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



                       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 June 30, 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,
51,884,612 shares issued and outstanding as of August 26, 2005.

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


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<PAGE>

                                         UNIVERSAL DETECTION TECHNOLOGY

                                                      INDEX
<TABLE>
<CAPTION>
                                                                                                              PAGE
<S>               <C>                                                                                         <C>
PART I            FINANCIAL INFORMATION.........................................................................1

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

                  Consolidated Balance Sheet as of June 30, 2005 (unaudited)....................................1

                  Consolidated Statements of Operations for the three months
                  ended June 30, 2005 and June 30, 2004 (unaudited).............................................2

                  Consolidated Statements of Operations for the six months
                  ended June 30, 2005 and June 30, 2004 (unaudited).............................................3

                  Condensed Consolidated Statements of Cash Flows for the six months
                  ended June 30, 2005 and June 30, 2004 (unaudited).............................................4

                  Notes to Consolidated Financial Statements....................................................5

ITEM 2.           Management's Discussion and Analysis or Plan of Operation.....................................9

ITEM 3.           Controls and Procedures......................................................................25



PART II           OTHER INFORMATION............................................................................26

ITEM 1.           Legal Proceeding.............................................................................26

ITEM 2.           Unregistered Sales of Equity Securities and Use of Proceeds..................................26

ITEM 3.           Defaults Upon Senior Securities..............................................................26

ITEM 4.           Submission of Matters to a Vote of Security Holders..........................................27

ITEM 5.           Other Information............................................................................27

ITEM 6.           Exhibits and Reports on Form 8-K.............................................................28

</TABLE>

<PAGE>



                                    PART I.
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                      UNAUDITED CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2005

                                     ASSETS

<S>                                                                                      <C>
CURRENT ASSETS:
     Cash and cash equivalents                                                          $         35,017
     Certificates of deposit                                                                       1,005
     Restricted cash                                                                             102,833
     Accounts receivable                                                                          65,000
     Stock subscription receivable                                                                83,092
     Deferred interest expense                                                                    24,300
     Prepaid expenses                                                                            480,714
                                                                                          -----------------

         Total Current Assets                                                                    791,961

EQUIPMENT, NET                                                                                   117,184
DEPOSITS                                                                                          10,226
PATENT COSTS                                                                                      31,022
                                                                                          -----------------

                                                                                        $        950,393
                                                                                          =================

                              LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
     Accounts payable, trade                                                            $        228,143
     Accrued liabilities                                                                       1,043,496
     Notes Payable - Related Party                                                                18,000
     Notes payable                                                                               882,766
     Deferred revenue                                                                             65,000
     Accrued interest expense                                                                    474,290
                                                                                          -----------------

         Total current liabilities                                                             2,711,695
                                                                                          -----------------

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, 51,653,087 issued and outstanding                                          22,700,402
     Additional paid-in-capital                                                                3,736,251
     Accumulated (deficit)                                                                   (28,197,955)
                                                                                          -----------------

         Total stockholders' equity (deficit)                                                 (1,761,302)
                                                                                          -----------------

         Total liabilities and stockholders' equity (deficit)                           $        950,393
                                                                                          =================


                        See accompanying notes to unaudited consolidated financial statements.


</TABLE>
                                       1
<PAGE>


<TABLE>
<CAPTION>
                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                          FOR THE THREE MONTHS ENDED JUNE 30,
                                                                               2005                  2004
                                                                        ------------------    ------------------
<S>                                                                           <C>                   <C>
REVENUE                                                               $           ---      $         25,000
COST OF GOODS SOLD                                                                ---                   ---
                                                                        ------------------    ------------------

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

OPERATING EXPENSES:
     Selling, general and administrative                                      740,161               803,284
     Depreciation                                                               6,002                 2,481
     Marketing                                                                 47,039               594,173
                                                                        ------------------    ------------------

     Total expenses                                                           793,202             1,399,938
                                                                        ------------------    ------------------

(LOSS) FROM OPERATIONS                                                       (793,202)           (1,374,938)

OTHER INCOME (EXPENSE):
     Interest income                                                              849                 1,364
     Interest expense                                                         (37,618)              (39,064)
     Amortization of loan fees                                                 (6,250)                  ---
                                                                        ------------------    ------------------
         Net other income (expense)                                           (43,019)              (37,700)
                                                                        ------------------    ------------------

NET (LOSS)                                                           $       (836,221)     $     (1,412,638)
                                                                        ==================    ==================

NET (LOSS) PER COMMON SHARE - BASIC AND DILUTED                      $          (0.02)     $          (0.03)
                                                                        ==================    ==================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                       50,938,597            41,249,231
                                                                        ==================    ==================
                                                                        ==================    ==================

                See accompanying notes to unaudited consolidated financial statements.


</TABLE>
                                       2
<PAGE>

<TABLE>
<CAPTION>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                           FOR THE SIX MONTHS ENDED JUNE 30,
                                                                              2005                  2004
                                                                        ------------------    ------------------
<S>                                                                      <C>                   <C>

REVENUE                                                               $           ---      $         25,000
COST OF GOODS SOLD                                                                ---                   ---
                                                                        ------------------    ------------------

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

OPERATING EXPENSES:
     Selling, general and administrative                                    1,526,193             1,456,373
     Depreciation                                                               9,179                 3,645
     Marketing                                                                 83,314             1,400,384
                                                                        ------------------    ------------------

     Total expenses                                                         1,618,686             2,860,402
                                                                        ------------------    ------------------

(LOSS) FROM OPERATIONS                                                     (1,618,686)           (2,835,402)

OTHER INCOME (EXPENSE):
     Interest income                                                            2,432                 2,461
     Interest expense                                                         (72,770)              (81,427)
     Amortization of loan fees                                                 (7,500)              (43,260)
                                                                        ------------------    ------------------
         Net other income (expense)                                           (77,838)             (122,226)
                                                                        ------------------    ------------------

NET (LOSS)                                                           $     (1,696,524)     $     (2,957,628)
                                                                        ==================    ==================

NET (LOSS) PER COMMON SHARE - BASIC AND DILUTED                      $          (0.03)     $          (0.07)
                                                                        ==================    ==================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                       50,760,123            39,489,581
                                                                        ==================    ==================
                                                                        ==================    ==================

                See accompanying notes to unaudited consolidated financial statements.

</TABLE>
                                       3
<PAGE>



                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                          FOR THE SIX MONTHS ENDED JUNE 30,
                                                                        2005                            2004
                                                                  ------------------              ------------------
<S>                                                            <C>                             <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:

Net (loss)                                                     $       (1,696,524)             $       (2,957,628)
Adjustments to reconcile net (loss) to net cash (used in)
   operations:
   Stock and warrants issued for services                                  75,595                          49,000
   Depreciation                                                             9,179                           3,646
   Changes in operating assets and liabilities:
          Prepaid expenses                                                622,602                         751,968
          Accounts Receivable                                             (65,000)                        (10,000)
          Deferred Revenue                                                 65,000                             ---
          Accounts payable and accrued expenses                           213,849                          65,615
                                                                  ------------------              ------------------

             Net cash (used in) operating activities                     (775,299)                     (2,097,399)
                                                                  ------------------              ------------------

CASH FLOWS FROM (TO) INVESTING ACTIVITIES:

  Purchase of equipment                                                   (16,885)                        (76,767)
  Payments received on bridge note to related party                           ---                          50,000
  Advances to related party                                                   ---                         (18,671)
  Redemption of/(Investment in) certificates of deposit                   252,340                        (900,990)
  (Increase) in restricted cash                                              (996)                           (745)
                                                                  ------------------              ------------------

         Net cash provided by (used in) investing activities              234,459                        (947,173)
                                                                  ------------------              ------------------

CASH FLOWS FROM (TO) FINANCING ACTIVITIES:

  Proceeds from exercise of stock options                                   9,500                             ---
  Proceeds from issuance of common stock                                   95,973                       4,831,101
  Payment of offering costs                                               (20,587)                       (585,514)
  Advance from related party                                               18,000                             ---
  Advances on Notes Payable                                               160,000                             ---
  Payments on notes payable                                              (154,000)                       (260,000)
                                                                  ------------------              ------------------

         Net cash provided by financing activities                        108,886                       3,985,587
                                                                  ------------------              ------------------

NET INCREASE/(DECREASE) IN CASH                                          (431,954)                        941,015

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

CASH, END OF PERIOD                                            $           35,017              $          955,914
                                                                  ==================              ==================


                   See accompanying notes to unaudited consolidated financial statements.


</TABLE>
                                       4

<PAGE>

                 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 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,
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 it 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.


                                       5
<PAGE>


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 June 30, 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.

RECLASSIFICATION

     Certain amounts reported in our financial statements for the three and six
months ended June 30, 2004, have been reclassified to conform to the current
year presentation.



                                       6
<PAGE>


NOTE 3 - STOCK SUBSCRIPTION RECEIVABLE

     The receivable represents proceeds received in July 2005 for the sale of
943,000 shares of common stock issued in the second quarter of 2005.

NOTE 4 - DEFERRED REVENUE

     Deferred Revenue at June 30, 2005 represents income on a unit shipped in
March 2005. Initially, the customer had the option to accept the device within
ninety days of delivery. The Company has agreed, at the request of the customer,
to extend the date of acceptance until further testing and verification can be
completed. The device is currently undergoing calibrations and additional
analysis. Once the tests are completed, the Company expects to reinstall the
device, however, the Company cannot guarantee that the customer will accept the
device until the further testing and third party verifications are complete.

NOTE 5 - STOCKHOLDERS' EQUITY

     During the six months ended June 30, 2005, the Company sold 430,928 shares
of common stock for a total of $95,973. The Company paid placement fees totaling
$20,587 to unrelated parties.

     During the six months ended June 30, 2005, the Company issued an aggregate
of 362,000 shares of common stock to employees for services rendered to the
Company valued at $70,044.

     During the six months ended June 30, 2005, an employee exercised an option
to purchase 50,000 shares of common stock for an aggregate amount of $9,500.

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 was $0.23.

     On May 5, 2005, the Company, under its stock incentive plan, granted an
employee the option to purchase 200,000 shares of the Company's common stock,
exercisable immediately, at the price of $0.19 per share. The option expires May
4, 2006. The market price on the date of grant was $0.19. No expense was
recognized by the Company.

NOTE 6 - 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, 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 amended on June 28, 2005 for
$6,100 which included previously accrued interest. The note was paid back with
interest in July 2005.

     On June 28, 2005, the Company executed a promissory note in the aggregate
principal amount of $12,000 payable to Jacques Tizabi, its President and Chief
Executive Officer. The promissory note bears interest of $100. The note was paid
back 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, its President and Chief
Executive Officer. The promissory note does not bear interest. The note was
repaid in August 2005.




                                       7
<PAGE>

NOTE 7 - SUBSEQUENT EVENTS

     During July and August 2005, the Company issued an aggregate of 231,525
shares of common stock to three employees as compensation for services rendered
valued at $38,000.

     On August 3, 2005, the Company entered into a consulting agreement for
advisory and consulting services in connection with its general business. As
part of the compensation arrangement, the Company granted a six month warrant to
purchase 50,000 shares of the company's stock at $0.40 per share, 50,000 shares
at $0.80 per share, and 50,000 shares at $1.20 per share.

     On August 15, 2005, the Company executed a promissory note in the aggregate
principal amount of $60,000 payable to an unrelated party. The promissory note
bears interest at 12% per annum, due November 15, 2005. In addition to the
principal and interest payments, the Company shall issue 50,000 shares of common
stock for a loan fee.


                                       8
<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 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. At June 30, 2005, our working capital deficit was $28,197,955. 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. We are pursuing strategies to raise funds,
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.

     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 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 $249,000 for its services and
we received an option to license all technology



                                       9
<PAGE>


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, which was paid, 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 sublicensees.

     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 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, 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. If funded, Rutgers would
use the proceeds from this grant to implement its site-specific emergency
management response protocol. 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 CAIT to commence this field testing in 2005.

     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.

     We plan to continue to market and sell the current version of our BSM-2000
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



                                       10
<PAGE>


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.

     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.

     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 required that
Quantum Automation purchase at a discounted price a unit of 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.

     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 for the
production of the air samplers, used to gather samples on the filter tape,
during our testing and evaluation program. Upon completion of our evaluation and
testing program, Met One Instruments 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 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


                                       11
<PAGE>


consisting principally of arranging meetings with potential buyers of our
device, including Secure Wrap.

     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.

     During the six months ended June 30, 2005 we spent an aggregate of
$1,618,686 on selling, general and administrative expenses and marketing
expenses representing a 43% decrease over the comparable year-ago period. The
significant decrease in our selling, general and administrative expenses in the
six months ended June 30, 2005 principally is due to a significant decrease in
marketing expense and outside professional services. In the six months ended
June 2004, we incurred expenses relating to European promotions, following the
unveiling of BSM-2000, which we did not incur during the six months ended June
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.



                                       12
<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, all of which has been used by us. 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. We do not have
adequate capital to fund our working capital needs or 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 June 30, 2005, was $28,197,955. 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 $1.4 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 September 30, 2004. As of
June 30, 2005, we owed our Chief Executive Officer $570,500 of accrued but
unpaid salary under his



                                       13
<PAGE>


employment agreement. The following provides the principal terms of our
outstanding debt as of June 30, 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 are required
          to pay an additional $80,000 as full payment of our obligations. We
          did not make a scheduled payment of $40,000 on July 1, 2005 and plan
          to discuss extended payment arrangements with the parties to this
          agreement. Our last scheduled payment of $40,000 is due on October 1,
          2005.

     o    One loan from an unaffiliated party in the aggregate principal amount
          of $195,000 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. At June 30, 2005, there was $145,000 principal amount
          remaining on this note. We did not make our scheduled payment under
          this note in July 2005, and are engaged in discussions with this note
          holder to extend our payment obligation.

     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 June 30, 2005, there
          was $74,500 principal amount remaining on this note. We did not make
          our scheduled payment under this note in July 2005, and are engaged in
          discussions with this note holder to extend our payment obligation.

     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 June 30, 2005 we owed $181,500 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 June 30,
          2005, we owed $17,827 in interest on these notes.


                                       14
<PAGE>



     o    One loan from an unaffiliated party evidenced by a promissory note in
          the aggregate principal amount of $75,000, due on May 10, 2003, and
          verbally extended to a date to be mutually agreed upon by the parties,
          with interest at the rate of 18% per annum. As of June 30, 2005, we
          owed $29,571 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 June 30, 2005, we owed $38,938 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 June 30, 2005, we owed
          $1,000 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 July 31, 2005 with an
          interest rate of 12% per annum. As of June 30, 2005, we owed $1,000 in
          interest on this note. We did not make our scheduled payment under
          this note in July 2005, and are engaged in discussions with this note
          holder to extend our payment obligation.

     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 June 30, 2005, we owed $375
          in interest on this note.

     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 12% per annum. As of June 30, 2005, we did not owe
          any amounts on this note. We did not make our scheduled payment under
          this note in July, and are engaged in discussions with this note
          holder to extend our payment obligation.

     Management continues to take steps to address the Company's liquidity
needs. In the past, management has entered into agreements with some of our note
holders to amend the terms of our notes to provide for extended scheduled
payment arrangements. Management continues to seek extensions with respect to
our debt that is past due. Management may seek additional extensions with
respect to these notes and our 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.


                                       15
<PAGE>


     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 half of 2005, management spent the
substantial majority of its time negotiating contracts for the installation of
the BSM-2000 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 was
due and payable on June 30, 2005. The note was amended on June 28, 2005 for
$6,100, which included previously accrued interest. The note was repaid with
interest in July 2005.

     On June 28, 2005, the Company executed a promissory note in the aggregate
principal amount of $12,000 payable to Jacques Tizabi, our President and Chief
Executive Officer. The promissory note bears interest of $100. 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, our President and Chief
Executive Officer. The promissory note does not bear interest. The note was
repaid in August 2005.

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

     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.


                                       16
<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 the private placement completed in October 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 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 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 August 1, 2005
we are in default on certain debt obligations totaling approximately $380,000,
excluding accumulated interest of approximately $23,090. In the aggregate, as of
June 30, 2005, we have approximately $1.4 million in debt obligations, including
interest, owed within the next 12 months. Of this amount, we currently have
verbal extensions with respect to approximately $675,360 of principal amount and
interest to a date to be mutually agreed upon by


                                       17
<PAGE>


us and each of the respective note holders. We cannot assure you that any of
these note holders 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 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 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, 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 2005.

     We do not anticipate material 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 $28.2 million at June 30, 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 six months ended June 30, 2005, and the
fiscal years ended December 31, 2004 and 2003, we have experienced losses of
$1.7 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 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.


                                       18
<PAGE>




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 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
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. 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 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.

     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.


                                       19
<PAGE>


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, third party verification, 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 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.



                                       20
<PAGE>


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

     If exercised, our outstanding options and warrants will cause immediate and
substantial dilution to our stockholders. We have issued options and warrants to
acquire our common stock to our employees, consultants, and investors at various
prices, some of which are or may in the future be below the market price of our
stock. As of June 30, 2005, we had outstanding options and warrants to purchase
a total of 20,351,105 shares of common stock. Of these options and warrants, all
have exercise prices above the recent market price of $0.17 per share (as of
August 15, 2005) and none 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
$0.4 million and $3.2 million in consulting fees during the six months ended
June 30, 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.

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.


                                       21
<PAGE>


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. The bacterial spore detection technology that is
integrated into BSM-2000 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;

     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.


                                       22
<PAGE>


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 was due to Caltech on August 1, 2005, which was paid, 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.


                                       23
<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.


                                       24
<PAGE>


ITEM 3. CONTROLS AND PROCEDURES.

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

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

     In connection with an inquiry by our Audit Committee and pursuant to its
recommendations, we made changes to our internal controls over financial
reporting during the quarter ended December 31, 2004, as more specifically
discussed in Item 6 Management Discussion and Analysis and Plan of Operation -
Audit Committee Inquiry, of our Annual Report on Form 10-KSB for the year ended
December 31, 2004, filed with the Securities and Exchange Commission on March
31, 2005.


                                       25
<PAGE>


                                    PART II.
                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     None.

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

     During the second quarter of fiscal 2005, we issued the following
securities which were not registered under the Securities Act of 1933, as
amended. No offer or sale of the securities was made to a person in the United
States. We believe that each purchaser of securities was not a U.S. person as
defined in Rule 902(k) of Regulation S and did not acquire the securities for
the account or benefit of any U.S. person. We did not engage in any directed
selling efforts in the United States. For these reasons, among others, the offer
and sale of the following securities were not subject to Section 5 of the
Securities Act by virtue of Regulation S promulgated by the SEC under the
Securities Act:

     o    In April 2005, we issued 167,980 shares of common stock to non-U.S.
          persons, as such term is defined in Regulation S, for an aggregate
          offering price of $21,953. We incurred $3,359 in placement fees, and
          our net proceeds were $18,594.

     o    In June 2005, we issued 943,000 shares of common stock to non-US
          persons, as such term is defined in Regulation S, for an aggregate
          offering price of $103,730. We incurred $20,638 in placement fees, and
          our net proceeds were $83,092.

     During the second 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    During the second quarter of fiscal 2005, we issued an aggregate of
          268,000 shares of common stock to employees for services rendered to
          us valued at $43,000.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

     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 are required
          to pay an additional $80,000 as full payment of our obligations. We
          did not make a scheduled payment of $40,000 on July 1, 2005 and plan
          to discuss extended payment arrangements with the parties to this
          agreement. Our last scheduled payment of $40,000 is due on October 1,
          2005.


                                       26
<PAGE>


     o    One loan from an unaffiliated party in the aggregate principal amount
          of $195,000 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. At June 30, 2005, there was $145,000 principal amount
          remaining on this note. We did not make our scheduled payment under
          this note in July 2005, and are engaged in discussions with this note
          holder to extend our payment obligation.

     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 June 30, 2005, there
          was $74,500 principal amount remaining on this note. We did not make
          our scheduled payment under this note in July 2005, and are engaged in
          discussions with this note holder to extend our payment obligation.

     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 June 30, 2005, we owed $1,000 in
          interest on this note. We did not make our scheduled payment under
          this note in July 2005, and are engaged in discussions with this note
          holder to extend our payment obligation.

     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 12% per annum. As of June 30, 2005, we did not owe
          any amounts on this note. We did not make our scheduled payment under
          this note in July, and are engaged in discussions with this note
          holder to extend our payment obligation.

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

     None.

ITEM 5. OTHER INFORMATION.

     None.


                                       27
<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 September 12, 2005.

          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
               September 12, 2005.

     (b)  Reports on Form 8-K.

          None.



                                       28
<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: September 12, 2005           /s/ Jacques Tizabi
                                  ----------------------------------------------
                                  By:   Jacques Tizabi
                                  Its:  President, Chief Executive Officer and
                                        Chairman of the Board