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, 2005

[_]   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: $-0-

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 April  13,  2006,  the  aggregate  market  value of the
registrant's   common   stock   held   by   non-affiliates   was   approximately
$4,221,899.78.  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.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 60,312,854 as of April 12, 2006.

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

<PAGE>

                                TABLE OF CONTENTS



ITEM 1.  DESCRIPTION OF BUSINESS..............................................3

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

ITEM 3.  LEGAL PROCEEDINGS....................................................9

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................9

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS............9

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

ITEM 7.  FINANCIAL STATEMENTS.................................................21

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.................................................22

ITEM 8A. CONTROLS AND PROCEDURES..............................................22

ITEM 8B. OTHER INFORMATION....................................................22


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT...................22

ITEM 10. EXECUTIVE COMPENSATION...............................................24

ITEM 11. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS..........................................25

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................26

<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

CORPORATE HISTORY

Universal  Detection  Technology  (the  "Company"  or  "We") is  engaged  in the
research  and  development  of   bio-terrorism   detection   devices.   We  were
incorporated  on  December  24,  1971,  under the laws of  California.  Our core
business for over twenty 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
September  2001,  we  retained a new  management  team.  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  reconfigured  one of  our  existing  air  monitoring
instruments  in order to develop  the  Anthrax  Smoke  Detector,  later  renamed
BSM-2000.

OVERVIEW

 In August 2002, we entered into a Technology Affiliates Agreement with the NASA
Jet Propulsion  Laboratory  ("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 initially
referred to as the Anthrax Smoke Detector and later renamed  BSM-2000.  BSM-2000
is designed to provide  continuous  unattended  monitoring of airborne bacterial
spores in large public places,  with real-time  automated  alert  functionality.
BSM-2000  combines  a  bio-aerosol  capture  device  with a  chemical  test  for
bacterial  spores  that is  designed  to  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
BSM-2000 at a press  conference on May 6, 2004,  and received our first purchase
order in the third quarter of 2004. We are currently  conducting simulated tests
to further enhance the  functionality of our device.  In 2006 we plan to conduct
field  tests in  different  environments  and  conditions  in  order  to  obtain
empirical data to improve the overall design and  functionality  of our BSM-2000
product. During our 2005 fiscal year, we presented our bacterial spore detection
technology  at  various  venues,   including  conferences  and  seminars.  These
presentations  were attended by potential users of our technology and solutions,
including security industry officials and members of the scientific community.

                                       3
<PAGE>

Our  management  continues to gain  expertise in  anti-terrorism  techniques and
solutions.  Through our partnership with Security  Solutions  International,  we
have begun  providing  training  seminars on  terrorism  detection  and response
methods.  The seminars are designed  for  security  officials,  building  safety
managers,  and law  enforcement  personnel.  Our first such  seminar was held on
April 6 and 7 at the  Institute  for Criminal  Studies at the Broward  Sheriff's
Office in Fort Lauderdale, Florida.

We have not realized any revenues from sales of our products since the beginning
of fiscal  2002,  the  commencement  of  development  of our  BSM-2000.  We have
incurred  losses for the fiscal  years ended  December  31, 2005 and 2004 in the
approximate amounts of $3.5 million and $5.8 million,  respectively, and have an
accumulated  deficit of $30 million as of December  31,  2005.  At December  31,
2005,  we were in default on certain  debt  obligations  totaling  approximately
$331,000,  including accumulated interest of approximately  $558,303. We require
approximately  $1.9 million in the next 12 months to repay debt obligations.  We
do not  anticipate  that our  cash on hand is  adequate  to meet  our  operating
expenses over the next 12 months.  In addition,  we do not have adequate capital
to repay all of our debt  currently  due and becoming due in the next 12 months.
We  principally  expect  to  raise  funds  through  the sale of  equity  or debt
securities. However, during the past 12 months, management spent the substantial
majority of its time on sales and marketing of BSM-2000 in target markets. These
activities   diverted   management  from  the  time  it  otherwise  would  spend
negotiating sales of securities to raise capital. In addition,  the recent price
and  volume  volatility  in the  common  stock  has made it more  difficult  for
management to negotiate  sales of its  securities  at a fair price.  We actively
continue to pursue additional  equity or debt financing,  but cannot provide any
assurances that it will be successful. If we are unable to pay our debts as they
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 other alternatives.


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 was contingent upon Secure Wrap's satisfaction of the
first unit shipped to it.  Secure Wrap could accept or return the device  within
90 days and if Secure Wrap accepted the  detection  device,  the purchase  order
would call for us to ship one device  every two months  over the next 18 months.
Pursuant to this purchase  order we shipped a unit of BSM-2000 to Secure Wrap in
March 2005. Prior to the expiration of the 90 day period, Secure Wrap requested,
and we agreed,  to extend  that  period to the date upon which we  complete  our
principal  field  testing and obtain third party  verification  of the BSM-2000.
Secure Wrap has returned the device initially provided to it for our analysis of
sample collection and for modifications.

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 expected to ship this unit in the second  quarter of
2005,  following  completion of an appropriate  response plan approved by Secure
Wrap. As we did with our first  purchase  order from Secure Wrap, we have agreed
to postpone the  fulfillment  of this purchase order until the completion of our
principal field tests and third party verifications.

During the first quarter of our 2006 fiscal year,  we received a purchase  order
for two units of BSM-2000 from the government of a Western European country.  We
successfully  manufactured and shipped one of the units and received payment for
it. The second unit is currently in the manufacturing process.

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  ("DHS").  The  Department  of  Homeland  Security  is intended to
     consolidate the federal government's  efforts to secure the homeland,  with
     the primary goal being an America that is stronger, safer, and more secure.

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:

                                       4
<PAGE>

      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.

     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. Nonetheless, the process is very expensive. 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.

OUR SOLUTION

Universal Detection  Technology's BSM-2000 combines a bio-aerosol capture device
with a chemical test for bacterial spores that is designed to 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.  The BSM-2000  device,  coupled with a testing
device  to be used  only in the event of actual  detection,  is  designed  to be
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
costs.

COMPANY PRODUCTS

We have expended all of our research and development  efforts towards the design
and testing of BSM-2000, which consists of four components:

      o     an air sampler  for  aerosol  capture,  which  collects  aerosolized
            particles on a 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.

In 2005 we added the following features to BSM-2000:

                                       5
<PAGE>

      o     A stronger air pump sampling the air at 100 lit/min;
      o     Self calibration capability

The  BSM-2000  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  endospores,  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  on 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 is designed to 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  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.

It is only upon  detection of a  significant  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,  either because of the expert personnel required or the
costs of the continuous immunoassay or DNA testing. In addition, these competing
technologies  may be more likely to result in false  positives due to the volume
of tests  performed.  In contrast,  BSM-2000 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 of a
false  alarm.  On one  occasion,  a false  anthrax  alarm  shut  down 11  postal
facilities in the Washington  D.C.  area.  BSM-2000 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.  The BSM-2000
device is  designed to function  as a  complement  to an existing  bio-terrorism
detection device in places such as public  buildings and stadiums.  For example,
BSM-2000 is designed to serve 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.

MARKETING AND SALES

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 a
verbal agreement in principle with KAL Consultants,  Inc., pursuant to which KAL
will assist us with marketing and sales efforts.  We made an initial  payment to
KAL  Consultants  and KAL  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.

The Company has retained the services of consultants  to market  BSM-2000 in the
United States and internationally. In 2005 we continued to work closely with our
international   distributors  to  market  our  automatic  detection  systems  to
government and private entities  outside of the U.S..  Quantum  Automation,  our
representative and distributor in Singapore,  Malaysia, and Taiwan, has attended
industry conferences and meetings to generate interest in our technology.
Sartec Saras,  our  distributor  in Italy,  continued to hold meetings and talks
with Italian businesses and officials about BSM-2000. We have not sold any units
in  Singapore  or in Italy but we plan to  continue  seeking  sale lead in these
territories in 2006.

In 2006,  we received a purchase  order for 2 units of BSM-2000  from a European
government.  We  successfully  manufactured  and  shipped  one of the  units and
received  payment  for it. The second  unit is  currently  in the  manufacturing
process.

In the United States, we plan to continue  presenting our technology at industry
events and trade shows. We also retain domestic  distributors and consultants to
arrange  meetings  with and  presentations  to  building  owners and  operators,
government  officials  in  charge  of  decisions  for  safety  and  security  of
government and private venues and buildings,  homeland security  officials,  and
security companies.

We also plan to develop  brand  recognition  for our company and for our product
through  attendance at national and international  defense related  exhibitions,
use of print and video  promotional  materials,  and by granting  interviews  to
national and international news media.

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MANUFACTURING

Currently,  we do not have any  manufacturing or distribution  capabilities.  We
have been in discussions with two third-party  contractors,  Met One Instruments
and Horiba Jobin Yvon, regarding the manufacturing of our BSM-2000.  Met One and
Horiba Jobin Yvon have each  manufactured  one unit for us. Pursuant to a verbal
agreement,  we have chosen Horiba Jobin Yvon as our  manufacturer  of choice for
the  production  of the  spectrometers  that  are used  within  our  device.  In
addition,  Met One  Instruments  has verbally  agreed to collaborate  with us in
production of air samplers, which are used to gather samples on the filter tape,
during the field testing of the BSM-2000.  Upon  completion of our testing,  Met
One Instruments also has agreed to collaborate with Horiba Jobin Yvon and Horiba
Jobin Yvon has agreed to obtain  technical  information from Met One Instruments
in order for Horiba Jobin Yvon to  manufacture  the entire device  including the
spectrometer  and the air  sampler.  In the  fourth  quarter  of  2005,  Met One
Instruments  manufactured another unit of BSM-2000 with a stronger pump and self
calibration  capability.  This  unit also uses a  spectrometer  manufactured  by
Horiba Jobin Yvon.

RESEARCH AND DEVELOPMENT

We intend to focus substantially on testing and  commercialization  of BSM-2000.
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 initially we referred to as the
Anthrax  Smoke  Detector,  and which we  renamed  BSM-2000  on April  21,  2005.
BSM-2000 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.  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.  To maintain
our license with Caltech, a minimum annual royalty of $10,000 was due to Caltech
on August 1, 2005,  and is due on 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
four percent  royalties on product  sales in countries  where a patent is issued
and two percent  royalties on product  sales in countries  where a patent is not
issued, as well as 35 percent of net revenues received from sub-licensees. As of
the date of this  report we are in  compliance  with the terms of our  agreement
with Caltech and have paid in full all owed royalties.

We spent  $12,125,  $20,000,  and $199,000 on research and  development  for the
years  ended  December  31,  2005,  2004  and  2003,  respectively.  We paid the
substantial majority of these amounts ($169,000 in fiscal 2003) 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.

TESTING

In May 2004,  we  unveiled  the first  functional  prototype  of  BSM-2000.  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  BSM-2000  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 plan to continue  field  testing of BSM-2000 in  different  environments  and
conditions  in 2006 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, which we refer
to as CAIT,  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.  Rutgers has applied for a
Phase  II  grant  from  the  National  Science  Foundation.   Initially,  CAIT's
commitment to engage in field  testing of BSM-2000 was  contingent on receipt of
the Phase II grant.  However,  CAIT recently  agreed to conduct field testing of
BSM-2000 at a facility it chooses regardless of whether it receives the Phase II
grant from the National  Science  Foundation.  We expect to see progress on this
front with Rutgers in 2006.

In the second quarter of 2005 we  strengthened  our  relationships  with Rutgers
University and CAIT. We have agreed to conduct a feasibility  study jointly with
CAIT to evaluate the  possibility  of  integration of BSM-2000 into CAIT's newly
designed software used for simulation of evacuation procedures for buildings and
public  structures.  Also,  in late  August  2005,  we jointly  represented  our
technology  with  representatives  from CAIT to a group of  officials,  industry
experts,  and academics in New Jersey. No work has yet been done with regards to
the  integration  of BSM-2000  into CAIT's  software.  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.  Thus far under this program, we have only
conducted tests at JPL and at a major hotel in Orange County.

                                       7
<PAGE>

GOVERNMENTAL APPROVAL

We are not presently  aware of any  governmental  agency  approval  required for
BSM-2000  before we can sell it in the United States.  We cannot assure you that
BSM-2000 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.

EMPLOYEES

As of December 31, 2005, we had a total of six 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 BSM-2000.  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.  We  stopped  paying  Dr.  Makowka  as of June  2005.
However,  we maintain close  relationships  with Dr. Makowka and he is available
for  help  and  consultation  upon  request  and he  maintains  his  seat on the
scientific advisory board. 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.  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
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. The
primary competition for BSM-2000 is PCR-based methods.  However,  the complexity
of PCR makes  automated  implementation  extremely  expensive.  We believe  that
BSM-2000  operating  costs will be  substantially  less than PCR-based  methods.
Thus, we expect to be  competitive  with  companies  offering these PCR methods.
Moreover,  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.

                                       8
<PAGE>

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 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 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. 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.

ITEM 3. LEGAL PROCEEDINGS

Sean Rose, Claire F. Rose and Mark Rose v. Universal Detection  Technology,  fka
Pollution Research and Control Corporation
Superior Court of the State of California  for the County of Los Angeles,  North
Central District, Case No. EC042040

On or about April 16, 2004,  Plaintiffs  commenced an action against the Company
(Case  No.  EC  038824)  for  amounts  allegedly  due  pursuant  to four  unpaid
promissory  notes.  On August 2,  2004,  the  parties  executed  a  Confidential
Settlement  Agreement  and Mutual  Releases (the  "Agreement").  On December 30,
2005,  Plaintiffs  commenced the  above-referenced  action  against the Company,
alleging the Company breached the Agreement and seeking  approximately  $205,000
in damages. A judgement was entered on April 11, 2006.

The Company is not a party to any other  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."

                                       9
<PAGE>

     Year                   Period                   Historic Prices
                                                --------------------------
                                                   High           Low
--------------- --------------------------------------------  ------------

     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                      0.40           0.19
                Second Quarter                     0.28           0.12
                Third Quarter                      0.25           0.13
                Fourth Quarter                     0.24           0.08

     2006       First Quarter             0.14           0.06


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

As of April 18, 2006,  the closing price of our common stock on Over The Counter
Bulletin  Board was $0.08,  and at that date, our  outstanding  common stock was
held of record by 1,346 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.

SALES OF UNREGISTERED SECURITIES

During the first  quarter of fiscal  2006,  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 January 2006, we issued 175,000 shares of common stock to a consultant that
were valued at  approximately  $15,000.

o     In January 2006, we issued 216,000 shares of common stock to employees for
      services that were valued at approximately $14,000.
o     In February  2006. we issued  234,000  shares of common stock to employees
      for services that were valued at approximately $14,000.
o     In February  2006, we issued  1,409,115  shares of common stock to various
      consultants that were valued at approximately $138,000.
o     During the first  quarter of 2006,  we issued  2,443,332  shares of common
      stock for the exercise of warrants and received  proceeds of approximately
      $366,500.
o     In March  2006,  we issued  1,409,756  shares of common  stock to  various
      consultants that were valued at approximately $126,000.
o     In March 2006, we issued  234,000  shares of common stock to employees for
      services that were valued at approximately $14,000.


During the fourth  quarter of fiscal 2005,  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 2005, we issued 173,000 shares of common stock to employees for
      services that were valued at approximately $28,000.

                                       10
<PAGE>

o     In October  2005,  we issued  50,000  shares of common  stock for warrants
      exercised.
o     In October 2005, we issued  100,000  shares of common stock as payment for
      loan fees valued at approximately 15,000.
o     In November  2005, we issued  194,000  shares of common stock to employees
      for services that were valued at approximately $14,000.
o     In  December  2005,  we  issued  1,400,000  shares  of  common  stock to a
      consultant that were valued at approximately $127,400.
o     In December  2005, we issued  198,860  shares of common stock to employees
      for services that were valued at approximately $14,000.


INVESTMENT AGREEMENT WITH EUROPEAN EQUITY GROUP

On February  13, 2006 we entered  into an  Investment  Agreement  with  European
Equity Group ("European"), for the future issuance and purchase of shares of our
common stock. This Investment Agreement  establishes what is sometimes termed an
equity line of credit or an equity drawdown facility.

In general, the drawdown facility operates as follows:  European,  has committed
to provide us up to  $10,000,000  as we  request it over a 36 month  period,  in
return for common stock we issue to European.  We, in our sole  discretion,  may
during the Open Period  deliver a "put  notice"  (the "Put  Notice") to European
which  states  the  dollar  amount  which we intend to sell to  European  on the
Closing Date. The Open Period is the period  beginning on the trading after this
Registration  Statement is declared  effective (the "Effective  Date") and which
ends on the earlier to occur of 36 months from the Effective Date or termination
of the Investment Agreement in accordance with its terms. The Closing Date shall
mean no more than 7 trading days  following the Put Notice Date.  The Put Notice
Date shall mean the Trading Day immediately  following the day on which European
receives a Put Notice, however a Put Notice shall be deemed delivered on (a) the
Trading Day it is received by  facsimile or otherwise by European if such notice
is received prior to 9:00 am EST, or (b) the immediately  succeeding Trading Day
if it is received by facsimile or otherwise after 9:00 am EST on a Trading Day.

The amount that we shall be  entitled  to Put to European  shall be equal to, at
our election, either: (A) Two Hundred percent (200%) of the average daily volume
(U.S.  market  only) of the Common Stock for the three (3) Trading Days prior to
the applicable Put Notice Date, multiplied by the average of the three (3) daily
closing  bid  prices  immediately  preceding  the Put Date,  or (B) One  Hundred
Thousand dollars ($100,000). During the Open Period, we shall not be entitled to
submit a Put Notice until after the  previous  Closing has been  completed.  The
Purchase Price for the Common Stock  identified in the Put Notice shall be equal
to ninety-three percent (93)% of the lowest closing Best Bid price of the Common
Stock during the Pricing Period.  The Pricing Period is the period  beginning on
the Put Notice Date and ending on and  including the date that is 5 trading days
after such Put Notice Date.

Upon the receipt by European of a validly  delivered Put Notice,  European shall
be required to purchase from us,  during the period  beginning on the Put Notice
Date and ending on and  including the date that is 5 Trading days after such Put
Notice,  that number of shares having an aggregate  purchase  price equal to the
lesser  of (a) the Put  Amount  set forth in the Put  Notice  and (b) 20% of the
aggregate  trading  volume of our common  stock  during the  applicable  Pricing
Period  times (x) the lowest  closing bid price of our common  stock  during the
specified  Pricing  period,  but only if such said  shares  bear no  restrictive
legend  and  are  not  subject  to  stop  transfer  instructions,  prior  to the
applicable Closing Date.

The Investment Agreement expires (a) when European has purchased an aggregate of
$10,000,000 of our Common Stock or (b) 36 months after the Effective Date of the
registration  statement of which this prospectus forms a part,  whichever occurs
earlier.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND 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.  At December 31, 2005, our working capital deficit was $2,880,875.  Our
independent  auditors'  report,  dated March 29, 2006,  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, 2005, and the sale
of our  operating  subsidiary.  We require  approximately  $1.9 million to repay
indebtedness  including  interest  in the next 12 months.  We  continue  to seek
financing,  but cannot assure you that we will be able to raise  adequate  funds
for our working  capital  purposes  and to repay our debt,  or at all.  While we
continue   to  pursue   development,   testing,   marketing   and   distribution
opportunities  with regard to our  detection  device,  our  financial  condition
places  significant  restrictions  on our current  ability to fully pursue these
activities.

We have not realized any revenues from sales of our products since the beginning
of fiscal  2002,  the  commencement  of  development  of our  BSM-2000.  We have
incurred  losses for the fiscal  years ended  December  31, 2005 and 2004 in the
approximate amounts of $3.5 million and $5.8 million,  respectively, and have an
accumulated  deficit of $30 million as of December  31,  2005.  At December  31,
2005,  we were in default on certain  debt  obligations  totaling  approximately
$331,000,  including accumulated interest of approximately  $558,303. We require
approximately  $1.9 million in the next 12 months to repay debt obligations.  We
do not  anticipate  that our  cash on hand is  adequate  to meet  our  operating
expenses over the next 12 months.  In addition,  we do not have adequate capital
to repay all of our debt  currently  due and becoming due in the next 12 months.
We  principally  expect  to  raise  funds  through  the sale of  equity  or debt
securities. However, during the past 12 months, management spent the substantial
majority of its time on sales and marketing of BSM-2000 in target markets. These
activities   diverted   management  from  the  time  it  otherwise  would  spend
negotiating sales of securities to raise capital. In addition,  the recent price
and  volume  volatility  in the  common  stock  has made it more  difficult  for
management to negotiate  sales of its  securities  at a fair price.  We actively
continue to pursue additional  equity or debt financing,  but cannot provide any
assurances that it will be successful. If we are unable to pay our debts as they
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 other alternatives.

                                       11
<PAGE>

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 NASA 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 National  Aeronautics  and Space
Administration  (NASA)  and  also is an  operating  division  of the  California
Institute  of  Technology,   or  Caltech,  a  private   non-profit   educational
institution.

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 initially we referred to as the
Anthrax  Smoke  Detector,  and which we  renamed  BSM-2000  on April  21,  2005.
BSM-2000 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.  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.  To maintain
our license with Caltech, a minimum annual royalty of $10,000 was due to Caltech
on August 1, 2005,  and is due on 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
four percent  royalties on product  sales in countries  where a patent is issued
and two percent  royalties on product  sales in countries  where a patent is not
issued, as well as 35 percent of net revenues received from sub-licensees. As of
the date of this  report we are in  compliance  with the terms of our  agreement
with Caltech and have paid in full all owed royalties.


In December  2004,  we signed an exclusive  distribution  agreement  with Sartec
Saras  Technologies  Srl,  a leading  distributor  of  environmental  monitoring
equipment in Italy,  for marketing  and sales of BSM-2000 in Italy.  Pursuant to
the terms of the  agreement,  Sartec  Saras is  obligated  a  purchase a unit of
BSM-2000 at a  discounted  price for  training and  demonstration  purposes.  We
agreed to postpone the obligation to purchase the BSM-2000  until  completion of
third party verification. To date, Sartec Saras has not made any sales in Italy.

In March 2005, we signed a distribution  agreement with Quantum  Automation,  in
Singapore,  providing it the right to represent,  sell, service,  and distribute
BSM-2000 in  Singapore,  Malaysia,  and Thailand.  The  agreement  requires that
Quantum  Automation  purchase at a discounted price one BSM-2000  intended to be
used for demonstration and training purposes.  We are in the process of applying
for an export license to be able to fulfill Quantum Automation's purchase order.
To  date,  Quantum  Automation  has not  made any  sales  of  BSM-2000  in these
countries.  On November 9th,  2005 Quantum  Automation  represented  BSM-2000 at
Safety & Security Asia 2005;  Asia  Homeland  Security  2005, an exhibition  and
conference  held at the  Singapore  Expo.  The event was  aimed at  providing  a
comprehensive solution to meet the discerning needs of users from the public and
private sectors with exhibits ranging from biometrics,  sensors,  identification
and communication devices, software to chemical,  biological,  radiological, and
nuclear detection, protection, decontamination, or mass casualties care systems.
The conference was intended to provide an international  perspective on homeland
security with speaker experts from the US, Europe,  and Asia who are expected to
share their experiences on the different aspects of homeland security pertaining
to their countries.

We intend to initiate production orders of BSM-2000 with Horiba Jobin Yvon based
on sales orders we receive. We have chosen Horiba Jobin Yvon as our manufacturer
of choice  for the  production  of the  spectrometers  that are used  within our
device.  Met One Instruments has agreed to collaborate  with us in production of
air samplers,  which are used to gather  samples on the filter tape,  during the
field  testing  of the  BSM-2000  to use  the  results  of that  testing  in the
production of the air samplers,  which are used to gather  samples on the filter
tape.  Upon completion of our testing,  Met One  Instruments  also has agreed to
collaborate  with Horiba  Jobin Yvon and Horiba  Jobin Yvon has agreed to obtain
technical information from Met One Instruments in order for Horiba Jobin Yvon to
manufacture the entire device including the spectrometer and the air sampler. In
the fourth quarter of 2005,  Met One  Instruments  manufactured  another unit of
BSM-2000 with a stronger pump and self  calibration  capability.  This unit also
uses a spectrometer manufactured by Horiba Jobin Yvon.

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 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.

                                       12
<PAGE>

We  initially  planned 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.  While we are still
considering the implementation of this plan, we also are considering  sponsoring
researchers  at JPL to work with the inventor of our bacterial  spore  detection
technology  to  perform  the  tasks  of  quality   assurance  and  research  and
development. Implementation of either of these plans is dependent on our ability
to secure  adequate  funds,  and we cannot  assure  you we will be able to do so
soon, or at all.

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 BSM-2000. If we are able to receive adequate
funding for our  working  capital  purposes,  we  anticipate  hiring up to three
additional  employees in the next 12 months,  one of whom would  concentrate  on
marketing BSM-2000 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.  In June 2005,  we appointed Mr. Nima  Montazeri as our
head of strategic development. Mr. Montazeri's principal responsibilities are to
identify and collaborate with qualified  independent  third parties that provide
goods and services that can be of strategic value to us and our business.

In October 2005, we announced two strategic  agreements one with RAE Systems and
the  other  with  Security  Pro USA.  The  agreement  with RAE  Systems  governs
cooperation  between us and RAE Systems with regards to  integration of BSM-2000
into RAE System's suite of chemical  detection  systems.  To date, no tasks have
been  complete  pursuant  to this  agreement.  We intend to start  conducting  a
feasibility  study for  integration of our BSM-2000 into RAE System's  detection
units.  Conducting of any  activities  pursuant to this  agreement is contingent
upon our ability to secure  adequate  financing and we cannot assure you we will
be able to do so soon, or at all.

The agreement with Security Pro USA, is for cooperation for sales of BSM-2000 in
the US. Security Pro USA has agreed to use its efforts to market BSM-2000 in the
US and to feature  BSM-2000 on its website.  We have not realized any sales from
Security Pro USA's  activities to date and cannot guarantee that we will realize
any soon, or at all.

In  February   2006  we  announced  our   agreement   with  Security   Solutions
International for marketing and sales of BSM-2000 in the US. Security  Solutions
International  (SSI) provides  training for law  enforcement  and anti terrorism
forces and has agreed to feature BSM-2000 in their seminars and conferences.  To
date,  we have not realized any leads or sales as a result of SSI's  efforts and
cannot guarantee that we will realize any sales through SSI soon, or at all.


In March 2006, we received a firm order from a government of a Western  European
country for two units of UDTT's  BSM-2000  Anthrax  Detection  Systems.  We have
already shipped the first unit. Due to confidentiality of the purchase order and
its  details  we are  unable to  release  the  specific  use and the name of the
government that has made the purchase.

During the year ended  December 31, 2005 we spent an aggregate of  $3,210,851 on
selling, general and administrative expenses and marketing expenses representing
a 43% decrease over the comparable year-ago period. The decrease  principally is
attributable  to significant  costs incurred in the year ended December 31, 2004
relating to marketing  of the BSM-2000  which we did not incur at the same level
in the year ended December 31, 2005.

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
has completed it tasks and obligations  under its agreement with us. We maintain
a close  relationship  with JPL and have  orally  agreed  to  pursue  additional
opportunities  and to fund further research on BSM-2000 as well as various other
applications  of  our  spore  detection  technology  in  terrorism-related   and
non-terrorism-related fields. Any additional research and development activities
are contingent on our receipt of adequate funding.

PLAN OF OPERATION

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 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.

We have  diversified  our  activities  and plan to  engage  more in value  added
services  to  complement  our  bio-terrorism  detection  technologies.  We  have
received a purchase  order for two units of BSM-2000 and have  manufactured  and
delivered  one of the  machines.  We plan to provide  installation  and training
services upon delivery of the second unit.

                                       13
<PAGE>

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 all of these  funds for  working  capital  purposes.  We
require  approximately  $3.9  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 each year on August 1,  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  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,  2005,  was  $2,880,875.   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,  2005.We  require  approximately  $1.9
million to repay  indebtedness  including  interest 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,  2005,  we owed our Chief
Executive  Officer  $643,221 of accrued but unpaid  salary under his  employment
agreement. The following provides the principal terms of our outstanding debt as
of December 31, 2005:

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, at
June 30, 2005, we were required to pay an additional  $80,000 as full payment of
our obligations. We did not make this payment and are in default of these notes.
As of December 31, 2005,  we have  $302,563  accrued for  including  interest in
anticipation of settling these notes.

o One loan  from an  unaffiliated  party in the  aggregate  principal  amount of
$195,000  with  interest  at a rate  of 12%  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.  At December 31, 2005,  there was $161,000  principal  amount
(and $17,710 in interest)  remaining on this note. We did not make our scheduled
payment under this note in July 2005, and are in default of this note.

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. At December 31, 2005, there was $74,500 principal amount (and $12,073
in interest) remaining on this note. We did not make our scheduled payment under
this note in July 2005, and are in default of this note.

                                       14
<PAGE>

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, and further 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, 2005 we
owed $199,500 in interest on 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, 2005, we owed $20,704 in interest
on these notes.

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, 2005 we owed $36,321 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, and further 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, 2005 we
owed $42,688 in interest on this note.

o One loan from an  unaffiliated  party  evidenced by a  promissory  note in the
aggregate  principal amount of $50,000 due on November 10, 2005 with an interest
rate of 12% per annum.  As of December 31,  2005,  we owed $4,000 in interest on
this note.  We did not make our  scheduled  payment  under this note in November
2005. We have verbally extended the unpaid note and the due date and other terms
are being renegotiated so the note is not considered in default.
o One loan from an  unaffiliated  party  evidenced by a  promissory  note in the
aggregate principal amount of $50,000 due on July 31, 2005 with an interest rate
of 12% per annum.  As of December 31,  2005,  we owed $4,000 in interest on this
note.  We did not make our  scheduled  payment  under this note in July 2005. We
have  verbally  extended  the unpaid  note and the due date and other  terms are
being renegotiated so the note is not considered in default..

o One loan from an  unaffiliated  party  evidenced by a  promissory  note in the
aggregate  principal  amount of $30,000  due on August 31, 2005 with an interest
rate of 15% per annum.  As of December 31,  2005,  we owed $2,625 in interest on
this  note.  We did not make our  scheduled  payment  in  August  2005 . We have
verbally  extended  the unpaid  note and the due date and other  terms are being
renegotiated so the note is not considered in default.

o One loan from an  unaffiliated  party  evidenced by a  promissory  note in the
aggregate principal amount of $30,000 due on July 31, 2005 with an interest rate
of 10% per annum.  As of December 31,  2005,  we owed $1,875 in interest on this
note.  We did not make our  scheduled  payment  under this note in July 2005. We
have  verbally  extended  the unpaid  note and the due date and other  terms are
being renegotiated so the note is not considered in default.

o One loan from an  unaffiliated  party  evidenced by a  promissory  note in the
aggregate  principal  amount of $30,000 due on October 30, 2005 with an interest
rate of 12% per annum.  We agreed to issue 100,000 shares of common stock to the
noteholder  as  additional  consideration  for  extending  credit  to us.  As of
December  31, 2005 we owed $1,200 in interest on this note.  We did not make our
scheduled payment on October 30, 2005. We have verbally extended the unpaid note
and the due date and  other  terms  are  being  renegotiated  so the note is not
considered in default.

o One loan from an  unaffiliated  party  evidenced by a  promissory  note in the
aggregate  principal amount of $60,000 due on November 15, 2005 with an interest
rate of 12% per annum.  We agreed to issue 50,000  shares of common stock to the
noteholder  as  additional  consideration  for  extending  credit  to us.  As of
December  31,  2005 we owed  $2,700 in interest on this note and the shares have
not yet been issued.  We have verbally extended the unpaid note and the due date
and other terms are being renegotiated so the note is not considered in default.

o One loan from an  unaffiliated  party  evidenced by a  promissory  note in the
aggregate  principal amount of $40,000 due on December 31, 2005 with an interest
rate of 12% per annum.  We agreed to issue 30,000  shares of common stock to the
noteholder  as  additional  consideration  for  extending  credit  to us.  As of
December  31,  2005 we owed  $1,200 in interest on this note and the shares have
not yet been issued.  We have verbally extended the unpaid note and the due date
and other terms are being renegotiated so the note is not considered in default.

o One loan  from an  affiliated  party  evidenced  by a  promissory  note in the
aggregate  principal  amount of $80,000  due on October  31,  2005 and  verbally
extended  to a date to be mutually  agreed upon by the parties  with an interest
rate of 10% per annum.  As of  December  31,  2005 we owed $1,700 in interest on
this note.

o One loan from an  unaffiliated  party  evidenced by a  promissory  note in the
aggregate  principal amount of $90,000 due on November 13, 2005 with an interest
rate of 12% per annum.  We agreed to issue 200,000 shares of common stock to the
noteholder as additional consideration for extending credit to us. This note has
not been repaid and we are in default. As of December 31, 2005 we owed $1,350 in
interest on this note and the shares have not yet been issued.  We have verbally
extended the unpaid note and the due date and other terms are being renegotiated
so the note is not considered in default.

o One loan  from an  affiliated  party  evidenced  by a  promissory  note in the
aggregate  principal  amount of $16,000  due on December  21, 2005 and  verbally
extended  to a date to be mutually  agreed upon by the parties  with an interest
rate of 12.5% per annum.  As of  December  31,  2005 we owed $417 in interest on
this note.

                                       15
<PAGE>

o One loan  from an  affiliated  party  evidenced  by a  promissory  note in the
aggregate  principal  amount  of $9,000  due on  December  4, 2005 and  verbally
extended  to a date to be mutually  agreed upon by the parties  with an interest
rate of 12.5% per annum.  As of  December  31,  2005 we owed $188 in interest on
this note.

o One loan  from an  affiliated  party  evidenced  by a  promissory  note in the
aggregate  principal  amount of $10,000  due on December  10, 2005 and  verbally
extended  to a date to be mutually  agreed upon by the parties  with an interest
rate of 12.5% per annum.  As of  December  31,  2005 we owed $208 in interest on
this note.

o One loan  from an  affiliated  party  evidenced  by a  promissory  note in the
aggregate principal amount of $900 due on March 1, 2006 with an interest rate of
12.5% per annum. As of December 31, 2005 we owed $9 in interest on this note.

o One loan from an  unaffiliated  party  evidenced by a  promissory  note in the
aggregate  principal amount of $15,000 due on December 20, 2005 with an interest
rate of 12.5% per annum.  As of December 31, 2005 we owed $150 in  interest.  We
did not make our  scheduled  payment on  December  20,  2005.  We have  verbally
extended the unpaid note and the due date and other terms are being renegotiated
so the note is not considered in default.

o One loan from an  unaffiliated  party  evidenced by a  promissory  note in the
aggregate  principal  amount of $100,000  due on March 31, 2006 with an interest
rate of 12% per annum. As of December 31, 2005 we owed $204 in interest.

o One loan  from an  affiliated  party  evidenced  by a  promissory  note in the
aggregate  principal  amount of $2,153 due on  November  20,  2005 and  verbally
extended  to a date to be mutually  agreed upon by the parties  with an interest
rate of 12% per annum.  As of December  31, 2005 we owed $65 in interest on this
note.

o One loan  from an  affiliated  party  evidenced  by a  promissory  note in the
aggregate  principal  amount of $5,000 due on November 20, 2009 with an interest
rate of 28.8% per annum or is due in full when the Company has an aggregate cash
balance of $100,000 or more.  During  February  2006 the note became due but has
not yet been repaid.
As of December 31, 2005 we owed $300 in interest on 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 2006, 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
recent  price  and  volume  volatility  in the  common  stock  has  made it more
difficult for  management to negotiate  sales of its securities at a fair price.
During the years ended  December 31, 2005 and 2004,  the Company  received gross
proceeds of approximately $0.9 million and $6.2 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, dated March 29, 2006, 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,  2005,.  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 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.

                                       16
<PAGE>

WE ARE IN DEFAULT OF A SUBSTANTIAL  PORTION OF OUR DEBT AND DO NOT HAVE ADEQUATE
CASH  TO  FUND  OUR  WORKING  CAPITAL  NEEDS.  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,
2005 we are in default on a portion of our debt totaling approximately $331,000,
excluding accumulated interest of approximately  $558,303. In the aggregate,  as
of  December  31,  2005,  we  have  approximately  $1,917,622  million  in  debt
obligations,  including  interest,  owing  within the next 12 months.  We cannot
assure you that any of these  note-holders will agree 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 nominal 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 downtrend 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,   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,  all of which have been used.
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. 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 2006.

We do not anticipate generating significant sales of the BSM-2000 until after we
complete all testing and  modifications,  which is contingent  principally  upon
receipt of adequate  funding  and our ability to continue to form  collaborative
arrangements  with qualified  third parties to engage in that testing at nominal
cost to us. We have not been profitable in the past years and had an accumulated
deficit of  approximately  $30 million at  December  31,  2005.  We have not had
revenues  from sales of our products  since the  beginning  of fiscal 2002,  the
commencement  of  development  of our  BSM-2000.  During the fiscal  years ended
December  31, 2005 and 2004,  we had losses of $3.5  million  and $5.8  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
2006.

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
BSM-2000.  Because we are unable to pay third  parties to test our  product  and
instead must rely on a qualified third party's willingness to partner with us to
test our product, our research and development activities and the testing of our
product may be delayed.  In addition,  since we contract  with third parties for
these  services,  we have less direct  control over those  activities and cannot
assure you that the  research  or testing  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 BACTERIAL SPORE 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
BSM-2000,  our costs of production  will  increase,  our  projected  margins may
decrease,  and we may not be able to timely  deliver our  product to  customers.
When and if we complete all design and 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  BSM-2000.  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.

                                       17
<PAGE>

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 BSM-2000.  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  BSM-2000.  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 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  in  development   requires  testing,   third  party  verification,
potentially  additional  modifications  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, the testing,  modification  and validation
process will be completed.  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 ADVERSELY  AFFECT THE DEMAND FOR OUR
ONLY PRODUCT, THE BSM-2000.

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 U.S.  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. 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.

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 February  14,  2006,  we had  outstanding  options and warrants to
purchase a total of  27,272,470  shares of common  stock.  Of these  options and
warrants, all have exercise prices at or above the recent market price of $0.085
per share (as of February  10, 2006) and none have  exercise  prices at or below
this price.

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.

                                       18
<PAGE>

The consultants that we hire may not provide us with the level of services,  and
consequently,  the operating results, we anticipate. We spent approximately $1.0
million and $3.2 million in consulting  fees during the years ended December 31,
2005 and 2004,  respectively,  and utilized  approximately 20 consultants during
this period. The consultants we engage provide us with a variety of services.

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  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 BSM-2000 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.  Caltech  owns the  bacterial  spore  detection  technology  that is
integrated  into  BSM-2000.  On January 31, 2003,  Caltech  filed a U.S.  patent
application  covering the  technology,  which currently is 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 and/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  U.S.  government  in our  license
agreement with Caltech,  a U.S.  government agency or the U.S. 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  U.S.
government,  for use in  activities  carried  out by the  U.S.  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;

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.

                                       19
<PAGE>

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  was due to Caltech on August 1,  2005,  and is due on 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.  As of the date of this
report,  we are in compliance  with the terms of our agreement  with Caltech and
have paid in full all owed royalties.

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.

RISKS RELATING TO OUR FEBRUARY 2006 INVESTMENT AGREEMENT:

THERE ARE A LARGE NUMBER OF SHARES  UNDERLYING  OUR PERIODIC  EQUITY  INVESTMENT
AGREEMENT  THAT ARE BEING  REGISTERED IN THIS  PROSPECTUS  AND THE SALE OF THESE
SHARES MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.

The issuance and sale of shares upon  delivery of an advance by European  Equity
Group  ("European")  pursuant to the  Investment  Agreement  in the amount up to
$10,000,000  are likely to result in  substantial  dilution to the  interests of
other  stockholders.  As of February 9, 2006 we had 56,218,277  shares of common
stock issued and outstanding.  We are registering  110,822,470  shares of common
stock pursuant to this  registration  statement,  of which up to 100,000,000 are
reserved for issuance pursuant to the Investment Agreement with European.

ASSUMING THE ISSUANCE OF  100,000,000  SHARES  UNDER THE  INVESTMENT  AGREEMENT,
EXISTING  SHAREHOLDERS  WILL  EXPERIENCE  SUBSTANTIAL  DILUTION OF OUR SHARES OF
COMMON STOCK.

Our  Investment  Agreement  with  European  contemplates  the  potential  future
issuance and sales of up to $10,000,000 of our Common Stock to European  subject
to certain restrictions and obligations. Given our current capital needs and the
market price of our common stock, we presently have no intention of drawing down
the entire  amount  available  to us unless the market price of our common stock
increases.

The  following is an example of the shares of our common stock that are issuable
upon the entire  drawdown of  $10,000,000  on our equity line based on prices at
25%, 50% and 75% below $.079.

                                       20
<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
% Below price            Price per share    Number of shares issuable (1)  Shares outstanding (2)    % of Outstanding stock(3)
-----------------------------------------------------------------------------------------------------------------------------
<S>                      <C>                              <C>                     <C>                                   <C>
Purchase price (4)       $          .079                  126,582,278             182,800,555                           225%
-----------------------------------------------------------------------------------------------------------------------------
25%                      $          .059                  169,491,525             225,709,802                           301%
-----------------------------------------------------------------------------------------------------------------------------
50%                      $         .0395                  253,164,556             309,382,833                           450%
-----------------------------------------------------------------------------------------------------------------------------
75%                      $        .01975                  506,329,113             562,547,390                           900%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Represents the number of shares issuable if all the entire $10,000,000 under
the equity line of credit, was drawn down at the indicated price.

(2) Based on  56,218,277  common shares  issued and  outstanding  on February 9,
2006.

(3) Percentage of the total  outstanding  common stock represented by the shares
issuable  on draw  down on the  equity  line of  credit  without  regard  to any
contractual  or other  restriction  on the  number  of  securities  the  selling
stockholders may own at any point in time.

(4) Based on a price of $.079,  which is 93% of the lowest  closing price of our
common  stock  during the five day period  commencing  February 7, 2006  through
February 13, 2006.

THE LOWER THE STOCK PRICE,  THE GREATER THE NUMBER OF SHARES  ISSUABLE UNDER THE
INVESTMENT  AGREEMENT WHICH COULD  CONTRIBUTE TO THE FUTURE DECLINE OF OUR STOCK
PRICE AND MATERIALLY DILUTE EXISTING STOCKHOLDERS' EQUITY AND VOTING RIGHTS.

The number of shares that European  will receive under its agreement  with us is
calculated  based upon the market  price of our common stock  prevailing  at the
time of each "put". The lower the market price, the greater the number of shares
issuable  under the agreement.  Upon issuance of the shares,  to the extent that
European  will  attempt  to sell the shares  into the  market,  these  sales may
further reduce the market price of our common stock.  This in turn will increase
the  number  of  shares  issuable  under  the  agreement.  This  may  lead to an
escalation  of lower  market  prices  and ever  greater  numbers of shares to be
issued.  A larger  number of shares  issuable  at a discount  to a  continuously
declining  stock price will expose our  shareholders  to greater  dilution and a
reduction of the value of their investment.

THE SALE OF OUR STOCK UNDER THE EUROPEAN  AGREEMENT  COULD ENCOURAGE SHORT SALES
BY THIRD  PARTIES,  WHICH COULD  CONTRIBUTE  TO THE FUTURE  DECLINE OF OUR STOCK
PRICE AND MATERIALLY DILUTE EXISTING STOCKHOLDERS' EQUITY AND VOTING RIGHTS.

The  Investment  Agreement  does not  contain  restrictions  on  short  selling.
Accordingly,  any significant downward pressure on the price of our common stock
can encourage  short sales by them or others,  subject to applicable  securities
laws. This is  particularly  the case if the shares being placed into the market
exceed the market's ability to absorb the increased number of shares of stock or
if we have not  performed  in such a manner to show that the equity funds raised
will be used by us to grow. Such an event could place further downward  pressure
on the  price  of our  common  stock.  Even if we use  the  proceeds  under  the
agreement  to grow our  revenues  and  profits  or invest in  assets,  which are
materially beneficial to us, the opportunity exists for short sellers and others
to contribute to the future decline of our stock price. If there are significant
short sales of our stock, the price decline that would result from this activity
will cause the share price to decline more so,  which,  in turn,  may cause long
holders of the stock to sell their shares thereby contributing to sales of stock
in the market.  If there is an  imbalance on the sell side of the market for the
stock, our stock price will decline. If this occurs, the number of shares of our
common  stock  that  is  issuable  pursuant  to the  Investment  Agreement  will
increase,  which will materially dilute existing stockholders' equity and voting
rights.

ITEM 7. FINANCIAL STATEMENTS

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

                                       21
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

                                      PAGE


Report of Independent Registered Public Accounting Firm                     F-2

Consolidated Balance Sheet                                                  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 and  Subsidiaries as of December 31, 2005, 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  consolidated
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  audits to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  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 and Subsidiaries as of December 31, 2005, 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
consolidated  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 1. The  consolidated  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.

                                 AJ. ROBBINS, PC
                          CERTIFIED PUBLIC ACCOUNTANTS


DENVER, COLORADO
MARCH 29, 2006


                                      F-2
<PAGE>

UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

ASSETS

                                                                    December 31,
                                                                        2005
CURRENT ASSETS:
Cash and cash equivalents                                           $    13,248
Restricted cash and certificate of deposit                               81,363
Assets held for sale                                                     45,083
Prepaid expenses and other current assets                               517,973
                                                                    -----------

Total current assets                                                    657,667

Deposits                                                                 10,226
Property and equipment, net                                             107,127
Patent Costs                                                             31,022
                                                                    -----------

                                                                    $806,042.00
                                                                    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable, trade                                             $   415,468
Bank Overdraft                                                            1,113
Accrued liabilities                                                   1,145,370
Notes payable - related party                                           125,553
Capital leases payable                                                   38,969
Notes payable-current                                                 1,233,766
Other Liabilities                                                        20,000
Accrued interest expense                                                558,303
                                                                    -----------

Total current liabilities                                             3,538,542
                                                                    -----------

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, 55,813,366 shares issued and outstanding                 23,202,495
Additional paid-in-capital                                            4,101,605
Accumulated (deficit)                                               (30,036,600)
                                                                    -----------

Total stockholders' equity (deficit)                                 (2,732,500)
                                                                    -----------

                                                                    $806,042.00
                                                                    ===========


See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>

UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   For the Year    For the Year
                                                      Ended           Ended
                                                   December 31,    December 31,
                                                       2005            2004
REVENUE                                            $         --    $     25,000
COST OF GOODS SOLD                                           --              --
                                                   ----------------------------

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

OPERATING EXPENSES:
Selling, general and administrative                   2,852,161       3,412,964
Marketing                                               358,690       2,229,344
Research and development                                 12,125          20,000
Depreciation                                             23,129          11,702
                                                   ----------------------------

Total expenses                                        3,246,105       5,674,010
                                                   ----------------------------

(LOSS) FROM OPERATIONS                               (3,246,105)     (5,649,010)

OTHER INCOME (EXPENSE):
Forgiveness of accrued interest payable                      --          40,518
Interest income                                           3,621          12,683
Interest expense                                       (200,700)       (111,163)
Amortization of loan fees                               (91,985)        (45,760)
                                                   ----------------------------

Net other income (expense)                             (289,064)       (103,722)
                                                   ----------------------------

(LOSS) FROM OPERATIONS BEFORE INCOME TAXES           (3,535,169)     (5,752,732)

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

NET (LOSS)                                         $ (3,535,169)   $ (5,752,732)
                                                   ============================

NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED:   $      (0.07)   $      (0.13)
                                                   ============================

WEIGHTED AVERAGE SHARES - BASIC AND DILUTED          51,766,178      43,374,429
                                                   ============================

See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
<TABLE>
<CAPTION>
                                                                                               Total
                                        Common Stock          Additional     Accumulated    Stockholders'
                                   Shares        Amount    Paid-in-Capital    Deficit)       (Deficit)
                                 -----------------------------------------------------------------------
<S>                              <C>          <C>            <C>            <C>             <C>
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)

Stock issued in private
placements, net of
offering costs of $32,942         1,373,928        158,479             --             --         158,479
Exercise of options                 100,000         19,000             --             --          19,000
Stock issued for services         4,372,279        547,636             --             --         547,636
Stock issued for loan fees          100,000         15,000             --             --          15,000
Warrants issued for services             --             --        358,594             --         358,594
Warrants issued as loan fees             --             --         12,311             --          12,311
Net (loss) for the year                  --             --             --     (3,535,169)     (3,535,169)
                                 -----------------------------------------------------------------------

BALANCE, DECEMBER 31, 2005       55,813,366   $ 23,202,495   $   4,101,605  $(30,036,600)   $ (2,732,500)
                                 ========================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                               For the Year   For the Year
                                                                   Ended         Ended
                                                               December 31,   December 31,
                                                                   2005           2004
<S>                                                            <C>            <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net (loss)                                                     $(3,535,169)   $(5,752,732)
Adjustments to reconcile net (loss) to net cash (used in)
operations:
Stock issued for services                                          299,592      1,253,400
Stock issued for compensation to employees                         248,044        123,809
Stock issued as loan fees                                           15,000             --
Warrants granted for services                                      358,594             --
Warrants granted for loan fees                                      12,311             --
Depreciation                                                        23,129         11,702
Changes in operating assets and liabilities:
Inventories                                                             --         20,000
Assets held for sale                                                (3,797)
Deferred interest                                                   24,300
Prepaid expenses                                                   585,343        (24,300)
Accounts payable                                                   229,004        (58,161)
Accrued expenses                                                   358,058        237,367
                                                               --------------------------

Net cash (used in) operating activities                         (1,385,591)    (4,188,915)
                                                               --------------------------

CASH FLOWS (TO) INVESTING ACTIVITIES:

Purchase of equipment                                              (20,778)       (92,228)
Investment in patent                                                    --        (31,022)
Advances to/(from) related party                                        --         (6,572)
Payments received bridge note                                           --         50,000
Investment in certificates of deposit                                   --       (253,345)
Redemption of certificates of deposit                              252,340             --
(Increase) decrease in restricted cash                              21,479         (1,604)
                                                               --------------------------

Net cash provided by (used in) investing activities                253,041       (334,771)
                                                               --------------------------

CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Bank Overdraft                                                       1,113             --
Proceeds from issuance of common stock                             191,420      6,189,540
Payment of offering costs                                          (32,942)      (738,615)
Proceeds from exercise of warrants and options                      19,000         20,000
Payments in advance of warrants being granted                       20,000
Payments on capital leases                                          (2,317)
Proceeds from notes payable                                        511,000             --
Proceeds from notes payable - related party                        173,353             --
Payments on notes payable                                         (154,000)      (495,167)
Payments on notes payable - related party                          (47,800)
                                                               --------------------------

Net cash provided by financing activities                          678,827      4,975,758
                                                               --------------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              (453,723)       452,072

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                       466,971         14,899
                                                               --------------------------

CASH AND CASH EQUIVALENTS, END OF YEAR                         $    13,248      $ 466,971
                                                               ==========================
</TABLE>

See accompanying notes to consolidated financial statements

                                      F-6
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

NOTE 1 - BUSINESS ACTIVITY

Universal Detection Technology,  a California  corporation,  primarily designed,
manufactured  and marketed air pollution  monitoring  instruments.  Beginning in
2002, the Company has focused its research and development efforts in developing
a real time biological weapon detection device. 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 has
entered  into a  technology  affiliates  agreement  with  NASA's Jet  Propulsion
Laboratory  ("JPL")  to  develop  technology  for  its  bio-terrorism  detection
equipment.  The Company has also entered a license agreement with the California
Institute of Technology  ("CalTech"),  which grants the Company  licensed patent
rights  to  technology  that  was  developed  under  the  Technology  Affiliates
Agreement with JPL.

GOING CONCERN AND MANAGEMENT'S PLANS

As  of  December  31,  2005,  the  Company  had a  working  capital  deficit  of
(2,880,875)  and a capital  deficit  of  (30,036,600).  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 to the
development,  field-testing and marketing of its bio-terrorism detection device,
known as BSM-2000.  The Company entered into a technology  affiliates  agreement
and a license agreement . The Company unveiled the first functional prototype of
its BSM-2000 in May 2004. Although the Company continues to engage in testing of
BSM-2000 to improve its functionality, BSM-2000 is currently available for sale.

During 2004, the Company commenced  simulated tests with benign bacterial spores
having  anthrax-like  properties in order to fine tune the Company's product and
reached an oral agreement in principal with KAL Consultants, Inc. to assist with
marketing and sales efforts. The Company received its first purchase order for a
minimum  of one and up to 10  Anthrax  detection  devices  by Secure  Wrap.  The
purchase order was contingent upon Secure Wrap's  satisfaction of the first unit
shipped to it.

In March  2005,  the Company  made its first  shipment.  Secure  Wrap  initially
accepted the unit,  however the unit was returned so further  modifications  and
enhancements could be made.

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 shipment of this unit has also been postponed until
more tests have been conducted on BSM-2000.


                                      F-7
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

The Company has entered into various  agreements with  distribution  partners as
well as  commercial  real  estate  consultants  to  initiate  sales and  develop
relationships to raise awareness of the Company's products in the United States,
Europe and Asia.

The  Company  is  considering  sponsoring  researchers  at JPL to work  with the
inventor of its  bacterial  spore  detection  technology to perform the tasks of
quality assurance and research and development.  The Company is also considering
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.  Implementation  of
either of these plans is dependent on the Company's  ability to secure  adequate
funding.

In October  2005,  the Company  entered into a  cooperation  agreement  with RAE
Systems and have agreed to evaluate the possibility of integrating BSM-2000 into
RAE Systems' chemical detection devices and solutions.

In an effort to raise  capital  in  January  2006 the  Company  entered  into an
agreement with 66 of its warrant holders,  holding a total of 6,122,470  Company
warrants,  to exchange their warrants with new ones with a new exercise price of
$0.15. The exchanged  warrants were  subsequently  re-priced and assigned to new
investors.  The new  investors can exercise the warrants at a newly set price of
$0.15.  As of March 31, 2006 the company had received  exercise  notices for all
6,122,470  outstanding  warrants from the new investors,  out of which 2,443,332
has been exercised and the company received proceeds of $366,500.

In February 2006, the Company  entered into an Investment  Agreement with with a
third party, for the future issuance and purchase of shares of its common stock.
This Investment  Agreement is an arrangement similar to an equity line of credit
or an equity drawdown facility.  The Company will be provided up to $10,000,000,
as requested over a 36 month period.  The Company may during the Open Period (36
months) deliver a "put notice" to the lender, which states the dollar amount the
Company  intends to sell its stock.  The amount  that the Company is entitled to
Put is subject to certain limitations and terms of the agreement.

In March 2006,  from the Company  shipped the first unit  pursuant to a purchase
order  received  from a  government  unit of a  Western  European  country.  The
purchase  order was for two units of the Company's  BSM-2000  Anthrax  Detection
systems.

During the first quarter of 2006,  the Company  entered into several  consulting
and advisory agreements.  The Company plans to utilize the consultants to assist
in the  marketing  and sales of its  products,  as well as improve its  business
plans and  operations.  The Company issued shares of its common stock as partial
payment to certain consultants.


                                      F-8
<PAGE>

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 a  former  subsidiary  of the  Company
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.  During the year ended December
31,  2005,  the  Company  recorded  $65,000 in deferred  revenue  related to the
shipment of a unit,  subject to customer  acceptance.  The unit was subsequently
returned  for  further  testing  and  recalibration  and the Company has reduced
deferred  revenues and accounts  receivable to $0 pending the  reshipment of the
unit to the customer.

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, 2005 and 2004,  the Company did not have  significant  advertising
costs.

PROPERTY AND EQUIPMENT AND DEPRECIATION AND AMORTIZATION

Property and  equipment  consist of office  furniture and  equipment,  leasehold
improvements  and lab testing  equipment,  is recorded at cost less  accumulated
depreciation. Depreciation and amortization is provided for on the straight-line
method over the estimated  useful lives of the assets,  generally  three to five
years or over the term of the lease.

The cost of property  and  equipment  at  December  31,  2005  consisted  of the
following:

Equipment                               $  51,998

Furniture                                  64,670

Leasehold Improvement                      25,443
                                        ---------
                                          142,111

Less accumulated depreciation             (34,984)

                                        $ 107,127
                                        =========

Total  depreciation  and  amortization  expense  was $23,129 and $11,702 for the
years ended December 31, 2005 and 2004,  respectively.  As of December 31, 2005,
accumulated depreciation was $34,984.

RESTRICTED CASH

Restricted cash is the balance required under the Company's office lease.


                                      F-9
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

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.

If the Company had elected to recognize compensation expense based upon the fair
value at the grant date for awards under the Stock Option Plan  consistent  with
the methodology  prescribed by SFAS No. 123, the Company's net loss and loss per
share would be increased to the pro forma amounts  indicated  below for the year
ended

December 31, 2005 and 2004:

                                                      2005            2004
                                                --------------    -------------
Net loss attributed to common stock holders:

As reported                                     $   (3,535,169)   $  (5,752,732)

Compensation recognized under APB 25                        --               --

Compensation recognized under SFAS 123                 (11,222)              --

                                                --------------    -------------
Pro Forma                                         (3, 546, 391)   $  (5,752,732)
                                                ==============    =============
Basic and diluted loss attributed to common
stockholders per common share:

As reported                                             (0.07)    $       (0.13)

Pro Forma                                               (0.07)    $       (0.13)


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 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 24,034,999 and 20,351,145 shares at December
31, 2005 and 2004, 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.


                                      F-10
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

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
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.  The Company has not  recorded  amortization  expense  related to its
patent acquisition costs because the awarding of the patent is still pending.

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 $12,125 and $20,000 for the
years ended December 31, 2005 and 2004, 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, 2005, 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.

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  requires 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.


                                      F-11
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

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.


                                      F-12
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

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.

NOTE 3 - INVENTORIES

During the year ended  December  31, 2004,  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


On September  21, 2004,  the Company had  outstanding  two notes  payable to JRT
Holdings  totaling  $40,000.  JRT  Holdings is a company in which the  Company's
president and Chief  executive  officer has a 50% equity  interest.  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.

During the year ended December 31, 2005, the Company borrowed a total of $41,853
from its president and chief executive  officer under  promissory notes executed
by the Company.  The notes had interest rates ranging from 0% to 28.8% per year.
The  Company  repaid  notes  totaling  $34,700  during  year and $9,653  remains
outstanding   at  December  31,  2005.  Of  the  remaining   balance  $2,500  is
non-interest  bearing and has no repayment  terms,  $2,153 bears interest at 12%
and is past due.  Additionally,  $5,000 bears interest at 28.8% and is due in 60
monthly installments of $158 or is due in full when the Company has an aggregate
cash balance of $100,000 or more.  During  February 2006 the note became due but
has not yet been repaid.


                                      F-13
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

During  the year  ended  December  31,  2005,  the  Company  borrowed a total of
$115,900 from its  vice-president  of Global  Strategy  under  promissory  notes
executed by the Company.  The notes bear  interest at rates  ranging from 10% to
12.5% per year.  The notes matured  between  October 2005 and March 2006 and are
past due.

NOTE 5 - NOTES PAYABLE

Notes payable consisted of the following at December 31, 2005:

Notes payable to individuals, subject to contingent                $   95,740
Settlement agreement and summary judgement,
interest at 11.67% per annum,
principal and interest due January 1, 2006, in default, unsecured

Note payable, subject to settlement agreement, interest
at 12% per annum, principal and interest due July
2005, in default, unsecured                                           161,000

Note payable, subject to settlement agreement, interest
at 9.17% per annum, principal and interest due July
2005, in default, unsecured                                             74,500

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 12% per annum, due November 2005
and verbally extended, unsecured                                       50,000

Note payable, interest at 12% per annum, due July 2005
and verbally extended, unsecured                                       50,000


                                      F-14
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

Note payable, interest at 15% per annum, due August 2005
and verbally extended, unsecured                                       30,000

Note payable, interest at 10% per annum, due July 2005
and verbally extended, unsecured                                       30,000

Note payable, interest at 12% per annum, due November 2005
and verbally extended, unsecured                                       30,000

Note payable, interest at 12% per annum, due November 2005
and verbally extended, unsecured                                       60,000

Note payable, interest at 12% per annum, due December 2005
and verbally extended, unsecured                                       40,000

Note payable, interest at 12% per annum, due November 2005
and verbally extended, unsecured                                       90,000

Note payable, interest at 12.5% per annum, due December 2005
and verbally extended, unsecured                                       15,000

Note payable, interest at 12% per annum, due March 2006
unsecured                                                             100,000

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

                                    Total notes payable            $1,233,766
                                                                   ==========


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. The Company defaulted on the two remaining
payments totaling $80,000 at which time the entire remaining balance became due,
including  default  interest and legal fees.  The Company  currently has accrued
$206,822  for  interest  and legal fees in  addition  to the  $95,740  principal
balance


                                      F-15
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

During  August  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  was  amortized  as a loan fee over the term of the  agreement.  Scheduled
payments were not made on the note and the company is currently in default.

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.

During  August  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 in 2004.  Scheduled
payments were not made on the note and the company is currently in default.

NOTE 6 - INCOME TAXES

The income tax  provision  (benefit)  for the years ended  December 31, 2005 and
2004  differs  from the  computed  expected  provision  (benefit) at the federal
statutory rate for the following reasons:


                                                   2005           2004
                                               -----------    -----------

Computed expected income tax provision         ($1,201,957)   ($1,964,000)
(benefit)
Net operating loss carryforward                  1,023,664      1,708,000
increased
Accrued liabilities                                 45,866        232,000
Stock-based expenses                               126,108         42,000
Non-deductible meals & entertainment                 3,932             --
Depreciation                                         2,388         18,000
                                               -----------    -----------

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


                                      F-16
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

The components of the deferred tax assets and  (liabilities)  as of December 31,
2005 were as follows:


Deferred tax assets:
Temporary differences:
        Depreciation                       $   (21,719)
        Accrued liabilities                     53,960
        Net operating loss carryforward      8,185,399
        Valuation allowance                 (8,217,640)
                                           -----------

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

The components of the deferred tax (expense) benefit were as follows for the
years ended December 31, 2005 and 2004:


                                                    December 31,   December 31,
                                                        2005           2004
                                                    -----------    -----------
Deferred tax assets:
   Accrued expenses                                $  (318,840)   $   273,000
Depreciation                                                --        (22,000)

     Increase in net operating loss carryforward     1,173,888      2,009,000
   Change in valuation allowance                      (855,048)    (2,260,000)
                                                   -----------    -----------

                                                   $        --    $        --
                                                   ===========    ===========

As  of  December  31,  2005,  the  Company  has  federal  net  operating  losses
carryforward of approximately $20,516,000 expiring in 2006 through 2020.


                                      F-17
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

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

PRIVATE PLACEMENT

During  2004 the  Company  completed  a private  placement  of common  stock and
warrants  generating  gross proceeds of  $3,000,000.  The Company paid placement
fees of $414,640 related to the offering.

The Company used the proceeds for working capital and general corporate use. The
Company was  precluded  from using the proceeds to pay debt  outstanding  at the
time of the  closing of the  offering or to make  payments  to Astor  Capital (a
related party owned by the Company's  president/chief executive officer and vice
president of Global Strategy

Each Unit  consisted  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.

In addition,  the Company amended the terms of its agreement with Astor reducing
the monthly payments to Astor. 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.

In January 2006, the investors returned their Class A and B warrants in exchange
for new warrants  exercisable at $.15 per share. The Class A and B warrants were
repriced  to be  exercisable  at $.15  per  share  and  were  reassigned  to new
investor.  During the first  quarter of 2006,  warrants  to  purchase  2,443,332
shares were exercised and the Company received proceeds of $366,500.

SALES OF COMMON STOCK

During the year ended December 31, 2005, the company sold 1,373,928 shares of
common stock for a total of $200,919. The company paid placement fees totaling
$32,942.


                                      F-18
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

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 were  exercisable at $0.50 per share and expired in July 2009.  Certain
of these stock and warrant  issuances were included in the  discussion  entitled
Private Placement above.

STOCK ISSUED FOR SERVICES

During the year ended  December  31,  2005,  the Company  issued an aggregate of
1,959,385  shares of its common  stock to various  employees  of the  Company as
compensation.  The shares  were valued at a total of  $248,044,  the fair market
value of the shares on the days issued.

In October 2005,  the Company issued 100,000 shares as payment of loan fees on a
note to an unrelated party.  The shares were valued at $15,000,  the fair market
value on the date of the loan.

In September  2005, the Company issued  1,012,894  shares of its common stock as
partial payment of an advertising campaign.  The shares were valued at $172,192,
the  fair  market  value of the  stock on the day  issued  of which  $37,500  is
recorded as prepaid expense.

On December 15, 2005,  the Company  entered into a three month Product Sales and
Marketing Consulting Agreement with an unrelated individual and issued 1,400,000
shares of common  stock with a fair value of  $127,400.  The fair value has been
recorded as prepaid expenses to be amortized over the term of the agreement. For
the year ended December 31, 2005, the Company  recognized $21,333 as stock based
compensation expense related to this agreement.

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  common  stock with 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. For the year ended December 31, 2005, the Company recognized $108,943
as stock based compensation expense related to this agreement.


                                      F-19
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

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.

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 which was amortized  over the one-year term of the  agreements.  The Company
expensed  related  consulting  fees of $740,000 for the years ended December 31,
2004.

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, which was amortized over the terms of the  agreements.  The
Company expensed related  consulting fees of $652,500 and $290,500 for the years
ended December 31, 2005 and December 31, 2004, respectively.

ISSUANCE OF OPTIONS AND WARRANTS

On March 2, 2005, the Company  entered into a consulting  agreement for advisory
and consulting  services in connection with its general business.  The agreement
expires  March 1, 2007.  As  compensation  for entering  into the  agreement and
providing  services there under,  the consultant  received an option to purchase
50,000 shares of the Company's  common stock,  exercisable  immediately,  at the
price of $0.24 per  share.  The  option  was  valued  at $5,551  using the Black
Scholes  model for  American  options,  with  volatility  of 90% and a risk free
interest  rate of 3.5%.  The market price of the common stock on the date of the
grant was $0.23.

On August 3, 2005, the Company entered into a consulting  agreement for advisory
and consulting  services in connection with its general business.  The agreement
expires  November 3, 2005. As  compensation  for entering into the agreement and
providing  services there under, the consultant  received 50,000 warrants of the
Company's stock at a price of $0.40 per share,  50,000 warrants of the Company's
stock at a price of  $0.80  per  share  and  50,000  warrants  to  purchase  the
Company's stock at a price of $1.20 per share.  The warrants were values at $256
using the Black Scholes model for  warrants,  with  volatility of 82% and a risk
free interest rate of 3.5%.  The market price of the common stock on the date of
the grant was $0.17.


                                      F-20
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

On August 19, 2005, the Company entered into a consulting agreement for advisory
and consulting  services in connection with its general business.  The agreement
expires  August 18, 2006.  As  compensation  for entering into the agreement and
providing  services there under, the consultant  received  3,600,000 warrants of
the Company's  stock at a price of $0.17 per share.  The warrants were values at
$293,171 using the Black Scholes model for warrants,  with volatility of 82% and
a risk free interest  rate of 3.5%.  The market price of the common stock on the
date of the grant was $0.155.

In September 2005, the Company  granted 250,000  warrants of the Company's stock
at a price of $0.05 per share as payment of loan fees.  The  warrants  expire in
one year.  The warrants were valued at $12,311 using the Black Scholes model for
warrants with a volatility  of 82% and a risk free  interest  rate of 3.5%.  The
market price of the common stock on the day of grant was $0.091.

In December 2005, the Company granted 1,000,000  warrants of the Company's stock
at a price  of  $0.10 to an  employee  of the  Company  for  services  rendered,
expiring in five years.  The warrants  expire in five years.  The warrants  were
valued at $59,616  using the Black  Scholes model for warrants with a volatility
of 82% and a risk free  interest  rate of 3.5%.  The market  price of the common
stock on the day of grant was $0.91.



During 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  expired on December 31, 2004. The Company paid
$34,500  cash,  and  issued  10,000  shares of the  Company's  common  stock and
warrants 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 had a value of $7,200 and the warrant was valued at $21,490 using
the Black Scholes model for 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  during
2004

On October 6, 2004,  the  Company  entered  into a Product  Sales and  Marketing
Consulting  Agreement for a period of two years. As compensation for services to
be rendered,  the Company  granted 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 , 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
consultant is no longer  providing  services to the Company and the value of the
warrant has been fully expensed.


                                      F-21
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

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, 2004 and 2005:

<TABLE>
<CAPTION>
                                                                       Weighted Average
                                                Number of                  Exercise
                                        ------------------------------------------------
                                         Options       Warrants       Price       Amount
                                        ------------------------------------------------
<S>                            <C>      <C>            <C>             <C>   <C>
Outstanding, December 31,     2003     9,339,017      2,495,543        0.50   5,971,986

Granted                                    60,000     10,099,999       0.57   5,804,166

Exercised                                      --        (55,556)      0.36     (20,000)

Expired/cancelled                        (428,571)    (1,159,287)      0.51    (816,823)
                                        ------------------------------------------------

Outstanding, December 31,      2004     8,970,446     11,380,699       0.50  10,939,329

Granted                                   200,000      5,000,000       0.15     757,500

Exercised                                (100,000)            --       0.19     (19,000)

Expired/cancelled                        (710,446)      (555,700)      0.86  (1,088,886)
                                        ------------------------------------------------

Outstanding, December 31,      2005     8,360,000     15,824,999       0.44  10,588,943
                                        ================================================
</TABLE>

                                      F-22
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

The  following  table  summarizes  information  about stock options and warrants
outstanding at December 31, 2005:
<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>
    0.05  to $0.33     12,850,000      5.71             0.261     12,850,000       0.261

    0.35  to $0.50      6,700,000      3.39             0.499      6,700,000       0.499

    0.53  to $0.80      4,028,331      3.16             0.675      4,028,331       0.675

   0.875  to $1.75        356,668      0.74             1.016        356,668       1.016

       2  to $3.10        100,000      0.70             2.000        100,000           2
          ---------------------------------------------------------------------------------
   0.225  to $3.10     24,034,999      4.54              0.44     24,034,999        0.44
</TABLE>


The weighted  average  exercise  price of options at their grant date during the
years ended  December  31, 2005 and 2004 where the  exercise  price  equaled the
market price at the grant date, was $0.16 and $0.53  respectively.  The weighted
average  exercise  price of options and  warrants at their grant date during the
years ended  December 31, 2005 and 2004,  where the exercise  price exceeded the
market price was $0.15 and $0.88,  respectively.  The weighted  average exercise
price of options and warrants at their date of grant  during the years  December
31, 2005 and 2004,  where the  exercise  price was less than the market price on
the grant date, was $0.05 and $0.56, respectively.

The  weighted  average  fair values of options and  warrants at their grant date
during the years  ended  December  31,  2005 and 2004 where the  exercise  price
equaled  the  market  price  on  the  day  of  grant,   were  $0.08  and  $0.41,
respectively.  The weighted average fair values of options and warrants at their
date of grant  during the years  ended  December  31,  2005 and 2004,  where the
exercise  price  exceeded the market price on the grant date was $0.08 and $0.22
respectively.  The  weighted  average  fair value of the of options and warrants
during the years  December 31, 2005 and 2004,  where the exercise price was less
than the market  price at the date of grant,  was $0.05 and $0.56  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:


                                      F-23
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

                                             2005               2004
                                       -----------------------------

Risk-free interest rate                      3.50%             3.87%
Volatility                                  82.08%            89.47%
Expected life                           3.22 years        4.93 years
Dividend yield                                  0%                0%


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 $358,594 and $123,809
during the years ended December 31, 2005 and 2004 respectively.

NOTE 9 - COMMITMENTS AND CONTINGENCIES


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.


                                      F-24
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

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 will
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.  In The
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 the entire
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 was $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,

2006                                        262,500
2007                                        275,625
2008                                        289,406
2009                                        303,876
2010                                        319,070
                                        -----------
                                        $ 1,450,477
                                        ===========


                                      F-25
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

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 was due and paid to
CalTech on August 1, 2005 and each anniversary thereof. The minimum royalty will
be offset by the abovementioned royalty payments, if any.

LEASES

During 2005,  the company  entered into two lease  agreements  to lease  testing
equipment.  The Company is  currently  in violation of the terms of the lease as
the Company  resold the  equipment in 2006 and is  classified as assets held for
sale. The Company is currently in discussions with the leasing company to remove
the sale of  equipment as a default of the lease and treat the two leases as one
single purchase transaction. Future minimum lease payments are all classified as
current.

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.

Capital leases payable at December 31, 2005 consist of the following:

                                  CAPITAL     OPERATING
                                  LEASES      LEASES
                                  ------      --------
   2006                           22,781      115,961
   2007                           22,781      119,440
   2008                           13,249      112,490
                                  ------      -------

     Min lease pmts               58,811      347,891
                                              =======

     Less Interest:              (19,842)
                                 -------

  PV of net min. lease pmts:      38,969
Less: current portion            (11,327)
                                 -------

                                  27,642
                                 =======

Interest Expense was $3,418 for 2005 and $0 for 2004.


                                      F-26
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004


Rent expense was $99,236 and $90,146 for 2005 and 2004 respectively.

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, 2005.  Cash
paid for  interest was $0 and $12,630  during the years ended  December 31, 2005
and 2004 respectively.

NOTE 11 - RELATED PARTY TRANSACTIONS

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

During the first quarter of 2006,  the Company  entered into several  consulting
and legal representation  agreements.  As part of these agreements,  the Company
issued  an  aggregate  of  3,024,871  shares  of  its  common  stock  valued  at
approximately $274,500. During the first quarter of 2006, the Company issued and
aggregate  of 684,000  shares of its common  stock to  employees  as payment for
services  valued at  approximately  $42,000.  During the first  quarter of 2006,
warrants to purchase  2,443,332  shares were exercised and the Company  received
proceeds of $366,500.


                                      F-27

<PAGE>

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

None.

ITEM 8A. CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure 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.

(b) Changes in Internal Controls over financial reporting

There have been no changes in our internal  controls  over  financial  reporting
during  our  last  fiscal  quarter,  which  have  materially  affected,  or  are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.

(c) Limitations on Effectiveness of Controls.

Internal control over financial  reporting cannot provide absolute  assurance of
achieving  financial reporting  objectives because of its inherent  limitations.
Internal  control over  financial  reporting is a process  that  involves  human
diligence  and  compliance  and is subject to lapses in judgment and  breakdowns
resulting from human failures.  Internal  control over financial  reporting also
can be circumvented  by collusion or improper  management  override.  Because of
such  limitations,  there  is a risk  that  material  misstatements  may  not be
prevented  or detected  on a timely  basis by internal  control  over  financial
reporting.  However,  these  inherent  limitations  are  known  features  of the
financial  reporting  process.  Therefore,  it is  possible  to design  into the
process safeguards to reduce, though not eliminate, this risk.

ITEM 8B. OTHER INFORMATION

None.

                                    PART III

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

                                       22
<PAGE>

The following tables set forth certain information with respect to our directors
and  officers  as of December  31,  2005.  The  following  persons  serve as our
directors and executive officers:



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

Jacques Tizabi.......................  34    Director, Chief Executive Officer
                                             and President
Matin Emouna (1) (2).................  37    Director
Michael Collins (1) (2)..............  36    Director, Secretary

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

Ali Moussavi                           35    Vice President of Global Strategy


(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.

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  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.

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.

                                       23
<PAGE>

COMMITTEES

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.

Our Compensation Committee determines matters pertaining to the compensation and
expense  reporting of certain of our executive  officers,  and  administers  our
stock option,  incentive  compensation,  and employee stock purchase plans.  Our
Compensation Committee currently consists of Michael Collins and Matin Emouna.

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,  2005,  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,  2005,  of our Chief  Executive  Officer  and our other  executive
officers whose annual  compensation  exceeded  $100,000 in the fiscal year ended
December 31,  2005,  if any. We refer to the Chief  Executive  Officer and these
other officers as the named executive officers.


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

                                                                         CASH VALUE      SECURITIES UNDERLYING
 NAME AND PRINCIPAL POSITION     YEAR      SALARY         BONUS        OF PERQUISITES           OPTIONS
<S>                              <C>      <C>           <C>            <C>                           <C>
Jacques Tizabi                   2005     $132,964
  President, Chief Executive     2004     $150,000                     $       16,218
  Officer, Acting CFO and        2003     $145,833 (1)  $416,667 (1)               --                6,800,000
  Chairman of the Board

Ali Moussavi
  Vice President of Global       2005     $143,507            --                   --                       --
  Strategy                       2004     $154,000            --                   --                       --
</TABLE>


(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 BSM-2000.

OPTION GRANTS IN FISCAL 2005

There  were  no  options  granted  during  fiscal  2005 to the  named  executive
officers.

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

                                       24
<PAGE>

The  following  table  sets  forth,  for each of the named  executive  officers,
certain information  regarding the exercise of stock options during fiscal 2005,
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, 2005 ($0.41 per share).


<TABLE>
<CAPTION>
                  SHARES                    NUMBER OF SECURITIES
                 ACQUIRED                  UNDERLYING UNEXERCISED          VALUE OF UNEXERCISED
                    ON        VALUE              OPTIONS AT              IN-THE-MONEY OPTIONS AT
     NAME        EXERCISE    REALIZED         DECEMBER 31, 2005             DECEMBER 31, 2005
     ----        ---------   ---------   ---------------------------   ----------------------------
                                         EXERCISABLE   UNEXERCISABLE   EXERCISABLE    UNEXERCISABLE
<S>                    <C>         <C>           <C>             <C>           <C>              <C>
Jacques Tizabi          --          --     7,950,000              --   $   670,500               --
</TABLE>


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.

LONG TERM INCENTIVES

STOCK OPTIONS AND RESTRICTED STOCK. Executive officers,  together with our other
employees,  are  eligible  to  receive  grants  of awards  under our 2003  Stock
Incentive  Plan.  These  awards  may be in the  form  of  stock  options  and/or
restricted  stock  grants.  The number of shares  underlying  options or shares,
together with all other terms of the options and shares,  are established by the
Board of Directors.

OTHER PLANS. Executive officers are eligible to participate in our group health,
dental,  life,  disability,  retirement and other plans on the same basis as all
other employees.

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

STOCK INCENTIVE PLANS

We have in effect the 2006 Stock Incentive  Plan,  which we refer to as the 2006
Plan.  The  purpose  of the  2006  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 2006 Plan is  7,500,000.  The 2006 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.

                                       25
<PAGE>

Subject to the provisions of the Plan, the Board and/or the Committee shall have
authority to (a) grant, in its discretion,  Stock Awards;  (b) determine in good
faith the fair market  value of the Stock  covered by any Grant;  (c)  determine
which  eligible   persons  shall  receive  Grants  and  the  number  of  shares,
restrictions,  terms and conditions to be included in such Grants;  (d) construe
and interpret the Plan; (e) promulgate,  amend and rescind rules and regulations
relating  to  its   administration,   and   correct   defects,   omissions   and
inconsistencies  in the Plan or any Grant; (f) consistent with the Plan and with
the consent of the Participant, as appropriate, amend any outstanding Grant; (g)
determine  the duration and purpose of leaves of absence which may be granted to
Participants  without  constituting  termination  of  their  engagement  for the
purpose  of the  Plan  or any  Grant;  and (h)  make  all  other  determinations
necessary or advisable for the Plan's  administration.  The  interpretation  and
construction  by the  Board  of any  provisions  of the  Plan  or  selection  of
Participants  shall be  conclusive  and  final.  No  member  of the Board or the
Committee  shall be liable  for any action or  determination  made in good faith
with respect to the Plan or any Grant made thereunder.

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 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,
2005.  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.


                                            Number of Shares of
                                              Common Stock          Percent of
    NAME AND ADDRESS                        Beneficially Owned (1)   Class (1)
    ----------------                        ----------------------------------

Jacques Tizabi (2).........................           7,979,700           14.2%
Michael Collins............................                  --              0%
Matin Emouna...............................                  --              0%
Ali Moussavi...............................                  --              0%
Directors and executive officers as a
     group (4 persons) (2).................           7,979,700           14.2%

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


(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 February 9, 2006.

(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%
owner of Astor Capital, Inc., share voting and dispositive power. Mr. Tizabi and
Mr. Raymond  Tizabi,  each a 50% owner of JRT Holdings,  Inc.,  share voting and
dispositive power.

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

On May 8,  2005,  the  Company  executed  a  promissory  note  in the  aggregate
principal  amount of $6,000 payable to Jacques  Tizabi,  its President and Chief
Executive  Officer.  The promissory  note bears interest at 9% per annum and was
due and  payable on June 30,  2005.  The note was repaid  with  interest in July
2005.

                                       26
<PAGE>

On June 28,  2005,  the  Company  executed a  promissory  note in the  aggregate
principal  amount of  $12,000  payable to Jacques  Tizabi,  President  and Chief
Executive  Officer.  The promissory  note bears interest at 9% per annum and was
due and  payable on July 20,  2005.  The note was repaid  with  interest in July
2005.

On August 3, 2005,  the  Company  executed a  promissory  note in the  aggregate
principal  amount of $8,000  payable  to  Jacques  Tizabi,  President  and Chief
Executive  Officer.  The promissory  note bears interest at 9% per annum and was
due and payable on August 31, 2005. The note was repaid in August 2005.

On September  20, 2005 the Company  executed a promissory  note in the aggregate
principal  amount of $2,153 payable to Jacques  Tizabi,  its President and Chief
Executive  Officer.  The promissory note bears interest at 12% per annum and was
due and payable on November  20,  2005.  As of December  31, 2005 we owed $65 in
interest on this note.

On October 17,  2005 the Company  executed a  promissory  note in the  aggregate
amount principal  amount of $5,000 payable to Jacques Tizabi,  its President and
Chief Executive  Officer.  The promissory note bears interest at 28.8% per annum
and was due and payable on November 20, 2009 with an interest  rate of 28.8% per
annum or is due in full  when the  Company  has an  aggregate  cash  balance  of
$100,000 or more.  During February 2006 the note became due but has not yet been
repaid.

On  October 7, 2005 the  Company  executed a  promissory  note in the  aggregate
amount  principal  amount of $80,000 payable to Ali Moussavi,  Vice President of
Global  Strategy  due on October 31,  2005 and with an interest  rate of 10% per
annum. As of December 31, 2005 we owed $1,700 in interest on this note.

o On October 21, 2005 the Company  executed a promissory  note in the  aggregate
amount  principal  amount of $16,000 payable to Ali Moussavi,  Vice President of
Global  Strategy due on December 21, 2005 and with an interest rate of 12.5% per
annum. As of December 31, 2005 we owed $417 in interest on this note.

o On November 4, 2005 the Company  executed a promissory  note in the  aggregate
amount  principal  amount of $9,000  payable to Ali Moussavi,  Vice President of
Global  Strategy due on December 4, 2005 and with an interest  rate of 12.5% per
annum. As of December 31, 2005 we owed $188 in interest on this note.

o On November 10, 2005 the Company  executed a promissory  note in the aggregate
amount  principal  amount of $10,000 payable to Ali Moussavi,  Vice President of
Global  Strategy due on December 10, 2005 and with an interest rate of 12.5% per
annum. As of December 31, 2005 we owed $208 in interest on this note.

On December  1, 2005 the Company  executed a  promissory  note in the  aggregate
amount  principal  amount of $900  payable to Ali  Moussavi,  Vice  President of
Global  Strategy  due on March 10, 2006 and with an  interest  rate of 12.5% per
annum. As of December 31, 2005 we owed $9 in interest on this note.

On November  16 2005 the Company  executed a  promissory  note in the  aggregate
amount principal  amount of $8,700 payable to Jacques Tizabi,  its President and
Chief  Executive  Officer.  The promissory note bears interest at 0.0% per annum
and was due and payable on November  30,  2005.  The note was repaid in November
2005.

In connection with our private placement  offering,  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, until December
31, 2005.

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 which Ali  Moussavi  our Vice  President  of
Global  Strategy  owns a 50%  interest,  pursuant to which we have 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, 2005 and 2004, we paid Astor Capital,  Inc.,
placement  fees in the aggregate  amounts of $-0-,  $149,073,  respectively,  in
connection with private placements and equity financings for us.

During the years ended December 31, 2005 and 2004, we paid Astor  Capital,  Inc.
$0 and $90,145 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. As of November 1, 2005 Astor stopped its use of office space  including
the  common  areas  and,  therefore,  we  became  responsible  for all the lease
payments.

                                       27
<PAGE>

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

(a) The following exhibits are filed herewith:

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
Exhibit  3.4 of the  Company's  Annual  Report on Form 10-KSB for the year ended
December 31, 2001, filed on April 15, 2002).

4.1 Amended and Restated 2003 Stock Incentive Plan (incorporated by reference to
Exhibit  4.2 of the  Company's  Annual  Report on Form 10-KSB for the year ended
December 31, 2004, filed on March 31, 2005).

4.2 2006 Stock  Compensation  Plan  (incorporated  by reference to the Company's
Form S-8 Registration Statement filed on February 13, 2006).

10.1  Employment  Agreement by and between the Company and Jacques  Tizabi dated
September 25, 2001 (incorporated by reference to Exhibit

10.1 to Registrant's Quarterly Report on Form 10-QSB for the Quarter Ended March
31, 2002, filed on May 20, 2002).

10.2 Amendment to Employment Agreement of Jacques Tizabi, dated August 23, 2004.
(incorporated by reference to Exhibit 10.1 to the Company 's Quarterly Report on
Form 10-QSB for the Quarter  Ended  September  30,  2004,  filed on November 22,
2004).

10.3 Technology  Affiliates  Agreement by and between the Company and California
Institute of Technology, dated August 6, 2002. (incorporated herein by reference
to Exhibit  10.3 to the  Company 's Annual  Report on Form 10-KSB for the fiscal
year ended December 31, 2002, filed on April 15, 2003).

10.4  Licensing  Agreement by and between  Universal  Detection  Technology  and
California  Institute of Technology,  dated September 30, 2003  (incorporated by
reference to Exhibit 10.4 to the Company 's Quarterly  Report on Form 10-QSB for
the Quarter Ended September 30, 2003, filed on November 19, 2003).

10.5 Agreement for Investment Banking and Advisory Services,  by and between the
Company and Astor Capital,  Inc., dated June 1, 2003  (incorporated by reference
to  Exhibit  10.5 of the  Company 's Annual  Report on Form  10-KSB for the year
ended December 31, 2003, filed on March 31, 2004).

10.6  Amendment to Agreement for Investment  Banking and Advisory  Services with
Astor Capital,  Inc. dated April 29, 2004  (incorporated by reference to Exhibit
10.1 to the Company 's  Quarterly  Report on Form  10-QSB for the Quarter  Ended
June 30, 2004, filed on August 23, 2004).

10.7  Amendment to Agreement for Investment  Banking and Advisory  Services with
Astor  Capital,  Inc.  dated  September 22, 2004  (incorporated  by reference to
Exhibit 10.4 to the Company 's  Quarterly  Report on Form 10-QSB for the Quarter
Ended September 30, 2004, filed on November 22, 2004).

10.8 Standard Form Office Lease,  dated September  2003,  between Astor Capital,
Inc. and CSDV, a Limited Partnership. (incorporated by reference to Exhibit 10.2
to the  Company  's  Quarterly  Report  on Form  10-QSB  for the  Quarter  Ended
September 30, 2004, filed on November 22, 2004).

10.9 Assumption of Lease Agreement,  dated October 14, 2004,  between  Universal
Detection  Technology  and Astor  Capital,  Inc.  (incorporated  by reference to
Exhibit 10.2 to the Company 's  Quarterly  Report on Form 10-QSB for the Quarter
Ended September 30, 2004, filed on November 22, 2004).

10.10  Letter  Agreement,  dated  August 10,  2004,  between the Company 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).

10.11 Letter  Agreement,  dated August 10, 2004,  between the Company 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).

                                       28
<PAGE>

10.12 Letter  Agreement,  dated  September  21, 2004 between the Company 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).

10.13  Letter  Agreement,  dated  October 1, 2004,  between  the Company 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).

10.14  Letter of  Engagement  dated  August 19, 2005,  between  Trilogy  Capital
Partners, Inc. and Universal Detection Technology  (incorporated by reference to
the Company's Current Report on Form 8-K filed on September 28, 2005).

10.15 Form of Stock Purchase Warrant (incorporated by reference to the Company's
Registration Statement on Form SB-2 filed on February 14, 2006).

10.16 Stock Purchase Warrant issued to Trilogy Capital Partners (incorporated by
reference to the Company's Registration Statement on Form SB-2 filed on February
14, 2006).

10.17 Investment  Agreement by and between  Universal  Detection  Technology,  a
California corporation,  and European Equity Group (incorporated by reference to
the Company's Registration Statement on Form SB-2 filed on February 14, 2006).

10.18 Form of Consulting  Agreement  (incorporated by reference to the Company's
Registration Statement on Form SB-2 filed on February 14, 2006).

21.1  Subsidiaries of Registrant  (incorporated  by reference to Exhibit 21.1 of
the  Company 's Annual  Report on Form  10-KSB for the year ended  December  31,
2003, filed March 31, 2004).

31.1  Certification  of Chief Executive  Officer  pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

32.1  Certification  of Chief Financial  Officer  pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

     (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.

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, 2005.  The Committee also
has approved the engagement of AJ. Robbins as our independent  auditors  through
the quarter ending September 30, 2006.

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,  2005 and 2004,  were  approximately
$66,691 and $91,241, 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, 2005 and 2004, 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, 2005 and 2004, were approximately $9,779 and $3,716 respectively.

ALL OTHER FEES

No other fees were billed by AJ. Robbins, PC for the fiscal years ended December
31, 2005 and 2004.

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.

                                       29
<PAGE>

                                   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.


NAME                    TITLE                                     DATE

/s/ Jacques Tizabi
--------------------
Jacques Tizabi          President, Chief Executive Officer &      April 21, 2006
                        Acting Chief Financial Officer


/s/ Michael Collins
--------------------
Michael Collins         Director, Secretary                       April 21, 2006



/s/ Matin Emouna
--------------------
Matin Emouna            Director                                  April 21, 2006