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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X]  Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
     of 1934

                  For the quarterly period ended March 31, 2005

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

  For the transition period from __________________ to ______________________.

                         Commission file number 0-14266

                         UNIVERSAL DETECTION TECHNOLOGY
        (Exact Name of Small Business Issuer as Specified in its Charter)

            California                                 95-2746949
(State or Other Jurisdiction of                     (I.R.S. Employer
 Incorporation or Organization)                    Identification No.)

                       9595 Wilshire Boulevard, Suite 700
                         Beverly Hills, California 90212
                    (Address of Principal Executive Offices)

                                 (310) 248-3655
                (Issuer's Telephone Number, Including Area Code)

     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 past 90 days.

                                                         Yes X   No __

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock, no par value,
50,224,107 shares issued and outstanding as of May 17, 2005.

     Transitional Small Business Disclosure Format (check one): Yes X No

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

<PAGE>

<TABLE>
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                                        UNIVERSAL DETECTION TECHNOLOGY

                                                    INDEX
                                                                                                      Page

<S>        <C>                                                                                         <C>
PART I     FINANCIAL INFORMATION.........................................................................1

ITEM 1.    Financial Statements..........................................................................1

           Consolidated Balance Sheet as of March 31, 2005 (unaudited)...................................1

           Consolidated Statements of Operations for the three months
           ended March 31, 2005 and March 31, 2004 (unaudited)...........................................2

           Condensed Consolidated Statements of Cash Flows for the three months
           ended March 31, 2005 and March 31, 2004 (unaudited)...........................................3

           Notes to Consolidated Financial Statements....................................................4

ITEM 2.    Management's Discussion and Analysis or Plan of Operation.....................................7

ITEM 3.    Controls and Procedures......................................................................22

PART II    OTHER INFORMATION............................................................................23

ITEM 1.    Legal Proceeding.............................................................................23

ITEM 2.    Changes in Securities and Small Business Issuer
           Purchases of Equity Securities...............................................................23

ITEM 3.    Defaults Upon Senior Securities..............................................................23

ITEM 4.    Submission of Matters to a Vote of Security Holders..........................................23

ITEM 5.    Other Information............................................................................23

ITEM 6.    Exhibits and Reports on Form 8-K.............................................................24

</TABLE>

<PAGE>


                                       PART I.
                               FINANCIAL INFORMATION
<TABLE>
<CAPTION>

ITEM 1.  FINANCIAL STATEMENTS.

                           UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                                UNAUDITED CONSOLIDATED BALANCE SHEET
                                           MARCH 31, 2005

                                               ASSETS

<S>                                                                                     <C>
CURRENT ASSETS:
     Cash and cash equivalents                                                          $        189,449
     Certificates of deposit                                                                       1,005
     Restricted cash                                                                             102,272
     Accounts receivable                                                                          65,000
     Loan receivable                                                                              75,000
     Deferred interest expense                                                                    24,300
     Prepaid expenses                                                                            789,515
                                                                                          -----------------

         Total Current Assets                                                                  1,246,541

EQUIPMENT, NET                                                                                   111,322
DEPOSITS                                                                                          10,226
PATENT COSTS                                                                                      31,022
                                                                                          -----------------

                                                                                        $      1,399,111
                                                                                          =================

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
     Accounts payable, trade                                                            $        224,985
     Accrued liabilities                                                                         970,453
     Notes payable                                                                               781,266
     Deferred revenue                                                                             65,000
     Accrued interest expense                                                                    436,673
                                                                                          -----------------

         Total current liabilities                                                             2,478,377
                                                                                          -----------------

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, 50,224,107 issued and outstanding                                          22,546,217
     Additional paid-in-capital                                                                3,736,251
     Accumulated (deficit)                                                                   (27,361,734)
                                                                                          -----------------

         Total stockholders' equity (deficit)                                                 (1,079,266)
                                                                                          -----------------

         Total liabilities and stockholders' equity (deficit)                           $      1,399,111
                                                                                          =================
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.


                                                       1
<PAGE>



                               UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                                UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
<S>                                                                   <C>                   <C>
                                                                         For the three months ended March 31,
                                                                              2005                  2004
                                                                        ------------------    ------------------

REVENUE                                                               $           ---      $            ---
COST OF GOODS SOLD                                                                ---                   ---
                                                                        ------------------    ------------------

GROSS PROFIT                                                                      ---                   ---
                                                                        ------------------    ------------------

OPERATING EXPENSES:
     Selling, general and administrative                                      786,032               653,089
     Depreciation                                                               3,177                 1,164
     Marketing                                                                 36,275               806,211
                                                                        ------------------    ------------------

     Total expenses                                                           825,484             1,460,464
                                                                        ------------------    ------------------

(LOSS) FROM OPERATIONS                                                       (825,484)           (1,460,464)

OTHER INCOME (EXPENSE):
     Interest income                                                            1,583                  1097
     Interest expense                                                         (35,152)              (42,363)
     Amortization of loan fees                                                 (1,250)              (43,260)
                                                                        ------------------    ------------------
                     Net other income (expense)                               (34,819)              (84,526)
                                                                        ------------------    ------------------

NET (LOSS)                                                           $       (860,303)     $     (1,544,990)
                                                                        ==================    ==================

NET (LOSS) PER COMMON SHARE - BASIC AND DILUTED                      $          (0.02)     $          (0.04)
                                                                        ==================    ==================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                       50,224,107            37,375,750
                                                                        ==================    ==================
                                                                        ==================    ==================

                    See accompanying notes to unaudited consolidated financial statements.



                                                        2
</TABLE>




                                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                           For the three months ended March 31,
                                                                               2005                     2004
                                                                        -------------------      -------------------

CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
<S>                                                                       <C>                     <C>
Net (loss)                                                                $    (860,303)          $   (1,544,990)
Adjustments to reconcile net (loss) to net cash (used in) operations:
   Stock and warrants issued for services                                        32,595                      ---
   Depreciation                                                                   3,177                    1,165
   Changes in operating assets and liabilities:
          Prepaid expenses                                                      313,801                  405,916
          Accounts Receivable                                                   (65,000)                     ---
          Loan receivable                                                       (75,000)                     ---
          Deferred Revenue                                                       65,000                      ---
          Accounts payable and accrued expenses                                 100,031                   72,129
                                                                        -------------------      -------------------

                             Net cash (used in) operating activities           (485,699)              (1,065,780)
                                                                        -------------------      -------------------

CASH FLOWS FROM (TO) INVESTING ACTIVITIES:

  Purchase of equipment                                                          (5,021)                 (50,757)
  Payments received on bridge note to related party                                 ---                   50,000
  Advances to related party                                                         ---                  (17,881)
  Redemption of certificates of deposit                                         252,340                      ---
  (Increase) in restricted cash                                                    (435)                    (372)
                                                                        -------------------      -------------------

                           Net cash provided by investing activities            246,884                  (19,010)
                                                                        -------------------      -------------------

CASH FLOWS FROM (TO) FINANCING ACTIVITIES:

  Proceeds from issuance of common stock                                         65,737                1,697,675
  Payment of offering costs                                                      (8,944)                (181,098)
  Proceeds from exercise of warrants                                                ---                      ---
  Payments on notes payable                                                     (95,500)                (260,000)
                                                                        -------------------      -------------------

                             Net cash (used in) financing activities            (38,707)               1,256,577
                                                                        -------------------      -------------------

NET INCREASE/(DECREASE) IN CASH                                                (277,522)                 171,787

CASH, BEGINNING OF PERIOD                                                       466,971                   14,899
                                                                        -------------------      -------------------

CASH, END OF PERIOD                                                         $   189,449             $    186,686
                                                                        ===================      ===================



                         See accompanying notes to unaudited consolidated financial statements.


</TABLE>




                                                               3
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

NOTE 1 - BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The accompanying
unaudited consolidated financial statements reflect all adjustments that, in the
opinion of management, are considered necessary for a fair presentation of the
financial position, results of operations, and cash flows for the periods
presented. The results of operations for such periods are not necessarily
indicative of the results expected for the full fiscal year or for any future
period. The accompanying financial statements should be read in conjunction with
the audited consolidated financial statements of Universal Detection Technology,
formerly Pollution Research and Control Corp., included in Form 10-KSB for the
fiscal year ended December 31, 2004.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

STOCK-BASED COMPENSATION

     The Company accounts for stock based compensation in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." This standard requires us 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 Principals Board Opinion No. 25.

VALUATION OF THE COMPANY'S COMMON STOCK

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

REVENUE RECOGNITION

     Revenue is recognized upon shipment and acceptance of products. Title of
goods is transferred when the products are shipped from our facility and
accepted by the purchaser. Income not earned is recorded as deferred revenue.



                                       4
<PAGE>



                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 2005

PATENTS

     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.

EARNINGS PER SHARE

     The Company computes earnings per common share in accordance with Statement
of Financial Accounting Standards No. 128, Earnings per Share (SFAS No. 128).
This Statement simplifies the standards for computing earnings per share (EPS)
previously found in Accounting Principles Board Opinion No. 15, Earnings Per
Share, and makes them more comparable to international EPS standards. SFAS No.
128 replaces the presentation of primary EPS with a presentation of basic EPS.
In addition, 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. However, such presentation is not required if the effect is
antidilutive. Accordingly, no such presentation has been made.

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 March 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.


                                       5
<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 2005


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.

RECLASSIFICATION

     Certain amounts reported in our financial statements for the three months
ended March 31, 2004, have been reclassified to conform to the current year
presentation.

NOTE 3 - LOAN RECEIVABLE

     In March 2005 the Company loaned its investor relations firm $75,000. The
loan is non-interest bearing and is due within one year.

NOTE 4 - STOCKHOLDERS' EQUITY

     During the three months ended March 31, 2005, the Company sold 262,948
shares of common stock for a total of $65,737. The Company paid placement fees
totaling $8,944 to unrelated parties.

     During the three months ended March 31, 2005, the Company issued an
aggregate of 94,000 shares of common stock to employees for services rendered to
the Company valued at $27,044.

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 thereunder, 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 of $0.23.



                                       6
<PAGE>


                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 2005


NOTE 5 - RELATED PARTY TRANSACTIONS

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

NOTE 6 - SUBSEQUENT EVENTS

     Subsequent to March 31, 2005, the Company received $11,875 as a deposit on
a possible future stock sale. No stock has been issued.

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

     On May 5, 2005, the Company issued 126,000 shares to three employees as
compensation for services rendered.




                                        7
<PAGE>


ITEM 2. PLAN OF OPERATION.

     The following discussion should be read in conjunction with our
consolidated financial statements, and the related notes included elsewhere in
this Quarterly Report on Form 10-QSB and the Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2004. 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 Quarterly Report on Form
10-QSB is as of the date of the date of its filing, and we undertake no duty to
update this information. Shareholders and prospective investors can find
information filed with the Securities and Exchange Commission, which we refer to
as the SEC, after the date of the filing of this report at our website at
www.udetection.com or at the SEC's website at www.sec.gov. More information
about potential factors that could affect our business and financial results is
included in the section entitled "Cautionary Statements and Risk Factors."

OVERVIEW

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

     Under the Technology Affiliates Agreement, JPL developed its proprietary
bacterial spore detection technology and integrated it into our existing aerosol
monitoring system, resulting in a product which we refer to as the Anthrax Smoke
Detector. The Anthrax Smoke Detector is designed to provide continuous
unattended monitoring of airborne bacterial spores in large public places, with
real-time automated alert functionality. The device operates to detect an
increase in the concentration of bacterial spores, which is indicative of a
potential presence of Anthrax. 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 is due to Caltech on August 1, 2005, and each anniversary
thereof, regardless of any product sales. Any royalties paid from product sales
for the 12-month period preceding the date of payment of the minimum annual
royalty will be credited against the annual minimum. Pursuant to the terms of
the license, we must pay 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 sublicensees.


                                        8
<PAGE>



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

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

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

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


                                        9
<PAGE>


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

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

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

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

     During the three months ended March 31, 2005 we spent an aggregate of
$822,307 on selling, general and administrative expenses and marketing expenses
representing a 46% decrease over the comparable year-ago period. The significant
decrease in our selling, general and administrative expenses in the three months
ended March 31, 2005 principally is due to an significant decrease in marketing
expense and outside professional services.

     Under our agreement with JPL, we were required to pay the entire estimated
cost of $249,000 in advance of JPL commencing its research and development work.
If these funds are depleted, we may be required to provide additional funds in
advance of further work by JPL. Representatives of JPL had informed us that JPL
expected to complete the project, without requiring additional funds from us,
during the first quarter of fiscal 2005. The project has not yet been completed.


                                       10
<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 require approximately $2.0 million in the next 12 months to complete
our existing prototype, engage in testing of the device, and revise the
technology or reengineer the device as may be necessary or desirable and
otherwise execute our business plan. As a result of the private placement, we
believe we have sufficient capital to fund our operating expenses for the next
12 months. We do not believe we have adequate capital to repay 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; and

     o    expenses of professionals, including investment bankers, accountants
          and attorneys.

     Our working capital deficit at March 31, 2005, was $1,231,836. Our
independent auditors' report, dated February 25, 2005, includes an explanatory
paragraph relating to substantial doubt as to our ability to continue as a going
concern, due to our working capital deficit at December 31, 2004, and the sale
of our operating subsidiary. We require approximately $1.2 million to repay
indebtedness in the next 12 months. As a condition to completing our private
placement in July 2004, we agreed not to use any of the proceeds to repay debt
outstanding at the time of the closing of the offering, or to pay accrued but
unpaid salary to our Chief Executive Officer, or our monthly consulting fee
under our Agreement for Investment Banking and Advisory Services with Astor
Capital, Inc. This agreement was terminated effective



                                       11
<PAGE>


September 30, 2004. As of March 31, 2005, we owed our Chief Executive Officer
$545,500 of accrued but unpaid salary under his employment agreement. The
following provides the principal terms of our outstanding debt as of March 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, we have repaid a total of
          $166,666 of the debt and are required to pay an additional $135,740 in
          monthly installments over the following 9 months as full payment of
          our obligations. The settlement agreement provides for an accelerated
          payment schedule (at our option), which would reduce the total amount
          we are required to pay by approximately $12,000.

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

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

     o    One loan from an unaffiliated party evidenced by a promissory note in
          the aggregate principal amount of $200,000, due on the extended due
          date of June 30, 2002, 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 March 31, 2005 we owed $172,500 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 March 31,
          2005, we owed $16,389 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 March 31, 2005, we
          owed $26,196 in interest on this note.




                                       12
<PAGE>

     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 March 31, 2005, we owed $37,073 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 other debt as it becomes due. In addition, management may
endeavor to convert some portion of the principal amount and interest on our
debt into shares of common stock.

     Historically, we have financed operations through private debt and equity
financings. In recent years, financial institutions have been unwilling to lend
to us and the cost of obtaining working capital from investors has been
expensive. We principally expect to raise funds through the sale of equity or
debt securities. However, during the first quarter of 2005, management spent the
substantial majority of its time negotiating contracts for the installation of
the Anthrax Smoke Detector in target markets, preparing to ship the first device
under the Secure Wrap October purchase order, and developing its marketing and
sales plan. These activities diverted management from the time it otherwise
would spend negotiating sales of securities to raise capital. In addition, the
more recent price and volume volatility in the common stock has made it more
difficult for management to negotiate sales of its securities at a price it
believes to be fair to the Company. 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.

RELATED PARTY TRANSACTIONS

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

     In connection with our recently completed 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, for nine months from April 29, 2004.

     On August 23, 2004, we entered into an amendment to the Employment
Agreement with Jacques Tizabi, our President and Chief Executive Officer. Among
other matters, the Amendment amends the term of the employment agreement to
terminate on December 31, 2010, provides that $100,000 of our CEO's compensation
shall be deferred until we have the financial resources to pay any or all of
that amount, and, commencing on January 1, 2006, increases our CEO's base salary
by 5% per annum. The Amendment also reduces our CEO's reimbursable automobile
cost and provides for reimbursement of a portion of his health and insurance
premiums.


                                       13
<PAGE>


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

CAUTIONARY STATEMENTS AND RISK FACTORS

     The risks and uncertainties described below are not the only risks and
uncertainties we face. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial also may impair our business operations.
If any of the following risks actually occur, our business, results of
operations and financial condition could suffer. In that event, the trading
price of our common stock could decline, and our shareholders may lose all or
part of their investment in our common stock. The risks discussed below also
include forward-looking statements and our actual results may differ
substantially from those discussed in these forward-looking statements.

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

     Our independent auditors' report, dated February 25, 2005, includes an
explanatory paragraph expressing substantial doubt as to our ability to continue
as a going concern, due to our working capital deficit at December 31, 2004, and
the sale of our operating subsidiary in March 2002. We have experienced
operating losses since the date of the auditors' report and in prior years. Our
auditor's opinion may impede our ability to raise additional capital on terms
acceptable to us. If we are unable to obtain financing on terms acceptable to
us, or at all, we will not be able to accomplish any or all of our initiatives
and will be forced to consider steps that would protect our assets against our
creditors. If we are unable to continue as a going concern, your entire
investment in us could be lost.

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

     If we cannot raise additional capital, we will not be able to repay our
debt or pursue our business strategies as scheduled, or at all, and we may cease
operations. We have been unable to pay all of our creditors and certain other
obligations in accordance with their terms, and as a result, at March 31, 2005
we are in default on certain debt obligations totaling approximately $275,000,
excluding accumulated interest of approximately $218,688. In the aggregate, as
of March 31, 2005, we have approximately $1.2 million in debt obligations,
including interest, owing within the next 12 months. Of this amount, we have
entered into written settlement agreements with respect to approximately
$721,000, pursuant to which we are obligated to make scheduled payments. Also,
we currently have verbal extensions with respect to approximately



                                       14
<PAGE>


$133,000 of the remaining aggregate debt obligations to a date to be mutually
agreed upon by us and each of the respective noteholders. We cannot assure you
that any of these noteholders will continue to extend payment of these debt
obligations or ultimately agree to revise the terms of this debt to allow us to
make scheduled payments over an extended period of time.

     We have limited cash on hand and short-term investments and we do not
expect to generate material cash from operations within the next 12 months. We
have attempted to raise additional capital through debt or equity financings and
to date have had limited success. The down-trend in the financial markets has
made it extremely difficult for us to raise additional capital. In addition, our
common stock trades on The Over the Counter Bulletin Board which makes it more
difficult to raise capital than if we were trading on The Nasdaq Stock Market.
Also, our default in repaying our debt restricts our ability to file
registration statements, including those relating to capital-raising
transactions, on Form S-3, which may make it more difficult for us to raise
additional capital. In July 2004, we completed a private placement resulting in
net proceeds to us of approximately $2.5 million. As a condition to this
financing however, we agreed that we would not use the net proceeds to repay any
of our debt outstanding as of the closing of the financing. We intend to use the
proceeds from the financing for working capital purposes, principally with
respect to, completion of development of our Anthrax Smoke Detector, testing and
manufacturing units for demonstration, marketing to both end users as well as
potentially to intermediaries including distributors or joint ventures, and
developing a sales and marketing program. If we are unable to obtain financing
on terms acceptable to us, or at all, we will not be able to accomplish any or
all of our initiatives and will be forced to consider steps that would protect
our assets against our creditors.

WE HAVE A HISTORY OF LOSSES AND WE DO NOT ANTICIPATE THAT WE WILL BE PROFITABLE
IN FISCAL 2004.

     We do not anticipate any material sales of the Anthrax Smoke Detector until
we complete all testing and modifications, which we expect may not occur until
the summer of 2005. We have not been profitable in the past years and had an
accumulated deficit of approximately $27.4 million at March 31, 2005. We have
not had revenues from sales of our products since the beginning of fiscal 2002,
the commencement of development of our Anthrax Smoke Detector. During the three
months ended March 31, 2005, and the fiscal years ended December 31, 2004 and
2003, we have experienced losses of $0.8 million, $5.8 million and $4.7 million,
respectively. Achieving profitability depends upon numerous factors, including
our ability to develop, market and sell commercially accepted products timely
and cost-efficiently. We do not anticipate that we will be profitable in fiscal
2005.

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


                                       15
<PAGE>


common stock. Furthermore, we cannot assure you that additional financing will
be available when and to the extent we require or that, if available, it will be
on acceptable terms.

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

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

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

     If we are unable to establish an efficient manufacturing process for the
Anthrax Smoke Detector, our costs of production will increase, our projected
margins may decrease, and we may not be able to timely deliver our product to
customers. We remain in the research and development phase of product
commercialization. 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 Anthrax Smoke Detector. In
addition, these third party contractors may experience regulatory compliance
difficulty, mechanical shutdowns, employee strikes, or other unforeseeable acts
that may increase the cost of production or delay or prevent production.

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



                                       16
<PAGE>


agreements with third parties to sell our Anthrax Smoke Detector. If we are
unable to enter into relationships with third parties to market, sell, and
distribute our products, we will need to develop our own capabilities. We have
no experience in developing, training, or 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 further research, development,
laboratory testing and demonstration of commercial scale manufacturing before it
can be proven to be commercially viable. Potential products that appear to be
promising at early stages of development may not reach the market for a number
of reasons. These reasons include the possibilities that the product may be
ineffective, unsafe, difficult or uneconomical to manufacture on a large scale,
or precluded from commercialization by proprietary rights of third parties. We
cannot predict with any degree of certainty when, or if, the research,
development, and testing 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 AFFECT THE DEMAND FOR OUR ANTHRAX SMOKE
DETECTOR.

     Our industry is subject to rapid and substantial technological change.
Developments by others may render our technology and planned product
noncompetitive or obsolete, or we may be unable to keep pace with technological
developments or other market factors. Competition from other biotechnology
companies, universities, governmental research organizations and others
diversifying into our field is intense and is expected to increase. According to
the public filings


                                       17
<PAGE>


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 March 31, 2005, we had outstanding options and warrants to purchase
a total of 20,401,145 shares of common stock. Of these options and warrants,
20,401,145 have exercise prices above the recent market price of $0.22 per share
(as of May 17, 2005) and 0 have exercise prices at or below this price. The
weighted average exercise price for these outstanding options and warrants is
$0.50.

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

     The consultants that we hire may not provide us with the level of services,
and consequently, the operating results, we anticipate. We spent approximately
$0.2 million and $3.2 million in consulting fees during the three months ended
March 31, 2005, and the year ended December 31, 2004, respectively, and utilized
approximately seventeen consultants during this period. The consultants we
engage provide us with a variety of services.

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

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


                                       18
<PAGE>



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



                                       19
<PAGE>



     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.

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

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


                                       20
<PAGE>



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.



                                       21
<PAGE>


ITEM 3. CONTROLS AND PROCEDURES.

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

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

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

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

     o    Increased automation of our accounting systems,

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

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

     o    Streamlining our banking relationships.

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



                                       22
<PAGE>

                                    PART II.
                               OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

     During the first 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 March 2005, we issued an aggregate of 262,948 shares of common
          stock for a total purchase price of $65,737. We incurred $8,944 in
          placement fees, and our net proceeds were $56,793.

     o    During the first quarter of fiscal 2005, we issued an aggregate of
          94,000 shares of common stock to employees for services rendered to us
          valued at $27,044.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

     In the third quarter of fiscal 2004, we entered into a settlement agreement
in connection with three one-year loans from unaffiliated individuals evidenced
by promissory notes that were in default. The aggregate amount due on the notes,
including interest, was $440,765, as of the date of settlement. We agreed to pay
a total of $298,667 as full payment. The settlement agreement allows us to pay a
total of $286,667 under an accelerated payment schedule.

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

     None.

ITEM 5. OTHER INFORMATION.

     None.



                                       23
<PAGE>



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

     (a) Exhibits.

          31.1 Certification of Chief Executive Officer and Acting Chief
               Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
               Act of 2002 Dated May 25, 2004.

          32.1 Certification of Chief Executive Officer and Acting Chief
               Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
               Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Dated
               May 25, 2004.

     (b) Reports on Form 8-K.

          None.



                                       24
<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                    UNIVERSAL DETECTION TECHNOLOGY



Date: May 25, 2005                   /s/ Jacques Tizabi
                                    --------------------------------------------
                                    By:  Jacques Tizabi
                                    Its: President, Chief Executive Officer and
                                         Chairman of the Board