12. RESTATEMENT OF FINANCIAL STATEMENTS

12 Months Ended

Dec. 31, 2012

Restatement of Prior Year Income [Abstract]

12. RESTATEMENT OF FINANCIAL STATEMENTS

The management of Universal Detection Technology has determined that the previously issued financial statements contained in the Company’s annual Report on Form 10-K for the year ended December 31, 2011 required restatement to properly account for certain derivative transactions.

The Company issued 2 secured convertible promissory notes to Beauvoir Capital, LTD on July 25, 2011 and August 8, 2011 for total proceeds to the Company of $90,000 (“Beauvoir Notes”). Beauvoir Notes could be converted into shares of the Company’s common stock at a conversion price of the lower of (i) $0.0003 or (ii) eight percent (80%) of the lowest closing bid price of the Common Stock during the 30 trading days preceding the date the Conversion Notice is delivered to the Company.

The Company issued 4 secured convertible promissory notes to Sendero Capital on August 16, 2011, November 1, 2011, November 21, 2011, and December 20, 2011 for total proceeds of $205,000 (“Sendero Notes”). Sendero Notes could be converted into shares of the Company’s common stock at a conversion price of the lower of (i) $0.0001 or (ii) fifty percent (50%) of the lowest closing bid price of the Common Stock during the 30 trading days preceding the date the Conversion Notice is delivered to the Company.

Because the conversion prices of the notes were variable, the Company should have recorded derivative liabilities against these notes as of their issuance dates. The Company calculated the derivative liabilities and determined that the amount is material.

Below is a comparative presentation of the balance sheet and income statement as of and for the year ended December 31, 2011 as restated in this report and as reported in the Company’s Report on Form 10K previously filed with the Securities and Exchange Commission.

	As Reported			As Restated
	12/31/2011			12/31/2011
BALANCE SHEET:
Derivative liabilities		–			1,043,639
Total current liabilities		4,368,787			5,412,427
Long term notes payable, net		309,625			37,522
Total liabilities		4,678,412			5,449,949
Accumulated deficit		(48,047,417	)		(48,818,954	)
Total stockholders' deficit		(4,622,017	)		(5,393,554	)
STATEMENT OF OPERATIONS:
Interest expense		(55,485	)		(78,382	)
Debt issuance cost		–			(464,262	)
Gain/(loss) in change of FV of derivative		–			(284,378	)
Total other expenses		(1,472,305	)		(2,243,842	)
NET LOSS		(2,613,866	)		(3,385,403	)