UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

   

See accompanying notes to the unaudited consolidated financial statements.

     

UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

See accompanying notes to the unaudited consolidated financial statements.

    

UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

		2010				2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(1,663,749	)		$	(3,579,432	)
Adjustments to reconcile net loss to net cash used in operations:
Stocks issued for services			356,195				1,692,124
Loss on settlement of debt			533,405				1,486,130
Depreciation			8,375				19,831
Changes in operating assets and liabilities:
Inventory			3,178				-
Accounts receivable			(1,493	)			(2,569	)
Prepaid expenses			(617	)			622
Deposits			-				(11,074	)
Accounts payable and accrued liabilities			430,582				(172,133	)
Net cash used in operating activities			(334,124	)			(566,501	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment			(3,012	)			-
Decrease (increase) in restricted cash			-				10,477
Net cash (used) provided by investing activities			(3,012	)			10,477
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable-related party			241,901				103,645
Proceeds from notes payable			112,000				509,716
Payments on notes payable - related party			(16,626	)			(49,116	)
Net cash provided by financing activities			337,275				564,245
NET DECREASE IN CASH AND CASH EQUIVALENTS			139				8,221
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			1,367				1,910
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	1,506			$	10,131
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income tax		$	-			$	-
Interest Paid		$	526			$	-
SUPPLEMENTAL DISCLOSURES FOR NON CASH INVESTING AND
FINANCING ACTIVITIES:
Shares issued for settlement of debt and accrued interest		$	890,118			$	2,522,205
Shares issued for prepaid expenses		$	88,000			$	-

  

UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

   

NOTE 1 - BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements have been prepared by Universal Detection Technology, 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 for the year ended December 31, 2009. The results of the three and nine months ended September 30, 2010, are not necessarily indicative of the results to be expected for the full year ending December 31, 2010.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

GOING CONCERN

 

As of September 30, 2010, the Company had a working capital deficit of $4,463,546 and an accumulated deficit of $44,901,105. The Company incurred a net loss of $1,663,749 for the nine month period ended September 30, 2010.  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 2010, the Company sold detection kits under various purchase agreements and had consulting revenue for $4,878. The Company also entered into various agreements to issue 419,837,761 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 $890,118.

   

 

 

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 January 2010, the FASB issued ASU No. 2010-06 Fair Value Measurements and Disclosures Topic 820 “Improving Disclosures about Fair Value Measurements”.  This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. The FASB’s objective is to improve these disclosures and, thus, increase the transparency in financial reporting. This pronouncement is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements.  Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this ASU will not have a material impact on the Company’s consolidated financial statements.

  

  

UNIVERSAL DETECTION TECHNOLOGY AND SUBSIDIARIES

NOTE 3 - NOTES PAYABLE

During the first quarter of 2010, the Company borrowed an aggregate of $53,000 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 May 4, 2010.  No interest or principal payments have been made on the notes.

 

During the second quarter of 2010, the Company borrowed an aggregate of $66,000 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 May 12, 2011.  No principal or interest payments have been made on these notes.

 

As of September 30, 2010, the Company had total notes payable of $1,041,465. As of December 31, 2009, the Company had total notes payable of $1,243,669, out of which $888,843 was current and $354,826 was long term.

 

The interest expense on these notes payable for the nine months ended September 30, 2010 and 2009 was $121,687 and $89,557, respectively.

  

NOTE 4 - COMMITMENTS AND CONTINGENCIES

 

The Company was involved in the following litigations:

 

 

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, 2010 and December 31, 2009, the Company has accrued $546,466 and $507,995 respectively for this settlement including principal and interest.

  

  

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 5 - STOCKHOLDERS’ EQUITY

 

During the nine month period ended September 30, 2010, the Company issued an aggregate of 125,199,788 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 $230,919.

 

During the nine month period ended September 30, 2010, the Company issued 70,150,325 shares of common stock as payment for consulting or other professional fees for an aggregate amount of $154,612.

 

During the nine month period ended September 30, 2010, the Company entered various agreements to convert $329,477 of debt and accrued interest into 419,837,761 shares of common stock.  The fair market value of the stock on the date of agreement and issuances was $890,118.  The company recorded a loss on settlement of debt of $533,405.

 

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.  No options or warrants have been issued for the nine months ended September 30, 2010.

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 300,000,000 shares of its common stock for awards to be made under the Plan. 299,991,072 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 330,000,000 shares of its common stock for awards to be made under the Plan. 326,854,165 of the shares reserved under this plan have been issued.

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.  59,605,412 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 200,000,000 shares of its common stock for awards to be made under the Plan.  159,350,113 of the shares under this plan have been issued.

  

 

NOTE 6 - RELATED PARTY TRANSACTIONS

 

During the nine months ended September 30, 2010, the Company repaid $16,626 in principal and $526 interest payments under various promissory note agreements to its president and CEO.  During the nine months ended September 30, 2010, the Company borrowed an aggregate of $241,901 in principal with interest rates of 12.0% from it president and CEO.

 

NOTE 7 - SUBSEQUENT EVENTS

 

During October and November 2010, the Company issued 20,071,895 shares of its common stock as partial payment to certain consultants and for payment of professional fees for an aggregate price of $17,365.

 

During October and November 2010, the Company entered in various agreements to convert outstanding debt to 151,397,093 shares of common stock valued at approximately $128,157.

  

·

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, 2010, we have $546,466 accrued for including interest relating to this matter.

·

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, 2010, there was $161,000 principal amount (and $92,519 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.

·

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, 2010, 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.

·

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, 2010, we owed $55,500 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.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $1,500 due June 27, 2007 with an interest rate of 12.5% per annum.  As of September 30, 2010, we owed $625 in interest.  We did not make our scheduled payment on June 27, 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.

·

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, 2010, we owed $4,000 in principal and $840 in interest.  We did not make our scheduled payment on January 9, 2010.  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.

·

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, 2010, we owed $8,000 in principal and $1,680 in interest.  We did not make our scheduled payment on January 13, 2010.  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.

·

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, 2010, we owed $5,000 in principal and $1,050 in interest.  We did not make our scheduled payment on January 16, 2010.  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.

·

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, 2010, we paid off the remaining balance.

·

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, 2010, we owed $13,000 in principal and $2,600 in interest.  We did not make our scheduled payment on February 11, 2010.  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.

·

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, 2010, we owed $12,000 in principal and $2,280 in interest.  We did not make our scheduled payment on February 20, 2010.  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.

·

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, 2010, we owed $17,000 in principal and $3,400 in interest.  We did not make our scheduled payment on February 11, 2010.  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.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $9,940 due on March 31, 2010 with an interest rate of 12.0% per annum.  As of September 30, 2010, we owed $9,940 in principal and $1,789 in interest.  We did not make our scheduled payment on March 31, 2010.  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.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $1,638 due on March 31, 2010 with an interest rate of 12.0% per annum.  As of September 30, 2010, we owed $1,638 in principal and $295 in interest.  We did not make our scheduled payment on March 31, 2010.  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.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $1,420 due on March 31, 2010 with an interest rate of 12.0% per annum.  As of September 30, 2010, we owed $1,420 in principal and $256 in interest.  We did not make our scheduled payment on March 31, 2010.  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.

·

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, 2010, we owed $12,500 in principal and $2,188 in interest.

·

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, 2010, we owed $4,475 in principal and $761 in interest.

·

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, 2010, we owed $9,000 in principal and $1,530 in interest.

·

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, 2010, we owed $2,500 in principal and $5,675 in interest.

·

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, 2010, we owed $13,677 in principal and $2,120 in interest.

·

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, 2010, we owed $18,940 in principal and $3,030 in interest.

·

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, 2010, we owed $30,000 in principal and $3,300 in interest.

·

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, 2010, we owed $40,000 in principal and $5,063 in interest.

·

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, 2010, we owed $10,000 in principal and $1,250 in interest.

·

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, 2010, we owed $29,920 in principal and $4,039 in interest.

·

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, 2010, we owed $25,940 in principal and $3,632 in interest.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $45,000 due on November 2, 2009 with an interest rate of 12.0% per annum.  As of September 30, 2010, we owed $45,000 in principal and $5,400 in interest.  We did not make our scheduled payment on November 2, 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.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $20,000 due on October 15, 2010 with an interest rate of 12.0% per annum.  As of September 30, 2010, we owed $20,000 in principal and $2,300 in interest.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $50,000 due on November 27, 2009 with an interest rate of 12.0% per annum.  As of September 30, 2010, we owed $50,000 in principal and $5,500 in interest.  We did not make our scheduled payment on November 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.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $90,000 due on December 23, 2009 with an interest rate of 12.0% per annum.  As of September 30, 2010, we owed $90,000 in principal and $9,000 in interest.  We did not make our scheduled payment on December 23, 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.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $25,000 due on January 16, 2010 with an interest rate of 12.0% per annum.  As of September 30, 2010, we owed $25,000 in principal and $2,375 in interest.  We did not make our scheduled payment on January 16, 2010.  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.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $23,000 due on May 4, 2010 with an interest rate of 12.0% per annum.  As of September 30, 2010, we owed $23,000 in principal and $1,840 in interest.  We did not make our scheduled payment on May 4, 2010.  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.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $30,000 due on March 26, 2010 with an interest rate of 12.0% per annum.  As of September 30, 2010, we owed $30,000 in principal and $2,100 in interest.  We did not make our scheduled payment on March 26,2010.  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.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $31,000 due on May 17, 2010 with a late charge of 15% per annum.  As of September 30, 2010, we owed $24,000 in principal and $4,650 in late charge.  We did not make our scheduled payment on May 17, 2010.  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.

·

One loan from an unaffiliated party evidenced by a promissory note in the aggregate principal amount of $35,000 due on May 12, 2011 with an interest rate of 12.0% per annum.  As of September 30, 2010, we owed $35,000 in principal and $1,400 in interest.

·

Various loans from the Company’s President & CEO evidenced by verbal and written promissory notes in the aggregate principal amount of $267,347 due on demand with interest rates between 0% and 12% per annum.  As of September 30, 2010, we owed $267,347 in principal and $451 in interest.

●

During the three months ended September 30, 2010, we entered into agreements to issue 142,260,000 shares of common stock to various notes holders to convert outstanding debt obligations valued at approximately $128,808 as follows :

o

On August 25, 2010, we issued 67,260,000 shares of common stock to convert outstanding obligations valued at $53,808.  The price per share of the conversion was $0.0008.

o

On September 13, 2010, we issued 75,000,000 shares of common stock to convert outstanding obligations valued at $75,000.  The price per share of the conversion was $0.001.

●

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, 2010, 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, 2010, we owed $92,519 in interest on this note.

 

●

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, 2010, 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, 2010, we owed $34,709 in interest on this note.

	UNIVERSAL DETECTION TECHNOLOGY
Dated: November 19, 2010	By:	/s/ Jacques Tizabi
		Jacques Tizabi, President, Chief Executive Officer (Principal Executive Officer), and Acting Chief Financial Officer (Acting Principal Financial Officer)

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