UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the Quarterly period ended June 30, 2014
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Commission
file number 001-31747
UNIVERSAL
SECURITY INSTRUMENTS, INC.
(Exact
name of registrant as specified in its charter)
|
Maryland |
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52-0898545 |
|
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(State or other jurisdiction
of |
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(I.R.S. Employer |
|
|
incorporation or organization) |
|
Identification No.) |
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11407 Cronhill Drive,
Suite A |
|
|
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Owings Mills, Maryland |
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21117 |
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(Address of principal executive offices) |
|
(Zip Code) |
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Registrant’s telephone number, including area code: (410) 363-3000 |
|
Inapplicable
(Former
name, former address and former fiscal year if changed from last report.)
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 ¨
No x
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 (§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 x
No ¨
Indicate
by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
|
Accelerated filer ¨ |
Non-Accelerated Filer ¨ |
Smaller Reporting Company x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨
No x
At August 6,
2014, the number of shares outstanding of the registrant’s common stock was 2,312,887.
TABLE
OF CONTENTS
PART
I - FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL
STATEMENTS |
UNIVERSAL
SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
ASSETS | |
June 30 | | |
March 31 | |
| |
2014 | | |
2014 | |
CURRENT ASSETS | |
| | | |
| | |
Cash and cash
equivalents | |
$ | 2,957,497 | | |
$ | 2,050,993 | |
Accounts receivable: | |
| | | |
| | |
Trade less allowance for doubtful
accounts | |
| 405,258 | | |
| 686,228 | |
Receivables from employees | |
| 67,185 | | |
| 67,583 | |
Receivable
from Hong Kong Joint Venture | |
| 119,148 | | |
| 137,360 | |
| |
| 591,591 | | |
| 891,171 | |
| |
| | | |
| | |
Amount due from factor | |
| 1,016,137 | | |
| 1,397,951 | |
Inventories, net of allowance
for obsolete inventory | |
| 3,530,159 | | |
| 4,194,213 | |
Prepaid
expense | |
| 345,040 | | |
| 406,012 | |
| |
| | | |
| | |
TOTAL CURRENT ASSETS | |
| 8,440,424 | | |
| 8,940,340 | |
| |
| | | |
| | |
INVESTMENT IN HONG KONG JOINT VENTURE | |
| 14,125,751 | | |
| 14,144,069 | |
| |
| | | |
| | |
PROPERTY AND EQUIPMENT – NET | |
| 135,594 | | |
| 146,212 | |
| |
| | | |
| | |
INTANGIBLE ASSET - NET | |
| 74,901 | | |
| 76,020 | |
| |
| | | |
| | |
OTHER ASSETS | |
| 38,134 | | |
| 38,134 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 22,814,804 | | |
$ | 23,344,775 | |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS’
EQUITY | |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable | |
$ | 712,206 | | |
$ | 606,314 | |
Due to Hong Kong Joint Venture | |
| 67,591 | | |
| 28,681 | |
Accrued liabilities: | |
| | | |
| | |
Accrued payroll and employee
benefits | |
| 109,434 | | |
| 78,054 | |
Accrued
- other | |
| 114,999 | | |
| 72,512 | |
| |
| | | |
| | |
TOTAL CURRENT LIABILITIES | |
| 1,004,230 | | |
| 785,561 | |
| |
| | | |
| | |
Long-term obligation –
other | |
| 25,000 | | |
| 25,000 | |
| |
| | | |
| | |
COMMITMENTS AND CONTINGENCIES | |
| - | | |
| - | |
| |
| | | |
| | |
SHAREHOLDERS’ EQUITY | |
| | | |
| | |
Common stock, $.01 par value per share; 20,000,000
authorized, 2,312,887 shares
outstanding at March 31, 2014 and June 30, 2014 | |
| 23,129 | | |
| 23,129 | |
Additional paid-in capital | |
| 12,885,841 | | |
| 12,885,841 | |
Retained earnings | |
| 7,692,267 | | |
| 8,435,116 | |
Accumulated
other comprehensive income | |
| 1,184,337 | | |
| 1,190,128 | |
TOTAL SHAREHOLDERS’ EQUITY | |
| 21,785,574 | | |
| 22,534,214 | |
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY | |
$ | 22,814,804 | | |
$ | 23,344,775 | |
The
accompanying notes are an integral part of these consolidated financial statements
|
UNIVERSAL
SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| |
Three
Months Ended June 30, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Net sales | |
$ | 2,514,385 | | |
$ | 3,005,669 | |
Cost of goods sold – acquired from Joint Venture | |
| 1,710,999 | | |
| 2,157,412 | |
Cost of goods sold – other | |
| 191,898 | | |
| 98,933 | |
| |
| | | |
| | |
GROSS PROFIT | |
| 611,488 | | |
| 749,324 | |
| |
| | | |
| | |
Research and development expense | |
| 161,964 | | |
| 126,636 | |
Selling, general and administrative
expense | |
| 1,187,491 | | |
| 1,089,744 | |
| |
| | | |
| | |
Operating loss | |
| (737,967 | ) | |
| (467,056 | ) |
| |
| | | |
| | |
Other income: | |
| | | |
| | |
Investment
and interest income | |
| 7,645 | | |
| 6,419 | |
| |
| | | |
| | |
| |
| | | |
| | |
LOSS BEFORE EQUITY IN EARNINGS OF JOINT VENTURE | |
| (730,322 | ) | |
| (460,637 | ) |
| |
| | | |
| | |
Equity in (loss) earnings of
Joint Venture | |
| (12,527 | ) | |
| 272,041 | |
| |
| | | |
| | |
Loss from operations before income taxes | |
| (742,849 | ) | |
| (188,596 | ) |
| |
| | | |
| | |
Income tax benefit | |
| 0 | | |
| 169,066 | |
| |
| | | |
| | |
NET LOSS | |
$ | (742,849 | ) | |
$ | (19,530 | ) |
| |
| | | |
| | |
Loss per share: | |
| | | |
| | |
Basic | |
$ | (0.32 | ) | |
$ | (0.01 | ) |
Diluted | |
$ | (0.32 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | |
Shares used in computing net loss per share: | |
| | | |
| | |
Basic | |
| 2,312,887 | | |
| 2,287,887 | |
Diluted | |
| 2,312,887 | | |
| 2,287,887 | |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
UNIVERSAL
SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE
LOSS
(Unaudited)
| |
Three
Months Ended June 30, | |
| |
2014 | | |
2013 | |
NET
LOSS | |
$ | (742,849 | ) | |
$ | (19,530 | ) |
Other
Comprehensive Income (Loss) | |
| | | |
| | |
Company’s
portion of Joint Ventures: | |
| | | |
| | |
Currency
translation | |
| 14,597 | | |
| (6,485 | ) |
Investment
Securities | |
| (20,388 | ) | |
| (174,095 | ) |
| |
| | | |
| | |
COMPREHENSIVE
(LOSS) | |
$ | (748,640 | ) | |
$ | (200,110 | ) |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
UNIVERSAL
SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| |
Three
Months Ended June 30, | |
| |
2014 | | |
2013 | |
OPERATING ACTIVITIES | |
| | | |
| | |
Net Loss | |
$ | (742,849 | ) | |
$ | (19,530 | ) |
Adjustments to reconcile net income to net cash provided
by operating activities: | |
| | | |
| | |
Increase in deferred taxes | |
| - | | |
| (169,066 | ) |
Depreciation and amortization | |
| 11,737 | | |
| 10,140 | |
Stock based compensation | |
| | | |
| 22,234 | |
Loss (Earnings) of the Joint Venture | |
| 12,527 | | |
| (272,041 | ) |
Changes in operating assets and
liabilities: | |
| | | |
| | |
Decrease in accounts
receivable and amounts due from factor | |
| 681,394 | | |
| 38,767 | |
Decrease (Increase)
in inventories and prepaid expenses | |
| 725,026 | | |
| (669,727 | ) |
Increase
in accounts payable and accrued expenses | |
| 218,669 | | |
| 108,365 | |
| |
| | | |
| | |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | |
| 906,504 | | |
| (950,858 | ) |
| |
| | | |
| | |
NET CASH USED IN INVESTING ACTIVITIES | |
| - | | |
| - | |
| |
| | | |
| | |
NET CASH USED BY FINANCING ACTIVITIES | |
| - | | |
| - | |
| |
| | | |
| | |
Cash at beginning of period | |
| 2,050,993 | | |
| 2,438,892 | |
| |
| | | |
| | |
CASH AT END OF PERIOD | |
$ | 2,957,497 | | |
$ | 1,488,034 | |
| |
| | | |
| | |
Supplemental information: | |
| | | |
| | |
Interest paid | |
| - | | |
| - | |
Income taxes | |
| - | | |
| - | |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
UNIVERSAL
SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Statement
of Management
The condensed
consolidated financial statements include the accounts of Universal Security Instruments, Inc. (USI or the Company) and its majority
owned subsidiaries. Except for the consolidated balance sheet as of March 31, 2014, which was derived from audited financial statements,
the accompanying condensed consolidated financial statements are unaudited. Significant inter-company accounts and transactions
have been eliminated in consolidation. In the opinion of the Company’s management, the interim condensed consolidated financial
statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the
results for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted. The
interim condensed consolidated financial statements should be read in conjunction with the Company’s March 31, 2014 audited
financial statements filed with the Securities and Exchange Commission on Form 10-K. The interim operating results are not necessarily
indicative of the operating results for the full fiscal year.
Use of Estimates
The preparation
of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America (US-GAAP) 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 the reported amounts of revenue
and expenses during the reporting period. Actual results could differ materially from those estimates.
Joint Venture
The Company
and its co-venturer, a Hong Kong corporation, each own a 50% interest in a Hong Kong joint venture, Eyston Company Limited (the
“Hong Kong Joint Venture”), that manufactures security products in its facilities located in the People’s Republic
of China. The following represents summarized balance sheet and income statement information of the Hong Kong Joint Venture as
of and for the three months ended June 30, 2014 and 2013:
| |
2014 | | |
2013 | |
Net
sales | |
$ | 3,664,900 | | |
$ | 6,250,349 | |
Gross
profit | |
| 939,947 | | |
| 1,810,813 | |
Net
(loss) income | |
| (121,206 | ) | |
| 527,078 | |
Total
current assets | |
| 17,237,635 | | |
| 13,579,390 | |
Total
assets | |
| 35,671,149 | | |
| 34,993,836 | |
Total
current liabilities | |
| 7,359,434 | | |
| 4,930,630 | |
During the
three months ended June 30, 2014 and 2013, the Company purchased $1,076,376 and $2,138,627, respectively, of products directly
from the Hong Kong Joint Venture for resale. For the three month period ended June 30, 2014 and 2013, the Company has adjusted
its earnings of the Joint Venture to reflect a decrease of and an increase of $(48,076) and $56,973, respectively, to eliminate
inter-Company profit on purchases held by the Company in inventory
Income Taxes
We calculate
our interim tax provision in accordance with the guidance for accounting for income taxes in interim periods. At the end of each
interim period, we estimate the annual effective tax rate and apply that tax rate to our ordinary quarterly pre-tax income. The
tax expense or benefit related to discrete events during the interim period is recognized in the interim period in which those
events occurred. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period
in which the change occurs.
The Company
recognizes a liability or asset for the deferred tax consequences of temporary differences between the tax basis of assets or
liabilities and their reported amounts in the financial statements. These temporary differences may result in taxable or deductible
amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. The deferred tax assets
are reviewed periodically for recoverability and a valuation allowance
is provided whenever it is more likely than not that a deferred tax asset will not be realized. The Company has established a
valuation allowance to fully offset the value of the deferred tax assets. Our ability to realize the tax benefits associated with
the deferred tax assets depends primarily upon the timing of future taxable income and the expiration dates of the components
of the deferred tax assets. If sufficient future taxable income is generated, we may be able to offset a portion of future tax
expenses.
The Company
follows ASC 740-10 that gives guidance to tax positions related to the recognition and measurement of a tax position taken or
expected to be taken in a tax return and requires that we recognize in our financial statements the impact of a tax position,
if that position is more likely than not to be sustained upon an examination, based on the technical merits of the position. Interest
and penalties related to income tax matters are recorded as income tax expenses. The Company has recorded a long-term liability
of $25,000 for an uncertain income tax position, tax penalties and any imputed interest thereon.
Accounts
Receivable and Amount Due from Factor
The Company
assigns the majority of its short-term receivables arising in the ordinary course of business to our factor. At the time a receivable
is assigned to our factor the credit risk associated with the credit worthiness of the debtor is assumed by the factor. The Company
continues to bear any credit risk associated with delivery or warranty issues related to the products sold.
Management
assesses the credit risk of both its trade accounts receivable and its financing receivables based on the specific identification
of accounts that have exceeded credit terms. An allowance for uncollectible receivables is provided based on that assessment.
Changes in the allowance account are charged to operations in the period the change is determined. Amounts ultimately determined
to be uncollectible are eliminated from the receivable accounts and from the allowance account in the period that the receivables’
status is determined to be uncollectible.
Based on the
nature of the factoring agreement and prior experience, no allowance related to Amounts Due from Factor has been provided. At
June 30, 2014 and 2013, an allowance of approximately $57,000 has been provided for uncollectible trade accounts receivable.
Net Income
per Common Share
Basic earnings
per common share are computed based on the weighted average number of common shares outstanding during the periods presented.
Diluted earnings per common share is computed based on the weighted average number of common shares outstanding plus the effect
of stock options and other potentially dilutive common stock equivalents, if any. The dilutive effect of stock options and other
potentially dilutive common stock equivalents is determined using the treasury stock method based on the Company’s average
stock price.
Diluted income
per common share for the three months ended June 30, 2013 excludes 97,000 shares issuable upon the exercise of outstanding “out-of-the-money”
stock options and 25,000 shares issuable upon the exercise of “in-the-money” stock options as their impact on our
net loss is anti-dilutive. As a result, basic and diluted weighted average common shares outstanding are identical for the three
month periods ended June 30, 2013. There were no potentially dilutive common stock equivalents outstanding during the three months
ended June 30, 2014.
Shareholders’
Equity
Stock Options.
In October 2011, the shareholders approved the Company’s 2011 Non-Qualified Stock Option Plan (the “Plan”).
Under the terms of the Plan, 120,000 shares are reserved for the granting of stock options, of which 97,000 were issued. Under
the provisions of the Plan, a committee of the Board of Directors determines the option price
and the dates exercisable. During December 2011, ninety-seven thousand (97,000) options were granted at an option price of $5.51
per share. These options expired on December 14, 2013, with no forfeiture or exercise activity.
For the period
ended June 30, 2013, we recorded $22,234 of stock-based compensation cost as general and administrative expense in our statement
of operations. No forfeitures have been estimated.
Contingencies
From time to
time, the Company is involved in various lawsuits and legal matters. It is the opinion of management, based on consultation with
legal counsel, that there are material losses from litigation are not reasonably likely.
Recent Accounting
Pronouncements not yet Adopted
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize revenues when promised
goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled
for those goods or services. The new standard will replace most of the existing revenue recognition standards in U.S. GAAP
when it becomes effective on January 1, 2017. Early adoption is not permitted. The new standard can be applied
retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized
at the date of the initial application. We are currently assessing the impact the adoption of ASU 2014-09 will have on our
condensed consolidated financial position, results of operations and cash flows.
| ITEM 2. | MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
As
used throughout this Report, “we,” “our,” “the Company” “USI” and similar words
refers to Universal Security Instruments, Inc.
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q contains certain forward-looking statements reflecting our current expectations with respect to
our operations, performance, financial condition, and other developments. These forward-looking statements may generally be identified
by the use of the words “may”, “will”, “believes”, “should”, “expects”,
“anticipates”, “estimates”, and similar expressions. These statements are necessarily estimates reflecting
management’s best judgment based upon current information and involve a number of risks and uncertainties. We caution readers
not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and readers are advised
that various factors could affect our financial performance and could cause our actual results for future periods to differ materially
from those anticipated or projected. While it is impossible to identify all such factors, such factors include, but are not limited
to, those risks identified in our periodic reports filed with the Securities and Exchange Commission, including our most recent
Annual Report on Form 10-K.
overview
We
are in the business of marketing and distributing safety and security products which are primarily manufactured by our 50%-owned
Hong Kong Joint Venture. Our financial statements detail our sales and other operational results only, and report the financial
results of the Hong Kong Joint Venture using the equity method. Accordingly, the following discussion and analysis of the three
month periods ended June 30, 2014 and 2013 relate to the operational results of the Company. A discussion and analysis of the
Hong Kong Joint Venture’s operational results for these periods is presented below under the heading “Joint Venture.”
The
Company has developed new products based on new smoke and gas detection technologies, with what the Company believes are improved
sensing technology and product features. To date we have applied for thirteen patents on these new technologies and features and
have been granted ten patents (including six for the new technologies and features), and we are currently awaiting notification
from the U.S. Patent Office regarding the three remaining patent applications. Most of our new technologies and features have
been trademarked under the trade name IoPhic®
Results
of Operations
Three
Months Ended June 30, 2014 and 2013
Sales.
Net sales for the three months ended June 30, 2014 were $2,514,385 compared to $3,005,669 for the comparable three months
in the prior fiscal year, a decrease of $491,284 (16.3%). The primary reason for the decrease in net sales volumes is the timing
of orders received from customers.
Gross
Profit Margin. Gross profit margin is calculated as net sales less cost of goods sold expressed as a percentage of net sales.
Our gross profit margin was 24.3% and 24.9% of sales for the quarters ended June 30, 2014 and 2013, respectively. The decrease
in gross profit margin was primarily due to lower margins realized due to changes in the product mix during the periods presented.
Expenses.
Research and development expense increased by $35,328 to $161,964 for the three month period ended June 30, 2014, from $126,636
for the three months in the prior year. The increase is due to the increase in expenditures to independent testing laboratories
and is related to new product development.
Selling,
general and administrative expense increased by $97,747 from the comparable three months in the prior year. As a percentage of
net sales, these expenses increased to 47.2% for the three month period ended June 30, 2014 from 36.3% for the 2013 period. The
increase in costs as a percentage was primarily due to selling, general and administrative expenses that have remained constant
as compared to reduced sales in the current period and an increase in professional fees associated with the audit for the fiscal
year ended March 31, 2014.
Interest
Expense and Income. Net interest income was $7,645 for the quarter ended June 30, 2014, compared to net interest income of
$6,419 for the quarter ended June 30, 2013. The increase in interest income, net of interest expense, is due to an increase in
funds on deposit with our factor.
Income
Taxes. During the quarter ended June 30, 2014, the Company generated additional net operating losses of $694,837. For the
corresponding 2013 period, the Company generated net income tax benefits of $169,066. The provision for income taxes for the quarter
ended June 30, 2014, as compared to the same quarter in the prior year, is determined principally by the loss from operations
and the amount and timing of the unrealized earnings of and the payment of dividends by the Hong Kong Joint Venture. The income
tax benefits generated for the three months ended June 30, 2014 and 2013 have been fully reserved, and accordingly, no income
tax benefit is recognized on the Company’s statement of operations at June 30, 2014.
Net
Income. We reported a net loss of $742,849 for the quarter ended June 30, 2014, compared to a net loss of $19,530 for the
corresponding quarter of the prior fiscal year, a $723,319 increase in the loss. The reason for the increase in net loss is principally
due to decreased earnings of the Joint Venture, a decrease in tax benefits recognized in the prior year’s period, and lower
sales by the Company.
Financial
Condition and Liquidity
The
Company has a Factoring Agreement with CIT Group, Inc. (CIT) which supplies both short-term borrowings and letters of credit to
finance foreign inventory purchases. The maximum amount available under the Factoring Agreement is currently $1,000,000. Based
on specified percentages of our accounts receivable and inventory and letter of credit commitments, as of June 30, 2014 we had
a borrowing availability of $1,000,000 under the Factoring Agreement. We had no borrowings on the debt portion of the agreement
as of June 30, 2014. The interest rate under the Factoring Agreement on the uncollected factored accounts receivable and any additional
borrowings is equal to the prime rate of interest charged by our lender. At June 30, 2014, the prime
rate was 3.25%.
Borrowings are collateralized by all of our accounts receivable and inventory. The Company does not anticipate any changes in
its ability to maintain its short-term or long-term liquidity.
Our
factored accounts receivable as of the end of our last fiscal year was $1,397,951, and was $1,016,137 as of June 30, 2014. Our
prepaid expenses as of the end of our last fiscal year were $406,012, and were $345,040 as of June 30, 2014.
Operating
activities provided cash of $906,504 for the three months ended June 30, 2014. This was primarily due to a decrease in inventories
and prepaid expenses of $725,026, decreases in accounts receivable and amounts due from factor of $681,394, and increases in accounts
payable and accrued expenses of $218,669 offset by a loss from operations of $742,849. For the
same period last year, operating activities used cash of $950,858, primarily as a result of increases in inventory in support
of our new product line, and prepaid expenses and a decrease in accounts payable and accrued expenses.
There
were no investing activities during the three months ended June 30, 2014 or 2013.
There
were no financing activities during the three months ended June 30, 2014 or 2013.
We
believe that funds available under the Factoring Agreement, distributions from the Joint Venture, and our line of credit facilities
provide us with sufficient resources to meet our requirements for liquidity and working capital.
Joint
Venture
Net
Sales. Net sales of the Joint Venture for the three months ended June 30, 2014 were $3,664,900, compared to $6,250,349, for
the comparable period in the prior fiscal year. The decrease in net sales by the Joint Venture for the three month period was
due to lower volumes of sales of smoke alarm products to the Company and to unaffiliated customers of the Joint Venture.
Gross
Margins. Gross margins of the Joint Venture for the three month period ended June 30, 2014 decreased to 25.6% from 29.0% for
the 2013 corresponding period. The lower gross margins for the 2014 period was due to higher labor costs and product mix of the
Joint Venture’s sales; since gross margins depend on sales volume of various products, with varying margins, lower sales
of higher margin products and increased sales of lower margin products affect the overall gross margins.
Expenses.
Selling, general and administrative expense was $1,094,879, for the three month period ended June 30, 2014, compared to $1,343,343
in the prior year’s respective period. As a percentage of sales, expenses were 29.9% for the three month period ended June
30, 2014, compared to 21.5% for the three month period ended June 30, 2013. The increase in selling, general and administrative
expenses, as a percent of sales, was primarily due to fixed costs that do not change in the same proportion as the increase in
sales while the decrease in absolute dollar amounts is associated with a reduction in management incentive bonuses.
Interest
Income and Expense. Net interest income on assets held for investment was $131,112 and $124,863 for the three month period
ended June 30, 2014 and 2013, respectively.
Net
(Loss) Income. For the reasons stated above, the net loss for the three months ended June 30, 2014 was $121,206, compared
to net income of $527,078, in the comparable period last year due to lower sales to the Company.
Liquidity.
Cash needs of the Joint Venture are currently met by funds generated from operations. During the three months ended June 30,
2014, working capital increased by $590,608 from $9,287,593 on March 31, 2014 to $9,878,201 on June 30, 2014.
Critical
Accounting Policies
Management’s
discussion and analysis of our consolidated financial statements and results of operations are based on our Condensed Consolidated
Financial Statements included as part of this document. The preparation of these consolidated financial statements requires management
to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures
of contingent assets and liabilities. On an ongoing basis, we evaluate these estimates, including those related to bad debts,
inventories, income taxes, and contingencies and litigation. We base these estimates on historical experiences, future projections
and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily
available from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe
the following critical accounting policies affect management’s more significant judgments and estimates used in the preparation
of its consolidated financial statements. For a detailed discussion on the application on these and other accounting policies,
see Note A to the consolidated financial statements included in Item 8 of the Form 10-K for the year ended March 31, 2014. Certain
of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions
for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty and actual
results could differ from these estimates. These judgments are based on our historical experience, terms of existing contracts,
current economic trends in the industry, information provided by our customers, and information available from outside sources,
as appropriate. Our critical accounting policies include:
Revenue
Recognition. We recognize sales upon shipment of products net of applicable provisions for any discounts or allowances. The
shipping date from our warehouse is the appropriate point of revenue recognition since upon
shipment we have substantially completed our obligations which entitle us to receive the benefits represented by the revenues,
and the shipping date provides a consistent point within our control to measure revenue. Customers may not return, exchange or
refuse acceptance of goods without our approval. We have established allowances to cover anticipated doubtful accounts based upon
historical experience.
Inventories.
Inventories are valued at the lower of cost or market. Cost is determined on the first-in first-out method. We evaluate inventories
on a quarterly basis and write down inventory that is deemed obsolete or unmarketable in an amount equal to the difference between
the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.
Income
Taxes. The Company recognizes a liability or asset for the deferred tax consequences of temporary differences between the
tax basis of assets or liabilities and their reported amounts in the financial statements. These temporary differences may result
in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled.
The deferred tax assets are reviewed periodically for recoverability and a valuation allowance is provided whenever it is more
likely than not that a deferred tax asset will not be realized. A full valuation allowance was established during the previous
fiscal year ended March 31, 2014. Our ability to realize the tax benefits associated with the deferred tax assets depends primarily
upon the timing of future taxable income and the expiration dates of the components of the deferred tax assets. If sufficient
future taxable income is generated, we may be able to offset a portion of future tax expenses.
The Company
follows the financial pronouncement that gives guidance related to the financial statement of recognition and measurement of a
tax position taken or expected to be taken in a tax return and requires that we recognize in our financial statements the impact
of a tax position, if that position is more likely than not to be sustained upon an examination, based on the technical merits
of the position. Interest and penalties related to income tax matters are recorded as income tax expenses.
Accounts
Receivable and Amount Due From Factor. The Company assigns the majority of its short-term receivables arising in the ordinary
course of business to our factor. At the time a receivable is assigned to our factor the credit risk associated with the credit
worthiness of the debtor is assumed by the factor. The Company continues to bear any credit risk associated with delivery or warranty
issues related to the products sold.
Management
assesses the credit risk of both its trade accounts receivable and its financing receivables based on the specific identification
of accounts that have exceeded credit terms. An allowance for uncollectible receivables is provided based on that assessment.
Changes in the allowance account from one accounting period to the next are charged to operations in the period the change is
determined. Amounts ultimately determined to be uncollectible are eliminated from the receivable accounts and from the allowance
account in the period that the receivables’ status is determined to be uncollectible.
Based on the
nature of the factoring agreement and prior experience, no allowance related to the Amount Due from Factor has been provided.
An allowance of $57,000 has been provided for uncollectible trade accounts receivable as of June 30, 2014 and 2013.
Contingencies.
From time to time, we are subject to lawsuits and other claims, related to patents and other matters. Management is required
to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses.
A determination of the amount of reserves required, if any, for these contingencies is based on a careful analysis of each individual
issue with the assistance of outside legal counsel. It is the opinion of management, based on
consultation with legal counsel, that material losses from litigation are not reasonably likely.
Warranties.
We generally provide warranties from one to ten years to the non-commercial end user on all products sold. The manufacturers
of our products provide us with a one-year warranty on all products we purchase for resale. A reserve for claims for warranty
replacement of $25,000 has been provided for products beyond the one-year warranty period covered by the manufacturers.
Recent Accounting
Pronouncements not yet Adopted
In May 2014,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,
“Revenue from Contracts with Customers,” which requires an entity to recognize revenues when promised goods or services
are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those
goods or services. The new standard will replace most of the existing revenue recognition standards in U.S. GAAP when it
becomes effective on January 1, 2017. Early adoption is not permitted. The new standard can be applied retrospectively
to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of
the initial application. We are currently assessing the impact the adoption of ASU 2014-09 will have on our condensed consolidated
financial position, results of operations and cash flows.
| ITEM 4. | CONTROLS AND PROCEDURES |
We
maintain a system of disclosure controls and procedures (as such item is defined in Rules 13a-15€ and 15d-15(c) of the Exchange
Act) that is designed to provide reasonable assurance that information, which is required to be disclosed by us in the reports
that we file or submit under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated and communicated
to management in a timely manner. Our Chief Executive Officer and Chief Financial Officer have evaluated this system of disclosure
controls and procedures as of the end of the period covered by this quarterly report, and have concluded that due to the material
weakness in our internal control over financial reporting, as noted below, our disclosure controls and procedures were not effective
as of June 30, 2014. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis.
As described
in our Annual Report on Form 10-K for our fiscal year ended March 31, 2014, as filed with the Securities and Exchange Commission
on August 4, 2014, our management determined that our processes, procedures and controls related to financial reporting were not
effective as a result of material weaknesses identified. The material weaknesses were identified in connection with our assessment
of the effectiveness of internal control over financial reporting as of March 31, 2014, and as of June 30, 2014 had
not determined to have been remediated.
Notwithstanding
the identified material weakness described above, management believes that the financial statements and other financial information
included in this report present fairly in all material respects our financial condition, results of operations and cash flows
at and for the periods presented in accordance with accounting principles generally accepted in the United States.
With the oversight
of our audit committee of our board of directors, we have since taken steps and plan to take additional measures to remediate
the underlying causes of the material weakness described above.
Changes
in Internal Control over Financial Reporting. There have not been any changes in our internal control over financial reporting
that occurred during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II -
OTHER INFORMATION
From
time to time, the Company is involved in various lawsuits and legal matters. It is the opinion of management, based on the advice
of legal counsel, that these matters will not have a material adverse effect on the Company’s financial statements.
Exhibit No. | |
3.1 | Articles
of Incorporation (incorporated by reference to the Company’s Quarterly Report on
Form 10 Q for the period ended December 31, 1988, File No. 1-31747) |
3.2 | Articles Supplementary,
filed October 14, 2003 (incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K filed October 31, 2002, file No. 1-31747) |
3.3 | Bylaws, as amended
(incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form
8-K filed July 13, 2011, File No. 1-31747) |
10.1 | 2011 Non Qualified
Stock Option Plan (incorporated by reference to the Company’s Proxy Statement with
respect to the Company’s 2011 Annual Meeting of Shareholders, filed July 26, 2011,
File No. 1-31747) |
10.2 | Hong Kong Joint
Venture Agreement, as amended (incorporated by reference to Exhibit 10.1 to the Company’s
Annual Report on Form 10 K for the year ended March 31, 2003, File No. 1-31747) |
10.3 | Amended and Restated
Factoring Agreement between the Registrant and The CIT Group/Commercial Services, Inc.
(“CIT”), dated June 22, 2007 (substantially identical agreement entered into
by the Registrant’s wholly-owned subsidiary, USI Electric, Inc.) (incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
June 26, 2007, file No. 1-31747) |
10.4 | Amended and Restated
Inventory Security Agreement between the Registrant and CIT, dated June 22, 2007 (substantially
identical agreement entered into by the Registrant’s wholly-owned subsidiary, USI
Electric, Inc.) (incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed June 26, 2007, file No. 1-31747) |
10.5 | Amendment, dated
December 22, 2009, to Amended and Restated Factoring Agreement between the Registrant
and CIT dated June 22, 2007 (substantially identical agreement entered into by the Registrant’s
wholly-owned subsidiary, USI Electric, Inc.) (incorporated by reference to Exhibit 10.5
to the Company’s Quarterly Report on Form 10-Q filed February 16, 2010, file No.
1-31747) |
10.6 | Lease between
Universal Security Instruments, Inc. and St. John Properties, Inc. dated November 4,
2008 for its office and warehouse located at 11407 Cronhill Drive, Suites A-D, Owings
Mills, Maryland 21117 (incorporated by reference to Exhibit 10.8 to the Company’s
Quarterly Report on Form 10 Q for the period ended December 31, 2008, File No. 1-31747) |
10.7 | Amendment to
Lease between Universal Security Instruments, Inc. and St. John Properties, Inc. dated
June 23, 2009 (incorporated by reference to Exhibit 10.9 to the Company’s Annual
Report on Form 10 K for the year ended March 31, 2009, File No. 1-31747) |
10.8 | Amended and Restated
Employment Agreement dated July 18, 2007 between the Company and Harvey B. Grossblatt
(incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on
Form 10-Q for the period ended December 31, 2007, File No. 1-31747), as amended by Addendum
dated November 13, 2007 (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed November 15, 2007, File No. 1-31747), by Addendum dated
September 8, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed September 8, 2008, File No. 1-31747), by Addendum dated March
11, 2010 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed March 12, 2010, File No. 1-31747), by Addendum dated July 19, 2012
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form
8-K filed July 20, 2012, File No. 1-31747) , by Addendum dated July 3, 2013 (incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
July 8, 2013, File No. 1-31747), and by addendum dated July 21, 2014 (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July
21, 2014, File No. 1-31747). |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer* |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer* |
32.1 |
Section 1350 Certifications*
|
99.1 | Press Release dated August 20, 2014* |
101 | Interactive data
files providing financial information from the Registrant’s Quarterly Report on
Form 10-Q for the quarter ended June 30,2014 in XBRL (eXtensible Business Reporting Language)
pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets, June
30, 2014 and March 31, 2014, (ii) Condensed Consolidated Statements of Earnings for the
three months ended June 30, 2014 and 2013, (iii) Condensed Consolidated Statements of
Cash Flows for the three months ended June 30, 2014 and 2013, and (v) Notes to Consolidated
Financial Statements* |
*Filed herewith
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
UNIVERSAL SECURITY INSTRUMENTS, INC. |
|
(Registrant) |
|
|
|
|
|
|
|
|
|
Date: August 20, 2014 |
By: |
/s/ Harvey B. Grossblatt |
|
|
|
Harvey B. Grossblatt |
|
|
|
President, Chief Executive Officer |
|
|
|
(principal executive officer) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ James B. Huff |
|
|
|
James B. Huff |
|
|
|
Vice President, Chief Financial Officer |
|
|
|
(principal financial officer) |
|
Exhibit 31.1
CERTIFICATION
I, Harvey B. Grossblatt,
certify that:
1. I have reviewed this Quarterly
Report on Form 10-Q of Universal Security Instruments, Inc.;
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 Registrant as of, and for, the periods presented in this report;
4. The Registrant’s
other certifying officer 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 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) | 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 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 |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting
that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal
control over financial reporting; and |
5. The Registrant’s
other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the
equivalent function):
| (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 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. |
Date: August 20, 2014 |
By: |
/s/ Harvey B. Grossblatt
|
|
|
|
Harvey B. Grossblatt, Chief Executive Officer |
|
|
(principal executive officer) |
|
Exhibit 31.2
CERTIFICATION
I, James B. Huff, certify
that:
1. I have reviewed this Quarterly
Report on Form 10-Q of Universal Security Instruments, Inc.;
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 Registrant as of, and for, the periods presented in this report;
4. The Registrant’s
other certifying officer 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 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) | 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 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 |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting
that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal
control over financial reporting; and |
5. The Registrant’s
other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the
equivalent function):
| (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 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. |
Date: August 20, 2014 |
By: |
/s/ James B. Huff |
|
|
|
James B. Huff, Chief Financial Officer |
|
|
|
(principal financial officer) |
|
Exhibit 32.1
SECTION 1350 CERTIFICATIONS
In connection with
the Quarterly Report of Universal Security Instruments, Inc. (the “Company”) on Form 10-Q for the period ending June
30, 2014 as filed with the Securities and Exchange Commission and to which this Certification is an exhibit (the “Report”),
the undersigned hereby certify, 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 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 Company for the periods reflected therein. |
Date: August 20, 2014 |
By: |
/s/ Harvey B. Grossblatt |
|
|
|
Harvey B. Grossblatt |
|
|
|
President, Chief Executive Officer |
|
|
|
(principal executive officer) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ James B. Huff |
|
|
|
James B. Huff |
|
|
|
Vice President, Chief Financial Officer |
|
|
|
(principal financial officer) |
|
Exhibit 99.1
|
For Immediate Release
Contact: Harvey Grossblatt, CEO
Universal Security Instruments, Inc.
410-363-3000, Ext. 224
or
Don Hunt, Jeff Lambert
Lambert, Edwards & Associates, Inc.
616-233-0500
|
Universal Security Instruments
Reports First-Quarter Results
OWINGS MILLS, MD, August 20, 2014 –
Universal Security Instruments, Inc. (NYSE Amex: UUU) today reported results for its first fiscal quarter ended June 30, 2014.
Universal reported sales of $2,514,385
for the quarter ended June 30, 2014 versus $3,005,669 for the comparable period of last year. The Company reported a net loss of
$742,849, or $0.32 per basic and diluted share, compared to a net loss of $19,530 or $0.01 per basic and diluted share, for the
same period last year. The major reasons for the change were lower joint venture earnings of $284,568, and the inclusion of an
income tax benefit of $169,066 in the same period of the prior year, along with lower sales during the current fiscal period.
The Company was not able to file its 10Q
due to its Hong Kong Joint venture inability to complete their financials and we expect to file the 10Q later this week.
The Company believes with the completion
of its new sealed product line later this fiscal year it will return to profitability. Additionally we believe that our Joint Venture
will be profitable for this fiscal year,” said Harvey Grossblatt, Universal CEO.
UNIVERSAL SECURITY INSTRUMENTS, INC. is
a U.S.-based manufacturer (through its Hong Kong Joint Venture) and distributor of safety and security devices. Founded in 1969,
the Company has an over 40-year heritage of developing innovative and easy-to-install products, including smoke, fire and carbon
monoxide alarms. For more information on Universal Security Instruments, visit our website at www.universalsecurity.com.
------------------------------------------------------------
"Safe
Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Certain matters discussed in this news release
may constitute forward-looking statements within the meaning of the federal securities laws that inherently include certain risks
and uncertainties. Actual results could differ materially from those projected in or contemplated by the forward-looking
statements due to a number of factors, including, among other items, our Hong Kong Joint Venture's respective ability to maintain
operating profitability, currency fluctuations, the impact of current and future laws and governmental regulations affecting us
and our Hong Kong Joint Venture and other factors which may be identified from time to time in our Securities and Exchange Commission
filings and other public announcements. We do not undertake and specifically disclaim any obligation to update any forward-looking
statements to reflect occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
We will revise our outlook from time to time and frequently will not disclose such revisions publicly.
-- more --
Universal/Page 2
UNIVERSAL SECURITY INSTRUMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| |
Three Months Ended June 30, | |
| |
2014 | | |
2013 | |
Sales | |
$ | 2,514,385 | | |
$ | 3,005,669 | |
| |
| | | |
| | |
Net loss: | |
$ | (742,849 | ) | |
$ | (19,530 | ) |
Net loss per share – basic | |
$ | (0.32 | ) | |
$ | (0.01 | ) |
Net loss per share – diluted | |
$ | (0.32 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | |
Weighted average number of common shares outstanding: | |
| | | |
| | |
Basic | |
| 2,312,887 | | |
| 2,287,887 | |
Diluted | |
| 2,312,887 | | |
| 2,287,887 | |
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS | |
| |
| |
June 30, 2014 | | |
June 30, 2013 | |
Cash | |
$ | 2,957,497 | | |
$ | 1,488,034 | |
Accounts receivable and amount due from factor | |
| 1,607,728 | | |
| 2,880,664 | |
Inventory | |
| 3,530,159 | | |
| 5,002,976 | |
Prepaid expense | |
| 345,040 | | |
| 637,207 | |
| |
| | | |
| | |
TOTAL CURRENT ASSETS | |
| 8,440,424 | | |
| 10,008,881 | |
INVESTMENT IN HONG KONG JOINT VENTURE | |
| 14,125,751 | | |
| 14,998,034 | |
PROPERTY, PLANT AND EQUIPMENT – NET | |
| 210,495 | | |
| 222,552 | |
OTHER ASSETS AND DEFERRED TAX ASSET | |
| 38,134 | | |
| 2,518,035 | |
TOTAL ASSETS | |
$ | 22,814,804 | | |
$ | 27,747,502 | |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 779,797 | | |
$ | 723,971 | |
Accrued liabilities | |
| 224,433 | | |
| 142,502 | |
TOTAL CURRENT LIABILITIES | |
| 1,004,230 | | |
| 866,473 | |
LONG TERM OBLIGATION | |
| 25,000 | | |
| 25,000 | |
SHAREHOLDERS’ EQUITY: | |
| | | |
| | |
Common stock, $.01 par value per share; authorized 20,000,000 shares; issued
and outstanding 2,312,887 at June 30, 2014 and 2,287,887 at June 30, 2013 | |
| 23,129 | | |
| 22,879 | |
Additional paid-in capital | |
| 12,885,841 | | |
| 12,771,490 | |
Retained earnings | |
| 7,692,267 | | |
| 12,865,830 | |
Equity in Comprehensive Income of Joint Venture | |
| 1,184,337 | | |
| 1,195,830 | |
TOTAL SHAREHOLDERS’ EQUITY | |
| 21,785,574 | | |
| 26,856,029 | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | |
$ | 22,814,804 | | |
$ | 27,747,502 | |
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