-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ilad9QL7mhGPIKCkKX5e7tbG9pHSZrJLKqZUNn48YPXnFrwwpivMT9YUU2g4HuHS 2qwdecLW1YTb0gbe9ID0Qg== 0001019687-09-004101.txt : 20091113 0001019687-09-004101.hdr.sgml : 20091113 20091113172505 ACCESSION NUMBER: 0001019687-09-004101 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20090930 FILED AS OF DATE: 20091113 DATE AS OF CHANGE: 20091113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL DETECTION TECHNOLOGY CENTRAL INDEX KEY: 0000763950 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 952746949 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09327 FILM NUMBER: 091182711 BUSINESS ADDRESS: STREET 1: 9595 WILSHIRE BOULEVARD, SUITE 700 CITY: BEVERLY HILLS STATE: CA ZIP: 90212 BUSINESS PHONE: 3102483655 MAIL ADDRESS: STREET 1: 9595 WILSHIRE BOULEVARD, SUITE 700 CITY: BEVERLY HILLS STATE: CA ZIP: 90212 FORMER COMPANY: FORMER CONFORMED NAME: POLLUTION RESEARCH & CONTROL CORP /CA/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DASIBI ENVIRONMENTAL CORP DATE OF NAME CHANGE: 19900529 10-Q 1 udt_10q-093009.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------- FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: SEPTEMBER 30, 2009 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ____ Commission File Number 0-31012 UNIVERSAL DETECTION TECHNOLOGY (NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER) CALIFORNIA 95-2746949 - -------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 340 NORTH CAMDEN DRIVE, SUITE 302 BEVERLY HILLS, CALIFORNIA 90210 - ---------------------------------------- ------------------------------------ (Address of principal executive offices) (Zip Code) Issuer's telephone number: (310) 248-3655 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [XX_] NO [_] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |_| Smaller reporting company |X| Check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ] Number of shares outstanding as of November 13, 2009: 959,885,733 common shares. Transitional Small Business Disclosure Format: Yes [ ] No [ X ] FORM 10-Q INDEX PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) : 3 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk. 24 Item 4T. Controls and Procedures. 24 PART II. OTHER INFORMATION Item 1. Legal Proceedings 25 Item 1A Risk Factors 25 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 27 SIGNATURES 28 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 (UNAUDITED) ASSETS SEPTEMBER 30, 2009 DECEMBER 31, 2008 ------------------ ----------------- CURRENT ASSETS: Cash and cash equivalents $ 10,131 $ 1,910 Restricted cash -- 10,477 Accounts Receivable, net 3,626 1,058 Prepaid expenses 3,044 3,666 ------------ ------------ Total current assets 16,801 17,111 Deposits 21,300 10,226 Equipment, net 17,185 32,946 Patent, net 79,939 84,008 ------------ ------------ Total assets $ 135,225 $ 144,291 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable, trade $ 1,080,641 $ 1,030,865 Accrued liabilities 502,020 480,126 Accrued payroll - officers 475,774 809,136 Notes payable - related party 64,853 10,325 Notes payable 1,216,373 1,630,711 Accrued interest expense 631,676 657,110 ------------ ------------ Total current liabilities 3,971,337 4,618,273 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIT: Preferred stock, $.01 par value, 20,000,000 shares authorized, -0- issued and outstanding -- -- Common stock, no par value, 20,000,000,000 shares authorized, 870,559,903 shares issued and outstanding as of September 30, 2009 and 35,286,671 shares issued and outstanding as of December 31, 2008 33,040,943 28,823,641 Additional paid-in-capital 5,313,089 5,313,089 Accumulated deficit (42,190,144) (38,610,712) ------------ ------------ Total stockholders' deficit (3,836,112) (4,473,982) ------------ ------------ Total liabilities and stockholders' deficit $ 135,225 $ 144,291 ============ ============ See accompanying notes to unaudited consolidated financial statements. 3 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED) 2009 2008 ------------- ------------- REVENUE, NET $ 19,897 $ 108,830 COST OF GOODS SOLD 11,444 76,560 ------------- ------------- GROSS PROFIT 8,453 32,270 ------------- ------------- OPERATING EXPENSES: Selling, general and administrative 1,030,087 1,183,822 Consulting 962,293 24,974 Depreciation and amortization 19,831 22,599 ------------- ------------- Total expenses 2,012,211 1,231,395 ------------- ------------- LOSS FROM OPERATIONS (2,003,758) (1,199,125) OTHER INCOME (EXPENSE): Interest income 13 105 Interest expense (89,557) (142,367) Penalties -- (10) Loss on settlement of debt (1,486,130) (538,370) ------------- ------------- Total other expenses (1,575,674) (680,642) ------------- ------------- NET LOSS $ (3,579,432) $ (1,879,768) ============= ============= NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED: $ (0.01) $ (0.17) ============= ============= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 310,572,145 10,808,354 ============= ============= Weighted average number of dilutive securities has not been calculated as the effect of dilutive securities would be anti-dilutive See accompanying notes to unaudited consolidated financial statements. 4 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED) 2009 2008 ------------- ------------- REVENUE, NET $ 4,415 $ 45,660 COST OF GOODS SOLD 9,576 58,355 ------------- ------------- GROSS PROFIT (5,161) (12,695) ------------- ------------- OPERATING EXPENSES: Selling, general and administrative 554,895 439,573 Consulting 907,368 17,038 Depreciation and amortization 4,764 7,533 ------------- ------------- Total expenses 1,467,027 464,144 ------------- ------------- LOSS FROM OPERATIONS (1,472,188) (476,839) OTHER INCOME (EXPENSE): Interest income 1 3 Interest expense (12,276) (51,730) Loss on settlement of debt (1,058,889) (117,795) ------------- ------------- Total other expenses (1,071,164) (169,522) ------------- ------------- NET LOSS $ (2,543,352) $ (646,361) ============= ============= NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED: $ (0.00) $ (0.04) ============= ============= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 614,930,050 16,319,224 ============= ============= Weighted average number of dilutive securities has not been calculated as the effect of dilutive securities would be anti-dilutive See accompanying notes to unaudited consolidated financial statements. 5 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED) 2009 2008 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(3,579,432) $(1,879,768) Adjustments to reconcile net loss to net cash used in operations: Stocks issued for services 1,692,124 570,274 Loss on settlement of debt 1,486,130 538,370 Depreciation and amortization 19,831 22,599 Changes in operating assets and liabilities: Deposits (11,074) -- Accounts receivable (2,569) 2,855 Prepaid expenses 622 10,826 Accounts payable and accrued liabilities (172,133) 334,418 ----------- ----------- Net cash used in operating activities (566,501) (400,427) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase)/Decrease in restricted cash 10,477 (98) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable-related party 103,645 12,350 Proceeds from notes payable 509,716 501,500 Payments on notes payable - related party (49,116) (78,373) Payments on notes payable -- (43,009) ----------- ----------- Net cash provided by financing activities 564,245 392,468 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,221 (8,056) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,910 9,555 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,131 $ 1,499 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Income tax $ -- $ -- =========== =========== Interest Paid $ -- $ 1,516 =========== =========== SUPPLEMENTAL DISCLOSURES FOR NON CASH INVESTING AND FINANCING ACTIVITIES: Shares issued for settlement of debt and accrued interest $ 2,522,205 $ 812,353 =========== =========== See accompanying notes to unaudited consolidated financial statements.
6 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared by Universal Detection Technology and Subsidiaries., pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") Form 10-Q and Item 310 of Regulation S-K, and generally accepted accounting principles for interim financial reporting. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) that are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K. The results of the three and nine months ended September 30, 2009, are not necessarily indicative of the results to be expected for the full year ending December 31, 2009. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES STOCK SPLIT On July 25, 2008, the Company affected a reverse stock split of their common stock. The reverse split was affected on a one-for-two hundred basis, resulting in 14,211,953 shares outstanding immediately following the stock split. All common stock numbers in this Current Report on Form 10-Q, have been retroactively restated for the effect of the reverse split. GOING CONCERN As of September 30, 2009, the Company had a working capital deficit of $3,954,536 and an accumulated deficit of $42,190,144. The Company incurred a net loss of $3,579,432 for the nine month period ended September 30, 2009. These conditions raise substantial doubt about its ability to continue as a going concern. Its ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and ultimately achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the first nine months of 2009, the Company sold detection kits under various purchase agreements and had consulting revenue for $19,897. The Company also entered into various agreements to issue 558,262,972 shares of its common stock to third parties in order to convert outstanding debt to the respective parties. The value of the stock issued in consideration for the debt conversion was $2,522,205. 7 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 RECLASSIFICATION Certain reclassifications have been made to the prior year balances to conform to the current year presentation. REVENUE RECOGNITION The Company's revenue recognition policies are in compliance with ASC 605 (previously Staff accounting bulletin (SAB) 104). Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. 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 certain 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 the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include collectability of accounts receivable, accounts payable, sales returns and recoverability of long-term assets. RECENT ACCOUNTING PRONOUNCEMENTS In June 2009, the FASB issued ASC 105 (previously SFAS No. 168, THE FASB ACCOUNTING STANDARDS CODIFICATION AND THE HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") - A REPLACEMENT OF FASB STATEMENT NO. 162), which will become the source of authoritative accounting principles generally accepted in the United States recognized by the FASB to be applied to nongovernmental entities. The Codification is effective in the third quarter of 2009, and accordingly, the Quarterly Report on Form 10-Q for the quarter ending September 30, 2009 and all subsequent public filings will reference the Codification as the sole source of authoritative literature. The Company does not believe that this will have a material effect on its consolidated financial statements. In June 2009, the FASB issued amended standards for determining whether to consolidate a variable interest entity. These amended standards eliminate a mandatory quantitative approach to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis, and require an ongoing reassessment of whether an entity is the primary beneficiary. These amended standards are effective for us beginning in the first quarter of fiscal year 2010 and we are currently evaluating the impact that adoption will have on our consolidated financial statements. 8 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 In June 2009, the FASB issued ASC 855 (previously SFAS No. 165, SUBSEQUENT EVENTS), which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or available to be issued. It is effective for interim and annual periods ending after June 15, 2009. There was no material impact upon the adoption of this standard on the Company's consolidated financial statements. In August 2009, the FASB issued Accounting Standards Update ("ASU") 2009-05, which amends ASC Topic 820, MEASURING LIABILITIES AT FAIR VALUE, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standards are effective for us beginning in the fourth quarter of fiscal year 2009 and are not expected to have a significant impact on our consolidated financial statements. NOTE 3 - PATENTS As of September 30, 2009, and December 31, 2008, the patent value is as follows: September 30, 2009 December 31, 2008 ------------------ ----------------- Patent Costs $ 117,341 $ 117,341 Accumulated Amortization (37,402) (33,333) --------- --------- Patent, Net $ 79,939 $ 84,008 ========= ========= Total amortization expense was $4,069 and $4,054 for the nine months ended September 30, 2009 and 2008 respectively. NOTE 4 - NOTES PAYABLE During the first quarter of 2009, the Company borrowed an aggregate of $92,000 from third parties under various promissory note agreements. The promissory notes all bear interest at 12.0% per annum, and are due on or before February 11, 2011. No interest or principal payments have been made on the notes. During the second quarter of 2009, the Company borrowed an aggregate of $318,887 from third parties under various promissory note agreements. The promissory notes all bear interest at 12.0% per annum, and are due on or before June 29, 2011. No principal or interest payments have been made on these notes. 9 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 During the third quarter of 2009, the Company borrowed an aggregate of $138,829 from third parties under various promissory note agreements. The promissory notes all bear interest at 12.0% per annum, and are due on or before September 15, 2011. No principal or interest payments have been made on these notes. As of September 30, 2009 and December 31, 2008, the Company had total notes payable of $1,216,373 and $1,630,711. NOTE 5 - COMMITMENTS AND CONTINGENCIES The Company was involved in the following litigations: a) A. Sean Rose, Claire F. Rose and Mark Rose v. Universal Detection Technology, fka Pollution Research and Control Corporation (Superior Court of the State of California for the County of Los Angeles, North Central District, Case No. EC042040) On or about April 16, 2004, Plaintiffs commenced an action against the Company (Case No. EC 038824) for amounts allegedly due pursuant to four unpaid promissory notes. On August 2, 2004, the parties executed a Confidential Settlement Agreement and Mutual Releases (the "AGREEMENT"). On December 30, 2005, Plaintiffs commenced the above-referenced action against the Company, alleging the Company breached the Agreement and seeking approximately $205,000 in damages. A judgment was entered on April 11, 2006. As of September 30, 2009 and December 31, 2008, the Company has accrued $495,118 and $456,607 respectively for this settlement including principal and interest. b) On June 2, 2006, Plaintiff Trilogy Capital Partners instituted an action in the Los Angeles Superior Court (TRILOGY CAPITAL PARTNERS V. UNIVERSAL DETECTION TECHNOLOGY, ET. AL., Case No. SC089929) against the Company. Plaintiff's Complaint alleged damages against UDT for breach of an engagement letter in the amount of $93,449. Also, Plaintiff alleged that UDT had failed to issue warrants to it pursuant to a written agreement. After completing the initial stages of litigation and conducting extensive mediation, Plaintiff and UDT reached a settlement wherein commencing December 15, 2006, UDT would make monthly payments to Plaintiff of $2,000 until a debt of $90,000 plus accrued interest at six percent per annum was fully paid. In exchange, Plaintiff would release all of its claims against UDT. UDT has been current on all of its agreed payments to Plaintiff. As of September 30, 2009, $48,357 was due under the agreement. c) On November 15, 2006, Plaintiff NBGI, Inc. instituted an action in the Los Angeles Superior Court (NBGI, Inc. v. Universal Detection Technology, et. al., Case No. BC361979) against the Company. NBGI, Inc.'s Complaint alleged breach of contract, and requested damages in the amount of $111,014 plus interest at the legal rate and for costs of suit. UDT strongly disputes and shall vigorously defend against the allegations of the Complaint. To date, discovery has commenced, and trial has been set for October 29, 2007. There is also a Motion for Summary Judgment set for September 11, 2007. The Summary Judgment was granted in NBGI's favor, and Judgment has been entered. 10 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 d) On June 23, 2009, California Institute of Technology ("Cal Tech") sent a letter to Universal Detection Technology ("UDT"), asserting certain breaches by UDT of that certain License Agreement between Cal Tech and UDT effective September 30, 2009 as amended (the "License Agreement") including nonpayment of royalties, failure to pay certain prosecution and legal costs and failure to fully commercialize the patents and technologies that are licensed to UDT under the License Agreement. Cal Tech is also asserting its right to terminate the License Agreement effective June 4, 2009. UDT disagrees with the various assertions made by Cal Tech in the letter and has requested that Cal Tech submit to arbitration all matters in dispute. To date, no further action has been taken and UDT continues to perform under the License Agreement. However, there can be no assurance that the License Agreement will continue in effect, or that UDT will be able to continue the use, development and commercialization of the underlying patents and technologies. Primarily the License Agreement concerns a group of patents that support UDT's "BSM" technologies and related products. The loss of these licensed technologies would have an adverse effect on UDT's prospects until such time as alternate technologies are licensed or developed. From time to time, the Company is a party to a number of lawsuits arising in the normal course of business. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's operations, cash flows or financial position. NOTE 6- STOCKHOLDERS' EQUITY During the three month period ended September 30, 2009, the Company issued an aggregate of 21,258,010 shares of common stock to employees for services rendered to the Company. The Company recorded the expense at the fair market value of the shares of $295,683. During the three month period ended September 30, 2009, the Company issued 106,700,000 shares of common stock as payment for consulting or other professional fees for an aggregate amount of $927,200. During the three month period ended September 30, 2009, the Company entered various agreements to convert $526,978 of indebtedness into 307,457,792 shares of common stock. The fair market value of the stock on the date of agreement and issuances was $1,585,867. The Company recorded a loss on settlement of debt of $1,058,889. During the three month period ended June 30, 2009, the Company issued an aggregate of 138,031,826 shares of common stock to employees for services rendered to the Company. The Company recorded the expense at the fair market value of the shares of $427,233. 11 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 During the three month period ended June 30, 2009, the Company issued 7,832,924 shares of common stock as payment for consulting or other professional fees for an aggregate amount of $32,329. During the three month period ended June 30, 2009, the Company entered various agreements to convert $356,699 of indebtedness into 210,073,930 shares of common stock. The fair market value of the stock on the date of agreement and issuances was $746,882. The Company recorded a loss on settlement of debt of $390,185. During the three month period ended March 31, 2009, the Company issued 3,187,500 shares of common stock as payment for consulting or other professional fees for an aggregate amount of $12,451. During the three month period ended March 31, 2009, the Company entered various agreements to convert $152,400 of indebtedness into 40,731,250 shares of common stock. The fair market value of the stock on the date of agreement & issuance was $189,456. The Company recorded a loss on settlement of debt of $37,056. COMMON STOCK PURCHASE WARRANTS AND OPTIONS From time to time, the Company issues options and warrants as incentives to employees, officers and directors, as well as to non-employees. STOCK OPTION PLAN On February 11, 2008, the Board of Directors adopted the 2008 Equity Incentive Plan (the "Plan"). The Plan provides for the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to our employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital-raising transaction. The Company reserved 1,500,000 shares of its common stock for awards to be made under the Plan. 1,499,955 shares reserved under this plan have been issued. On April 29, 2008, the Board of Directors adopted the 2008-2 Equity Incentive Plan (the "Plan"). The Plan provides for the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to our employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital-raising transaction. The Company initially reserved 1,650,000 shares of its common stock for awards to be made under the Plan. 1,634,270 of the shares reserved under this plan have been issued. 12 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 On July 1, 2008, the Board of Directors adopted the 2008-3 Equity Incentive Plan (the "Plan"). The Plan provides for the granting of the nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to their employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital-raising transaction. The Company initially reserved 2,500,000 shares of its common stock for awards to be made under the Plan. 2,500,000 of the shares reserved under this plan have been issued. On September 2, 2008, the Board of Directors adopted the 2008-4 Equity Incentive Plan (the "Plan"). The Plan provides for the granting of the nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs). Restricted Stock, Performance Units, and Performance Shares, to their employees, officers, directors, consultants, independent contractors, advisors, or other service provider, provided that such services are not in connection with the offer and sale of securities in a capital raising transactions. The company initially reserved 3,800,000 shares of its common stock for awards to be made under the Plan. 3,800,000 of the shares reserved under this plan have been issued. On February 15, 2009, the Board of Directors adopted the 2009 Equity Incentive Plan (the "Plan.") The Plan provides for the granting of the nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to their employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are no it connection with the offer and sale of securities in a capital raising transactions. The company initially reserved 10,000,000 shares of its common stock for awards to be made under the Plan. 10,000,000 of the shares reserved under this plan have been issued. On May 15, 2009, the Board of Directors adopted the 2009-2 Equity Incentive Plan (The "Plan".) The Plan provides for the granting of the nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to their employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital raising transaction. The Company initially reserved 60,000,000 shares of its common stock for awards to be made under the Plan. 20,457,250 of the shares under this plan have been issued. On November 6, 2009, the Board of Directors adopted the 2009-3 Equity Incentive Plan (The "Plan".) The Plan provides for the granting of the nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to their employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital raising transaction. The Company initially reserved 60,000,000 shares of its common stock for awards to be made under the Plan. 20,457,250 of the shares under this plan have been issued. 13 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 The Company granted 100,800,000 restricted shares in the three months ended September 30, 2009. Of the shares granted, 100,000,000 shares vested immediately and 800,000 shares vest over a six-month period. The Company recognized marketing expense on a straight-line basis over the vesting periods based on the market price of their stock on the grant date. The Company recognized $895,956 in marketing expense during the nine months ended September 30, 2009, due to the restricted shares. Warrants: There were no warrants granted during the three month period ended September 30, 2009. Common stock purchase options and warrants consisted of the following as of September 30, 2009. Aggregated Exercise Intrinsic # shares Price Value ---------------------------------------------------- OPTIONS: Outstanding and exercisable, December 31, 2008 539,750 $2 to $66 $ - Granted - - Exercised - - Expired - - ------------------ --------------- Outstanding and exercisable, September 30, 2009 539,750 $2 to $66 $ - WARRANTS: Outstanding and exercisable, December 31, 2008 53,000 $2 to $140 $ - Granted - - Exercised - - Expired (48,000) - --------------- ------------------ Outstanding and exercisable, September 30, 2009 5,000 $2 to $140 $ -
Options: Prior to July 1, 2006, the Company measured stock compensation expense using the intrinsic value method of accounting in accordance with Accounting Principles Board (APB) Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES," and related interpretations (APB No. 25). The Company adopted ASC 718 (previously SFAS No. 123-R) effective July 1, 2006 using the modified prospective method. Under this transition method, stock compensation expense recognized in the six months ended June 30, 2009 includes compensation expense for all stock-based compensation awards vested during the six months ended June 30, 2009, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123-R. As there were no options granted or vested since the implementation of ASC 718, no expense has been recorded during the six month period ended June 30, 2009. Methods of estimating fair value Under ASC 718 (previously SFAS No. 123-R), the fair value of stock options is determined using the Black-Scholes model. The Company's expected volatility assumption is based on the historical volatility of the Company's stock. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. ASC 718 (previously SFAS No. 123-R) requires forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from those estimates. 14 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 7 - RELATED PARTY TRANSACTIONS During the three months ended September 30, 2009, the Company borrowed an aggregate of $54,731 in principal with interest rates of 12.0% and repaid $22,902 in principal payments under various promissory note agreements to its president and CEO. No interest has been paid under these agreements. During the three months ended September 30, 2009, the Company borrowed an aggregate of $776 in principal with interest rates of 12.0% under various promissory note agreements to its Vice President of Global Strategies. No principal or interest has been paid on these notes. During the three months ended June 30, 2009, the Company borrowed an aggregate of $17,371 in principal with interest rates of 12.0% and repaid $17,371 in principal payments under various promissory note agreements to its president and CEO. No interest has been paid under these agreements. During the three months ended June 30, 2009, the Company issued an aggregate of 12,000,000 shares of common stock directly to its Vice President of Global Strategies, in connection with the satisfaction of third party debt as instructed by the note holder. The value of the common stock on the days of issuance was $35,600. During the three months ended June 30, 2009 the Company issued an aggregate of 117,386,666 shares of common stock to its president and CEO, in connection with payment for accrued salary. The value of the common stock on the day of issuance was $352,160. During the three months ended March 31, 2009, the Company borrowed an aggregate of $4,300 in principal with interest rates of 12.0% and repaid $4,300 in principal payments under various promissory note agreements to its president and CEO. No interest has been paid under these agreements During the three months ended March 31, 2009, the Company borrowed an aggregate of $12,998 in principal with interest rates of 12.0% under various promissory note agreements to its Vice President of Global Strategies. No principal or interest has been paid on these notes. During the three months ended March 31, 2009, the Company issued an aggregate of 11,800,000 shares of common stock directly to its Vice President of Global Strategies, in connection with the satisfaction of third party debt as instructed by the note holder. The value of the common stock on the days of issuance was $46,820. NOTE 8 - SUBSEQUENT EVENTS During October 2009, the Company issued an aggregate of 3,181,818 shares of common stock to employees for services rendered valued at approximately $18,136. During October 2009, the Company issued an aggregate of 2,000,000 shares of common stock to various consultants for services rendered valued at approximately $15,300. During October 2009, the Company entered in various agreements to covert outstanding debt to 83,153,380 shares of common stock valued at approximately $599,597. The shares were issued in October. During October 2009, the Company borrowed an aggregate of $20,000 from third parties under various promissory note agreements. The notes carry interest at 12%. The notes are due on or before October 2010. During October 2009, the Company borrowed an aggregate of $680 from their president and CEO under various promissory note agreements. The notes carry interest at 12%. The notes are due on or before October 2010. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS THIS QUARTERLY REPORT OF FORM 10-Q, INCLUDING THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS, AND OTHER REPORTS FILED BY THE REGISTRANT FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE COMMISSION (COLLECTIVELY THE "FILINGS") CONTAIN FORWARD-LOOKING STATEMENTS WHICH ARE INTENDED TO CONVEY OUR EXPECTATIONS OR PREDICTIONS REGARDING THE OCCURRENCE OF POSSIBLE FUTURE EVENTS OR THE EXISTENCE OF TRENDS AND FACTORS THAT MAY IMPACT OUR FUTURE PLANS AND OPERATING RESULTS. THESE FORWARD-LOOKING STATEMENTS ARE DERIVED, IN PART, FROM VARIOUS ASSUMPTIONS AND ANALYSES WE HAVE MADE IN THE CONTEXT OF OUR CURRENT BUSINESS PLAN AND INFORMATION CURRENTLY AVAILABLE TO US AND IN LIGHT OF OUR EXPERIENCE AND PERCEPTIONS OF HISTORICAL TRENDS, CURRENT CONDITIONS AND EXPECTED FUTURE DEVELOPMENTS AND OTHER FACTORS WE BELIEVE TO BE APPROPRIATE IN THE CIRCUMSTANCES. YOU CAN GENERALLY IDENTIFY FORWARD-LOOKING STATEMENTS THROUGH WORDS AND PHRASES SUCH AS "SEEK", "ANTICIPATE", "BELIEVE", "ESTIMATE", "EXPECT", "INTEND", "PLAN", "BUDGET", "PROJECT", "MAY BE", "MAY CONTINUE", "MAY LIKELY RESULT", AND SIMILAR EXPRESSIONS. WHEN READING ANY FORWARD-LOOKING STATEMENT YOU SHOULD REMAIN MINDFUL THAT ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AS THEY ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS CONCERNING FUTURE EVENTS OR FUTURE PERFORMANCE OF OUR COMPANY, AND ARE SUBJECT TO RISKS, UNCERTAINTIES, ASSUMPTIONS AND OTHER FACTORS RELATING TO OUR INDUSTRY AND RESULTS OF OPERATIONS. EACH FORWARD-LOOKING STATEMENT SHOULD BE READ IN CONTEXT WITH, AND WITH AN UNDERSTANDING OF, THE VARIOUS OTHER DISCLOSURES CONCERNING OUR COMPANY AND OUR BUSINESS MADE IN OUR FILINGS. YOU SHOULD NOT PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENT AS A PREDICTION OF ACTUAL RESULTS OR DEVELOPMENTS. WE ARE NOT OBLIGATED TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT CONTAINED IN THIS REPORT TO REFLECT NEW EVENTS OR CIRCUMSTANCES UNLESS AND TO THE EXTENT REQUIRED BY APPLICABLE LAW. OVERVIEW We are engaged in the research, development, and marketing of bioterrorism detection devices, radiation detectors, and counter terrorism training references. In August 2002, we entered into a Technology Affiliates Agreement with NASA's Jet Propulsion Laboratory, commonly referred to as JPL, to develop technology for our bioterrorism detection equipment. Under the Technology Affiliates Agreement, JPL developed its proprietary bacterial spore detection technology and integrated it into our existing aerosol monitoring system, resulting in a product named BSM-2000. BSM-2000 is designed to provide continuous unattended monitoring of airborne bacterial spores in large public places, with real-time automated alert functionality. The device is designed to detect an increase in the concentration of bacterial spores, which is indicative of a potential presence of Anthrax. Our management continues to gain expertise in anti-terrorism techniques and solutions. Through partnerships with various third parties, we have commenced sales and marketing of bioterrorism hand held assays, radiation detection systems, and training references. During the nine months ended September 30, 2009 we spent an aggregate of $2,012,211 on selling, general and administrative expenses, research and development expenses and marketing expenses. This amount represents a 63% increase over the comparable year-ago period. The increase is principally attributable to an increase in marketing expenses. 16 Our working capital deficit at September 30, 2009, was $3,954,536. Our independent auditors' report, dated August 15, 2009 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, 2008. We require approximately $2 million to repay indebtedness in the next 12 months. We plan to engage more in value added services to complement our bioterrorism detection technologies. We now supply bioterrorism detection kits capable of detecting anthrax, ricin, botulinum, plague, and SEBs, radiation detection systems, and counter-terrorism training references. We plan to continue expanding our product base and to sell our products to more users inside and outside the U.S. There is no guarantee that we will succeed in implementing this strategy or if implemented, that this strategy will be successful. We plan to seek and find third parties interested in collaborating on further research and development on BSM-2000. Such research shall be aimed at making BSM-2000 more user-friendly, developing a less complicated interface and software, and designing a lighter casing. The ideal third party collaborator would also assist us in marketing BSM-2000 more aggressively. There is no guarantee that any such collaborators will be found and, if found, that this strategy will be successful. The current version of BSM-2000 is functional and available for sale. To date, we have sold two units to the Government of the United Kingdom and we intend to develop a more wide-spread use for BSM-2000 through our planned collaborative research, development, sales, and marketing efforts. On July 28, 2009 we announced that we have been granted a patent from the U.S. Patent and Trademark Office (USPTO) for BSM-2000. The patent is the second for the technology licensed from the California Institute of Technology. On June 23, 2009, California Institute of Technology ("Cal Tech") sent a letter to the Company asserting certain breaches by the Company of the License Agreement between Cal Tech and the Company. The Company disagrees with the various assertions made by Cal Tech in the letter and has requested that Cal Tech submit to arbitration all matters in dispute. To date, no further action has been taken and the Company continues to perform under the License Agreement. However, there can be no assurance that the License Agreement will continue in effect, or that the Company will be able to continue the use, development and commercialization of the underlying patents and technologies. Primarily the License Agreement concerns a group of patents that support the Company's "BSM" technologies and related products. The loss of these licensed technologies would have an adverse effect on the Company's prospects until such time as alternate technologies are licensed or developed. See "Legal Proceedings" under Item 1, Part II, of this Report. Results of Operations The following discussion is included to describe our consolidated financial position and results of operations. The unaudited consolidated financial statements and notes thereto contain detailed information that should be referred to in conjunction with this discussion. NINE MONTHS ENDED September 30, 2009 COMPARED TO THE NINE MONTHS ENDED September 30, 2008 REVENUE. Total revenue for the nine months ended September 30, 2009 was $ 19,897, as compared to revenue of $108,830 for the same period in the prior fiscal year, a decrease of $88,933. The decrease is primarily due to a one-time sale in 2008. OPERATING EXPENSES. Total operating expenses for the nine months ended September 30, 2009 were $2,012,211, representing an increase of $780,816. The increase is principally attributable to an increase in marketing expense. Total selling, general and administrative expenses for the nine months ended September 30, 2009 were $1,030,087 representing a decrease of $153,735 (13%) as compared to the same period in the prior fiscal year. The decrease is principally attributable to a decrease in professional fees. 17 OTHER INCOME(EXPENSE). Other income (expense) amounted to ($1,575,674) for the nine months ended September 30, 2009 as compared to ($680,642) for the corresponding period of the prior year. The change is principally related to interest accrued on the outstanding notes payable and the loss recognized on the settlement of shares issued for debt. NET LOSS. Net loss for the nine months ended September 30, 2009 was $3,579,432, as compared to a net loss of $1,879,768 for the same period in the prior fiscal year, representing an increase of $1,692,611. The primary reasons for this are an increase in marketing expense and an increase in loss recognized on the settlement of shares issued for debt. LIQUITY AND CAPITAL RESOURCES We require approximately $2 million to repay debt and $2 million to execute our business plan in the next twelve months. We do not anticipate that our cash on hand is adequate to meet our operating expenses over the next 12 months. Also, we do not believe we have adequate capital to repay all of our debt currently due and becoming due in the next 12 months. We anticipate that uses of our available capital during the next 12 months principally will be for: o administrative expenses, including salaries of officers and other employees we plan to hire; o repayment of debt; o sales and marketing; o product testing and manufacturing; and o expenses of professionals, including accountants and attorneys. Our working capital deficit at September 30, 2009 was $3,954,536. Our independent auditors' report includes an explanatory paragraph relating to substantial doubt as to our ability to continue as a going concern, due to our working capital deficit at December 31, 2008. We require approximately $2 million to repay indebtedness including interest in the next 12 months. The following provides principal terms of our outstanding debt as of September 30, 2009: o One loan from three family members, each of whom is an unaffiliated party, evidenced by four promissory notes in the aggregate principal amounts of $100,000, $50,000, $50,000, and $100,000, each due June 24, 2001 with interest rates ranging from 11% to 12%. We entered into a settlement agreement in the third quarter of 2004 with each of these parties. Pursuant to this agreement, at June 30, 2005, we were required to pay an additional $80,000 as full payment of our obligations. We did not make this payment and are in default of these notes. As of September 30, 2009, we have $495,118 accrued for including interest relating to this matter. o One loan from an unaffiliated party in the aggregate principal amount of $195,000 with interest at a rate of 12% per annum. Pursuant to a letter agreement dated as of August 10, 2004, we entered into a settlement with this party and agreed to pay a total of $261,000 pursuant to a scheduled payment plan through July 2005. Additionally, the Company, in September 2004, issued 206,250 shares of common stock upon the conversion of unpaid interest in the aggregate amount of $33,000. At September 30, 2009, there was $161,000 principal amount (and $78,010 in interest) remaining on this note. We did not make our scheduled payment under this note in July 2005, and are in default of this note. 18 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 this third party and us, we agreed to pay a total of $130,800 pursuant to a scheduled payment plan through July 2005. At September 30, 2009, there was $71,500 principal amount (and $34,709 in interest) remaining on this note. We did not make our scheduled payment under this note in July 2005, and are in default of this note. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $100,000 due on March 31, 2006 with an interest rate of 12% per annum. As of September 30, 2009, we owed $43,500 in interest. We did not make our scheduled payment on March 31, 2006. We have verbally extended the unpaid note and the due date and other terms are being renegotiated so the note is not considered in default. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $100,000 due on February 14, 2007 with an interest rate of 12.5% per annum. As of September 30, 2009, we owed $24,798 in principal and $13,756 in interest. We did not make our scheduled payment on February 14, 2007. We have verbally extended the unpaid note and the due date and other terms are being renegotiated so the note is not considered in default. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $50,000 due on April 5, 2007 with an interest rate of 12.5% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $30,000 due on April 13, 2007 with an interest rate of 12.5% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $60,000 due on November 1, 2007 with an interest rate of 12.5% per annum. As of September 30, 2009, we owed $2,970 in principal. We did not make our scheduled payment on November 1, 2007. We have verbally extended the unpaid note and the due date and other terms are being renegotiated so the note is not considered in default. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $30,000 due on December 7, 2007 with an interest rate of 12.5% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $30,000 due on January 11, 2008 with an interest rate of 12% per annum. As of September 30, 2009, we owed $3,000 in principal and $270 in interest. We did not make our scheduled payment on January 11, 2008. We have verbally extended the unpaid note and the due date and other terms are being renegotiated so the note is not considered in default. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $40,000 due on March 12, 2008 with an interest rate of 12.5% per annum. As of September 30, 2009, we owed $10,000 in principal and $8,375 in interest. We did not make our scheduled payment on March 12, 2008. We have verbally extended the unpaid note and the due date and other terms are being renegotiated so the note is not considered in default. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $40,000 due on April 11, 2008 with an interest rate of 12.5% per annum. As of September 30, 2009, we paid off the remaining balance. 19 o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $60,000 due on May 30, 2008 with an interest rate of 12.5% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $20,000 due on July 8, 2008 with an interest rate of 12.5% per annum. As of September 30, 2009, we owed $20,000 in principal and $4,375 in interest. We did not make our scheduled payment on July 8, 2008. We have verbally extended the unpaid note and the due date and other terms are being renegotiated so the note is not considered in default. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $15,000 due on August 4, 2008 with an interest rate of 12% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $17,000 due on August 11, 2008 with an interest rate of 12% per annum. As of September 30, 2009, we paid off the remaining principal balance and owed $1,372 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $30,000 due on August 27, 2008 with an interest rate of 12% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $13,000 due on August 28, 2008 with an interest rate of 12% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $13,000 due on September 6, 2008 with an interest rate of 12.5% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $20,000 due on April 2, 2009 with an interest rate of 12.5% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $19,000 due on April 2, 2009 with an interest rate of 12.5% per annum. As of September 30, 2009 we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $30,000 due on May 2, 2009 with an interest rate of 12.5% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $35,000 due on May 6, 2009 with an interest rate of 12.5% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $50,000 due on June 13, 2009 with an interest rate of 12.5% per annum. As of September 30, 2009, we owed $14,406 in principal and $1,672 in interest. We did not make our scheduled payment on June 13, 2009. We have verbally extended the unpaid note and the due date and other terms are being renegotiated so the note is not considered in default. 20 o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $40,000 due on December 24, 2009 with an interest rate of 12.5% per annum. As of September 30, 2009, we owed $40,000 in principal and $6,250 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $35,000 due on July 15, 2009 with an interest rate of 12.0% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $15,000 due on July 17, 2009 with an interest rate of 13.0% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $34,000 due on July 22, 2009 with an interest rate of 12.0% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $17,000 due on August 5, 2009 with an interest rate of 10.0% per annum. As of September 30, 2009, we owed $17,000 in principal and $2,323 in interest. We did not make our scheduled payment on August 5, 2009. We have verbally extended the unpaid note and the due date and other terms are being renegotiated so the note is not considered in default. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $23,500 due on August 27, 2009 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $23,500 in principal and $3,055 in interest. We did not make our scheduled payment on August 27, 2009. We have verbally extended the unpaid note and the due date and other terms are being renegotiated so the note is not considered in default. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $55,000 due on August 28, 2009 with an interest rate of 12.0% per annum. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $25,000 due on November 13, 2009 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $25,000 in principal and $2,750 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $18,000 due on November 18, 2009 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $18,000 in principal and $1,800 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $27,000 due on December 2, 2009 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $27,000 in principal and $2,700 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $30,000 due on December 15, 2009 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $30,000 in principal and $2,700 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $25,000 due on October 9, 2009 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $25,000 in principal and $3,000 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $4,000 due on January 9, 2010 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $4,000 in principal and $380 in interest. 21 o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $8,000 due on January 13, 2010 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $8,000 in principal and $720 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $5,000 due on January 16, 2010 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $5,000 in principal and $450 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $33,000 due on January 22, 2010 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $33,000 in principal and $2,640 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $13,000 due on February 11, 2010 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $13,000 in principal and $1,040 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $12,000 due on February 20, 2010 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $12,000 in principal and $840 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $17,000 due on February 11, 2010 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $17,000 in principal and $1,360 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $40,000 due on May 15, 2009. As of September 30, 2009, we paid off the remaining balance. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $12,500 due on April 16, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $12,500 in principal and $688 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $4,475 due on April 23, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $4,475 in principal and $224 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $9,000 due on May 1, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $9,000 in principal and $450 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $40,000 due on May 6, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $40,000 in principal and $2,000 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $41,000 due on May 13, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $41,000 in principal and $1,845 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $52,941 due on May 28, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $52,941 in principal and $2,118 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $17,450 due on June 4, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $17,450 in principal and $698 in interest. 22 o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $13,677 due on June 16, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $13,677 in principal and $479 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $23,000 due on June 29, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $23,000 in principal. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $18,940 due on June 9, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $18,940 in principal and $758 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $45,904 due on June 19, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $45,904 in principal and $1,607 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $30,000 due on August 24, 2010 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $30,000 in principal and $300 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $40,000 due on September 10, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $40,000 in principal and $263 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $10,000 due on September 15, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $10,000 in principal and $50 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $29,920 due on August 12, 2010 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $29,920 in principal and $449 in interest. o One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $25,940 due on July 23, 2011 with an interest rate of 12.0% per annum. As of September 30, 2009, we owed $25,940 in principal and $519 in interest. 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 is engaged in discussions with each holder of debt that is in default and continues to seek extensions with respect to our debt that is past due. In addition, management may endeavor to convert some portion of the principal amount and interest on our debt into shares of common stock. Since September 2009 we have converted certain debt into 83,153,380 shares of common stock valued at $599,596. 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. 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. OFF-BALANCE SHEET ARRANGEMENTS We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources, and that would be considered material to investors. 23 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLSOURES ABOUT MARKET RISK. Not Applicable ITEM 4T. CONTROLS AND PROCEDURES Disclosure Controls and Procedures Under the supervision and with the participation of our management, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the period covered by this report. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are not effective to ensure that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (a) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (b) accumulated and communicated to our management, including our chief executive officer, as appropriate to allow timely decisions regarding disclosure. Internal Control Over Financial Reporting CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the quarter ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. ADDITIONAL DISCLOSURE CONCERNING CONTROLS AND PROCEDURES. We currently believe that the Company has material weaknesses in its disclosure controls and procedures. We will continue to work in the coming weeks and months to address such weaknesses. We believe that the out-of-pocket costs, the diversion of management's attention from running the day-to-day operations and operational changes caused by the need to make changes in our internal control and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) could be significant and still we may not achieve significant improvements in our internal controls and procedures. If the time and costs associated with such compliance exceed our current expectations, our results of operations and the accuracy and timeliness of the filing of our annual and periodic reports may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative affect on the trading price of our common stock. 24 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On or about April 16, 2004, Plaintiffs A. Sean Rose, Claire F. Rose, and Mark Rose commenced an action in the Los Angeles Superior Court against the Company (A. SEAN ROSE, CLAIRE F. ROSE AND MARK ROSE V. UNIVERSAL DETECTION TECHNOLOGY, FKA POLLUTION RESEARCH AND CONTROL CORPORATION) for amounts allegedly due pursuant to four unpaid promissory notes. On August 2, 2004, the parties executed a Confidential Settlement Agreement and Mutual Releases (the "Agreement"). On December 30, 2005, Plaintiffs commenced an action against the Company, alleging the Company breached the Agreement and sought approximately $205,000 in damages. A judgment was entered on April 11, 2006 for $209,277.58. The Company has previously accrued for this settlement. As of September 30, 2009, we have accrued $495,118 for this settlement including principal and interest. On June 2, 2006, Plaintiff Trilogy Capital Partners instituted an action in the Los Angeles Superior Court (TRILOGY CAPITAL PARTNERS V. UNIVERSAL DETECTION TECHNOLOGY, ET. AL., Case No. SC089929) against the Company. Plaintiff's Complaint alleged damages against Universal Detection Technology ("UDT")for breach of an engagement letter in the amount of $93,448.54. Also, Plaintiff alleged that UDT had failed to issue warrants to it pursuant to a written agreement. After completing the initial stages of litigation and conducting extensive mediation, Plaintiff and UDT reached a settlement wherein commencing December 15, 2006, UDT would make monthly payments to Plaintiff of $2,000 until a debt of $90,000 plus accrued interest at six percent per annum was fully paid. In exchange, Plaintiff would release all of its claims against UDT. UDT has been current on all of its agreed payments to Plaintiff. As of September 30, 2009, $48,357 was due under the agreement. On November 15, 2006, Plaintiff NBGI, Inc. instituted an action in the Los Angeles Superior Court (NBGI, Inc. v. Universal Detection Technology, et. al., Case No. BC361979) against Universal Detection Technology ("UDT"). NBGI, Inc.'s Complaint alleged breach of contract, and requested damages in the amount of $111,014.34 plus interest at the legal rate and for costs of suit. There is also a Motion for Summary Judgment set for September 11, 2007. The Summary Judgment was granted in NBGI's favor and Judgment has been entered. On June 23, 2009, California Institute of Technology ("Cal Tech") sent a letter to Universal Detection Technology ("UDT"), asserting certain breaches by UDT of that certain License Agreement between Cal Tech and UDT effective September 30, 2009 as amended (the "License Agreement") including nonpayment of royalties, failure to pay certain prosecution and legal costs and failure to fully commercialize the patents and technologies that are licensed to UDT under the License Agreement. Cal Tech is also asserting its right to terminate the License Agreement effective June 4, 2009. UDT disagrees with the various assertions made by Cal Tech in the letter and has requested that Cal Tech submit to arbitration all matters in dispute. To date, no further action has been taken and UDT continues to perform under the License Agreement. However, there can be no assurance that the License Agreement will continue in effect, or that UDT will be able to continue the use, development and commercialization of the underlying patents and technologies. Primarily the License Agreement concerns a group of patents that support UDT's "BSM" technologies and related products. The loss of these licensed technologies would have an adverse effect on UDT's prospects until such time as alternate technologies are licensed or developed. ITEM 1A. RISK FACTORS Not Applicable. 25 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. During the third quarter of 2009, 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 three months ended September 30, 2009, we issued 307,457,792 shares of common stock to various notes holders upon the conversion of outstanding debt obligations valued at approximately $526,978. o During October 2009, we issued 83,153,380 shares of common stock to various note holders upon conversion of outstanding debt obligations valued at approximately $599,596. ITEM 3. DEFAULTS UPON SENIOR SECURITIES We have defaulted upon the following 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 were required to pay an additional $80,000 as full payment of our obligations. We did not make scheduled payments and are in default of these notes. 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 September 30, 2009, there was $161,000 principal amount remaining on this note. We did not make our scheduled payment under this note and are in default. As of September 30, 2009, we owed $78,010 in interest on this note. o One loan from an unaffiliated party in the aggregate principal amount of $98,500, due July 31, 2005 with interest at the rate of 9% per annum. Pursuant to a letter agreement dated August 10, 2004, between this third party and us, we agreed to pay a total of $130,800 pursuant to a scheduled payment plan through July 2005. At September 30, 2009, there was $71,500 principal amount remaining on this note. We did not make our scheduled payments under this note and are in default. As of September 30, 2009, we owed $34,709 in interest on this note. 26 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable. ITEM 5. OTHER INFORMATION. During the three months ended September 30, 2009, we issued 307,457,792 shares of common stock to various notes holders upon the conversion of outstanding debt obligations valued at approximately $526,978. During October 2009, we issued 83,153,380 shares of common stock to various note holders upon conversion of outstanding debt obligations valued at approximately $599,596. ITEM 6. EXHIBITS. EXHIBIT LIST Exhibit Number Description - ----------------------- -------------------------------------------------------- 10.1 Form of Note Conversion Agreement - ----------------------- -------------------------------------------------------- Exhibit 31 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith - ----------------------- -------------------------------------------------------- Exhibit 32 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. - ----------------------- -------------------------------------------------------- 27 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: November 13, 2009 UNIVERSAL DETECTION TECHNOLOGY /s/ Jacques Tizabi ------------------ Jacques Tizabi, President, Chief Executive Officer (Principal Executive Officer), and Acting Chief Financial Officer (Acting Principal Financial Officer) 28 EX-10.1 2 udt_10qex10-1.txt FORM OF NOTE CONVERSION AGMT. EXHIBIT 10.1 UNIVERSAL DETECTION TECHNOLOGY -------------------- FORM DEBT CONVERSION AGREEMENT -------------------- NOTEHOLDER: NOTE AMOUNT: $_____ OUTSTANDING PRINCIPAL: $______ INTEREST RATE: __% DATE OF NOTE: _____ MATURITY: _____ ACCRUED INTEREST: $____ ---------------------------------------- [Date] AGREEMENT This Agreement (the "Agreement") is entered into by and between Universal Detection Technology (the "Issuer") and [NAME](the "Noteholder") on the date first shown above. The Noteholder confirms that pursuant to the note dated _________ (the "Note") in the principal amount of $_______ with an interest rate of __% per annum and a maturity date of _______, the Issuer owes the Noteholder a balance of $____ including principal and accrued interest as of ----. The Noteholder further agrees to convert the following amount of principal and interest (the "Conversion Amount") due under the Note into shares of common stock of the Issuer ("Shares"), no par value, at the price stated below. The parties anticipate that the Shares will be eligible for resale pursuant to Rule 144. PRINCIPAL BEING CONVERTED: $_____ INTEREST BEING CONVERTED: $_____ CONVERSION PRICE: $_____ NUMBER OF SHARES TO BE ISSUED: ______ The Noteholder is surrendering for conversion that portion of the principal and interest due under the Note represented by the Conversion Amount and is not furnishing any other or additional consideration to the Issuer. The Noteholder hereby waives, releases, relinquishes and discharges the Issuer of any and all claims and causes of action it now has or that may hereafter arise with respect to the Conversion Amount and agrees to accept the Shares as full satisfaction thereof. No claims are reserved with respect to the Conversion Amount, and the Noteholder expressly waives any and all rights related thereto, except for those provided for herein, that it may have under the provisions of California Civil Code Section 1542, which provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." The Noteholder acknowledges and agrees that this Agreement and the waiver set forth herein are valid and binding on the Noteholder in accordance with the terms hereof. The Noteholder represents and warrants that: o It has the requisite authority to execute and deliver this Agreement and that the person executing and delivering this Agreement has been duly authorized by the Noteholder to do so; o It is not, and has not been for the three months preceding the date hereof, an affiliate of the Issuer and will not hold more than 10% of the issued and outstanding Shares upon consummation of the conversion contemplated hereby; and o It has not assigned or transferred, or purported to assign or transfer, the Note or any right or claim in connection therewith to any other person. This Agreement shall be governed by the laws of the State of California, without regard to the conflict of laws principles thereof. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Agreement may not be modified or amended except by a writing signed by both parties hereto. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one and the same agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. Agreed to and accepted by: UNIVERSAL DETECTION TECHNOLOGY NOTEHOLDER - ------------------------- ------------------------- By: Jacques Tizabi, CEO EX-31 3 udt_10qex-31.txt CERTIFICATION EXHIBIT 31 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Jacques Tizabi, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Universal Detection Technology; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Dated: November 13, 2009 /s/ Jacques Tizabi ------------------ Jacques Tizabi Principal Executive Officer and Acting Principal Financial Officer and Principal Accounting Officer EX-32 4 udt_10qex-32.txt CERTIFICATION EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Universal Detection Technology (the "Registrant") on Form 10-Q for the period ending September 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jacques Tizabi, Principal Executive Officer and Acting Principal Financial Officer and Principal Accounting Officer of the Registrant, certify to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant. /s/ Jacques Tizabi ------------------ Dated: November 13, 2009 Jacques Tizabi Principal Executive Officer and Acting Principal Financial Officer and Principal Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----