-----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, SF+G7C4yKAmx18Sp6lzWVSAnzKMFypATjuJojRRuTTsdXUpjDFX4sZKb60Tr0kie ErZg5bO6LlZ2CuQ1XJLYDA== 0001170918-07-000427.txt : 20070518 0001170918-07-000427.hdr.sgml : 20070518 20070518150525 ACCESSION NUMBER: 0001170918-07-000427 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070331 FILED AS OF DATE: 20070518 DATE AS OF CHANGE: 20070518 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-09327 FILM NUMBER: 07864467 BUSINESS ADDRESS: STREET 1: 9300 WILSHIRE BOULEVARD, SUITE 308 CITY: BEVERLY HILLS STATE: CA ZIP: 90212 BUSINESS PHONE: 3102483655 MAIL ADDRESS: STREET 1: 9300 WILSHIRE BOULEVARD, SUITE 308 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 10QSB 1 fm10qsb-033107.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: MARCH 31, 2007 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) 9595 WILSHIRE BLVD., SUITE 700 BEVERLY HILLS, CALIFORNIA 90212 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number: (310) 248-3655 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Check 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 May 17, 2007: 426,564,849 common shares. Transitional Small Business Disclosure Format: Yes [ ] No [X] PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEET MARCH 31, 2007 ASSETS CURRENT ASSETS: Cash and cash equivalents .................................. $ 30,557 Certificates of deposit .................................... 11,027 Accounts Receivable, net ................................... 250 Prepaid expenses and other current assets .................. 6,084 ------------ Total current assets ....................................... 47,918 DEPOSITS ................................................... 10,226 EQUIPMENT, NET ............................................. 76,219 PATENT COSTS ............................................... 117,341 ------------ $ 251,704 ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable, trade .................................... $ 699,318 Bank overdraft ............................................. 3,837 Accrued liabilities ........................................ 812,664 Notes payable - related party .............................. 2,500 Notes payable .............................................. 1,110,564 Accrued interest expense ................................... 394,221 ------------ Total current liabilities .................................. 3,023,104 Note Payable Long term, net of current portion ............. 14,443 ------------ Total Liabilities .......................................... 3,037,547 ------------ COMMITMENTS AND CONTINGENCIES .............................. -- STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock, $.01 par value, 20,000,000 shares authorized Series A-1, 150 shares issued and outstanding .............. 1 Common stock, no par value, 480,000,000 shares authorized, 331,133,726 shares issued and outstanding .............................................. 26,270,617 Additional paid-in-capital ................................. 5,363,088 Accumulated (deficit) ...................................... (34,419,549) ------------ Total stockholders' equity (deficit) ....................... (2,785,843) ------------ Total Liabilities and Stockholders Equity (deficit) ........ $ 251,704 ============ See accompanying notes to unaudited consolidated financial statements. 2 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, ------------------------------ 2007 2006 ------------- ------------- REVENUE ............................................ $ 1,175 $ -- COST OF GOODS SOLD ................................. 1,650 -- ------------- ------------- GROSS PROFIT (LOSS) ................................ (475) -- ------------- ------------- OPERATING EXPENSES: Selling, general and administrative ................ 1,616,918 636,172 Marketing .......................................... 15,000 101,300 Research and development ........................... -- 8,250 Depreciation ....................................... 6,182 6,182 ------------- ------------- Total expenses ..................................... 1,638,100 751,904 ------------- ------------- (LOSS) FROM OPERATIONS ............................. (1,638,575) (751,904) OTHER INCOME (EXPENSE): Interest income .................................... 663 4 Interest expense ................................... (42,247) (57,585) Amortization of loan fees .......................... -- (16,926) ------------- ------------- Net other income (expense) ......................... (41,584) (74,507) ------------- ------------- (LOSS) FROM OPERATIONS BEFORE INCOME TAXES ......... (1,680,159) (826,411) INCOME TAX EXPENSE ................................. -- -- ------------- ------------- NET (LOSS) ......................................... $ (1,680,159) $ (826,411) ============= ============= NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED: ... $ (0.006) $ (0.014) ============= ============= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 273,535,590 58,322,418 ============= =============
See accompanying notes to unaudited consolidated financial statements. 3 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, -------------------------- 2007 2006 ----------- ----------- CASH FLOWS FROM (TO) OPERATING ACTIVITIES: Net (loss) .............................................. $(1,680,159) $ (826,411) Adjustments to reconcile net (loss) to net cash (used in) operations: Stocks and warrants issued for services ................. 1,302,244 221,166 Depreciation ............................................ 6,182 6,182 Changes in operating assets and liabilities: Inventory, Installation in process ...................... -- (2,566) Accounts receivable ..................................... (250) (55,507) Prepaid expenses ........................................ 31,887 208,115 Deferred revenue ........................................ -- 55,507 Accounts payable and accrued expenses ................... 36,380 130,633 ----------- ----------- Net cash (used in) operating activities ................. (303,716) (262,881) ----------- ----------- CASH FLOWS (TO) FROM INVESTING ACTIVITIES: Decrease in restricted cash ............................. 51,280 20,000 ----------- ----------- Net cash provided by investing activities ............... 51,280 20,000 ----------- ----------- CASH FLOWS FROM (TO) FINANCING ACTIVITIES: Bank overdraft .......................................... 3,837 (1,113) Proceeds from sale of common stock ...................... 21,000 125,000 Proceeds from exercise of warrants ...................... -- 221,500 Advances from related party ............................. 28,000 -- Advances on notes payable ............................... 300,000 -- Payments on Capital Lease ............................... -- (2,491) Payments on notes payable - related party ............... (28,000) (54,312) Payments on notes payable ............................... (59,957) (37,600) ----------- ----------- Net cash provided by (used in) financing activities ..... 264,880 250,984 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .... 12,444 8,103 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .......... 18,113 13,248 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD ................ $ 30,557 $ 21,351 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest Paid ........................................... $ 34,989 $ 8,878 =========== ===========
See accompanying notes to unaudited consolidated financial statements. 4 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 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, 2006. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES MANAGEMENT PLANS AND GOING CONCERN As of March 31, 2007, the Company had a working capital deficit of $2,975,186 and an accumulated deficit of $34,419,549. These conditions raise substantial doubt about its ability to continue as a going concern. Its ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and ultimately achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is currently devoting its effort to raising capital, and to the development, field-testing and marketing of its bio-terrorism detection device, known as BSM-2000 and to the expansion of its product line into other counterterrorism products and services in related fields including threat evaluation services, safety videos, and anthrax detection kits. . During the first quarter of 2007, the Company shipped anthrax detection kits under various purchase agreements for proceeds of $1,150. The Company entered into a technology affiliates agreement and a license agreement with NASA's JPL and Caltech. The Company unveiled the first functional prototype of its BSM-2000 in May 2004. Although the Company continues to engage in testing of BSM-2000 to improve its functionality, BSM-2000 is currently available for sale. During 2006, the Company sold two units the BSM-2000 Anthrax Detection Systems to the government of the United Kingdom. The Company shipped both units and payment for both has been received and the Company has no further obligations under the sales agreement. In February 2006, the Company entered into a marketing and sales agreement with Security Solutions International (SSI), pursuant to which SSI will market BSM-2000 in the United States. The Company maintains close relationships with SSI and hopes to collaborate on more training or marketing projects with them in the future. In January and February of 2007 the Company received two purchase orders from SSI for one and five units of our anthrax test kits respectively. The company also participated in training various members of law enforcement in Washington DC in April 2007 with SSI, on dealing with biological threats. During the three months ended March 31, 2007, 33,337,129 shares were sold pursuant to a prior investment agreement for $146,500. The Company received $21,000 cash and the remaining $125,500 was paid directly to note holders for repayment of outstanding notes payable and accrued interest. The Company will no longer be using the investment agreement to raise funds. 5 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 In January 2007, the Company entered into an agreement to sell 60,000,000 shares of its common to a third party for $1,800,000 cash equivalent credits. The cash equivalent credits may be used in combination with cash to obtain certain goods and services. The value of the stock issued in consideration for the credits was $288,000. While management believes that it will be able to utilize the credit to purchase goods or services to be used in the operations of the Company, it must raise additional debt or equity financing in order to combine the credits with cash consideration. Management continually evaluates its ability to utilize the cash equivalent credits and has elected to carry the credits at $0 on its future balance sheets. The Company continues to evaluate uses for such credits. SIGNIFICANT ACCOUNTING POLICIES For a description of the Company's significant accounting policies, refer to the notes to the audited consolidated financial statements for the Company for its year ended December 31, 2006 included in the Company's Annual Report on Form 10-KSB for that year, as it may be amended. RECLASSIFICATION Certain reclassifications have been made to the balances as of March 31, 2006 to conform to the March 31, 2007 presentation. REVENUE RECOGNITION Revenue is recognized upon satisfaction of the Company's obligations, generally upon shipment and acceptance of products and devices have occurred. Title of goods is generally transferred when the products are shipped from the Company's facility. Income not earned will be recorded as deferred revenue. Service revenue, including event security, is recognized when services are performed. STOCK-BASED COMPENSATION The Company adopted SFAS No. 123 (Revised 2004), SHARE BASED PAYMENT ("SFAS No. 123R"), under the modified-prospective transition method on January 1, 2006. SFAS No. 123R requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value. Share-based compensation recognized under the modified-prospective transition method of SFAS No. 123R includes share-based compensation based on the grant-date fair value determined in accordance with the original provisions of SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, for all share-based payments granted prior to and not yet vested as of January 1, 2006 and share-based compensation based on the grant-date fair-value determined in accordance with SFAS No. 123R for all share-based payments granted after January 1, 2006. SFAS No. 123R eliminates the ability to account for the award of these instruments under the intrinsic value method prescribed by Accounting Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and allowed under the original provisions of SFAS No. 123. The Company recognized $661,484 and $0 in share-based compensation expense for the three months ended March 31, 2007 and 2006, respectively. 6 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 STOCK BASED COMPENSATION TO OTHER THAN EMPLOYEES The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with Statement of Financial Accounting Standards No. 123, "Accounting FOR STOCK-BASED COMPENSATION," and the conclusions reached by the Emerging Issues Task Force in Issue No. 96- 18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services" ("EITF 96-18"). Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably determinable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18. EARNINGS PER SHARE In accordance with SFAS No. 128, "EARNINGS PER SHARE," the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. At March 31, 2007 and March 31, 2006, the only potential dilutive securities were outstanding options and warrants to purchase 116,937,430 and 21,341,667 shares of common stock respectively. Due to the net loss, none of the potentially dilutive securities were included in the calculation of diluted earnings per share since their effect would be anti-dilutive. INCOME TAXES Deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial statement amounts at the end of each reporting period. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable for the current period and the change during the period in deferred tax assets and liabilities. The deferred tax assets and liabilities have been netted to reflect the tax impact of temporary differences. At March 31, 2007, 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. 7 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 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. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Company has adopted all accounting pronouncements effective before March 31, 2007, which are applicable to the Company. NOTE 3 - ACCRUED LIABILITIES Included in accrued liabilities are payments due in connection with certain loan fees. A total of 300,000 shares are payable to third parties. The total value of the stock on the date of the notes was $68,600. NOTE 4 - NOTES PAYABLE During the first quarter of 2007, the Company borrowed an aggregate of $300,000 from third parties under various promissory note agreements. The promissory notes all bear interest at 12.5% per annum, due on or before April 13, 2007. No interest or principal payments have been made on the notes and have been verbally extended. NOTE 5 - COMMITMENTS AND CONTINGENCIES 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. The Company has previously accrued for this settlement. b) Steven P. Sion and Sion Consulting, Inc. v. Universal Detection Technology Corporation, et. Al. Superior Court of the State of California for the County of Los Angeles, Case NO. BC350942 On April 19, 2006, Plaintiffs Steven P Sion and Sion Consulting, Inc., a Nevada corporation, instituted an action in the Los Angeles Superior Court (Central District Case 8 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 No. BC350942) against Defendants Universal Detection Technology Corporation, Albert E. Gooselin, Jr., Roy Peterson, Greg Edwards, Bombay Consortium, Inc., Howard Sperling, Assisted Care, Inc. As to Universal Detection, Plaintiffs alleged claims for: (1) Breach of Contract; (2) Fraud, (3) Negligent Misrepresentation; and (4) Conspiracy in relation to the sale of Dasibi Environmental Corp. Plaintiffs seeks an unspecified amount of compensatory, general and punitive damages against all Defendants. On July 17, 2006, Universal Detection timely filed an Answer to the Complaint. Universal Detection strongly disputes and shall vigorously defend against the allegations of the Complaint. To date, no trial date has been set. While Universal Detection disputes these allegations, the Company cannot control the outcome of the case or what damages, if any, will result. c) During 2005, the Company entered into two lease agreements to lease testing equipment. The Company had violated the terms of the lease as the Company sold the equipment in March 2006. In April 2006, the leasing company agreed to remove the sale of equipment as a default of the lease and treat the two leases as one single purchase transaction. Under the forebearance agreement entered into by the two parties, the Company shall pay the outstanding balance plus interest at a rate of 18% in monthly payments of $1,816 until October 15, 2008. The outstanding balance on this note is $32,164 as of March 31, 2007. 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 Defendant Universal Detection Technology. Plaintiff's Complaint alleged damages against the Company for breach of an engagement letter in the amount of $93,448.54. Also, Plaintiff alleged that the plaintiff had failed to issue warrants to it pursuant to a written agreement, which have been recorded and expensed in the December 31, 2006 and 2005 financial statements. After completing the initial stages of litigation and conducting extensive mediation, Plaintiff and the Company reached a settlement commencing December 15, 2006, the Company 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 the Company. The amounts due under the agreement have previously been accrued for in the financial statements. 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 Defendant Universal Detection Technology. 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. The Company strongly disputes and shall vigorously defend against the allegations of the Complaint. To date, discovery has commenced, but no trial date has been set. The Company has recorded the amounts due as notes payable in the financial statements. 9 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 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 months ended March 31, 2007, the Company issued an aggregate of 12,187,496 shares of common stock to employees for services rendered to the Company valued at $52,000. During the three months ended March 31, 2007, the Company issued 48,000,000 shares of common stock as payment for consulting services for an aggregate amount of $299,600. During the three months ended March 31, 2007, an investor purchased 33,337,129 shares of common stock as required under an investment agreement for an aggregate amount of $146,500. The Company received $21,000 of the proceeds during the first quarter of 2007. The remaining $125,500 was used to repay outstanding notes payable and accrued interest. The notes were paid directly by the investor. PREFERRED STOCK On March 28, 2007, the Board of Directors approved the creation of the Series A-1 Preferred Stock of the Company and the issuance of 150 shares of such stock to Jacques Tizabi for $50,000 in accrued compensation. The stock entitles the holder to 1,000,000 votes per share, which shall vote together with the Common Stock of the Company for all purposes, except where a separate vote of the classes of capital stock is required by California law. The aggregate value of the 150 shares issued to Mr. Tizabi is $50,000. The shares have a liquidation value, as described in the Company's Articles of Incorporation, of $50,000. Mr. Tizabi is prohibited, by agreement with the Company, from transferring or selling such stock, or any interest in such stock for so long as the shares are outstanding. During the first quarter of 2007, the Company issued to Mr. Tizabi, 100,000,000 shares of Common Stock in exchange for the cancellation of indebtedness owed to him. However, the Company determined to cancel such issuance, and issue in lieu thereof, the shares of Series A-1 Preferred Stock and the Option described below. Additionally, Mr. Tizabi has contributed $550,000 of accrued compensation to the Company. The Company has recorded $550,000 as additional paid-in capital. STOCK OPTIONS On March 28, 2007, the Company granted to Jacques Tizabi, its president and CEO an option to purchase 100,000,000 shares of Common Stock at an exercise price of $0.01 per share, for a term of five years. The option is fully vested and immediately exercisable. 10 UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 The option was valued at $661,484 using the Black Scholes model for American Options, with volatility of 174% and risk-free interest rate of 4.65%. The market price on the day of grant was $0.007. The Company recognized $661,484 as expense during the first quarter of 2007. NOTE 7 - RELATED PARTY TRANSACTIONS During the three months ended March 31, 2007, the Company's president and CEO loaned the Company a total of $21,000 with interest rates of 12%-12.5% under various promissory note agreements. All notes have been repaid. The CEO has elected to forgo interest payments on the notes due to the short-term payback period. NOTE 8 - SUBSEQUENT EVENTS During April and May 2007, the Company issued an aggregate of 13,999,999 shares of common stock to three employees for services rendered valued at approximately $52,000. During April and May 2007, the Company issued an aggregate of 47,439,992 shares of common stock valued at approximately $196,804 in connection with services. During May 2007, the Company issued an aggregate of 30,000,000 shares of common stock in exchange for the cancellation of a promissory note with a principal amount of $50,000. On May 1, 2007, the Company issued a promissory note for $60,000 received from an unrelated party. The note carries a 12.5% per annum interest rate and is due on or before November 1, 2007. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. FORWARD-LOOKING STATEMENTS THE INFORMATION IN THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, INCLUDING STATEMENTS REGARDING OUR CAPITAL NEEDS, BUSINESS PLANS AND EXPECTATIONS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES REGARDING THE MARKET PRICE OF GOLD, AVAILABILITY OF FUNDS, GOVERNMENT REGULATIONS, COMMON SHARE PRICES, OPERATING COSTS, CAPITAL COSTS, OUTCOMES OF GOLD RECOVERY ACTIVITIES AND OTHER FACTORS. FORWARD-LOOKING STATEMENTS ARE MADE, WITHOUT LIMITATION, IN RELATION TO OPERATING PLANS, PROPERTY EXPLORATION AND GOLD RECOVERY ACTIVITIES, AVAILABILITY OF FUNDS, ENVIRONMENTAL RECLAMATION, OPERATING COSTS AND PERMIT ACQUISITION. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACTS MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. IN SOME CASES, YOU CAN IDENTIFY FORWARD-LOOKING STATEMENTS BY TERMINOLOGY SUCH AS "MAY", "WILL", "SHOULD", "EXPECT", "PLAN", "INTEND", "ANTICIPATE", "BELIEVE", "ESTIMATE", "PREDICT", "POTENTIAL" OR "CONTINUE", THE NEGATIVE OF SUCH TERMS OR OTHER COMPARABLE TERMINOLOGY. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING THESE STATEMENTS, YOU SHOULD CONSIDER VARIOUS FACTORS, INCLUDING THE RISKS OUTLINED BELOW, AND, FROM TIME TO TIME, IN OTHER REPORTS WE FILE WITH THE SEC. THESE FACTORS MAY CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENT. WE DISCLAIM ANY OBLIGATION TO PUBLICLY UPDATE THESE STATEMENTS, OR DISCLOSE ANY DIFFERENCE BETWEEN ITS ACTUAL RESULTS AND THOSE REFLECTED IN THESE STATEMENTS. THE INFORMATION CONSTITUTES FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. GIVEN THESE UNCERTAINTIES, READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. OVERVIEW We are engaged in the research and development of bio-terrorism detection devices. Our strategy is to identify qualified strategic partners with whom to collaborate in order to develop commercially viable bio-terrorism detection devices. Consistent with this strategy, we integrated our proprietary bacterial spore detection technology 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. PLAN OF OPERATION 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, designing a lighter casing, and some cosmetics. 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, 12 that this strategy will be successful. The current version of BSM-2000 is fully 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. We require approximately $4.2 million in the next 12 months to repay debt obligations and execute our business plan. We do not anticipate that our cash on hand is adequate to meet our operating expenses over the next 12 months. Also, we do not believe we have adequate capital to repay all of our debt currently due and becoming due in the next 12 months. We anticipate that our uses of capital during the next 12 months principally will be for: o administrative expenses, including salaries of officers and other employees we plan to hire; o repayment of debt; o sales and marketing; o product testing and manufacturing; and o expenses of professionals, including accountants and attorneys. During the three months ended March 31, 2007 we spent an aggregate of $1,632,000 on selling, general and administrative expenses and marketing expenses. This amount represents a 220% increase over the comparable year-ago period. The increase is principally attributable to an expense recognized by the Company in connection with the granting of stock options to its president and CEO. Our working capital deficit at March 31, 2007, was $ 2,975,186. Our independent auditors' report, dated March 9, 2007, 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, 2006. We require approximately $1.5 million to repay indebtedness in the next 12 months. 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. Management also may seek extensions with respect to 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. 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. During 2005, management spent the substantial majority of its time negotiating contracts for the installation of the BSM-2000 in target markets and developing its marketing and sales plan. These activities diverted management from the time it otherwise would 13 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. OFF BALANCE SHEET ARRANGEMENTS The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. ITEM 3. CONTROLS AND PROCEDURES As required by SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures at the end of the period covered by this report. The evaluation was carried out by our Chief Executive Officer and Acting Principal Financial Officer (the "Certifying Officers"). Based upon this evaluation, the Certifying Officers have concluded that the design and operation of our disclosure controls and procedures are effective. Such disclosure controls and procedures are designed to ensure that material information is made known to the Certifying Officers, particularly during the period in which this report was prepared. The Certifying Officers have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and believe that our disclosure controls and procedures are effective based on the required evaluation. During the period covered by this report, there were no changes in internal controls that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. While management believes that our disclosure controls and procedures and our internal control over financial reporting are effective, no system of controls can prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with its policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 14 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no reportable events to disclose hereunder. Except as previously disclosed with the Commission, the Company is not a party to any other pending legal proceedings, other than routine litigation deemed incidental to our business. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. During the first quarter of fiscal 2007, we issued the following securities, which were not registered under the Securities Act of 1933, as amended (the "Securities Act"). The offer and sale of the following unregistered securities is exempt from the registration requirements of the Securities Act, pursuant to Section 4(2). During the first three months ended March 31, 2007, we issued an aggregate of 60,000,000 shares of common stock to a vendor for $1,800,000 in cash equivalents. The value of the stock on the day of issuance was $288,000. On March 28, 2007, the Board of Directors approved the creation of the Series A-1 Preferred Stock of the Company and the issuance of 150 shares of such stock to Jacques Tizabi, the Company's President, CEO, and Acting CFO, in lieu of $50,000 in accrued compensation. On March 28, 2007, the Company granted to Mr. Tizabi an option to purchase 100,000,000 shares of the Company's Common Stock at an exercise price of $0.01 per share, for a term of five years. The option is fully vested and immediately exercisable. The option was valued at $661,484 using the Black-Scholes model for American Options, with volatility of 174% and risk-free interest rate of 4.65%. The market price on the day of grant was $0.007. The Company recognized $661,484 as an expense during the first quarter of 2007. 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. 15 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 March 31, 2007, 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 March 31, 2007 we owed $39,528 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 us and this third party, we agreed to pay a total of $130,800 pursuant to a scheduled payment plan through July 2005. At March 31, 2007 there was $ 74,500 principal amount remaining on this note. We did not make our scheduled payments under this note and are in default. As of March 31, 2007 we owed $23,391 in interest on this note. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS. EXHIBIT LIST EXHIBIT NUMBER DESCRIPTION - ------------- -------------------------------------------------------------- Exhibit 3.1 Articles of Incorporation. (1) Exhibit 3.2 Certificate of Amendment to Articles of Incorporation. (1) Exhibit 3.3 Certificate of Amendment to Articles of Incorporation. (1) Exhibit 3.4 Amended and Restated Bylaws. (2) Exhibit 4.1 Certificate of Determination of Preferences of Preferred Shares. (3) Exhibit 4.2 Amended and Restated 2003 Stock Incentive Plan. (4) Exhibit 4.3 2006 Stock Compensation Plan. (5) Exhibit 4.4 Consultant Stock Plan. (6) Exhibit 4.5 2006-II Consultant Stock Plan. (7) Exhibit 10.1 Employment Agreement by and between the Company and Jacques Tizabi dated September 25, 2001. (8) 16 Exhibit 10.2 Amendment to Employment Agreement of Jacques Tizabi, dated August 23, 2004. (9) Exhibit 10.3 Technology Affiliates Agreement by and between the Company and California Institute of Technology, dated August 6, 2002. (10) Exhibit 10.4 Licensing Agreement by and between the Company and California Institute of Technology, dated September 30, 2003. (11) Exhibit 10.5 Agreement for Investment Banking and Advisory Services, by and between the Company and Astor Capital, Inc., dated June 1, 2003. (12) Exhibit 10.6 Amendment to Agreement for Investment Banking and Advisory Services with Astor Capital, Inc. dated April 29, 2004. (13) Exhibit 10.7 Amendment to Agreement for Investment Banking and Advisory Services with Astor Capital, Inc. dated September 22, 2004. (14) Exhibit 10.8 Standard Form Office Lease, dated September 2003, between Astor Capital, Inc. and CSDV, a Limited Partnership. (15) Exhibit 10.9 Assumption of Lease Agreement, dated October 14, 2004, between the Company and Astor Capital, Inc. (15) Exhibit 10.10 Letter Agreement, dated August 10, 2004, between the Company and IIG Equity Opportunities Fund Ltd. (16) Exhibit 10.11 Letter Agreement, dated August 10, 2004, between the Company and Target Growth Fund Ltd. (16) Exhibit 10.12 Letter Agreement, dated September 21, 2004 between the Company and JRT Holdings. (17) Exhibit 10.13 Letter Agreement, dated October 1, 2004, between the Company and Ali Moussavi. (18) Exhibit 10.14 Letter of Engagement dated August 19, 2005, between Trilogy Capital Partners, Inc. and the Company. (19) Exhibit 10.15 Form of Stock Purchase Warrant. (20) Exhibit 10.16 Stock Purchase Warrant issued to Trilogy Capital Partners. (21) Exhibit 10.17 Investment Agreement by and between the Company and European Equity Group. (22) Exhibit 10.18 Form of Consulting Agreement. (23) Exhibit 10.19 Stock Agreement, dated January 18, 2007, by and between the Company and Innovative Marketing, Inc. (24) Exhibit 21.1 Subsidiaries. (25) Exhibit 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith (1) Incorporated herein by reference to Exhibit 3(a) to the Company's Registration Statement on Form 10. (2) Incorporated by reference to Exhibit 3.4 of the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001, as filed April 15, 2002. (3) Incorporated by reference to Exhibit 3.5 of the Company's Annual Report on Form 10-KSB for the year ended December 31, 2006, as filed April 14, 2007. 17 (4) Incorporated by reference to Exhibit 4.2 of the Company's Annual Report on Form 10-KSB for the year ended December 31, 2004, as filed on March 31, 2005. (5) Incorporated by reference to the Company's Form S-8 Registration Statement as filed February 13, 2006. (6) Incorporated by reference to the Company's Form S-8 Registration Statement as filed June 30, 2006 (7) Incorporated by reference to the Company's Form S-8 Registration Statement as filed November 22, 2006. (8) Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB for the Quarter Ended March 31, 2002, as filed May 20, 2002. (9) Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB for the Quarter Ended September 30, 2004, as filed November 22, 2004. (10) Incorporated herein by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002, as filed April 15, 2003. (11) Incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-QSB for the Quarter Ended September 30, 2003, as filed November 19, 2003. (12) Incorporated by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-KSB for the year ended December 31, 2003, as filed March 31, 2004. (13) Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB for the Quarter Ended June 30, 2004, as filed August 23, 2004. (14) Incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-QSB for the Quarter Ended September 30, 2004, as filed on November 22, 2004 (15) Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-QSB for the Quarter Ended September 30, 2004, as filed November 22, 2004. (16) Incorporated by reference to the Company's Registration Statement on Form SB-2, File No. 333-117859, as filed on February 2, 2005. (17) Incorporated by reference to the Company's Registration Statement on Form SB-2, File No. 333-117859, as filed on February 2, 2005. (18) Incorporated by reference to the Company's Registration Statement on Form SB-2, File No. 333-117859, as filed on February 2, 2005. (19) Incorporated by reference to the Company's Registration Statement on Form SB-2, File No. 333-117859, as filed on February 2, 2005. (20) Incorporated by reference to Exhibit 10.15 to the Company's Registration Statement on Form SB-2, as filed on February 14, 2006. (21) Incorporated by reference to Exhibit 10.16 to the Company's Registration Statement on Form SB-2, as filed on February 14, 2006. (22) Incorporated by reference to Exhibit 10.17 to the Company's Registration Statement on Form SB-2, as filed on February 14, 2006. (23) Incorporated by reference to Exhibit 10.18 to the Company's Registration Statement on Form SB-2, as filed on February 14, 2006. (24) Incorporated by reference to Exhibit 10.19 to the Company's Current Report on Form 8-K, as filed on January 31, 2007. (25) Incorporated by reference to Exhibit 21.1 of the Company's Annual Report on Form 10-KSB for the year ended December 31, 2003, as filed on March 31, 2004. 18 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: May 18, 2007 UNIVERSAL DETECTION TECHNOLOGY /S/ JACQUES TIZABI ---------------------------------------------- Jacques Tizabi, President, Chief Executive Officer (Principal Executive Officer), and Acting Chief Financial Officer (Acting Principal Financial Officer) 19 EX-31 2 ex31-1a.txt EX-31.1 EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Universal Detection Technology (the "Registrant") on Form 10-QSB for the period ending March 31, 2007 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 of the Registrant, certify, pursuant to Rules 13a-14 and 15-d14 of the Securities Exchange Act of 1934 (the "Exchange Act"), as adopted pursuant to ss.302 of the Sarbanes-Oxley Act of 2002, that: I have reviewed this quarterly report on Form 10-QSB of the Registrant. 1. 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; 2. 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 Registrant as of, and for, the periods presented in this report; 3. The Registrant'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)) for the registrant 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 Registrant, 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) Evaluated the effectiveness of the Registrant'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 (c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Issuer's fiscal quarter ending March 31, 2007, that has materially affected, or is reasonably likely to materially affect, the Issuer's internal control over financial reporting. 4. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditor and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant'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 Registrant's internal control over financial reporting. Dated: May 18, 2007 /S/ JACQUES TIZABI ------------------ Jacques Tizabi Principal Executive Officer and Acting Principal Financial Officer EX-32 3 ex32-1a.txt EX-32.1 EXHIBIT 32.1 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-QSB for the period ending March 31, 2007, 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 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. Dated: May 18, 2007 /S/ JACQUES TIZABI ------------------ Jacques Tizabi Principal Executive Officer and Acting Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----