell proprietary products,
processes and services for use in the detection of pathogens, spores, and
biological warfare agents. These licenses include a worldwide exclusive license
to the patent rights referenced in the Technology Affiliates Agreement with JPL
and a worldwide nonexclusive license to rights in related proprietary
technology. We also have a right under the agreement to grant sublicenses
without rights to sublicense further. Caltech reserves the right to produce,
provide and sell the licensed products, processes and services solely for
noncommercial educational and research purposes. The United States government
also has a worldwide, non-exclusive, non-transferable license to use or have
used, for the performance of work for it or on its behalf, any inventions
covered by


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the patent rights or the rights in the proprietary technology. The terms of the
license further require that our licensed products are manufactured
substantially in the United States, unless we can show that domestic
manufacturing is not commercially feasible.

     As part of the sale of our wholly-owned subsidiary, Dasibi Environmental
Corp. to a third party in March 2002, we obtained a perpetual nonexclusive
license to exploit all of Dasibi's intellectual property rights anywhere in the
universe outside of mainland China. Dasibi's core business had been the design,
manufacture and marketing of automated continuous monitoring instruments used to
detect and measure various types of air pollution, such as "acid rain," "ozone
depletion" and "smog episodes." Dasibi also supplied computer-controlled
calibration systems that verify the accuracy of our instruments, data loggers to
collect and manage pollutant information, and final reporting software for
remote centralized applications.

                           FORWARD-LOOKING STATEMENTS

     This annual report on Form 10-KSB includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
which we refer to in this annual report as the Securities Act, and Section 21E
of the Securities Exchange Act of 1934, as amended, which we refer to in this
annual report as the Exchange Act. Forward-looking statements are not statements
of historical fact but rather reflect our current expectations, estimates and
predictions about future results and events. These statements may use words such
as "anticipate," "believe," "estimate," "expect," "intend," "predict," "project"
and similar expressions as they relate to us or our management. When we make
forward-looking statements, we are basing them on our management's beliefs and
assumptions, using information currently available to us. These forward-looking
statements are subject to risks, uncertainties and assumptions, including but
not limited to, risks, uncertainties and assumptions discussed in this annual
report. Factors that can cause or contribute to these differences include those
described under the headings "Risk Factors" and "Management Discussion and
Analysis and Plan of Operation."

     If one or more of these or other risks or uncertainties materialize, or if
our underlying assumptions prove to be incorrect, actual results may vary
materially from what we projected. Any forward-looking statement you read in
this annual report reflects our current views with respect to future events and
is subject to these and other risks, uncertainties and assumptions relating to
our operations, results of operations, growth strategy and liquidity. All
subsequent written and oral forward-looking statements attributable to us or
individuals acting on our behalf are expressly qualified in their entirety by
this paragraph. You should specifically consider the factors identified in this
annual report which would cause actual results to differ before making an
investment decision. We are under no duty to update any of the forward-looking
statements after the date of this annual report or to conform these statements
to actual results.

ITEM 2. DESCRIPTION OF PROPERTY

     We currently do not own any property. As of February 2004, we moved our
corporate headquarters to 9595 Wilshire Blvd., Suite 700, Beverly Hills,
California, an office space then leased by Astor Capital, Inc., a company owned
50% by our President and Chief Executive Officer and 50% by our Vice President
of Global Strategy. In November 2004, we entered into an agreement pursuant to
which we assumed the lease from Astor. We believe that this space, which is
approximately 3,245 square feet is adequate for our current needs. We plan to
lease property for our testing facility as our business demands require in the
future.



                                       12
<PAGE>


ITEM 3. LEGAL PROCEEDINGS

     We are not a party to any pending legal proceedings, other than routine
litigation deemed incidental to our business.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

     The following table sets forth, for the periods indicated, the range of
high and low intraday closing bid information per share of our common stock as
quoted on the Over The Counter Bulletin Board. Our stock is traded under the
symbol "UDTT."

<TABLE>
<CAPTION>

             Year                   Period                   Historic Prices
                                                        ---------------------------
                                                           High           Low
        --------------- --------------------------------------------  -------------
<S>          <C>        <C>                                       <C>            <C>
             2003       First Quarter                          0.25           0.17
                        Second Quarter                         0.31           0.18
                        Third Quarter                          0.54           0.22
                        Fourth Quarter                         0.80           0.45

             2004       First Quarter                          1.01           0.60
                        Second Quarter                         0.99           0.70
                        Third Quarter                          0.92           0.45
                        Fourth Quarter                         0.70           0.27

             2005       First Quarter
                          (through March 7, 2005)              0.40           0.19

</TABLE>

     The above prices are believed to reflect representative inter-dealer
quotations, without retail markup, markdown or other fees or commissions, and
may not represent actual transactions.

     As of March 7, 2005, the closing price of our common stock on Over The
Counter Bulletin Board was $0.24, and at that date, our outstanding common stock
was held of record by 1,341 stockholders.

DIVIDEND POLICY

     We do not currently pay any dividends on our common stock, and we currently
intend to retain any future earnings for use in our business. Any future
determination as to the payment of dividends on our common stock will be at the
discretion of our Board of Directors and will depend on our earnings, operating
and financial condition, capital requirements and other factors deemed relevant
by our Board of Directors including the General Corporation Law of the State of
California, which provides that dividends are only payable out of retained
earnings or if certain minimum ratios of assets to liabilities are satisfied.
The declaration of dividends on our common stock also may be restricted by the
provisions of credit agreements that we may enter into from time to time.



                                       13
<PAGE>


SALES OF UNREGISTERED SECURITIES

     During the fourth quarter of fiscal 2004, we issued the following
securities which were not registered under the Securities Act of 1933, as
amended. We did not employ any form of general solicitation or advertising in
connection with the offer and sale of the securities described below. In
addition, we believe the purchasers of the securities are "accredited investors"
for the purpose of Rule 501 of the Securities Act. For these reasons, among
others, the offer and sale of the following securities were made in reliance on
the exemption from registration provided by Section 4(2) of the Securities Act
or Regulation D promulgated by the SEC under the Securities Act:

     o    In October 2004, we issued 1,500,000 shares of common stock to a
          consultant that were valued at $870,000.

     o    In November 2004, we issued 100,000 shares of common stock to a
          consultant that were valued at $40,000.

     o    In December 2004, we issued 100,000 shares of common stock to a
          consultant that were valued at $33,000.

     During the fourth quarter of fiscal 2004, we issued 600,636 shares of
common stock to non-U.S. persons, as such term is defined in Regulation S, for
an aggregate offering price of $180,190. We incurred $23,424 in placement fees,
$81,689 in marketing fees and our net proceeds were $75,077. No offer or sale of
the securities was made to a person in the United States. We believe that each
purchaser of securities was not a U.S. person as defined in Rule 902(k) of
Regulation S and did not acquire the securities for the account or benefit of
any U.S. person. We did not engage in any directed selling efforts in the United
States. For these reasons, among others, the offer and sale of the following
securities were not subject to Section 5 of the Securities Act by virtue of
Regulation S promulgated by the SEC under the Securities Act.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The following discussion should be read in conjunction with our
consolidated financial statements provided in this annual report on Form 10-KSB.
Certain statements contained herein may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements involve a number of risks, uncertainties and other factors that
could cause actual results to differ materially, as discussed more fully herein.

     The forward-looking information set forth in this annual report is as of
the date of this filing, and we undertake no duty to update this information.
More information about potential factors that could affect our business and
financial results is included in the section entitled "Risk Factors" of this
annual report.

OVERVIEW

     We are engaged in the research and development of bio-terrorism detection
devices. After engaging in initial research and development efforts, we
determined to pursue a strategy to identify qualified strategic partners and
collaborate to develop commercially viable bio-terrorism detection devices.
Consistent with this strategy, in August 2002, we entered into a Technology
Affiliates Agreement with the Jet Propulsion Laboratory, commonly referred to as
JPL, to develop technology for our bio-terrorism detection equipment. JPL is a
federally funded research and development center sponsored by NASA and also is
an operating division of the California Institute of Technology, or Caltech, a
private non-profit educational institution.



                                       14
<PAGE>


     Under the Technology Affiliates Agreement, JPL developed its proprietary
bacterial spore detection technology and integrated it into our existing aerosol
monitoring system, resulting in a product which we refer to as the Anthrax Smoke
Detector. The Anthrax Smoke Detector is designed to provide continuous
unattended monitoring of airborne bacterial spores in large public places, with
real-time automated alert functionality. The device operates to detect an
increase in the concentration of bacterial spores, which is indicative of a
potential presence of Anthrax. In the event of a substantial increase in
bacterial spore count from the normal background levels, whether anthrax or
benign spores, our device will indicate a positive detection. Upon detection,
first responders will need to implement more expensive tests such as immunoassay
or DNA testing techniques to verify the identity of the detected spores. In
essence, our device serves as the first line of defense at substantially less
cost than existing competing technologies.

     Under our agreement with JPL, we paid it approximately $250,000 for its
services and we received an option to license all technology developed under the
Technology Affiliates Agreement from Caltech. On September 30, 2003, we
exercised our option and Caltech granted to us a worldwide exclusive license to
the patent rights referenced in the Technology Affiliates Agreement and a
worldwide nonexclusive license to rights in related proprietary technology.

PLAN OF OPERATION

     In May 2004, we unveiled the first functional prototype of our Anthrax
Smoke Detector. The prototype operated on external software. In July 2004, we
commenced simulated tests with benign bacterial spores having anthrax-like
properties in order to fine tune our product. The use of benign spores is as
effective as testing with anthrax spores because our device is designed to
detect an increase in bacterial spore concentration levels. Based on results we
obtained, we were able to enhance the sensitivity of the Anthrax Smoke Detector
by improving the sample collection efficiency of the device, and made certain
other modifications to improve efficiency. Our device is a functional viable
product, available for sale.

     We hope to commence field testing of devices in different environments and
conditions in 2005 and to use the empirical data gained from the testing to
further improve the design and functionality of our product. We are engaged in
discussions with Rutgers University to perform our field testing. The Center for
Advanced Infrastructure and Transportation at Rutgers University was given an
initial (Phase I) grant from the National Science Foundation to conduct a
preliminary study on methods to protect the nation's transportation
infrastructure against a potential airborne biological attack. Rutgers
identified us as a partner in this project. At this time, Rutgers has applied
for a Phase II grant from the National Science Foundation. Rutgers would use the
proceeds from this grant to implement its site-specific emergency management
response protocol. Rutgers orally has agreed to incorporate our bio-detection
technology in its response protocol. Rutgers has informed us that it intends to
select a facility managed by the NY/NJ Port Authority to run simulated tests.
Rutgers will manage all details relating to the implementation of the program.
We cannot assure you that Rutgers will received the Phase II grant this year, or
at all, or that Rutgers will include our device in its response protocol.

     We plan to continue to market and sell the current version of our Anthrax
Smoke Detector while we engage in field testing. In the third quarter of 2004,
we received our first purchase order for a minimum of one and up to 10 Anthrax
detection devices. The purchase order was made by Global Baggage Protection
Systems, which is doing business as Secure Wrap, a company based in Miami,
Florida. The sales price to Secure Wrap reflects a discount not to exceed 15% of
the lower end of our expected price range for the device. The purchase order is
contingent upon Secure Wrap's satisfaction of the first unit shipped to it,
which we shipped in March 2005. Secure Wrap may accept or return the device
within 90 days. If Secure Wrap accepts the detection device, the purchase order
calls for us to ship one device every two months over the next 18 months.


                                       15
<PAGE>


     In the first quarter of 2005, we received an additional purchase order from
Secure Wrap for one unit for installation at their site at the Miami
International Airport. We expect to ship this unit in the second quarter of
2005. We currently are working with Secure Wrap to complete an appropriate
response plan which we expect to conclude prior to shipment. Following approval
of the response plan by Secure Wrap, the device will be installed at MIA. The
purchase order calls for payment following installation.

     We expect to offer for sale the existing version of our detection device at
a price range of $75,000 to $100,000 per device. However, depending upon market
reaction, our costs of production, the timeliness that we receive orders, and
additional factors, our price range may increase or decrease. In addition, we
may offer successive versions of our device, if any, at an increased or
decreased price point depending upon the features, performance and other
relevant factors of the particular version.

     We intend to initiate production orders of our Anthrax Smoke Detector with
Met One Instruments based on sales orders we receive. In connection with our
sales and marketing efforts, we hope to sell units to customers in specific
sectors in the market including, sports stadiums, conventions centers, and
casinos. We believe that these sales will provide us a well-defined customer
base to use as a reference in connection with our marketing campaign in 2005. In
August 2004, we reached an oral agreement in principal with KAL Consultants,
Inc. pursuant to which it will assist us with marketing and sales efforts. We
made an initial payment to KAL Consultants and it commenced services to us
consisting principally of arranging meetings with potential buyers of our
device, including Secure Wrap. At this time, we have not entered into any
agreements with any third parties regarding the manufacturing of our product,
but Met One Instruments has indicated to us that it will be capable of producing
between 50 to 100 units per month.

     During the next 12 month period, we also plan to secure and lease a testing
facility close to the JPL laboratories where we would be able to implement a
quality assurance program and test our products against the required
specifications before shipping them to customers. We believe that the proximity
to JPL and in particular to Caltech will help us by utilizing the knowledge of
graduate and PhD students familiar with the project in a consultant or
employment capacity.

     During 2004, we hired four additional employees and increased our use of
consultants for corporate development purposes, including further development of
our strategic business plan to sell our Anthrax Smoke Detector. We anticipate
hiring up to three additional employees in the next 12 months, one of whom would
concentrate on marketing our Anthrax Smoke Detector to both the public and
private sector. Upon establishment of the testing facility, we intend to hire up
to two employees to assist with the testing of the products.

     During the years ended December 31, 2004 and 2003, we spent an aggregate of
$5,660,000 and $3,590,000, respectively, on selling, general and administrative
expenses and marketing expenses representing a 58% and 368% increase over the
comparable year ago periods. The significant increase in our selling, general
and administrative expenses and marketing expenses in the year ended December
31, 2004 principally is due to an increase of $362,000, or 566%, in legal
expense, $90,000 rent expense (when in the prior comparable period we did not
have rent expense), $105,000, or 118%, relating to travel for business
development, $853,000, or 192%, in consulting fees, and $297,000, or 15%, in
capital raising. The significant increase in selling, general and administrative
cost for the year ended December 31, 2004 compared to the year ended December
31, 2003 principally is attributable to an increase of $77,000, or 670%, in
travel for business development, $560,000 in wages for additional employees
(when in the prior comparable period we did not have any employee wage expense),
$453,000, or 370%, in consulting fees, and $1,888,000, or 4,194%, in capital
raising. In connection with our selling, general and administrative and
marketing expenses, we engaged 17 consultants during the year ended December 31,
2004 and paid an aggregate of $2.3 million of cash and stock based


                                       16
<PAGE>


compensation in consulting fees, and 12 consultants during fiscal 2003 and paid
an aggregate of $2.4 million of cash and stock based compensation in consulting
fees. The consulting services include marketing, services of finders and brokers
in connection with sales of securities, public and investor relations,
administrative oversight of research and development and management of our
relationship with JPL, and Scientific Advisory Board services.

     We also have incurred a significant increase in our marketing expenses
during these periods in comparison to the prior periods. We retained several
consultants to help promote awareness of and create an interest in our product
and company in the U.S. and abroad, facilitate contacts with strategic
individuals and agencies, and assist in arranging meetings in connection with
the manufacturing, distribution, and sale of our product. We also attended
several trade shows in the U.S. and abroad, including England and France, and
made several presentations to various private and public entities in the U.S.,
England, and France. During fiscal 2003, we also hired an investor relations
company to help promote awareness of our company, through press releases, road
shows, meetings with brokers and fund managers, and other appropriate means.

     During year ended December 31, 2004, we incurred $20,000 of research and
development expenses related to the use of our finished goods inventory in our
research an development efforts. Under our agreement with JPL, we were required
to pay the entire estimated cost of $249,000 in advance of JPL commencing its
research and development work. JPL will continue to enhance the efficiency of
the device until it uses all of the funds we previously provided under the
agreement.

AUDIT COMMITTEE INQUIRY

     During the third quarter of 2004, our chief executive officer directed
Company funds in the amount of $250,000, in lieu of personal funds, to be used
to secure a personal obligation. Shortly following the quarter end, in the
normal course of closing the Company's books for the third quarter, we
identified this issue, immediately alerted the chief executive officer, and with
his full acknowledgement, cooperation and assistance, the Company funds promptly
were released. We notified the Audit Committee, which is comprised solely of
independent directors, and it immediately commenced an inquiry into the matter.

     The inquiry included a review of all relevant loan and other transaction
documents, interviews with the chief executive officer, the other officers or
employees that were involved in identifying the issue and facilitating the
release of the Company funds, and other employees or persons that the Audit
Committee believed may be helpful to its inquiry, and a review of the internal
controls of the Corporation.

     The Audit Committee determined that the chief executive officer's conduct
did not involve any management impropriety or fraud, but was made possible
nonetheless due to a gap in our internal controls. As a result of the Audit
Committee's investigation and at its direction, we implemented implementing
changes to our financial organization and enhanced our internal controls. These
changes include,

     o    Additions to or enhancement of our existing internal controls,
          including the requirement that all checks in excess of $25,000 require
          two authorized signatories, and that the board of directors approve
          all indebtedness in excess of $50,000 and all corporate transactions
          whereby the Company is committed to any expenditure in excess of
          $100,000,

     o    Increased automation of our accounting systems,

     o    The retention of a financial consultant who is a Certified Public
          Accountant, and other personnel to increase the depth and experience
          of our finance and accounting staff,



                                       17
<PAGE>


     o    Improved documentation of our accounting policies and procedures, and
          internal control procedures, and

     o    Streamlining our banking relationships.

     We have implemented each of the foregoing recommendations. We will continue
to evaluate the effectiveness of our controls quarterly and more frequently if
business developments warrant. We will continue to make changes in our controls
and procedures, including our internal controls over financial reporting, aimed
at enhancing their effectiveness and ensuring that our systems evolve with, and
meet the needs of, our business as it grows and changes over time.

LIQUIDITY AND CAPITAL RESOURCES

     On April 29, 2004, we commenced a private offering of our securities. In
this private placement, we sold $3.0 million of Units. The offering was made
solely to accredited investors through Meyers Associates, L.P., a registered
broker dealer firm. Each Unit consists of one share of common stock and a Class
A Warrant and a Class B Warrant. The offering price per Unit was $0.50. Both the
Class A and Class B Warrants are exercisable by the holder at any time up to the
expiration date of the warrant, which is five years from the date of issuance.
In the aggregate, the investors purchased 6,000,000 shares of common stock,
Class A Warrants to purchase 3,000,000 shares of common stock at $0.50 per share
and Class B Warrants to purchase 3,000,000 shares of common stock at $0.70 per
share. Meyers received a sales commission equal to 10% of the gross proceeds and
payment of 3% of the gross proceeds for a non-accountable expense allowance for
an aggregate payment of $403,140. Meyers and its agents also received Class A
Warrants to purchase an aggregate of 2,400,000 shares of common stock as
consideration for their services as placement agent. In connection with the
private placement, we also entered into a consulting agreement with Meyers for
an 18 month term, whereby Meyers will provide us consulting services related to
corporate finance and other financial service matters and will receive $7,500
per month, as well as Class A Warrants to purchase 1,200,000 shares of our
common stock.

     The net proceeds to us from the sale of the Units were approximately $2.5
million. We have used a substantial portion of these funds for working capital
purposes. We require approximately $2.0 million in the next 12 months to repay
debt obligations and execute our business plan. We do not anticipate that our
cash on hand is adequate to meet our operating expenses over the next 12 months.
Also, we do not believe we have adequate capital to repay all of our debt
currently due and becoming due in the next 12 months. We anticipate that our
uses of capital during the next 12 months principally will be for:

     o    administrative expenses, including salaries of officers and other
          employees we plan to hire;

     o    repayment of debt;

     o    sales and marketing;

     o    product testing and manufacturing; and

     o    expenses of professionals, including accountants and attorneys.

     To maintain our license with Caltech, a minimum annual royalty of $10,000
is due to Caltech on August 1, 2005, and each anniversary thereof, regardless of
any product sales. Any royalties paid from product sales for the 12-month period
preceding the date of payment of the minimum annual royalty will be credited
against the annual minimum. Pursuant to the terms of the license, we must pay 4%
royalties


                                       18
<PAGE>


on product sales in countries where a patent is issued and 2% royalties on
product sales in countries where a patent is not issued, as well as 35% of net
revenues received from sublicensees.

     Our working capital deficit at December 31, 2004, was $459,000. Our
independent auditors' report includes an explanatory paragraph relating to
substantial doubt as to our ability to continue as a going concern, due to our
working capital deficit at December 31, 2004, and the sale of our operating
subsidiary. We require approximately $1.3 million to repay indebtedness in the
next 12 months. As a condition to completing our private placement in July 2004,
we agreed not to use any of the proceeds to repay debt outstanding at the time
of the closing of the offering, or to pay accrued but unpaid salary to our Chief
Executive Officer, or our monthly consulting fee under our Agreement for
Investment Banking and Advisory Services with Astor Capital, Inc. We terminated
this agreement effective September 30, 2004. As of December 31, 2004, we owed
our Chief Executive Officer $520,500 of accrued but unpaid salary under his
employment agreement. The following provides the principal terms of our
outstanding debt as of December 31, 2004:

     o    One loan from three family members, each of whom is an unaffiliated
          party, evidenced by four promissory notes in the aggregate principal
          amounts of $100,000, $50,000, $50,000, and $100,000, each due June 24,
          2001 with interest rates ranging from 11% to 12%. We entered into a
          settlement agreement in the third quarter of 2004 with each of these
          parties. Pursuant to this agreement, in July 2004, we repaid a total
          of $126,667 of the debt and agreed to pay an additional $175,740 in
          monthly installments over the following 18 months as full payment of
          our obligations. The settlement agreement provides for an accelerated
          payment schedule (at our option), which would reduce the total amount
          we are required to pay by approximately $12,000.

     o    One loan from an unaffiliated party in the aggregate principal amount
          of $195,000, due July 31, 2005, with interest at the rate of 9% per
          annum. Pursuant to a letter agreement dated as of August 10, 2004, we
          entered into a settlement with this party and agreed to pay a total of
          $261,000 pursuant to a scheduled payment plan through July 2005.
          Additionally, the Company, in September 2004, issued 206,250 shares of
          common stock upon the conversion of unpaid interest in the aggregate
          amount of $33,000.

     o    One loan from an unaffiliated party in the aggregate principal amount
          of $98,500, due July 31, 2005, with interest at the rate of 9% per
          annum. Pursuant to a letter agreement dated August 10, 2004, between
          us and this third party, we agreed to pay a total of $130,800 pursuant
          to a scheduled payment plan through July 2005.

     o    One loan from an unaffiliated party evidenced by a promissory note in
          the aggregate principal amount of $200,000, due on the extended due
          date of June 30, 2002, with interest at the rate of 18% per annum. As
          of December 31, 2004, we owed $163,500 in interest on this note, and
          were in default of all amounts owing under this note.

     o    Two loans from an unaffiliated party evidenced by two promissory notes
          in the aggregate principal amount of $57,526, due September 10, 2002,
          and verbally extended to a date to be mutually agreed upon by the
          parties, with interest at the rate of 10% per annum. As of December
          31, 2004, we owed $14,951 in interest on these notes.



                                       19
<PAGE>


     o    One loan from an unaffiliated party evidenced by a promissory note in
          the aggregate principal amount of $75,000, due on May 10, 2003, and
          verbally extended to a date to be mutually agreed upon by the parties,
          with interest at the rate of 18% per annum. As of December 31, 2004,
          we owed $22,821 in interest on this note.

     o    One loan from an unaffiliated party evidenced by a promissory note in
          the aggregate principal amount of $75,000, due on the extended due
          date of June 30, 2002, with interest at the rate of 10% per annum. As
          of December 31, 2004, we owed $35,188 in interest on this note, and
          were in default of all amounts owing under this note.

     Management continues to take steps to address the Company's liquidity
needs. Recently management concluded discussions with most of our note holders
and amended the terms of these notes to provide for extended scheduled payment
arrangements. Management continues to seek extensions with respect to debt past
due. Management also may seek additional extensions with respect to these notes
and the Company's debt as it becomes due. In addition, management may endeavor
to convert some portion of the principal amount and interest on our debt into
shares of common stock.

     Historically, we have financed operations through private debt and equity
financings. In recent years, financial institutions have been unwilling to lend
to us and the cost of obtaining working capital from investors has been
expensive. We principally expect to raise funds through the sale of equity or
debt securities. However, during the first quarter of 2005, management spent the
substantial majority of its time negotiating contracts for the installation of
the Anthrax Smoke Detector in target markets, preparing to ship the first device
under the Secure Wrap October purchase order, and developing its marketing and
sales plan. These activities diverted management from the time it otherwise
would spend negotiating sales of securities to raise capital. In addition, the
more recent price and volume volatility in the common stock has made it more
difficult for management to negotiate sales of its securities at a price it
believes to be fair to the Company. During the years ended December 31, 2004 and
2003, the Company received gross proceeds of approximately $6.2 million and $3.8
million, respectively, from the sale of equity and debt securities. The Company
actively continues to pursue additional equity or debt financings, but cannot
provide any assurance that it will be successful. If we are unable to pay our
debt as it becomes due and are unable to obtain financing on terms acceptable to
us, or at all, we will not be able to accomplish any or all of our initiatives
and will be forced to consider steps that would protect our assets against our
creditors.

                                  RISK FACTORS

     YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS TOGETHER WITH OUR
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS
ANNUAL REPORT. SOME OF THE INFORMATION CONTAINED IN THIS DISCUSSION AND ANALYSIS
OR SET FORTH ELSEWHERE IN THIS ANNUAL REPORT, INCLUDING INFORMATION WITH RESPECT
TO OUR PLANS AND STRATEGIES FOR OUR BUSINESS, INCLUDES FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. YOU SHOULD REVIEW THE "RISK
FACTORS" SECTION OF THIS REPORT FOR A DISCUSSION OF IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE RESULTS DESCRIBED IN OR
IMPLIED BY THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT. IF ANY OF
THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS COULD SUFFER.

OUR INDEPENDENT AUDITORS' REPORT EXPRESSES DOUBT ABOUT OUR ABILITY TO CONTINUE
AS A GOING CONCERN.

     Our independent auditors' report includes an explanatory paragraph
expressing substantial doubt as to our ability to continue as a going concern,
due to our working capital deficit at December 31, 2004, and the sale of our
operating subsidiary in March 2002. We have experienced operating losses since
the date of the auditors' report and in prior years. Our auditor's opinion may
impede our ability to raise additional capital on terms acceptable to us. If we
are unable to obtain financing on terms acceptable to


                                       20
<PAGE>


us, or at all, we will not be able to accomplish any or all of our initiatives
and will be forced to consider steps that would protect our assets against our
creditors. If we are unable to continue as a going concern, your entire
investment in us could be lost.

WE ARE IN DEFAULT OF SOME OF OUR DEBT. OUR FAILURE TIMELY TO PAY OUR
INDEBTEDNESS MAY REQUIRE US TO CONSIDER STEPS THAT WOULD PROTECT OUR ASSETS
AGAINST OUR CREDITORS.

     If we cannot raise additional capital, we will not be able to repay our
debt or pursue our business strategies as scheduled, or at all, and we may cease
operations. We have been unable to pay all of our creditors and certain other
obligations in accordance with their terms, and as a result, at December 31,
2004, we are in default on certain debt obligations totaling approximately
$275,000, including accrued interest of approximately $198,688, are past due. In
the aggregate, as of December 31, 2004, we have approximately $1.3 million in
debt obligations, including interest, owing within the next 12 months. Of this
amount, we have entered into settlement agreements with respect to approximately
$721,000, pursuant to which we are obligated to make scheduled payments. As of
December 31, 2004, we have verbal extensions with respect to approximately
$133,000 of this debt to a date to be mutually agreed upon by us and each of the
respective noteholders. However, we cannot assure you that any of these
noteholders will continue to extend payment of these debt obligations or
ultimately agree to revise the terms of this debt to allow us to make scheduled
payments over an extended period of time. We have limited cash on hand and
short-term investments and we do not expect to generate material cash from
operations within the next 12 months. We have attempted to raise additional
capital through debt or equity financings and to date have had limited success.
The down-trend in the financial markets has made it extremely difficult for us
to raise additional capital. In addition, our common stock trades on The Over
the Counter Bulletin Board which makes it more difficult to raise capital than
if we were trading on the Nasdaq Stock Market. Also, the recent price and volume
volatility in our common stock has made it more difficult for management to
negotiate sales of our securities at a price it believes to be fair to the
Company. Also, our default in repaying our debt restricts our ability to file
registration statements, including those relating to capital-raising
transactions, on Form S-3, which may make it more difficult for us to raise
additional capital. In July 2004, we completed a private placement resulting in
net proceeds to us of approximately $2.5 million. As a condition to this
financing however, we agreed that we would not use the net proceeds to repay any
of our debt outstanding as of the closing of the financing. We have used the
proceeds from the financing for working capital purposes, principally with
respect to, testing and manufacturing units of the Anthrax Smoke Detector for
demonstration, marketing to both end users as well as potentially to
intermediaries including distributors or joint ventures, and developing a sales
and marketing program. If we are unable to obtain financing on terms acceptable
to us, or at all, we will not be able to accomplish any or all of our
initiatives and will be forced to consider steps that would protect our assets
against our creditors.

WE HAVE A HISTORY OF LOSSES AND WE DO NOT ANTICIPATE THAT WE WILL BE PROFITABLE
IN FISCAL 2005.

     We do not anticipate any material sales of the Anthrax Smoke Detector until
we complete all testing and modifications, which we expect may not occur until
the summer of 2005. We have not been profitable in the past years and had an
accumulated deficit of approximately $26.5 million at December 31, 2004. We have
not had revenues from sales of our products since the beginning of fiscal 2002,
the commencement of development of our Anthrax Smoke Detector. During the fiscal
years ended December 31, 2004, 2003 and 2002, we have experienced losses of
$5.8, $4.7, and $2.1 million, respectively. Achieving profitability depends upon
numerous factors, including our ability to develop, market and sell commercially
accepted products timely and cost-efficiently. We do not anticipate that we will
be profitable in fiscal 2005.


                                       21
<PAGE>



IF WE OBTAIN FINANCING, EXISTING SHAREHOLDER INTERESTS MAY BE DILUTED.

     If we raise additional funds by issuing equity or convertible debt
securities, the percentage ownership of our shareholders will be diluted. In
addition, any convertible securities issued may not contain a minimum conversion
price, which may make it more difficult for us to raise financing and may cause
the market price of our common stock to decline because of the indeterminable
overhang that is created by the discount to market conversion feature. In
addition, any new securities could have rights, preferences and privileges
senior to those of our common stock. Furthermore, we cannot assure you that
additional financing will be available when and to the extent we require or
that, if available, it will be on acceptable terms.

IF WE CANNOT PARTNER WITH THIRD PARTIES TO ENGAGE IN RESEARCH AND DEVELOPMENT
AND TESTING OF OUR DEVICE AT MINIMAL COST TO US, OUR PRODUCT DEVELOPMENT WILL BE
DELAYED.

     We contract with third parties at minimal cost to us to conduct research
and development activities and we expect to continue to do so in the future.
Under our agreement with JPL, it will engage in limited testing of our device.
We have engaged in discussions with Rutgers University to conduct field testing
of our Anthrax Smoke Detector but Rutgers' obligations are contingent upon its
receipt of funding from the National Science Foundation to conduct the testing.
If Rutgers is unable to obtain the funding necessary to engage in field testing,
or we are unable to partner with a reputable organization at a nominal cost to
us, we will need to raise additional capital, and our testing and further
product development will be delayed. Also, because we rely on third parties for
our research and development activities, we have less direct control over those
activities and cannot assure you that the research will be done properly or in a
timely manner.

MANAGEMENT HAS NO EXPERIENCE IN PRODUCT MANUFACTURING, MARKETING, SALES, OR
DISTRIBUTION. WE MAY NOT BE ABLE TO MANUFACTURE OUR ANTHRAX SMOKE DETECTOR IN
SUFFICIENT QUANTITIES AT AN ACCEPTABLE COST, OR IN A TIMELY FASHION, AND MAY NOT
BE ABLE TO MARKET AND DISTRIBUTE IT EFFECTIVELY, EACH OF WHICH COULD HARM OUR
FUTURE PROSPECTS.

     If we are unable to establish an efficient manufacturing process for the
Anthrax Smoke Detector, our costs of production will increase, our projected
margins may decrease, and we may not be able to timely deliver our product to
customers. We have completed the research and development phase for the first
version of our product. When and if we complete all desirable testing of our
product, we will need to establish the capability to manufacture it. Management
has no experience in establishing, supervising, or conducting commercial
manufacturing. We plan to rely on third party contractors to manufacture our
product, although to date we have not entered into any manufacturing
arrangements with any third party. Relying on third parties may expose us to the
risk of not being able to directly oversee the manufacturing process, which may
adversely affect the production and quality of our Anthrax Smoke Detector. In
addition, these third party contractors may experience regulatory compliance
difficulty, mechanical shutdowns, employee strikes, or other unforeseeable acts
that may increase the cost of production or delay or prevent production.

     In addition, if we are unable to establish a successful sales, marketing,
and distribution operation, we will not be able to generate sufficient revenue
in order to maintain operations. We have no experience in marketing or
distributing new products. We have not yet established marketing, sales, or
distribution capabilities for our Anthrax Smoke Detector. At this time, we have
an oral agreement with KAL Consultants, Inc. to assist us with our marketing and
sales efforts. To date, KAL Consultants' principal function has been to arrange
meetings with potential buyers of our device, including Secure Wrap. We also
plan on entering into distribution agreements with third parties to sell our
Anthrax Smoke Detector. If we are unable to enter into relationships with third
parties to market, sell, and distribute our products, we will need to develop
our own capabilities. We have no experience in developing, training, or


                                       22
<PAGE>


managing a sales force. If we choose to establish a direct sales force, we will
incur substantial additional expense. We may not be able to build a sales force
on a cost effective basis or at all. Any direct marketing and sales efforts may
prove to be unsuccessful. In addition, our marketing and sales efforts may be
unable to compete with the extensive and well-funded marketing and sales
operations of some of our competitors. We also may be unable to engage qualified
distributors. Even if engaged, they may fail to satisfy financial or contractual
obligations to us, or adequately market our products.

WE CANNOT GUARANTEE THAT OUR BIO-TERRORISM DETECTION DEVICE WILL WORK OR BE
COMMERCIALLY VIABLE.

     Our product requires further testing and demonstration of commercial scale
manufacturing before it can be proven to be commercially viable. Potential
products that appear to be promising at early stages of development may not
reach the market for a number of reasons. These reasons include the
possibilities that the product may be ineffective, unsafe, difficult or
uneconomical to manufacture on a large scale, or precluded from
commercialization by proprietary rights of third parties. We cannot predict with
any degree of certainty when, or if, all testing will be completed. Also,
depending on the results of our tests, we may determine to make modifications to
our device that require further research and development efforts. If our product
development efforts are unsuccessful or if we are unable to develop a
commercially viable product timely, we would need to consider steps to protect
our assets against our creditors.

OUR PRODUCTS MAY NOT BE COMMERCIALLY ACCEPTED WHICH WILL ADVERSELY AFFECT OUR
REVENUES AND PROFITABILITY.

     Our ability to enter into the bio-terrorism detection device market,
establish brand recognition and compete effectively depends upon many factors,
including broad commercial acceptance of our products. If our products are not
commercially accepted, we will not recognize meaningful revenue and may not
continue to operate. The success of our products will depend in large part on
the breadth of information these products capture and the timeliness of delivery
of that information. The commercial success of our products also depends upon
the quality and acceptance of other competing products, general economic and
political conditions and other factors, all of which can change and cannot be
predicted with certainty. We cannot assure you that our new products will
achieve market acceptance or will generate significant revenue.

EXISTING AND DEVELOPING TECHNOLOGIES MAY AFFECT THE DEMAND FOR OUR ANTHRAX SMOKE
DETECTOR.

Our industry is subject to rapid and substantial technological change.
Developments by others may render our technology and planned product
noncompetitive or obsolete, or we may be unable to keep pace with technological
developments or other market factors. Competition from other biotechnology
companies, universities, governmental research organizations and others
diversifying into our field is intense and is expected to increase. According to
the public filings of Cepheid, one of our competitors, it has begun shipping its
detection technology product, including for use by the United States Postal
Service. Cepheid's entry into the market before us may make it more difficult
for us to penetrate the market. In addition, our competitors offer technologies
different than ours which potential customers may find more suitable to their
needs. For example, Cepheid's technology specifically detects for Anthrax
whereas our technology detects for an increase in the level of bacterial spores
which indicates a potential presence of Anthrax. Many of our competitors also
have significantly greater research and development capabilities than we do, as
well as substantially greater marketing, manufacturing, financial and managerial
resources.


                                       23
<PAGE>


SHARES ISSUED UPON THE EXERCISE OF OUR OUTSTANDING OPTIONS AND WARRANTS MAY
DILUTE YOUR STOCK HOLDINGS AND ADVERSELY AFFECT OUR STOCK PRICE.

     If exercised, our outstanding options and warrants will cause immediate and
substantial dilution to our stockholders. We have issued options and warrants to
acquire our common stock to our employees, consultants, and investors at various
prices, some of which are or may in the future be below the market price of our
stock. As of December 31, 2004, we had outstanding options and warrants to
purchase a total of 20,351,145 shares of common stock. Of these options and
warrants, 20,351,145 have exercise prices above the recent market price of $0.24
per share (as of March 7, 2005), and 0 have exercise prices at or below this
price. The weighted average exercise price for these outstanding options and
warrants is $0.50.

WE USE A SIGNIFICANT PORTION OF OUR CASH ON HAND AND STOCK TO PAY CONSULTING
FEES. WE MAY NOT RECEIVE THE BENEFIT WE EXPECT FROM THESE CONSULTANTS.

     The consultants that we hire may not provide us with the level of services,
and consequently, the operating results, we anticipate. We spent approximately
$3.2 million and $2.4 million in consulting fees during the years ended December
31, 2004 and 2003, respectively, and utilized approximately 17 consultants
during this period. The consultants we engage provide us with a variety of
services. In the year ended December 31, 2004, we paid our consultants in the
aggregate approximately $2,230,000 in cash for marketing and as serving as a
finder or broker in connection with sales of securities, $745,000 in stock for
public and investor relations, $149,000 in a combination of cash and stock for
administrative oversight of research and development and management of our
relationship with JPL, $54,000 in cash and stock based compensation for general
business and advisory services, and $57,000 in a combination of cash and stock
based compensation for Scientific Advisory Board services.

WE HAVE ENTERED INTO SEVERAL RELATED PARTY TRANSACTIONS IN 2004 AND 2003.

     We have engaged in a number of transactions with related parties in 2004
and 2003. During the years ended December 31, 2004 and 2003, we spent an
aggregate of $288,000 and $375,000, respectively in related party transactions.
These included an agreement with Astor Capital, Inc. pursuant to which it
provided us with investment banking and strategic advisory services as well as a
10% placement fee for debt and equity financings raised for us. We terminated
this agreement effective September 30, 2004. We also subleased office space from
Astor. Effective November 1, 2004, we assumed the lease for the office space. In
addition, we issued notes to related parties. In light of the number of
transactions and the aggregate sums involved, there may be a perception that
these transactions were not at arm's length. We believe that each of these
transactions were on terms at least as favorable to us as they would have been
with unrelated parties.

THE LOSS OF OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER WOULD DISRUPT OUR
BUSINESS.

     Our success depends in substantial part upon the services of Jacques
Tizabi, our President, Chief Executive Officer and Chairman of the Board of
Directors. The loss of or the failure to retain the services of Mr. Tizabi would
adversely affect the development of our business and our ability to realize or
sustain profitable operations. We do not maintain key-man life insurance on Mr.
Tizabi and have no present plans to obtain this insurance.

IF A U.S. PATENT FOR THE BACTERIAL SPORE DETECTION TECHNOLOGY IS NOT ISSUED,
COMPETITORS MAY BE ABLE TO COPY AND SELL PRODUCTS SIMILAR TO OURS WITHOUT PAYING
A ROYALTY, WHICH WOULD HAVE A MATERIAL ADVERSE IMPACT ON OUR ABILITY TO COMPETE.

     If our Anthrax Smoke Detector is commercialized, the lack of U.S. or
foreign patent protection could allow competitors to copy and sell products
similar to ours without paying a royalty. The bacterial spore detection
technology that is integrated into our Anthrax Smoke Detector is owned by
Caltech. On January 31, 2003, Caltech filed a U.S. patent application covering
the technology, which currently is


                                       24
<PAGE>


being reviewed by the U.S. Patent and Trademark Office. Caltech also filed a
patent application with the European Patent Office. We paid and filed on behalf
of Caltech a patent application in Japan as well. No patents have been issued
and we cannot assure you that any patents will be issued. If a U.S. patent is
not issued, or not issued timely, we may face substantially increased
competition in our primary geographic market.

WE MAY BE SUED BY THIRD PARTIES WHO CLAIM OUR PRODUCT INFRINGES ON THEIR
INTELLECTUAL PROPERTY RIGHTS. DEFENDING AN INFRINGEMENT LAWSUIT IS COSTLY AND WE
MAY NOT HAVE ADEQUATE RESOURCES TO DEFEND OURSELVES.

     We may be exposed to future litigation by third parties based on claims
that our technology, product, or activity infringes on the intellectual property
rights of others or that we have misappropriated the trade secrets of others.
This risk is compounded by the fact that the validity and breadth of claims
covered in technology patents in general and the breadth and scope of trade
secret protection involves complex legal and factual questions for which
important legal principles are unresolved. Any litigation or claims against us,
whether or not valid, could result in substantial costs, could place a
significant strain on our financial and managerial resources, and could harm our
reputation. Our license agreement with Caltech requires that we pay the costs
associated with initiating an infringement claim and defending claims by third
parties for infringement, subject to certain offsets that may be allowed against
amounts we may owe to Caltech under the licensing agreement. In addition,
intellectual property litigation or claims could force us to do one or more of
the following:

     o    cease selling, incorporating, or using any of our technology or
          products that incorporate the challenged intellectual property, which
          could adversely affect our potential revenue;

     o    obtain a license from the holder of the infringed intellectual
          property right, which license may be costly or may not be available on
          reasonable terms, if at all; or

     o    redesign our products, which would be costly and time consuming.

THE U.S. GOVERNMENT HAS RIGHTS TO THE TECHNOLOGY WE LICENSE FROM CALTECH.

     Under the license rights provided to the United States government in our
license agreement with Caltech, a United States government agency or the United
States armed forces may, either produce the proprietary products or use the
proprietary processes or contract with third parties to provide the proprietary
products, processes, and services to one or more Federal agencies or the armed
forces of the United States government, for use in activities carried out by the
United States government, its agencies, and the armed forces, including, for
instance, the war on terrorism or the national defense. Further, the Federal
agency that provided funding to Caltech for the research that produced the
inventions covered by the patent rights referenced in the Technology Affiliates
Agreement and the related technology may require us to grant, or if we refuse,
itself may grant a nonexclusive, partially exclusive, or exclusive license to
these intellectual property rights to a third party if the agency determines
that action is necessary:

     o    because we have not taken, or are not expected to take within a
          reasonable time, effective steps to achieve practical application of
          the invention in the detection of pathogens, spores, and biological
          warfare agents;

     o    to alleviate health or safety needs which are not reasonably satisfied
          by us or our sublicensees;



                                       25
<PAGE>


     o    to meet requirements for public use specified by Federal regulations
          and those regulations are not reasonably satisfied by us; or

     o    because we have not satisfied, or obtained a waiver of, our obligation
          to have the licensed products manufactured substantially in the United
          States.

THE BACTERIAL SPORE DETECTION TECHNOLOGY IS LICENSED TO US BY CALTECH. IF OUR
LICENSE TERMINATES, OUR FUTURE PROSPECTS WOULD BE HARMED.

     The loss of our technology license would require us to cease operations
until we identify, license and integrate into our product another technology, if
available. If we fail to fulfill any payment obligation under the terms of the
license agreement or materially breach the agreement, Caltech may terminate the
license. To maintain our license with Caltech, a minimum annual royalty of
$10,000 is due to Caltech on August 1, 2005, and each anniversary thereof,
regardless of any product sales. Any royalties paid from product sales for the
12-month period preceding the date of payment of the minimum annual royalty will
be credited against the annual minimum.

OUR STOCK PRICE IS VOLATILE.

     The trading price of our common stock fluctuates widely and in the future
may be subject to similar fluctuations in response to quarter-to-quarter
variations in our operating results, announcements of technological innovations
or new products by us or our competitors, general conditions in the
bio-terrorism detection device industry in which we compete and other events or
factors. In addition, in recent years, broad stock market indices, in general,
and the securities of technology companies, in particular, have experienced
substantial price fluctuations. These broad market fluctuations also may
adversely affect the future trading price of our common stock.

OUR STOCK HISTORICALLY HAS BEEN THINLY TRADED. THEREFORE, SHAREHOLDERS MAY NOT
BE ABLE TO SELL THEIR SHARES FREELY.

     The volume of trading in our common stock historically has been low and a
limited market presently exists for the shares. We have no analyst coverage of
our securities. The lack of analyst reports about our stock may make it
difficult for potential investors to make decisions about whether to purchase
our stock and may make it less likely that investors will purchase our stock. We
cannot assure you that our trading volume will increase, or that our
historically light trading volume or any trading volume whatsoever will be
sustained in the future. Therefore, we cannot assure you that our shareholders
will be able to sell their shares of our common stock at the time or at the
price that they desire, or at all.

POTENTIAL ANTI-TAKEOVER TACTICS THROUGH ISSUANCE OF PREFERRED STOCK RIGHTS MAY
BE DETRIMENTAL TO COMMON SHAREHOLDERS.

     We are authorized to issue up to 20,000,000 shares of preferred stock, of
which none currently are issued and outstanding. The issuance of preferred stock
does not require approval by the shareholders of our common stock. Our Board of
Directors, in its sole discretion, has the power to issue preferred stock in one
or more series and establish the dividend rates and preferences, liquidation
preferences, voting rights, redemption and conversion terms and conditions and
any other relative rights and preferences with respect to any series of
preferred stock. Holders of preferred stock may have the right to receive
dividends, certain preferences in liquidation and conversion and other rights,
any of which rights and preferences may operate to the detriment of the
shareholders of our common stock. Further, the issuance of any preferred stock
having rights superior to those of our common stock may result in a decrease in
the market price of the common stock and, additionally, could be used by our
Board of Directors as an anti-takeover measure or device to prevent a change in
our control.



                                       26
<PAGE>


ITEM 7. FINANCIAL STATEMENTS

     Our financial statements and related notes are set forth at pages F-1
through F- 23.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

ITEM 8A. CONTROLS AND PROCEDURES

     We maintain disclosure controls and procedures that are designed to ensure
that the information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission, and that this
information is accumulated and communicated to our management, including our
chief executive officer and chief financial officer, as appropriate, to allow
timely decisions regarding required disclosure. As of the end of the period
covered by this report, we carried out an evaluation, under the supervision and
with the participation of our chief executive officer and chief financial
officer, of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, our chief executive officer
and chief financial officer concluded that our disclosure controls and
procedures are effective in timely alerting him to material information required
to be included in our periodic reports with the Securities and Exchange
Commission.

     Disclosure controls and procedures are our controls and other procedures
that are designed to ensure that information required to be disclosed by us in
the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
SEC's rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by us in the reports that we file under the Exchange Act is
accumulated and communicated to our management, including principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.

     In connection with the Audit Committee inquiry and pursuant to its
recommendations, we made changes to our internal controls over financial
reporting during the quarter ended December 31, 2004, as more specifically
discussed in Item 6 Management Discussion and Analysis and Plan of Operation -
Audit Committee Inquiry.

ITEM 8B. OTHER INFORMATION

     None.



                                       27
<PAGE>


                                    PART III



ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16 (A) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

     The following tables set forth certain information with respect to our
directors and officers as of December 31, 2004. The following persons serve as
our directors and executive officers:

<TABLE>
<CAPTION>

        DIRECTORS & EXECUTIVE OFFICERS    AGE                   POSITION
        ------------------------------    ---                   --------

<S>                                       <C>    <C>
Jacques Tizabi.......................     33    Director,  Chief Executive Officer and
                                                President
Matin Emouna (1) (2).................     36    Director
Michael Collins (1) (2)..............     35    Director, Secretary

        KEY EMPLOYEES                     AGE                   POSITION
        -------------                     ---                   --------

Ali Moussavi.........................     34    Vice President of Global Strategy

-------------
<FN>
(1)     Member of the Compensation Committee.
(2)     Member of the Audit Committee.
</FN>

</TABLE>

     Our executive officers are appointed by and serve at the discretion of our
Board of Directors. There are no family relationships between any director
and/or any executive officer.

JACQUES TIZABI has been the Chief Executive Officer, President and Chairman of
the Board of Directors of our Company since October 2001. He also serves as our
Acting Chief Financial Officer. Mr. Tizabi spends on average 40-50 hours per
week providing services to us, and also is involved with several other companies
in industries unrelated to our business. He is the co-founder and managing
partner of Astor Capital, Inc., which was founded in 1995 and specializes in
investment banking and asset management, predominantly in the area of direct
private investment in public companies. He is also a director of eCast Media, a
subsidiary of NT Media Corp. of California, a publicly traded company, and
President, Chief Executive Officer, and director of Riddle Records, Inc., a
publicly traded company. Mr. Tizabi has substantial experience in evaluating,
structuring and negotiating direct investments in public companies and later
stage private companies. Mr. Tizabi holds a B.S. degree in Business from New
York University and an M.B.A. from Pepperdine University.

MICHAEL COLLINS has been the Secretary and a director of our Company since
October 2001. He has been an independent business consultant since December
1998. Between 1993 and 1997, Mr. Collins worked for Twentieth Century Fox
International, PolyGram Filmed Entertainment and Savoy Pictures in the field of
media management. Mr. Collins received a B.A. in Political Science from Columbia
University and an M.B.A. from The Anderson School at UCLA.

MATIN EMOUNA has served as a director of our Company since October 2001. Since
1997, Mr. Emouna has maintained his own law practice in New York, where he
represents foreign and domestic clients in a broad range of real estate
transactions, with emphasis on new constructions, commercial real estate
transactions, shopping center development, financing, and commercial leasing.
Mr. Emouna also serves as a general counsel for Omni Abstract Title, Radio
Sedayeh Iran and several non-profit religious



                                       28
<PAGE>


organizations. He holds a B.S. degrees in Business Administration and Spanish
from New York State University at Albany and a J.D. from Benjamin N. Cardozo
School of Law.

ALI MOUSSAVI has been the Vice President of Global Strategy of our Company since
October 2004. Mr. Moussavi principally is responsible for identifying and
structuring international opportunities and partnerships. Mr. Moussavi has
substantial experience and knowledge in global expansion and for over the past
five years, has acted as corporate advisor to several U.S. companies,
structuring financial and business reorganization plans and assisting in the
expansion of their consumer and/or investment base to the European and Asian
continents. Mr. Moussavi is a co-founder of Astor Capital, Inc. He holds a B.S.
degree in Mathematics from New York University.

AUDIT COMMITTEE

     Our Audit Committee currently consists of Michael Collins and Matin Emouna.
Each Audit Committee member is independent within the meaning of the applicable
Nasdaq listing standards and applicable rules and regulations promulgated by the
Securities and Exchange Commission. Our Audit Committee currently does not have
a financial expert within the meaning of the applicable SEC rules as management
does not believe one is necessary in light of the Company's current stage of
product development.

CODE OF ETHICS

     We have adopted a Code of Business Conduct and Ethics which is designed to
set the standards of business conduct and ethics and help directors and
employees resolve ethical issues. The Code applies to all directors and
employees, including the Chief Executive Officer and Chief Financial Officer and
other persons performing similar functions. The Code covers topics including,
but not limited to, conflicts of interest, confidentiality of information, fair
dealing with customers, supplies and competitors, and compliance with applicable
laws, rules and regulations. The purpose of the Code is to ensure to the
greatest possible extent that our business is conducted in a consistently legal
and ethical manner.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires our officers,
directors, and persons who beneficially own more than 10% of our common stock to
file reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and greater than
10% beneficial owners are also required by rules promulgated by the SEC to
furnish us with copies of all Section 16(a) forms they file.

     Based solely upon a review of the copies of such forms furnished to us, or
written representations that no Form 3, Form 4, or Form 5 filings were required,
we believe that during the fiscal year ended December 31, 2004, there was
compliance with all Section 16(a) filing requirements applicable to our
officers, directors and persons who beneficially own greater than 10% of our
common stock.

ITEM 10.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     The following table sets forth information concerning the compensation for
services in all capacities rendered to us for the three fiscal years ended
December 31, 2004, of our Chief Executive Officer and our other executive
officers whose annual compensation exceeded $100,000 in the fiscal year ended
December 31, 2004, if any. We refer to the Chief Executive Officer and these
other officers as the named executive officers.



                                       29
<PAGE>


<TABLE>
<CAPTION>
<S>                            <C>     <C>                <C>         <C>            <C>
                                          ANNUAL                                       LONG-TERM
                                       COMPENSATION                                  COMPENSATION
                                                                                         AWARDS

                                                                                      SECURITIES
                                                                    CASH VALUE OF     UNDERLYING
 NAME AND PRINCIPAL POSITION   YEAR       SALARY         BONUS       PERQUISITES        OPTIONS

Jacques Tizabi                 2004      $150,000         --           $16,218            --
  President, Chief Executive   2003    $145,833 (1)    $416,667          --            6,800,000
                                                          (1)
  Officer, Acting CFO and      2002        (1)                           --               --
  Chairman of the Board

Ali Moussavi                   2004      $154,000         --             --               --
  Vice President of Global
  Strategy
--------------
<FN>
(1)  To enable us to meet a portion of our obligations as they became due, our
     Chairman and Chief Executive Officer agreed to continue to provide services
     to us, despite our inability to pay his salary to him for 20 consecutive
     months, totaling $416,667. Our CEO agreed permanently to waive that
     compensation. In August 2003, our Board of Directors approved a bonus of
     $416,667 based largely upon our CEO's continued service to the Company
     without payment, his waiver of those amounts owed, and the progress of the
     Anthrax Smoke Detector.
</FN>

</TABLE>

OPTION GRANTS IN FISCAL 2004

     There were no options granted during fiscal 2004 to the named executive
officers.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

     The following table sets forth, for each of the named executive officers,
certain information regarding the exercise of stock options during fiscal 2004,
the number of shares of common stock underlying stock options held at fiscal
year-end and the value of options held at fiscal year-end based upon the last
reported sales price of the common stock on the OTC Bulletin Board on December
31, 2004 ($0.41 per share).


<TABLE>
<CAPTION>
<S>             <C>           <C>         <C>           <C>            <C>           <C>

                 SHARES                    NUMBER OF SECURITIES
                 ACQUIRED                 UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED
                    ON         VALUE            OPTIONS AT             IN-THE-MONEY OPTIONS AT
     NAME        EXERCISE    REALIZED        DECEMBER 31, 2004            DECEMBER 31, 2004
     ----        --------    ---------   --------------------------   ---------------------------
                                         EXERCISABLE   UNEXERCISABLE  EXERCISABLE    UNEXERCISABLE
                 ---------   ---------   -----------   ------------   ------------   ------------

Jacques Tizabi      --          --       7,950,000         --         $670,500           --

</TABLE>

DIRECTOR COMPENSATION

     On October 18, 2004, the Board of Directors determined to compensate
independent directors in the amount of $15,000 each for services rendered
through December 31, 2004. The Board also determined to compensate the
independent directors $5,000 each for services to be rendered for the period
January 1, 2005 through December 31, 2005. When we request our Board members to
attend meetings in person, it is our policy to reimburse directors for
reasonable travel and lodging expenses incurred in attending those Board
meetings.


                                       30
<PAGE>



EMPLOYMENT AGREEMENTS

     We have an employment agreement with Jacques Tizabi. Mr. Tizabi's
employment agreement, dated as of September 24, 2001, and amended August 23,
2004, provides for Mr. Tizabi to serve as our Chairman of the Board, Chief
Executive Officer and President until December 31, 2010, unless otherwise
extended. The employment agreement provides for Mr. Tizabi to receive an annual
base salary of $250,000, subject to salary increases of 5% per year commencing
January 1, 2006. Mr. Tizabi also is entitled to specified perquisites, including
participation in any group life, medical, disability and other insurance plans
provided by us, use of a luxury automobile approved by the compensation
committee (with a maximum cost of $2,500 per month), monthly dues for club
memberships not to exceed $1,500 per month, and reimbursement of entertainment
expenses provided to our customers, vendors, and strategic partners. To date,
Mr. Tizabi has not received any of these specified perquisites.

     If Mr. Tizabi's employment is terminated due to his death, the employment
agreement provides that we will pay Mr. Tizabi's estate his remaining base
salary during the remaining scheduled term of the employment agreement,
accelerate the vesting of his options and continue to provide family medical
benefits. If Mr. Tizabi's employment is terminated due to his disability, the
employment agreement provides that we will pay Mr. Tizabi his remaining base
salary during the remaining scheduled term of the employment agreement (reduced
by any amounts paid under long-term disability insurance policy maintained by us
for the benefit of Mr. Tizabi).

     If Mr. Tizabi terminates the employment agreement for cause, if we
terminate the employment agreement without cause or in the event of a change of
control, in which event the employment of Mr. Tizabi terminates automatically,
we will pay Mr. Tizabi his remaining base salary during the remaining scheduled
term of the employment agreement and an amount based on his past bonuses and
continue to provide specified benefits and perquisites.

     If Mr. Tizabi terminates the employment agreement without cause or we
terminate the employment agreement for cause, Mr. Tizabi is entitled to receive
all accrued and unpaid salary and other compensation and all accrued and unused
vacation and sick pay.

     If any of the payments due Mr. Tizabi upon termination qualifies as "excess
parachute payments" under the Internal Revenue Code, Mr. Tizabi also is entitled
to an additional payment to cover the tax consequences associated with these
excess parachute payments.

     Mr. Tizabi has agreed that he will defer payment of all accrued but unpaid
bonus or salary, or other compensation payable to him, in excess of $150,000 per
year, for 2004 and 2005 until December 31, 2005.

     We also have an employment agreement with Ali Moussavi. Mr. Moussavi's
employment agreement, dated as of October 1, 2004, provides for Mr. Moussavi to
serve as our Vice President of Global Strategy. The employment agreement
provides for Mr. Moussavi to receive an annual base salary of $150,000. Mr.
Moussavi has agreed that his annual base salary for 2005 may be paid to him in
either cash or shares of our stock.


                                       31
<PAGE>


ITEM 11. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

STOCK INCENTIVE PLANS

     We have in effect the 2003 Stock Incentive Plan, which we refer to as the
2003 Plan. The purpose of the 2003 Plan is to advance our interests and our
stockholders by strengthening our ability to obtain and retain the services of
the types of officers, employees, directors, and consultants who will contribute
to our long-term success and to provide incentives which are linked directly to
increases in stock value which will inure to the benefit of all of our
stockholders. The total number of our common shares authorized and reserved for
issuance under 2003 Plan is 4,500,000. The 2003 Plan is administered by our
board of directors or a committee comprised of at least two members of our board
of directors appointed by our board of directors, referred to as the Plan
Administrator. The Plan Administrator has the authority to grant to eligible
persons following rights:

     o    incentive stock options;

     o    nonstatutory stock options; and

     o    restricted stock.

     The Plan Administrator also has the authority to:

     o    construe and interpret the 2003 Plan;

     o    promulgate, amend, and rescind rules and regulations relating to the
          administration of the 2003 Plan;

     o    from time to time select from among our and our subsidiaries' eligible
          employees, directors, and consultants those persons to whom options
          will be granted;

     o    determine the timing and manner of the grant of the options or award
          of stock, whether the option will be an incentive stock option or a
          nonstatutory stock option;

     o    determine the exercise price, the number of shares covered by, and all
          of the terms of the options (which need not be identical) as well as
          the number of shares of restricted stock that may be awarded, the
          purchase price, and form of payment;

     o    determine the duration and purpose of leaves of absence which may be
          granted to optionees without constituting termination of their
          employment for purposes of the 2003 Plan;

     o    make all of the determinations necessary or advisable for
          administration of the 2003 Plan; and

     o    in its absolute discretion, without amendment to the 2003 Plan,
          accelerate the date on which any option granted under the 2003 Plan
          becomes exercisable, waive or amend the operation of 2003 Plan
          provisions respecting exercise after termination of employment, or
          otherwise adjust any of the terms of the option.



                                       32
<PAGE>


     The 2003 Plan will terminate automatically on June 13, 2013. To date, we
have not yet issued any options nor granted any restricted common stock under
the 2003 Plan.

PRINCIPAL STOCKHOLDERS

     The following table sets forth certain information relating to the
ownership of common stock by (i) each person known by us be the beneficial owner
of more than five percent (2,311,594 shares) of the outstanding shares of our
common stock, (ii) each of our directors, (iii) each of our named executive
officers, and (iv) all of our executive officers and directors as a group.
Unless otherwise indicated, the information relates to these persons, beneficial
ownership as of December 31, 2004. Except as may be indicated in the footnotes
to the table and subject to applicable community property laws, each person has
the sole voting and investment power with respect to the shares owned. The
address of each person listed is in care of Universal Detection Technology, 9595
Wilshire Blvd., Suite 700, Beverly Hills, California 90212, unless otherwise set
forth below that person's name.

<TABLE>
<CAPTION>

                                                Number of Shares of
                                                    Common Stock         Percent of
Name and Address                               Beneficially Owned (1)    Class (1)
----------------                               ----------------------    -----------
<S>                                                 <C>                  <C>
   Jacques Tizabi (2).........................              7,979,700        14.7%
   Michael Collins............................                     --         0%
   Matin Emouna...............................                     --         0%
   Ali Moussavi...............................                     --         0%
   Directors and executive officers as a
        group (4 persons) (2).................              7,979,700        14.7%
-----------
<FN>

     (1)  Under Rule 13d-3 under the Exchange Act, certain shares may be deemed
          to be beneficially owned by more than one person (if, for example,
          persons share the power to vote or the power to dispose of the
          shares). In addition, shares are deemed to be beneficially owned by a
          person if the person has the right to acquire the shares (for example,
          upon exercise of an option) within 60 days of the date as of which the
          information is provided. In computing the percentage ownership of any
          person, the amount of shares outstanding is deemed to include the
          amount of shares beneficially owned by that person (and only that
          person) by reason of these acquisition rights. As a result, the
          percentage of outstanding shares of any person as shown in this table
          does not necessarily reflect the person's actual ownership with
          respect to the number of shares of our common stock actually
          outstanding at September 20, 2004.

     (2)  Includes (a) 7,950,000 shares that may be acquired upon the exercise
          of options, which are or will become exercisable on or prior to March
          1, 2005, (b) 21,900 shares that may be acquired upon the exercise of
          warrants owned by Astor Capital, Inc., and (c) 6,000 shares that may
          be acquired upon the exercise of warrants owned by JRT Holdings, Inc.
          Mr. Tizabi and Mr. Ali Moussavi, each a 50-percent owner of Astor
          Capital, Inc., share voting and dispositive power. Mr. Tizabi and Mr.
          Raymond Tizabi, each a 50-percent owner of JRT Holdings, Inc., share
          voting and dispositive power.
</FN>

</TABLE>


     The information as to shares beneficially owned has been individually
furnished by our respective directors, named executive officers and other
stockholders, or taken from documents filed with the SEC.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In connection with our private placement offering in July 2004, our Chief
Executive Officer agreed to defer payment of all accrued but unpaid bonus and
salary, as well as any compensation payable to him in excess of $150,000 per
year, for nine months from April 29, 2004.

     Effective June 1, 2003, we entered into an agreement with Astor Capital,
Inc., a company in which Jacques Tizabi, our Chief Executive Officer, is the
President of and owns a 50% interest and in


                                       33
<PAGE>


which Ali Moussavi our Vice President of Global Strategy owns a 50% interest,
pursuant to which we agreed to pay $25,000 per month for investment banking and
strategic advisory services as well as a 10% fee for all debt and equity
financing raised for us. In connection with our private placement offering in
July 2004, we modified this agreement so that the compensation payable to Astor
Capital under the agreement is reduced during the period from April 29, 2004,
and for nine months thereafter, to an amount not to exceed the sum of $5,000 per
month, excluding any fees for placement of securities. Effective September 30,
2004, we terminated this agreement.

     During the years ended December 31, 2004, 2003 and 2002, we paid Astor
Capital, Inc. placement fees in the aggregate amounts of $149,073, $157,633, and
$34,900, respectively, in connection with private placements and equity
financings for us.

     During the years ended December 31, 2004 and 2003, we paid Astor Capital,
Inc. $90,145 and $28,654 in connection with the use of the office space we
sublease from it. This amount is equal to the amount Astor Capital paid to its
landlord for the pro rata portion of the lease of the office space. Effective
November 1, 2004, we entered into an agreement pursuant to which we assumed the
lease from Astor. Under that agreement, Astor is obligated to pay $500 per month
for the non-exclusive use of certain common areas of the office that Astor
subleases from us.

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K


     (a) The following exhibits are filed herewith:

<TABLE>
<CAPTION>

NUMBER   EXHIBIT TITLE
<S>  <C>
     The following exhibits are included as part of this filing and incorporated
     herein by this reference.

3.1  Articles of Incorporation of A. E. Gosselin Engineering, Inc. (now the
     Company) (incorporated herein by reference to Exhibit 3(a) to Amendment No.
     1 to the Registration Statement on Form 10 of Dasibi Environmental
     Corporation).

3.2  Certificate of Amendment of Articles of Incorporation of A. E. Gosselin
     Engineering, Inc. (now the Company) (incorporated herein by reference to
     Exhibit 3(a) to Amendment No. 1 to the Registration Statement on Form 10 of
     Dasibi Environmental Corporation).

3.3  Certificate of Amendment of Articles of Incorporation of Dasibi
     Environmental Corp. (now the Company) (incorporated herein by reference to
     Exhibit 3(a) to Amendment No. 1 to the Registration Statement on Form 10 of
     Dasibi Environmental Corporation).

3.4  Amended and Restated Bylaws of Registrant (incorporated by reference to the
     exhibit so described in the Company's Annual Report on Form 10-KSB for the
     fiscal year ended December 31, 2001, filed with the Securities and Exchange
     Commission on April 15, 2002).

4.1  Amended and Restated 2003 Stock Incentive Plan

10.1 Binding letter of Intent dated March 18, 2002, by and between Registrant
     and Steven Sion (incorporated by reference to the exhibit so described in
     the Company's Current Report on Form 8-K filed with the Securities and
     Exchange Commission on March 22, 2002).

10.2 Employment Agreement by and between Registrant and Jacques Tizabi dated
     September 25, 2001 (incorporated by reference to the exhibit so described
     in the Company's Quarterly Report on Form


                                       34
<PAGE>


     10-QSB for the Quarter Ended March 31, 2002, filed with the Securities and
     Exchange Commission on May 20, 2002).

10.3 Amendment to Employment Agreement of Jacques Tizabi, dated August 23, 2004.
     (incorporated by reference to the exhibit so described in the Company's
     Quarterly Report on Form 10-QSB for the Quarter Ended September 30, 2004,
     filed with the Securities and Exchange Commission on November 22, 2004).

10.4 Technology Affiliates Agreement by and between Registrant and California
     Institute of Technology, dated August 6, 2002. (incorporated herein by
     reference to the exhibit so described in the Company's Annual Report on
     Form 10-KSB for the fiscal year ended December 31, 2002, filed with the
     Securities and Exchange Commission on April 15, 2003).

10.5 Licensing Agreement by and between Registrant and California Institute of
     Technology, dated September 30, 2003. (incorporated by reference to the
     exhibit so described in the Company's Quarterly Report on Form 10-QSB for
     the Quarter Ended September 30, 2003, filed with the Securities and
     Exchange Commission on November 19, 2003).

10.6 Agreement for Investment Banking and Advisory Services, by and between
     Registrant and Astor Capital, Inc., dated June 1, 2003. (incorporated by
     reference to the exhibit so described in the Company's Annual Report on
     Form 10-KSB for the year ended December 31, 2003, filed with the Securities
     and Exchange Commission on March 31, 2004)

10.7 Amendment to Agreement for Investment Banking and Advisory Services with
     Astor Capital, Inc. dated April 29, 2004 (incorporated by reference to the
     exhibit so described in the Company's Quarterly Report on Form 10-QSB for
     the Quarter Ended June 30, 2004, filed with the Securities and Exchange
     Commission on August 23, 2004).

10.8 Amendment to Agreement for Investment Banking and Advisory Services with
     Astor Capital, Inc. dated September 22, 2004 (incorporated by reference to
     the exhibit so described in the Company's Quarterly Report on Form 10-QSB
     for the Quarter Ended September 30, 2004, filed with the Securities and
     Exchange Commission on November 22, 2004).

10.9 Placement Agency Agreement by and between the Company and Meyers
     Associates, L.P. dated April29, 2004 (incorporated by reference to the
     exhibit so described in Amendment No. 5 to the Company's Registration
     Statement on Form SB-2, File No. 333-117859, filed with the Securities and
     Exchange Commission on February 2, 2005).

10.10 Amendment No. 1 to the Placement Agency Agreement by and between the
     Company and Meyers Associates, L.P., dated May 25, 2004 (incorporated by
     reference to the exhibit so described in Amendment No. 5 to the Company's
     Registration Statement on Form SB-2, File No. 333-117859, filed with the
     Securities and Exchange Commission on February 2, 2005).

10.11 Form of Subscription Agreement by and between the Company and the selling
     stockholders named in the Registration Statement on Form SB-2 filed on
     August 2, 2004, File No. 333-117859 (incorporated by reference to the
     exhibit so described in Amendment No. 5 to the Company's Registration
     Statement on Form SB-2, File No. 333-117859, filed with the Securities and
     Exchange Commission on February 2, 2005).

10.12 Form of Class A Warrants issued to the selling stockholders named in the
     Registration Statement on Form SB-2 filed on August 2, 2004, File No.
     333-117859 (incorporated by reference to the exhibit so described in
     Amendment No. 5 to the Company's Registration Statement on Form SB-2, File
     No. 333-117859, filed with the Securities and Exchange Commission on
     February 2, 2005).

                                       35
<PAGE>


10.13 Form of Class B Warrants issued to the selling stockholders named in the
     Registration Statement on Form SB-2 filed on August 2, 2004, File No.
     333-117859 (incorporated by reference to the exhibit so described in
     Amendment No. 5 to the Company's Registration Statement on Form SB-2, File
     No. 333-117859, filed with the Securities and Exchange Commission on
     February 2, 2005).

10.14 Registration Rights Agreement by and between the Company and Meyers
     Associates, L.P., as agent for the selling stockholders named in the
     Registration Statement on Form SB-2 filed on August 2, 2004, File No.
     333-117859 (incorporated by reference to the exhibit so described in
     Amendment No. 5 to the Company's Registration Statement on Form SB-2, File
     No. 333-117859, filed with the Securities and Exchange Commission on
     February 2, 2005).

10.15 Form of Class B Warrants issued to the selling stockholders named in the
     Registration Statement on Form SB-2 filed on August 2, 2004, File No.
     333-117859 (incorporated by reference to the exhibit so described in
     Amendment No. 5 to the Company's Registration Statement on Form SB-2, File
     No. 333-117859, filed with the Securities and Exchange Commission on
     February 2, 2005).

10.16 Registration Rights Agreement by and between the Company and Meyers
     Associates, L.P., as agent for the selling stockholders named in the
     Registration Statement on Form SB-2 filed on August 2, 2004, File No.
     333-117859 (incorporated by reference to the exhibit so described in
     Amendment No. 5 to the Company's Registration Statement on Form SB-2, File
     No. 333-117859, filed with the Securities and Exchange Commission on
     February 2, 2005).

10.17 Standard Form Office Lease, dated September 2003, between Astor Capital,
     Inc. and CSDV, a Limited Partnership. (incorporated by reference to the
     exhibit so described in the Company's Quarterly Report on Form 10-QSB for
     the Quarter Ended September 30, 2004, filed with the Securities and
     Exchange Commission on November 22, 2004).

10.18 Assumption of Lease Agreement, dated October 14, 2004, between Universal
     Detection Technology and Astor Capital, Inc. (incorporated by reference to
     the exhibit so described in the Company's Quarterly Report on Form 10-QSB
     for the Quarter Ended September 30, 2004, filed with the Securities and
     Exchange Commission on November 22, 2004).

10.19 Letter Agreement, dated August 10, 2004, between Registrant and IIG Equity
     Opportunities Fund Ltd. (incorporated by reference to the exhibit so
     described in Amendment No. 5 to the Company's Registration Statement on
     Form SB-2, File No. 333-117859, filed with the Securities and Exchange
     Commission on February 2, 2005).

10.20 Letter Agreement, dated August 10, 2004, between Registrant and Target
     Growth Fund Ltd. . (incorporated by reference to the exhibit so described
     in Amendment No. 5 to the Company's Registration Statement on Form SB-2,
     File No. 333-117859, filed with the Securities and Exchange Commission on
     February 2, 2005).

10.21 Letter Agreement, dated September 21, 2004 between Registrant and JRT
     Holdings. (incorporated by reference to the exhibit so described in
     Amendment No. 5 to the Company's Registration Statement on Form SB-2, File
     No. 333-117859, filed with the Securities and Exchange Commission on
     February 2, 2005).

10.22 Letter Agreement, dated October 1, 2004, between Registrant and Ali
     Moussavi (incorporated by reference to the exhibit so described in
     Amendment No. 5 to the Company's Registration Statement on Form SB-2, File
     No. 333-117859, filed with the Securities and Exchange Commission on
     February 2, 2005).

10.23 Universal Detection Technology Board of Directors Compensation 2005.

10.24 Universal Detection Technology Executive Officers' Compensation for 2005.

21.1 Subsidiaries of Registrant (incorporated by reference to the exhibits so
     described in the Company's Annual Report on Form 10-KSB for the year ended
     December 31, 2003, filed with the Securities and Exchange Commission on
     March 31, 2004).

23.1 Consent of Independent Auditors - AJ Robbins, PC.

24.1 Power of Attorney (including in signature page).


                                       36
<PAGE>


31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
     Sarbanes-Oxley Act of 2002, dated March 30, 2005.

32.1 Certification of Chief Financial Officer pursuant to Section 302 of the
     Sarbanes-Oxley Act of 2002, dated March 30, 2005.

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

     (b) The Company did not file any reports on Form 8-K during the last
quarter of the period for which this Annual Report on Form 10-KSB covers.

</TABLE>


ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES

The Audit Committee approved the engagement of AJ. Robbins, PC as our
independent auditors for the year ended December 31, 2004. The Committee also
has approved the engagement of AJ. Robbins as our independent auditors through
the quarter ending September 30, 2005.

AUDIT FEES

The aggregate fees billed by AJ. Robbins, PC for the audit and review of our
annual financial statements and services that are normally provided by an
accountant in connection with statutory and regulatory filings or engagements
for the fiscal years ended December 31, 2004 and 2003, were approximately
$91,241 and $59,138, respectively.

AUDIT-RELATED FEES

The aggregate fees billed by AJ. Robbins, PC for assurance and related services
rendered by AJ. Robbins that are reasonably related to the performance of the
audit or review of our financial statements for the fiscal years ended December
31, 2004 and 2003, were approximately $0 and $0, respectively.

TAX FEES

The aggregate fees billed by AJ. Robbins, PC for professional services rendered
for tax compliance, tax advice and tax planning for the fiscal years ended
December 31, 2004 and 2003, were approximately $3,716 and $18,843, respectively.

ALL OTHER FEES

No other fees were billed by AJ. Robbins, PC for the fiscal years ended December
31, 2004 and 2003.

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

     The audit committee is required to pre-approve the audit and non-audit
services performed by the independent auditor in order to assure that the
provision of such services do not impair the auditor's independence.



                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    UNIVERSAL DETECTION CORPORATION



                                    /s/ Jacques Tizabi
                                    --------------------------------------------
                                    Jacques Tizabi
                                    Chief Executive Officer and President



     KNOWN BY ALL MEN THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jacques Tizabi his attorney-in-fact and agent
with full power of substitution and re-substitution, for him and his name, place
and stead, in any and all capacities, to sign any or all amendments to this Form
10-K and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
foregoing, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

<TABLE>
<CAPTION>
<S>                                 <C>                                       <C>

NAME                                   TITLE                                     DATE


/s/ Jacques Tizabi
-----------------------------------
Jacques Tizabi                         President, Chief Executive Officer &      March 30, 2005
                                       Acting Chief Financial Officer


/s/ Michael Collins
-----------------------------------
Michael Collins                        Director, Secretary                       March 30, 2005



/s/ Matin Emouna
-----------------------------------
Matin Emouna                           Director                                  March 30, 2005



</TABLE>


                                       37
<PAGE>


                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)

                          INDEX TO FINANCIAL STATEMENTS


                                                                            PAGE

Report of Independent Registered Public Accounting Firm                     F-2

Consolidated Balance Sheets                                                 F-3

Consolidated Statements of Operations                                       F-4

Consolidated Statements of Changes in Stockholders' Equity (Deficit)        F-5

Consolidated Statements of Cash Flows                                       F-6

Notes to Consolidated Financial Statements                                  F-7






                                      F-1
<PAGE>


                                AJ. ROBBINS, P.C.
                              216 SIXTEENTH STREET
                                    SUITE 600
                             DENVER, COLORADO 80202

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Audit Committee
Universal Detection Technology
(f/k/a Pollution Research and Control Corporation and Subsidiaries)
Beverly Hills, California

We have audited the accompanying consolidated balance sheet of Universal
Detection Technology (formerly Pollution Research and Control Corp.) and
Subsidiaries as of December 31, 2004, and the related consolidated statements of
operations, changes in stockholders' equity (deficit), and cash flows for each
of the years in the two year period then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Universal Detection Technology (formerly Pollution Research and Control Corp.)
and Subsidiaries as of December 31, 2004, and the results of its consolidated
operations and its cash flows for each of the years in the two year period then
ended in conformity with generally accepted accounting principles in the United
States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations,
it has a net working capital deficiency, and has a net capital deficiency that
raises substantial doubt about the entity's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                            AJ. ROBBINS, PC
                                            CERTIFIED PUBLIC ACCOUNTANTS



DENVER, COLORADO
FEBRUARY 25, 2005



                                      F-2
<PAGE>


<TABLE>
<CAPTION>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
                                                                          December 31,
                                                                              2004
                                                                          --------------
<S>                                                                     <C>
CURRENT ASSETS:
    Cash and cash equivalents                                           $     466,971
    Certificate of deposit                                                    253,345
    Restricted cash                                                           101,837
    Deferred interest expense                                                  24,300
    Prepaid expenses and other current assets                               1,103,316
                                                                          --------------

        Total current assets                                                1,949,769

DEPOSITS                                                                       10,226
EQUIPMENT, NET                                                                109,478
PATENT COSTS                                                                   31,022
                                                                          --------------

                                                                        $   2,100,495
                                                                          ==============

        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
    Accounts payable, trade                                             $     186,464
    Accrued liabilities                                                       882,221
    Notes payable                                                             876,766
    Accrued interest expense                                                  463,395
                                                                          --------------

        Total current liabilities                                           2,408,846
                                                                          --------------

COMMITMENTS AND CONTINGENCIES                                                       -

STOCKHOLDERS' EQUITY (DEFICIT):
    Preferred stock, $.01 par value, 20,000,000 shares
      authorized, -0- issued and outstanding                                        -
    Common stock, no par value, 480,000,000 shares
    authorized, 49,867,159 shares issued and outstanding                   22,462,380
    Additional paid-in-capital                                              3,730,700
    Accumulated (deficit)                                                 (26,501,431)
                                                                          --------------

        Total stockholders' equity (deficit)                                 (308,351)
                                                                          --------------

                                                                        $   2,100,495
                                                                          ==============

          See accompanying notes to consolidated financial statements.

</TABLE>

                                      F-3
<PAGE>


<TABLE>
<CAPTION>
                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
<S>                                                                     <C>              <C>
                                                                        For the Year     For the Year
                                                                            Ended            Ended
                                                                        December 31,     December 31,
                                                                             2004             2003
                                                                        --------------   --------------
                                                                                           (Restated)
REVENUE                                                                 $      25,000    $         ---
COST OF GOODS SOLD                                                                ---              ---
                                                                        --------------   --------------

GROSS PROFIT                                                                   25,000              ---
                                                                        --------------   --------------

OPERATING EXPENSES:
     Selling, general and administrative                                    3,412,964        1,655,711
     Marketing                                                              2,229,344        1,932,512
     Research and development                                                  20,000          199,000
     Depreciation                                                              11,702              152
                                                                        --------------   --------------

               Total expenses                                               5,674,010        3,787,375
                                                                        --------------   --------------

(LOSS) FROM OPERATIONS                                                     (5,649,010)      (3,787,375)

OTHER INCOME (EXPENSE):
     Forgiveness of accrued interest payable                                   40,518              ---
     Interest income                                                           12,683              726
     Interest expense                                                        (111,163)        (185,563)
     Amortization of loan fees                                                (45,760)        (235,136)
     Beneficial conversion feature of convertible debt                            ---         (495,305)
                                                                        --------------   --------------
        Net other income (expense)                                           (103,722)        (915,278)
                                                                        --------------   --------------

(LOSS) FROM OPERATIONS BEFORE INCOME TAXES                                 (5,752,732)      (4,702,653)

INCOME TAX EXPENSE                                                                ---              ---
                                                                        --------------   --------------

  NET (LOSS)                                                           $   (5,752,732)   $  (4,702,653)
                                                                        ==============   ==============

NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED:                       $        (0.13)   $       (0.23)
                                                                        ==============   ==============

WEIGHTED AVERAGE SHARES - BASIC AND DILUTED                                43,374,429       20,919,845
                                                                        ==============   ==============


          See accompanying notes to consolidated financial statements.

</TABLE>

                                      F-4
<PAGE>

<TABLE>
<CAPTION>
                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

                                                                                                           Total
                                           Common Stock              Additional       Accumulated      Stockholders'
                                       Shares          Amount      Paid-in-Capital     (Deficit)         (Deficit)
                                    ------------    -----------    ---------------    ------------    --------------
<S>                                 <C>             <C>                 <C>            <C>                <C>
BALANCE, DECEMBER 31, 2002
(RESTATED)                          10,873,392      10,813,330          2,870,167      (16,046,046)       (2,362,549)
Common stock issued for services     3,357,000       1,181,280                ---               ---        1,181,280
Common stock issued for loan fees      415,000         198,400                ---               ---          198,400
Conversion of convertible debt
   and accrued interest              3,889,044         573,805                ---               ---          573,805
Stock issued in private
   placements net of offering
   costs of $443,033                15,907,903       2,876,222                ---               ---        2,876,222
Fair market value of repriced
   warrants                                ---             ---             56,019               ---           56,019
Warrants issued for services               ---             ---            185,400               ---          185,400
Value of beneficial
   conversion feature of
   convertible debt                        ---             ---            495,305               ---          495,305
Exercise of warrants                   559,858          62,018                ---               ---           62,018
Net (loss) for the year                    ---             ---                ---       (4,702,653)       (4,702,653)
                                    ------------    -----------    ---------------    -------------    --------------

BALANCE, DECEMBER 31, 2003
(RESTATED)                          35,002,197      15,705,055          3,606,891      (20,748,699)       (1,436,753)

Stock issued in private
placements, net of
offerings costs of $738,615         12,373,156       5,450,925                ---              ---         5,450,925
Exercise of warrants                    55,556          20,000                ---              ---            20,000
Stock issued for services            2,230,000       1,253,400                ---              ---         1,253,400
Conversion of accrued
interest                               206,250          33,000                ---              ---            33,000
Warrants issued for services               ---             ---            123,809              ---           123,809
Net (loss) for the year                    ---             ---                ---       (5,752,732)       (5,752,732)
                                    ------------    -----------    ---------------    -------------    --------------


BALANCE, DECEMBER 31, 2004          49,867,159    $ 22,462,380      $   3,730,700    $ (26,501,431)    $    (308,351)
                                    ============    ===========    ===============    =============    ==============
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                                                    For the Year      For the Year
                                                                       Ended             Ended
                                                                    December 31,      December 31,
                                                                        2004              2003
                                                                 ---------------    --------------
                                                                                      (Restated)
<S>                                                               <C>                <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net (loss)                                                        $  (5,752,732)     $  (4,702,653)
Adjustments to reconcile net (loss) to net cash (used in)
   operations:
   Beneficial conversion feature of convertible debt                        ---            495,305
   Stock issued for services                                          1,253,400          1,181,280
   Stock based compensation issued for services                         123,809            185,400
   Stock issued for loan fees                                               ---            198,400
   Fair market value of repriced warrants                                   ---             56,019
   Depreciation                                                          11,702                152
   Changes in operating assets and liabilities:
          Accounts receivable                                               ---             30,000
          Due from related parties                                          ---            (29,099)
          Inventories                                                    20,000                ---
          Prepaid expenses                                              (24,300)          (999,217)
          Accounts payable                                              (58,161)          (126,701)
          Accrued expenses                                              237,367            577,347
                                                                 ---------------    --------------

          Net cash (used in) operating activities                    (4,188,915)        (3,133,767)
                                                                 ---------------    --------------
CASH FLOWS (TO) INVESTING ACTIVITIES:

  Purchase of equipment                                                 (92,228)            (3,659)
  Investment in patent                                                  (31,022)               ---
  Advances to related party                                              (6,572)               ---
  Bridge note to related party                                              ---            (50,000)
  Payments received bridge note                                          50,000                ---
  Investment in certificates of deposit                                (253,345)               ---
   (Increase) in restricted cash                                         (1,604)          (100,233)
                                                                 ---------------    --------------

    Net cash (used in) investing activities                            (334,771)          (153,892)
                                                                 ---------------    --------------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
  Proceeds from issuance of common stock                              6,189,540          3,319,255
  Payment of offering costs                                            (738,615)          (443,033)
  Proceeds from exercise of warrants                                     20,000             62,018
  Proceeds from notes payable                                               ---            450,000
  Payments on notes payable                                            (495,167)           (95,000)
                                                                 ---------------    --------------

Net cash provided by financing activities                             4,975,758          3,293,240
                                                                 ---------------    --------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    452,072              5,581

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                             14,899              9,318
                                                                 ---------------    --------------

CASH AND CASH EQUIVALENTS, END OF YEAR                           $      466,971       $     14,899
                                                                 ===============    ==============
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>


                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 1 - BUSINESS ACTIVITY

Universal Detection Technology (formerly Pollution Research and Control Corp.),
a California corporation, primarily designed, manufactured and marketed air
pollution monitoring instruments, through its formerly wholly-owned subsidiary
Dasibi Environmental Corporation ("Dasibi"). The Company's wholly owned
subsidiary Nutek, Inc. ("Nutek") is inactive. The Company's wholly owned
subsidiary Logan Medical Devices, Inc. ("Logan") was renamed Dasibi China, Inc.
("Dasibi China") and is currently inactive.

In March 2002, the Company sold Dasibi to one of its creditors in exchange for
the cancellation of $1,500,000 in debt and accrued interest owed to the
creditor. A non-exclusive license agreement for all of the Dasibi's technology
was also granted to the Company. In May 2002, Dasibi vacated its premises and
management believes Dasibi has since suspended operations.

Beginning in 2002, the Company began doing business as Universal Detection
Technology and has focused its research and development efforts in developing a
real time biological weapon detection device. On August 8, 2003, the
shareholders approved the change of the name of Pollution Research and Control
Corp. to Universal Detection Technology. To accelerate development of its
initial biological weapon detection device, the Company has developed and is
implementing a collaborative partnering strategy. Under this strategy, the
Company identifies and partners with researchers and developers. The Company
entered into a technology affiliates agreement with NASA's Jet Propulsion
Laboratory ("JPL") to develop technology for its bio-terrorism detection
equipment and a license agreement with the California Institute of Technology
("CalTech"), which granted the Company an exclusive worldwide license to
products that incorporate patent rights referenced in the above technology
affiliates agreement.

GOING CONCERN AND MANAGEMENT'S PLANS
As of December 31, 2004, the Company had a working capital deficit and a capital
deficit. These conditions raise substantial doubt about its ability to continue
as a going concern. Its ability to continue as a going concern is dependent upon
its ability to develop additional sources of capital and ultimately achieve
profitable operations. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. The Company's financial
statements have been presented on the basis that it is a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business.

The Company is currently devoting its efforts to raising capital, and the
development, field testing and marketing of its bio-terrorism detection devices,
known as the Anthrax Smoke Detector ("ASD"). The Company entered into a
technology affiliates agreement with JPL to develop technology for its
bio-terrorism detection equipment and a license agreement with Caltech, which
granted the Company an exclusive worldwide license to products that incorporate
patent rights referenced in the above technology affiliates agreement. The
Company unveiled the first functional prototype of its ASD in May 2004. Although
the Company continues to engage in testing of the ASD to improve its
functionality, the ASD is currently available for sale.

In July 2004, the Company commenced simulated tests with benign bacterial spores
having anthrax-like properties in order to fine tune the Company's product.
Based on the results obtained, the Company enhanced the sensitivity of the ASD
by improving the sample collection efficiency and made certain other
modifications to improve efficiency. Commencing in 2005, the Company plans to
engage in field testing of these units in different environments and conditions
and to use the empirical data gained from the testing to further improve the
design and functionality of the product.

The Company is engaged in discussions with Rutgers University to perform the
Company's field testing. Rutgers University was given an initial (Phase I) grant
from the National Science Foundation to conduct a preliminary study on methods
to protect the nation's transportation infrastructure against a potential
airborne biological attack. At this time, Rutgers has applied for a Phase II
grant from NSF. If Rutgers obtains this Phase II grant, the Company expects that
they will select a site operated by the New York and New Jersey Port Authority
in order to test its


                                      F-7
<PAGE>


                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


product under a real-time environment. Rutgers will manage all details relating
to the implementation of the program.

The Company also seeks to negotiate arrangements with operators of large venues
to install the ASD and allow the Company to collect, analyze and otherwise use
the data collected to improve the functionality of the Company's device.
Management expects that collected samples will provide valuable scientific data
about background bacterial spore levels in the air. The Company intends to use
the data to closely monitor and study the performance of the machine in a
non-controlled setting. Under this program, the Company has devices installed,
and is collecting samples, at the Miami International Airport, and a major hotel
in Orange County, California.

The Company plans to initiate orders of the ASD with Met One Instruments ("Met
One"), a third-party manufacturer that assembled the first functional prototype,
based on sales orders it receives. In connection with sales and marketing
efforts, the Company hopes to sell units to customers in specific sectors in the
market including, sports stadiums, conventions centers, and casinos. At this
time, the Company has not entered into any agreements with any third parties
regarding the manufacturing of the ASD, but Met One has indicated that it will
be capable of producing between 50 to 100 units per month.

In the third quarter of 2004, the Company received its first purchase order for
a minimum of one and up to 10 Anthrax detection devices. The purchase order was
made by Secure Wrap. The sales price to Secure Wrap reflects a discount not to
exceed 15% of the lower end of the Company's expected price range for the
device. The purchase order is contingent upon Secure Wrap's satisfaction of the
first unit shipped to it, which the Company shipped in March 2005. Secure Wrap
may accept or return the device within 90 days. If Secure Wrap accepts the
detection device, the purchase order calls for us to ship one device every two
months over the next 18 months.

In the first quarter of 2005, the Company received an additional purchase order
from Secure Wrap for one unit for installation at its site at the Miami
International Airport. The Company expects to ship this unit in the second
quarter of 2005. We currently are working with Secure Wrap to complete an
appropriate response plan which we expect to conclude prior to shipment.
Following approval of the response plan by Secure Wrap, the device will be
installed at MIA. The purchase order calls for payment following installation.

During the next 12 month period, the Company also plans on securing and leasing
a testing facility close to the JPL laboratories where it would be able to
implement a quality assurance program and test its products against the required
specifications before shipping them to customers.

During July 2004, the Company completed the final closing of its private
placement offering of Units consisting of common stock and warrants to purchase
common stock. The aggregate gross proceeds from the offering were $3,000,000.
The Company intends to use these proceeds for working capital and general
corporate purposes but is precluded from using the proceeds to pay debt
outstanding at the time of final closing of the offering or make payments to
Astor Capital, Inc. ("Astor"), a company in which its President and CEO has a
50% equity interest and is a co-founder and managing partner. Pursuant to a
related Registration Rights Agreement, the Company filed a registration
statement with the Securities and Exchange Commission within 30 days of final
closing of the offering to register for resale shares of the Company's common
stock and the shares underlying the warrants included in the Units.

The Company estimates that it will require approximately $2.0 million in the
next twelve months to engage in testing of the ASD, revise the technology or
reengineer the device as may be necessary or desirable, develop and implement
its sales and marketing plan, repay its existing debt obligations and otherwise
execute its business plan. The Company does not believe it has adequate cash on
hand to meet its working capital needs and debt repayment obligations over the
next twelve months. Management continues to take steps to address its liquidity
needs. Recently management concluded discussions with most of its note holders
and amended the terms of these notes to provide for extended scheduled payment
arrangements. The Company may seek additional extensions with respect to these
notes and its other debt as it becomes due. In addition, management may endeavor
to convert some portion of the principal amount and interest on the Company's
debt into shares of common stock. The Company expects to



                                      F-8
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


raise funds through the sale of equity or debt securities. However, during the
first quarter of 2005, management principally spent its time negotiating
contracts for the installation of the ASD devices, and preparing to ship the
first device under the Secure Wrap October purchase order. These activities
diverted management from the time it otherwise would spend negotiating sales of
securities to raise capital. In addition, the more recent price and volume
volatility in the common stock has made it more difficult for management to
negotiate sales of its securities at a price it believes to be fair to the
Company. During the years ended December 31, 2004 and 2003, the Company received
gross proceeds of approximately $6.2 million and $3.8 million, respectively,
from the sale of equity and debt securities. The Company actively continues to
pursue additional equity or debt financings, but cannot provide any assurance
that it will be successful.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRIOR PERIOD RESTATEMENT
During the fourth quarter of 2004, a change was made to the accumulated deficit,
notes payable and accrued expenses of the Company to correct the recording of a
loan guarantee assumed in the sale of Dasibi recorded during the year ended
December 31, 2002. The Company originally recorded the amount of the guarantee,
but later determined that it was not a guarantor of the debt. The Company has
retroactively restated accumulated deficit for the years ended December 31, 2002
and 2003 due to an adjustment of $266,875 and $22,500, respectively.

CONSOLIDATION
The consolidated financial statements include the accounts of Universal
Detection Technology and its wholly-owned subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.

REVENUE RECOGNITION
Revenue will be recognized upon satisfaction of the Company's obligations,
generally upon shipment of products. Title of goods is generally transferred
when the products are shipped from the Company's facility. Income not earned
will be recorded as deferred revenue.

During the year ended December 31, 2004, the Company recognized $25,000 of
revenue in accordance with its agreement with Rutgers University. The Company
completed all obligations under the agreement.

INVENTORIES
Inventories, consisting of finished goods, are stated at the lower of cost
(first-in first-out) basis or market.

ADVERTISING EXPENSES
The Company expenses advertising costs as incurred. During the years ended
December 31, 2004 and 2003, the Company did not have significant advertising
costs.

EQUIPMENT AND DEPRECIATION
Equipment, consisting of office equipment, is recorded at cost less accumulated
depreciation. Depreciation is provided for on the straight-line method over the
estimated useful lives of the assets, generally five years. Total depreciation
expense was $11,702 and $152 for the years ended December 31, 2004 and 2003,
respectively. As of December 31, 2004, accumulated depreciation was $11,854.

STOCK-BASED COMPENSATION
The Company accounts for stock based compensation in accordance with Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). This standard requires the Company to adopt the "fair
value" method with respect to stock-based compensation of consultants and other
non-employees and allows for use of the intrinsic value method for stock-based
compensation of employees under Accounting Principles Board Opinion No. 25.



                                      F-9
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


Had compensation cost for the Company's stock-based compensation plans been
determined using the fair value of the options at the grant date as prescribed
by SFAS 123, the Company's pro forma net loss and loss per common share would be
as follows:



                                                        FOR THE YEAR ENDED
                                                           DECEMBER 31,
                                                        2004           2003
                                                        ----           ----
Net (loss):
As reported                                         $ (5,752,732)    (4,702,653)
Stock based employee
 compensation (as recorded):                                   --            --
Stock based employee
 compensation (fair value method):                             --     1,995,000
                                                    -------------- -------------
Proforma                                            $ (5,752,732)  $ (6,697,653)
                                                    ============== =============

Basic and diluted (loss) per share:
As reported                                         $      (0.13)  $      (0.23)
                                                    ============== =============
Proforma                                            $      (0.13)  $      (0.32)
                                                    ============== =============


VALUATION OF THE COMPANY'S COMMON STOCK
Unless otherwise disclosed, all stock based transactions entered into by the
Company have been valued at the market value of the Company's common stock on
the date the transaction was entered into or have been valued using the
Black-Scholes model for American options to estimate the fair market value.

EARNINGS PER COMMON SHARE
The Company computes earnings per common share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128). The
Statement requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Basic loss per
share is computed by dividing loss available to common shareholders by the
weighted average number of common shares outstanding. The computation of diluted
loss per share is similar to the basic loss per share computation except the
denominator is increased to include the number of additional shares that would
have been outstanding if the dilutive potential common shares had been issued.
In addition, the numerator is adjusted for any changes in income or loss that
would result from the assumed conversions of those potential shares. However,
such presentation is not required if the effect is antidilutive. Accordingly,
the diluted per share amounts do not reflect the impact of warrants and options
or convertible debt outstanding for 20,351,145 and 11,834,560 shares at December
31, 2004 and 2003, respectively, because the effect of each is antidilutive.

CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all short term,
interest bearing deposits with original maturities of three months or less to be
cash equivalents.

PATENTS AND IMPAIRMENT OF LONG-LIVED ASSETS
Patents and other intangible assets with finite useful lives are amortized on a
straight-line basis over their estimated useful lives. In accordance with
Statement of Financial Accounting Standard (SFAS) No. 142, GOODWILL AND OTHER


                                      F-10
<PAGE>


                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


INTANGIBLE ASSETS ("SFAS 142"), the Company periodically evaluates its
long-lived assets by measuring the carrying amounts of assets against the
estimated undiscounted future cash flows associated with them. At the time the
carrying value of such assets exceeds the fair value of such assets, impairment
is recognized. To date, no adjustments to the carrying value of the assets have
been made.

FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, notes receivable, accounts
payable, accrued expenses and notes payable approximate fair value because of
the short maturity of these items.

RESEARCH AND DEVELOPMENT COSTS
In 2002, the Company entered into a technology affiliates agreement with NASA's
Jet Propulsion Laboratory ("JPL") to develop technology for its bio-terrorism
detection equipment. Research and development costs are charged to expense as
incurred. Research and development expenses were $20,000 and $199,000 for the
years ended December 31, 2004 and 2003, respectively.

INCOME TAXES
Deferred income taxes are recorded to reflect the tax consequences in future
years of temporary differences between the tax basis of the assets and
liabilities and their financial statement amounts at the end of each reporting
period. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. Income tax expense is the tax
payable for the current period and the change during the period in deferred tax
assets and liabilities. The deferred tax assets and liabilities have been netted
to reflect the tax impact of temporary differences. At December 31, 2004, a full
valuation allowance has been established for the deferred tax asset as
management believes that it is more likely than not that a tax benefit will not
be realized.



                                      F-11
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

CONCENTRATION OF CREDIT RISK
Generally, the Company required no collateral when it extends credit to its
customers. The Company's credit losses in the aggregate have not exceeded
managements' expectations. The Company maintains all cash in bank accounts,
which at times may exceed federally insured limits. The Company has not
experienced a loss in such accounts.

RECLASSIFICATION
Certain amounts in the prior period financial statements have been reclassified
for comparative purposes to conform to the presentation in the current period
financial statements.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-Based
Payment" ("SFAS 123(R)"). SFAS 123(R) will provide investors and other users of
financial statements with more complete and neutral financial information by
requiring that the compensation cost relating to share-based payment
transactions be recognized in financial statements. That cost will be measured
based on the fair value of the equity or liability instruments issued. SFAS
123(R) covers a wide range of share-based compensation arrangements including
share options, restricted share plans, performance-based awards, share
appreciation rights, and employee share purchase plans. SFAS 123(R) replaces
SFAS No. 123, "Accounting for Stock-Based Compensation", and supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS 123, as
originally issued in 1995, established as preferable a fair-value-based method
of accounting for share-based payment transactions with employees. However, that
Statement permitted entities the option of continuing to apply the guidance in
Opinion 25, as long as the footnotes to financial statements disclosed what net
income would have been had the preferable fair-value-based method been used.
Public entities (other than those filing as small business issuers) will be
required to apply SFAS 123(R) as of the first interim or annual reporting period
that begins after June 15, 2005. The Company has evaluated the impact of the
adoption of SFAS 123(R), and believes that it could have an impact to the
Company's overall results of operations depending on the number of stock options
granted in a given year.

In December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary Assets,
an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions."
The amendments made by SFAS 153 are based on the principle that exchanges of
nonmonetary assets should be measured based on the fair value of the assets
exchanged. Further, the amendments eliminate the narrow exception for
nonmonetary exchanges of similar productive assets and replace it with a broader
exception for exchanges of nonmonetary assets that do not have commercial
substance. Previously, Opinion 29 required that the accounting for an exchange
of a productive asset for a similar productive asset or an equivalent interest
in the same or similar productive asset should be based on the recorded amount
of the asset relinquished. Opinion 29 provided an exception to its basic
measurement principle (fair value) for exchanges of similar productive assets.
That exception required that some nonmonetary exchanges, although commercially
substantive, to be recorded on a carryover basis. By focusing the exception on
exchanges that lack commercial substance, the FASB believes SFAS No.153 produces
financial reporting that more faithfully represents the economics of the
transactions. SFAS No.153 is effective for nonmonetary asset exchanges occurring
in fiscal periods beginning after June 15, 2005. Earlier application is
permitted for nonmonetary asset exchanges occurring in fiscal periods beginning
after the date of issuance. The provisions of SFAS No.153 shall be applied
prospectively. The Company has evaluated the impact of the adoption of SFAS 153,
and does not believe the impact will be significant to the Company's overall
results of operations or financial position.

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") SFAS 152 amends SFAS No. 66, "Accounting for Sales of Real Estate", to
reference the financial accounting and reporting guidance for real estate
time-sharing


                                      F-12
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


transactions that is provided in AICPA Statement of Position (SOP)
04-2, "Accounting for Real Estate Time-Sharing Transactions". SFAS 152 also
amends SFAS 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. SFAS 152 is effective for financial
statements for fiscal years beginning after June 15, 2005, with earlier
application encouraged. The Company has evaluated the impact of the adoption of
SFAS 152, and does not believe the impact will be significant to the Company's
overall results of operations or financial position.

In November 2004, the FASB issued SFAS No. 151 "Inventory Costs, an amendment of
ARB No. 43, Chapter 4 (" SFAS No. 151". The amendments made by SFAS 151 clarify
that abnormal amounts of idle facility expense, freight, handling costs, and
wasted materials (spoilage) should be recognized as current-period charges and
require the allocation of fixed production overheads to inventory based on the
normal capacity of the production facilities. The guidance is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005.
Earlier application is permitted for inventory costs incurred during fiscal
years beginning after November 23, 2004. The Company has evaluated the impact of
the adoption of SFAS 151, and does not believe the impact will be significant to
the Company's overall 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," which is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. SFAS No. 150 establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. The adoption of this standard
did not have a material impact on the Company's financial statements.

In April 2003, FASB issued SFAS No. 149, "Accounting for Derivative Instruments
and Hedging Activities," which is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after June
30, 2003. This statement amends and clarifies financial accounting and reporting
for derivative instruments including certain instruments embedded in other
contracts and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The adoption of this standard
did not have a material impact on the Company's financial statements.

In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest
Entities." FIN 46 clarifies the application of Accounting Research Bulletin No.
51, "Consolidated Financial Statements," for certain entities which do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties or in which equity
investors do not have the characteristics of a controlling financial interest
("variable interest entities"). Variable interest entities will be required to
be consolidated by their primary beneficiary. The primary beneficiary of a
variable interest entity is determined to be the party that absorbs a majority
of the entity's expected losses, receives a majority of its expected returns, or
both, as a result of holding variable interests, which are ownership,
contractual, or other pecuniary interests in an entity. FIN 46 applies
immediately to variable interest entities created after January 31, 2003, and to
variable interest entities in which an enterprise obtains an interest after that
date. It applies in the first fiscal year or interim period beginning after
December 15, 2003, to variable interest entities in which an enterprise holds a
variable interest that it acquired before February 1, 2003. FIN 46 applies to
public enterprises as of the beginning of the applicable interim or annual
period. The Company's adoption of FIN 46 did not have any impact upon the
Company's financial condition or results of operations.

In March 2004, the FASB approved the consensus reached on the Emerging Issues
Task Force (EITF) Issue No. 03-1, "The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments." The objective of this
Issue is to provide guidance for identifying impaired investments. EITF 03-1
also provides new disclosure requirements for investments that are deemed to be
temporarily impaired. In September 2004, the FASB issued a FASB Staff Position
(FSP) EITF 03-1-1 that delays the effective date of the measurement and
recognition guidance in EITF 03-1 until after further deliberations by the FASB.
The disclosure requirements are effective only for annual


                                      F-13
<PAGE>


                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


periods ending after June 15, 2004. The Company has evaluated the impact of the
adoption of the disclosure requirements of EITF 03-1 and does not believe it
will have an impact to the Company's overall combined results of operations or
combined financial position. Once the FASB reaches a final decision on the
measurement and recognition provisions, the Company will evaluate the impact of
the adoption of EITF 03-1.

NOTE 3 - INVENTORIES

As part of the sale of Dasibi, the Company arranged with Dasibi that Dasibi
would continue to house the inventory that was assigned to the Company. During
the second quarter of 2002, Dasibi vacated its manufacturing space, and moved
the inventory that was assigned to the Company to a location unknown to the
Company. The Company currently is in the process of reviewing its rights under
the circumstances and has been unsuccessful in locating the inventory. At
December 31, 2002, such inventory was written down to reflect the loss. During
the year ended December 31, 2004, management of the Company determined that all
remaining finished goods inventory had been utilized for research and
development and the $20,000 asset was expensed as research and development
expenses.

NOTE 4 - NOTES PAYABLE, RELATED PARTY

During the year ended December 31, 2003, the Company borrowed cash for operating
expenses on a short-term basis from certain related entities, Astor and JRT
Holdings. JRT Holdings is a company in which the Company's President and CEO has
a 50% equity interest. The Company borrowed a total $85,000 during the year
ended December 31, 2003 and repaid a total of $45,000 during the same year. On
September 21, 2004, the Company had outstanding two notes payable to JRT
Holdings totaling $40,000. These notes payable were amended, combined and
extended to December 31, 2004, with total interest fixed at $2,000. The Company
has recognized a $658 gain on forgiveness of accrued interest as a result of the
amended agreement. On October 29, 2004, the combined note was further amended,
reducing total interest to $750 as consideration for payment on that date. The
note payable and accrued interest were paid October 29, 2004 at which time the
Company recognized an additional $1,250 gain on forgiveness of accrued interest.

NOTE 5 - NOTES PAYABLE

Notes payable consisted of the following at December 31, 2004:

  Notes payable to individuals, subject to contingent         $    175,740
     settlement agreement, interest at 11.67% per annum,
     principal and interest due January 1, 2006, unsecured

  Note payable, subject to settlement agreement, interest
     at 9.01% per annum, principal and interest due July
     2005, unsecured                                               195,000

  Note payable, subject to settlement agreement, interest
     at 9.17% per annum, principal and interest due July
     2005, unsecured                                                98,500

  Note payable, interest at 18% per annum, principal and
     interest due June 2000, and verbally extended, unsecured      200,000

  Bridge loan payable, interest of 10% per annum, principal
     and interest due June 2002 and verbally extended, unsecured    22,526

  Bridge loan payable, interest of 10% per annum, principal
     and interest due September 2002 and verbally extended,
     unsecured                                                      35,000

  Note payable, interest at 18% per annum, due May 2003 and
     verbally extended, unsecured                                   75,000

  Note payable, interest at 10% per annum, due June 2002
     and verbally extended, unsecured                               75,000
                                                                 ------------

                  Total notes payable                         $    876,766
                                                                 ============


                                      F-14
<PAGE>


                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


During the year ended December 31, 2003, certain convertible debt holders
converted debt of $485,000 into 3,258,887 shares of the Company's common stock.
In addition, certain convertible debt holders converted $88,805 of accrued
interest on the convertible debt to 630,157 shares of the Company's common
stock.

In October 2003, as incentive to certain debenture holders, the Company agreed
to convert the debentures to the Company's common stock at $.15 per share rather
than at 70% to 80% of market price per the terms of the debentures. In
connection with these transactions, the Company recorded $495,305 as an expense
for the beneficial conversion feature.

In October 2003, certain debenture holders agreed in principle to novate the
$320,000 of convertible debentures and enter into non-convertible notes payable
with extended due dates ranging from six months to one year.

In March 2002, the holder of $450,000 of convertible debt agreed to extend the
due date of the debt to February 23, 2004 and the Company agreed to reduce the
conversion rate on the convertible debt from 85% of the market price of the
Company's common stock to 70% of the market price of the Company's common stock.
The Company recorded $113,000 as an expense for the beneficial conversion
feature of the new conversion rate. During 2002, $250,000 was converted and the
remaining outstanding debt balance was $200,000 as of December 31, 2002. During
the year ended December 31, 2003 the remaining balance was converted to shares
of the Company's common stock as described above.

The Company entered into a contingent settlement agreement on July 26, 2004
related to $440,765 of notes payable to individuals and related accrued
interest. In July 2004, the Company paid a total of $73,333 towards the debt and
agreed to pay a total of $298,667, including interest through January 2006 in
full payment. The Settlement Agreement provides for an accelerated payment
schedule at the Company's option, which would reduce the total payment made by
the Company by approximately $12,000. At such time as the terms of the
Settlement Agreement are satisfied, the Company will recognize a gain on
restructuring of debt as appropriate.

As of August 10, 2004, the Company entered into an agreement to settle a note
payable in the amount of $200,000 plus accrued interest. The parties agreed to
settle the debt for $261,000 payable as follows: Twelve consecutive payments of
$12,500 payable monthly commencing August 31, 2004 and ending July 31, 2005; a
lump-sum payment of $95,000 payable on July 31, 2005; and a one-time interest
payment of $16,000 on July 31, 2005. This agreement includes an additional
$7,500 as inducement to the note holder to enter into the extended agreement,
which will be amortized as a loan fee over the term of the agreement.

During September 2004, the Company agreed to settle accrued interest of $33,000
on a note payable by issuing 206,250 shares of common stock at the rate of $0.16
per share.

On August 10, 2004, the Company entered into an agreement to settle a note
payable in the amount of $100,000 plus accrued interest. The parties agreed to
settle the debt for $130,800 payable as follows: Twelve consecutive payments of
$6,000 payable monthly commencing August 31, 2004 and ending July 31, 2005; a
lump-sum payment of $50,500 payable on July 31, 2005; and a one-time interest
payment of $8,300 on July 31, 2005. The Company has recognized a $38,610 gain on
forgiveness of accrued interest related to this transaction.



                                      F-15
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 6 - INCOME TAXES

The income tax provision (benefit) for the years ended December 31, 2004 and
2003 differs from the computed expected provision (benefit) at the federal
statutory rate for the following reasons:

<TABLE>
<CAPTION>
                                                        2004              2003
                                                   ---------------    -------------
<S>                                             <C>                <C>
Computed expected income tax provision          $    (1,964,000)   $    (1,606,000)
(benefit)
Net operating loss carryforward                       1,708,000          1,356,000
increased
Accrued liabilities                                     232,000                ---
Stock-based expenses                                     42,000             82,000
Beneficial conversion feature of convertible                ---            168,000
debt
Depreciation                                            (18,000)               ---
                                                   ---------------    -------------

    Income tax provision (benefit)              $           ---    $           ---
                                                   ===============    =============

The components of the deferred tax assets and (liabilities) as of December 31,
2004 were as follows:

   Deferred tax assets:
   Temporary differences:
       Depreciation                                               $       (22,000)
       Accrued liabilities                                                 373,000
       Net operating loss carryforward                                   7,011,000
       Valuation allowance                                              (7,362,000)
                                                                      --------------

       Net long-term deferred tax asset                            $           ---
                                                                      ==============

</TABLE>

The components of the deferred tax (expense) benefit were as follows for the
years ended December 31, 2004 and 2003:

<TABLE>
<CAPTION>
<S>                                                    <C>            <C>
                                                             December 31,
                                                          2004           2003
                                                       -----------    -----------
   Deferred tax assets:
       Accrued expenses                              $   273,000     $      ---$
                                                         (22,000)           ---
   Depreciation
       Increase in net operating loss carryforward     2,009,000      1,723,000
      Change in valuation allowance                   (2,260,000)    (1,723,000)
                                                       -----------    -----------

                                                     $       ---     $      ---
                                                       ===========    ===========
</TABLE>


As of December 31, 2004, the Company has net operating loss carryforwards
available to offset future taxable income of approximately $17,584,000 expiring
in 2005 through 2019.

NOTE 7-STOCKHOLDERS' EQUITY

PREFERRED STOCK
The Company is authorized to issue up to 20,000,000 shares of preferred stock,
$.01 par value per share in series to be designated by the Board of Directors.
No preferred shares are issued and outstanding.

COMMON STOCK
On August 8, 2003, the stockholders approved an increase in the number of shares
of common stock authorized to 480,000,000 from 30,000,000.

PRIVATE PLACEMENT
On April 29, 2004, the Company commenced a private placement, offering for sale
a minimum of $250,000 of Units on a "best efforts all or none" basis and an
additional of $750,000 of Units on a "best efforts" basis. Upon mutual


                                      F-16
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

agreement between the Company and the placement agent, the Company offered an
additional $2,000,000 of Units. The offering was completed in July 2004,
generating gross proceeds of $3,000,000. The Company paid placement fees of
$414,640 related to the offering.

The Company intends to use the proceeds for working capital and general
corporate use. The Company is precluded from using the proceeds to pay debt
outstanding at the time of the closing of the offering or to make payments to
Astor.

Each Unit consists of one share of common stock and a Class A Warrant and a
Class B Warrant. The offering price per Unit was $0.50. Both the Class A and
Class B Warrants are exercisable by the holder at any time up to the expiration
date of the warrant, which is five years from the date of issuance. In the
aggregate, the investors purchased 6,000,000 shares of common stock, Class A
Warrants to purchase 3,000,000 shares of common stock at $0.50 per share and
Class B Warrants to purchase 3,000,000 shares of common stock at $0.70 per
share. The warrants expire five years from the final closing date.

Pursuant to the agreement with the placement agent, following closing of the
private placement offering, the Company amended the terms of its agreement with
Astor for investment banking and strategic advisory services, reducing the
monthly payment to Astor to a sum no greater than $5,000 per month commencing
April 29, 2004, and for the nine months thereafter. The agreement with Astor was
terminated effective September 30, 2004.

In addition, the Company's Chief Executive Officer agreed to defer payment of
all accrued wages and future compensation due to him in excess of $150,000 per
year for nine months from April 29, 2004. (See Note 9.)

SALES OF COMMON STOCK
During the year ended December 31, 2004, the Company sold 12,373,156 shares of
common stock for a total of $6,189,540. The Company paid placement fees totaling
$738,615, which includes $105,576 in placement fees to Astor and $633,039 in
placement fees to unrelated entities. Certain investors received warrants to
purchase 6,166,668 shares of the Company's common stock at $0.50, $0.70, and
$0.90 per share in connection with the sale of stock. The Company also issued
warrants to purchase 3,600,000 shares of its common stock as placement fees. The
warrants are exercisable at $0.50 per share and expire in July 2009. Certain of
these stock and warrant issuances were included in the discussion entitled
Private Placement above.

During the year ended December 31, 2003, the Company sold 15,907,903 shares of
common stock for a total of $3,319,255, $50,000 of which had been received prior
to December 31, 2002, and had been recorded as a liability. The Company paid
placement fees totaling $443,033, which includes $157,634 in placement fees to
Astor and $285,399 in placement fees to an unrelated company. Certain investors
received warrants to purchase 349,300 shares of common stock at prices ranging
from $0.27 to $0.65 per share.

STOCK ISSUED FOR SERVICES
On September 8, 2004, the Company entered into a Product Sales and Marketing
Consulting Agreement with an unrelated individual, commencing September 8, 2004
and ending December 31, 2006. As compensation for the services to be rendered,
the Company issued 410,000 shares of its no par value common stock. On the
effective date of the agreement, the shares had a fair value of $254,200 and
have been recorded as prepaid expenses to be amortized over the term of the
agreement. For the year ended December 31, 2004, the Company recognized $27,236
as stock based compensation expense related to this agreement.

In June 2004, the Company issued 10,000 shares of its common stock for
consulting services. The shares were valued at $9,000, the fair market value of
the stock on the date issued.

Pursuant to a binding Letter of Intent dated March 18, 2002, in connection with
the sale of its wholly owned subsidiary, Dasibi Environmental Corp., the Company
was obligated to issue 100,000 shares of its common stock to the purchaser of
Dasibi. During the year ended December 31, 2004, the Company issued these
100,000 shares of common stock. The shares were valued at $40,000, the fair
market value of the stock on March 18, 2002.



                                      F-17
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

During August 2003, the Company entered into two agreements for strategic
business planning, financial advisory, investor relations and public relations
services. As compensation, the Company issued a total of 3,000,000 shares of its
common stock to the consultants, valued at $1,110,000, the fair market value of
the stock on the effective date of the agreements, which amount is being
amortized over the one-year term of the agreements. The Company had recorded
$740,000 as prepaid expense as of December 31, 2003. The Company expensed
related consulting fees of $740,000 and $370,000 for the years ended December
31, 2004 and 2003, respectively.

During fourth quarter of 2004, the Company entered into two agreements for
strategic business planning, financial advisory, investor relations and public
relations services. As compensation, the Company issued a total of 1,700,000
shares of its common stock to the consultants, valued at $943,000, the fair
market value of the stock on the effective date of the agreements, which amount
is being amortized over the terms of the agreements. The Company had recorded
$652,500 as prepaid expense as of December 31, 2004. The Company expensed
related consulting fees of $290,500 for the year ended December 31, 2004.

On January 6, 2003, the Company entered into an agreement with an individual to
provide consulting services through January 6, 2004 in connection with the
Company's corporate business development and strategy. As compensation for
services received, the Company issued 300,000 unrestricted shares of its common
stock valued at $60,000 based upon the price of the Company's common stock on
the date of issuance. The Company recognized $60,000 in related expenses during
2003.

During 2003, the Company issued an additional 57,000 shares of its common stock
to individuals for various consulting services rendered. The stock was valued at
$11,280 based upon the price of the Company's common stock on the date of
issuance. The Company recognized $11,280 in related expenses during 2003.

ISSUANCE OF OPTIONS AND WARRANTS
On August 10, 2004, the Company entered into a consulting agreement for advisory
and consulting services in connection with its general business and corporate
affairs matters. The agreement expires December 31, 2004. The terms of the
agreement provide for an initial payment of $4,500, plus $7,500 per month
beginning September 1, 2004. In addition, as inducement to enter into the
agreement, the consultant received 10,000 shares of the Company's common stock
and options to purchase 60,000 shares of the Company's common stock, exercisable
immediately, at prices ranging from $0.75 per share to $1.75 per share. The
10,000 shares issued had a value of $7,200 on August 10, 2004. The option was
valued at $21,490 using the Black Scholes model for American options, with
volatility of 90.27% and a risk free interest rate of 2.89%. The market price of
the common stock on the date of the grant was $0.72. The value of the stock and
options has been expensed.

On October 6, 2004, the Company entered into a Product Sales and Marketing
Consulting Agreement with an unrelated entity for a period of two years. As
compensation for services to be rendered, the Company issued a warrant to
purchase 250,000 shares of the Company's common stock, exercisable immediately
through October 6, 2007 at the price of $0.53 per share. The warrant was valued
at $102,319 using the Black Scholes model for American options, with volatility
of 131% and a risk free interest rate of 3.5%. The market price of the common
stock on the date of the grant was $0.54. The value of the warrant is being
amortized over the term of the agreement.

On October 18, 2003, the Company issued warrants to purchase 600,000 shares of
common stock at an exercise price of $0.60 per share to two individuals for
services to be rendered during the period through October 15, 2004. The warrants
expire October 15, 2008. The warrants were valued at $185,400, the fair market
value using the Black-Scholes model for American options. The average risk-free
interest rate used was 3.32%, volatility was estimated at 93.5% and the expected
life was five years. The amount was recorded as a prepaid expense and is being
amortized over the term of the service period.



                                      F-18
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

REPRICED AND EXERCISED WARRANTS
In February 2003, the Company agreed to reprice warrants to purchase 300,000
shares of common stock related to outstanding debt from $2.25 and $4.50 per
share to $0.12 per share. The repriced warrants were valued at $30,000, the fair
market value using the Black-Scholes model for American options. The average
risk-free interest rate used was 1.19%, volatility was estimated at 93% and the
expected life was one day. The value of the repriced warrants was expensed as
loan fees. The warrants to purchase 300,000 shares of common stock were
immediately exercised for proceeds of $36,000.

During the second quarter of 2003, the Company agreed to reprice warrants to
purchase 260,191 shares of common stock issued as incentive to exercise warrants
from $4.00 per share to $0.10 per share. The repriced warrants were valued at
$26,019, the fair market value using the Black-Scholes model for American
options. The average risk-free interest rate used was 1.12%, volatility was
estimated at 91% and the expected life was one day. The value of the repriced
warrants was expensed as stock based compensation. The warrants to purchase
259,858 shares of common stock were exercised for proceeds of $26,018.

STOCK OPTION PLAN
During 2003, the Company adopted the 2003 Stock Incentive Plan ("the Plan"),
which provides for the granting of stock and options to selected officers,
directors, employees and consultants of the Company. 4,500,000 shares are
reserved for issuance under the Plan for the granting of options. Unless
terminated sooner, the Plan will terminate on June 22, 2013. The options issued
under the Plan may be exercisable to purchase stock for a period of up to ten
years from the date of grant.

Incentive stock options granted pursuant to this Plan may not have an option
price that is less than the fair market value of the stock on the date of grant.
Incentive stock options granted to significant stockholders shall have an option
price of not less than 110% of the fair market value of the stock on the date of
grant. To date, no options have been granted under the Plan.

The following table summarizes the activity of options and warrants under all
agreements and plans for the two years ended December 31, 2003 and 2004:

<TABLE>
<CAPTION>

                                                                Weighted Average
                                      Number of                     Exercise
                             ------------- - ------------    --------     ----------
                                Options      Warrants         Price        Amount
                             -------------   ------------    --------     ----------
<S>                            <C>            <C>              <C>       <C>
Outstanding, December 31,
 2002                         2,702,017      2,395,450         1.32       6,716,990

Granted                       6,800,000        949,300          .35       2,740,320
Repriced warrants exercised         ---       (559,858)        3.76      (2,102,445)
Expired/cancelled              (163,000)      (289,349)        3.06      (1,382,879)
                            -------------   ------------    --------     -----------

Outstanding, December 31,
 2003                         9,339,017      2,495,543          .50       5,971,986

Granted                          60,000     10,099,999          .57       5,804,166
Exercised                           ---        (55,556)         .36         (20,000)
Expired/cancelled              (428,571)    (1,159,287)         .51        (816,823)
                             -------------  -------------    --------     ----------

Outstanding, December 31,
 2004                         8,970,446     11,380,699       $  .50     $10,939,329
                             =============  =============    ========    ===========
</TABLE>


                                      F-19
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


The following table summarizes information about stock options and warrants
outstanding at December 31, 2004:

<TABLE>
<CAPTION>

                                         OPTIONS AND WARRANTS
        -----------------------------------------------------------------------------------
                         OUTSTANDING                             EXERCISABLE

                                        WEIGHTED
                                        AVERAGE      WEIGHTED                   WEIGHTED
           RANGE OF                    REMAINING     AVERAGE                     AVERAGE
           EXERCISE       NUMBER      CONTRACTUAL    EXERCISE       NUMBER      EXERCISE
            PRICES     OUTSTANDING     LIFE-YEARS     PRICE      EXERCISABLE     PRICE

<S>    <C>       <C>     <C>              <C>         <C>          <C>            <C>
       $0.225 to $0.33   8,338,100        8.02        $0.323       8,338,100      $0.323
        $0.35 to $0.50   6,808,100        4.38        $0.497       6,808,100      $0.497
        $0.53 to $0.75   4,016,431        4.16        $0.673       4,016,431      $0.673
       $0.875 to $1.75     935,239        0.76        $0.925         935,239      $0.925
        $2.00 to $3.10     253,275        0.72        $2.244         253,275      $2.244
       ---------------  ------------ ------------- ------------   ----------- -------------
      $ 0.225 to $3.10  20,351,145        5.62        $ 0.50      20,351,145      $0.50
        ============= ============== ============= ============   =========== =============

</TABLE>

The weighted average exercise price of options at their grant date during the
years ended December 31, 2004 and 2003 where the exercise price equaled the
market price on the grant date, was $0.53 and $0.33, respectively. The weighted
average exercise price of options at their grant date during the years ended
December 31, 2004 and 2003, where the exercise price exceeded the market price
on the grant date was $0.88, and $0.55, respectively. The weighted average
exercise price of options at their grant date during the years ended December
31, 2004 and 2003, where the exercise price was less than the market price on
the grant date, was $0.56 and $0.37, respectively.

The weighted average fair values of options at their grant date during the years
ended December 31, 2004 and 2003 where the exercise price equaled the market
price on the grant date, were $0.41 and $0.29, respectively. The weighted
average fair value of options at their grant date during the years ended
December 31, 2004 and 2003, where the exercise price exceeded the market price
on the grant date, was $0.22 and $0.24, respectively. The weighted average fair
value of options at their grant date during the years ended December 31, 2004
and 2003, where the exercise price was less than the market price on the grant
date, was $0.56 and $0.46, respectively. The estimated fair value of each option
granted is calculated using the Black-Scholes model for American options. The
weighted average assumptions used in the model were as follows:


                                        2004             2003
                                     ------------    -------------
        Risk-free interest rate         3.87%            4.29%
               Volatility              89.47%           93.41%
             Expected life           4.93 years       9.27 years
             Dividend yield             0.00%            0.00%


NOTE 8- STOCK-BASED COMPENSATION

The Company accounts for stock based compensation in accordance with Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The standard requires the Company to adopt the "fair value"
method with respect to stock-based compensation of consultants and other
non-employees, which resulted in charges to operations of $123,809 and $185,400
during the years ended December 31, 2004 and 2003 respectively.

Effective August 18, 2003, the board of directors of the Company granted an
option to the President and CEO to purchase 6,800,000 shares of the Company's
common stock at $0.33 per share, the closing price on the date of the grant. The
option expires in ten years and is fully vested and immediately exercisable on
the date of grant. The fair value of the option is estimated at $1,995,000 based
on the Black-Scholes model for American options. The average risk-free interest
rate used was 4.49%, volatility was estimated at 93.5% and the expected life was
ten years.


                                      F-20
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 9 - COMMITMENTS AND CONTINGENCIES

LEGAL JUDGMENT
The Company leased its facilities under a long-term non-cancelable operating
lease. The Company assigned the lease to Dasibi in March 2002. The Company was
named in a lawsuit to collect past due rent. In November 2002, a judgment was
entered against the Company for a total of $411,500, which has been accrued.

LITIGATION
From time to time, the Company is a party to a number of lawsuits arising in the
normal course of business. In the opinion of management, the resolution of these
matters will not have a material adverse effect on the Company's operations,
cash flows or financial position.

EMPLOYMENT AGREEMENTS
In September 2001, the Company entered into an employment agreement with an
individual serving in the capacity of Chairman of the Board, Chief Executive
Officer and President of the Company. According to the agreement, there shall
always be a minimum of at least five years remaining on the term of the
agreement. Base salary is $250,000 to be adjusted on an annual basis, with an as
yet undetermined cash bonus plan, provisions for use of a luxury automobile,
club memberships, and insurance plans. In addition, as inducement to retain the
services of the Officer, the Company granted the Officer options to purchase
1,150,000 shares of its common stock exercisable at $.30 per share. The Officer
had waived claim to his cash compensation until June 1, 2003. In August 2003,
the Board of Directors approved a bonus of $416,667 for the officer.

The Company's President and Chief Executive Officer agreed to defer payment of
all accrued wages and future compensation due to him in excess of $150,000 per
year for nine months from April 29, 2004.

On August 23, 2004, the Company entered into an amendment of the employment
agreement with its President and Chief Executive Officer. The amendment provides
that $100,000 of the Officer's annual salary shall be accrued as payable until
such time as the Company has the financial resources to pay any or all of the
accrued amount. The agreement also provides for salary increases of 5% per year
commencing January 1, 2006, and an extension of the term of the agreement until
December 31, 2010. In addition, automobile cost is limited to a maximum of
$2,500 per month and the Company will reimburse the officer for individual life
insurance premiums up to $1,000 per month and for health insurance premiums and
related expenses.

On October 1, 2004, the Company entered into an employment agreement with its
Vice President of Global Strategy. For the period from October 1 through
December 31, 2004, compensation is $35,000 per month. Thereafter, the agreement
provides for salary of $150,000 per year plus health care costs not to exceed
$400 per month. Employment is at will and may be terminated by either party at
any time.

The Company is obligated to make certain minimum salary payments as follows:

     YEAR ENDING DECEMBER 31,

     2005                                                    250,000
     2006                                                    262,500
     2007                                                    275,625
     2008                                                    289,406
     2009                                                    303,876
     2010                                                    319,070
                                                         --------------

                                                         $ 1,700,477
                                                         ==============


                                      F-21
<PAGE>


                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

                 (FORMERLY POLLUTION RESEARCH AND CONTROL CORP.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

LICENSE AGREEMENT

On September 30, 2003, the Company entered into a license agreement with CalTech
whereby CalTech granted the Company an exclusive, royalty-bearing license to
make, use, and sell all products that incorporate the technology that was
developed under the Technology Affiliates Agreement with JPL and is covered by
related patents. In addition, the grant includes a nonexclusive, royalty-bearing
license to make derivative works of the technology. The Company is required to
make quarterly royalty payments to CalTech, ranging from 2% to 4% of net
revenues for each licensed product made, sold, licensed, distributed, or used by
the Company and 35% of net revenues that the Company receives from sublicensing
the licensed products. A minimum annual royalty of $10,000 is due to CalTech on
August 1, 2005 and each anniversary thereof. The minimum royalty will be offset
by the abovementioned royalty payments, if any.

NOTE 10 - SUPPLEMENTAL CASH FLOW INFORMATION

During the year December 31, 2004, the Company paid $2,400 for income taxes. No
cash was paid for income taxes during the year ended December 31, 2003. Cash
paid for interest was $12,630 and $747 during the years ended December 31, 2004
and 2003, respectively.

NOTE 11 - RELATED PARTY TRANSACTIONS

Effective June 1, 2003, the Company entered into an agreement with Astor. The
Company's President and Chief Executive Officer owns 50% of the common stock of
Astor. The agreement required the Company to pay $25,000 per month for
investment banking and strategic advisory services as well as a 10% fee for all
debt and equity financing raised by the Company. The Company amended the terms
of its agreement for investment banking and strategic advisory services,
reducing the monthly payment to a sum no greater than $5,000 per month
commencing April 29, 2004 and for the nine months thereafter. During the years
ended December 31, 2004 and 2003 the Company paid Astor approximately $230,576
and $378,000, respectively in related expenses, which includes monthly fees,
placement fees, and loan fees. Effective September 30, 2004, the agreement was
terminated.

In September 2003, the Company loaned $20,000 to NT Media Corp. of California,
Inc. ("NT Media"), a related party entity in which Astor has an approximate 6.4%
equity interest and whose Director, Ali Moussavi, is a 50% partner in Astor. The
bridge note was due upon the sooner of October 15, 2003, or upon NT Media
raising additional funds of more than $50,000, and bears interest at the rate of
6%. The note was extended by mutual consent and must be repaid from financing
before any other creditor. In December 2003, the Company advanced an additional
$10,000 and $20,000 under agreements, which provide for interest at 6% per annum
and were due upon the sooner of February 24 and 29, 2004, respectively, or upon
NT Media raising additional funds of more than $50,000. These notes were paid in
full during the three months ended March 31, 2004.

The Company had advanced $-0- and $28,654 to Astor as of December 31, 2004 and
December 31, 2003, respectively.

On October 14, 2004, the Company entered into an assignment of a lease agreement
(sublease) for office space with Astor Capital, effective November 1, 2004. The
agreement provides for the sublease of office common areas to Astor for a
monthly fee equal to $500 per month. The sublease assigns to the Company all
right, title and interest in and to any security deposit or other refundable
amounts to which Astor may be entitled. The Company has been assigned the rights
to the related security deposit of $10,226 and leasehold improvements of $25,445
and has recorded such amounts, offsetting related amounts due from Astor.

The Company has certain employees in common with NT Media and Astor.

NOTE 12 - SUBSEQUENT EVENTS

On March 2, 2005, the Company entered into a scientific advisory consulting
agreement that expires on March 1, 2007. The consultant was granted 50,000
options to purchase shares of the Company's common stock for $0.24 per shares.

On March 7, 2005, the Company entered into an exclusive distribution agreement
with Quantum Automation to exclusively sell and distribute the Company's
bacterial spore monitors in Singapore, Malaysia and Thailand.


                                      F-22