UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter ended December 31, 2002
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________________ to
_________________
Commission file number 0-7885
UNIVERSAL SECURITY INSTRUMENTS, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-0898545
State of Incorporation I.R.S. Employer Identification
Number
7-A Gwynns Mill Court, Owings Mills, MD 21117
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 410-363-3000
Indicate by check mark whether the registrant (l) has filed all
reports required to be filed by Section 13 and 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to the filing requirements for at least
the past 90 days.
YES X NO _______
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Date Class Shares Outstanding
February 14, 2003 Common Stock, $.01 par value 1,120,982
UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
INDEX
Part I - FINANCIAL INFORMATION
Item l. FINANCIAL STATEMENTS (unaudited)
Consolidated balance sheets at December 31, 2002 and
March 31, 2002
Consolidated statements of earnings for the three
and nine months ended December 31, 2002 and 2001
Consolidated statements of cash flows for the nine
months ended December 31, 2002 and 2001
Notes to consolidated financial statements
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Item 4. CONTROLS AND PROCEDURES
Part II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE
CERTIFICATIONS
- 2 -
UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
December 31, 2002 March 31, 2002
CURRENT ASSETS
Cash $ 161,638 $ 19,383
Accounts receivable:
Trade (less allowance for
doubtful accounts of $0
and $68,358 at December
31, 2002 and March 31,
2002) 339,309 155,052
Employees 19,150 1,115
358,459 156,167
Due from Factor 1,117,814 38,436
Inventories 2,632,416 1,557,994
Prepaid expenses 152,329 109,238
TOTAL CURRENT ASSETS 4,422,656 1,881,218
INVESTMENT IN JOINT VENTURE 3,610,354 2,990,067
PROPERTY, PLANT AND EQUIPMENT - NET 276,448 301,082
OTHER ASSETS 8,294 10,095
TOTAL ASSETS $8,317,752 $5,182,462
See notes to consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, 2002 March 31, 2002
CURRENT LIABILITIES
Short-term borrowings $ - $ 216,959
Accounts payable 1,635,489 787,492
Accrued liabilities 677,965 451,092
Current obligations under
capital lease 15,730 15,730
TOTAL CURRENT LIABILITIES 2,329,184 1,471,273
LONG-TERM CAPITAL LEASE
OBLIGATIONS 18,537 29,916
SHAREHOLDERS' EQUITY
Common stock, $.01 par value
per share; authorized
20,000,000 shares; issued
1,120,232 shares at December
31, 2002 and 1,092,770 at
March 31, 2002 11,202 10,098
Additional paid-in capital 11,055,899 10,648,679
Accumulated deficit (5,097,070) (6,977,504)
TOTAL SHAREHOLDERS' EQUITY 5,970,031 3,681,273
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 8,317,752 5,182,462
See notes to consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
For the Nine Months Ended
December 31, December 31,
2002 2001
Net sales $12,094,645 $7,873,998
Cost of goods sold 8,435,672 5,782,782
GROSS PROFIT 3,658,973 2,091,216
Research and development expense 216,637 154,807
Selling, general and
administrative expense 2,908,909 2,164,186
Operating income (loss) 533,427 (227,777)
Other income (expense):
Interest expense (113,310) (156,218)
Other 9,100 (11)
(104,210) (156,229)
INCOME (LOSS) BEFORE EARNINGS
OF JOINT VENTURE 429,217 (384,006)
Earnings from joint venture:
Equity in earnings of joint venture 1,652,766 506,341
Cost allocatable to joint venture (201,549) -
NET INCOME $ 1,880,434 $ 122,335
Net income per common share amounts:
Basic 1.77 .13
Diluted 1.65 .13
Weighted average number of common
shares outstanding:
Basic 1,059,708 918,282
Diluted 1,139,544 927,439
See notes to consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
For the Three Months Ended
December 31, December 31,
2002 2001
Net sales $4,252,447 $2,965,386
Cost of goods sold 2,962,846 2,175,036
GROSS PROFIT 1,289,601 790,350
Research and development expense 83,657 49,894
Selling, general and
administrative expense 1,005,189 800,119
Operating income (loss) 200,755 (59,663)
Other income (expense):
Interest expense (40,040) (35,948)
Other 8,350 (11)
(31,690) (35,959)
INCOME (LOSS) BEFORE EQUITY IN
EARNINGS OF JOINT VENTURE 169,065 (95,622)
Earnings from joint venture:
Equity in earnings of joint venture 600,636 132,055
Cost allocatable to joint venture (96,336) -
NET INCOME $ 673,365 $ 36,433
Net income per common share amounts:
Basic .61 .04
Diluted .55 .04
Weighted average number of common
shares outstanding:
Basic 1,110,149 930,305
Diluted 1,226,243 949,963
See notes to consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Nine Months Ended
December 31, December 31,
2002 2001
OPERATING ACTIVITIES
Net income $ 1,880,434 $ 122,335
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization 28,798 33,179
Stock issued to directors in lieu
of fees 30,000 -
Earnings of Joint venture (1,652,766) (506,341)
Changes in operating assets
and liabilities:
Increase in accounts receivable
and due from factor (1,281,670) (1,017,282)
(Increase) decrease in inventories
and prepaid expenses (1,117,513) 1,027,980
Increase in accounts payable
and accrued expenses 1,114,070 271,048
Decrease in other assets 1,801 13
Decrease in amount due factor (216,959) -
NET CASH USED IN OPERATING ACTIVITIES (1,213,805) (69,068)
INVESTING ACTIVITIES
Distribution by Joint Venture 1,032,479 67,357
Purchase of equipment (4,165) (2,322)
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,028,314 65,035
FINANCING ACTIVITIES
Net (repayments) borrowings of
short-term debt - (37,579)
Principal repayment of capital
lease obligations (11,379) (11,379)
Proceeds from issuance of common stock
from exercise of employee stock options 89,125 39,422
Proceeds from issuance of common stock 250,000 -
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 327,746 (9,536)
INCREASE (DECREASE) IN CASH 142,255 (13,569)
Cash at beginning of period 19,383 34,642
CASH AT END OF PERIOD $ 161,638 $ 21,073
Supplemental information:
Interest paid $ 113,310 $ 156,218
Income taxes paid - -
Non-cash investing transactions:
Joint Venture dividend applied
to reduce Joint Venture payable - 532,643
Issuance of 13,488 shares of common stock
in satisfaction of accounts payable 39,200 -
Issuance of 6,974 shares of common stock
as directors' fees 30,000 -
69,200 532,643
See notes to consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Statement of Management - The consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiaries. Significant intercompany accounts and transactions
have been eliminated in consolidation. In the opinion of the
Company's management, the interim 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 consolidated financial statements should be read in
conjunction with the Company's March 31, 2002 audited financials
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.
Income Taxes - No income tax expense has been provided for the
period ended December 31, 2002 as a result of the carryforward of
prior year's operating losses.
Joint Venture - The Company maintains a 50% interest in a joint
venture with a Hong Kong corporation (Hong Kong joint venture)
which has manufacturing facilities in the People's Republic of
China, for the manufacturing of consumer electronic products. The
following represents summarized balance sheet and income
statement information of the Hong Kong joint venture for the nine
months ended December 31, 2002 and 2001:
2002 2001
Net sales $17,395,366 $7,509,279
Gross profit 5,958,635 2,183,185
Net income 3,663,638 1,012,681
Total current assets 7,686,402 3,932,812
Total assets 10,225,111 6,074,501
Total liabilities 2,731,171 1,380,889
During the nine month periods ended December 31, 2002 and 2001,
the Company purchased products for resale from the Hong Kong
Joint Venture of approximately $5,578,341 and $3,265,000,
respectively. At December 31, 2002 and 2001, the Company had
amounts payable to the Hong Kong Joint Venture of $487,176 and
$200,000, respectively.
In 2002, the Company has amended its employment agreements so
that bonus payments shall be allocated between domestic
operations and joint venture operations. The Company recorded
$201,549 of costs allocatable to the joint venture in the
accompanying statement of operations for the nine months ended
December 31, 2002.
- 8 -
Net Income Per Common Share - Basic earnings per common share is
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. 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.
A reconciliation of the weighted average shares of common stock
utilized in the computation of basic and diluted earnings per
share for the three and nine month periods ended December 31,
2002 and 2001 is as follows:
Three months ended December 31,
2002 2001
Weighted average number of
common shares outstanding
for basic EPS 1,110,149 930,305
Shares issued upon the assumed
exercise of outstanding
stock options 116,094 19,658
Weighted average number of common
and common equivalent shares
outstanding for diluted EPS 1,226,243 949,963
Nine months ended December 31,
2002 2001
Weighted average number of
common shares outstanding
for basic EPS 1,059,708 918,282
Shares issued upon the assumed
exercise of outstanding
stock options 79,836 9,157
Weighted average number of common
and common equivalent shares
outstanding for diluted EPS 1,139,544 927,439
Contingencies - The Company has outstanding letters of credit in
the amount of $900,274 as of December 31, 2002.
- 9 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Item 2.
Nine Months Ended December 31, 2002 Compared to
Nine Months Ended December 31, 2001
Sales - Net sales for the nine months ended December 31, 2002 were
$12,094,645 compared to $7,873,998 for the comparable nine months in
the prior fiscal year, an increase of $4,220,647. Net sales of
security products increased by $4,116,998 and other products
increased by $103,649. The increase in security sales resulted
primarily from increased demand for certain of the Company's
security products sold by the Company's subsidiary, USI ELECTRIC,
INC. The increase in other sales resulted from higher demand for
certain of the Company's products.
Net Income - The Company reported net income of $1,880,434 for the
nine months ended December 31, 2002 compared to $122,335 for the
corresponding nine months of the prior fiscal year. The increase in
net income resulted both from the Company's operating income from
higher sales and higher Joint Venture earnings from sales to non-
related parties.
Expenses - Research, selling, general and administrative expenses
increased by $806,553 from the comparable nine months in the prior
year, as a result of increased support of higher USI ELECTRIC, INC.
sales.
As a percentage of sales, research, selling, general and
administrative expenses were 26% for the nine months ended December
31, 2002 and 29% for the same period in the prior fiscal year. The
decrease in research, selling and administrative expense as a
percent of sales was due to higher sales volume and variable costs
which did not increase at the same rate as sales.
Interest Expense - The Company's interest expense was $113,310 for
the nine months ended December 31, 2002 compared to $156,218 for the
same period in 2001. The decrease in interest expense resulted from
both lower levels of borrowing from factor and interest rates.
- 10 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Three Months Ended December 31, 2002 Compared to
Three Months Ended December 31, 2001
Sales - Net sales for the three months ended December 31, 2002 were
$4,252,447 compared to $2,965,386 for the comparable three months in
the prior fiscal year, an increase of $1,287,061. Net sales of
security products increased by $1,255,683 and other products
increased by $31,378. The increase in security sales resulted
primarily from increased demand for certain of the Company's
security products sold by the Company's subsidiary, USI ELECTRIC,
INC. The increase in other sales resulted from higher demand for
certain of the Company's products.
Net Income - The Company reported net income of $673,365 for the
quarter ended December 31, 2002 compared to net income of $36,433
for the corresponding quarter of the prior fiscal year. The increase
in net income resulted both from the Company's operating income from
higher sales and higher Joint Venture earnings from sales to non-
related parties.
Expenses - Research, selling, general and administrative expenses
increased by $238,833 from the comparable three months in the prior
year, as a result of increased support of higher USI ELECTRIC, INC.
sales.
As a percentage of sales, research, selling, general and
administrative expenses were 26% for the three months ended December
31, 2002 and 29% for the same period in the prior fiscal year. The
decrease in research, selling and administrative expense as a
percent of sales was due to higher sales volume and variable costs
which did not increase at the same rate as sales.
Interest Expense - The Company's interest expense was $40,040 for
the quarter ended December 31, 2002 compared to $35,948 for the
comparable period in 2001. The increase in interest expense resulted
from higher levels of borrowing related to accounts receivable, due
from factor and inventory, partially offset by lower rates of
interest.
Financial Condition and Liquidity
Cash needs of the Company are currently met by funds generated from
operations and the Company's Factoring Agreement which supplies both
short-term borrowings and letters of credit to finance foreign
- 11 -
inventory purchases. The Company's maximum amount available under
the Factoring Agreement is currently $7,500,000. However, based on
specified percentages of the Company's accounts receivable and
inventory and letter of credit commitments, at December 31,
2002, the Company had $1,992,274 available under the Factoring
Agreement, of which $900,274 had been utilized in letter of credit
borrowings as of December 31, 2002. Any outstanding principal
balance due under the Factoring Agreement is payable upon demand.
The interest rate under the Factoring Agreement on the uncollected
factored accounts receivable and any additional borrowings is equal
to 1% in excess of the prime rate of interest charged by the
Company's lender, which was 5.25% at December 31, 2002. The
borrowings are collateralized by all the Company's accounts
receivable, inventory and a 1.5 acre parcel of land which is
adjacent to the Company's prior headquarters.
Operating activities used cash of $1,213,805 for the quarter ended
December 31, 2002. This was primarily due to an increase in
accounts receivable and due to factor of $1,281,670 and inventory of
$1,117,513 that was partially offset by an increase in accounts
payable and accrued expenses of $1,114,070. For the same period last
year, operating activities used cash of $69,068.
Investing activities provided cash of $1,028,314 in the current
quarter. The primary source was distributions from the Company's
Joint Venture.
Financing activities provided cash of $327,746. The primary
reason was the issuance of common stock for $250,000.
The Company believes that funds available under the Factoring
Agreement, Joint Venture distributions and its working capital
provide it with sufficient resources to meet its requirements for
liquidity and working capital in the ordinary course of its
business over the next twelve months.
Hong Kong Joint Venture - Net sales of the Hong Kong Joint
Venture for the nine months and three months ended December 31,
2002 were $17,395,366 and $5,667,352, respectively, compared to
$7,509,279 and $2,498,291, respectively, for the comparable nine
months and three months in the prior fiscal year. The increase
in sales was primarily due to increased sales of smoke alarms
to non-related customers.
- 12 -
Net income for the nine months and three months ended December
31, 2002 was $3,663,638 and $970,811, respectively, compared to
$1,012,681 and $264,108, respectively, in the comparable nine months
and three months last year. The increase in net income resulted
primarily from higher sales to non-related customers.
Cash needs of the Hong Kong Joint Venture are currently met by
funds generated from operations. During the nine months ended
December 31, 2002, working capital increased by $1,153,374 from
$3,844,654 on March 31, 2002 to $4,998,028 on December 31, 2002.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes have occurred in the quantitative and
qualitative market risk disclosures of the Company as presented
in the Company's Annual Report Form 10-K for the year ended March
31, 2002.
Item 4. CONTROLS AND PROCEDURES
Based on the evaluation of the Company's disclosure controls and
procedures by Stephen C. Knepper, the Company's Chief Executive
Officer, and Harvey B. Grossblatt, the Company's Chief Financial
Officer, as of a date within 90 days of the filing date of this
quarterly report, such officers have concluded that the Company's
disclosure controls and procedures are effective in ensuring that
information required to be disclosed by the Company in the
reports that it files or submits under the Securities and
Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported, within the time period specified by the
Securities and Exchange Commission's rules and forms.
There were no significant changes in the Company's internal
controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
- 13 -
PART II
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the nine months ended December 31, 2002, the Company
issued an aggregate of 71,462 shares of its Common Stock for
cash, in exchange for directors' services and in the satisfaction
of amounts payable at March 31, 2002 as follows. These shares
were issued pursuant to an exemption from registration from the
Securities Act of 1933 pursuant to Section 4(2) and/or Regulation
D thereunder.
Date of Number of Class of Cash Other
Issuance of Shares Persons Proceeds Consideration
05/07/02 10,000 Employee $ - 27,200(2)
06/28/02 31,334 Director $ 97,500 20,000(1)
06/28/02 3,488 Director $ - 12,000(2)
09/24/02 26,640 Director $152,500 10,000(1)
(1) Issued in lieu of annual Director's fees during the nine
months ended December 31, 2002.
(2) Issued in satisfaction of amounts accrued at March 31, 2002.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No.
3.1 Articles of Incorporation, as amended (incorporated by
reference to Exhibit 3.1 to the Company's Quarterly Report
on Form 10-Q for the period ended December 31, 1998, File
No. 0-7885)
3.2 Articles Supplementary, filed October 14, 2002
(incorporated by reference to Exhibit 3.1 to the Company's
Current Report on Form 8-K filed October 31, 2002, File
No. 0-7885)
3.3 Bylaws, as amended (incorporated by reference to Exhibit 3.3
to the Company's Quarterly Report on Form 10-Q for the period
ended September 30, 2002, File No. 0-7885)
- 14 -
10.1. Non-Qualified Stock Option Plan, 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, 1999, File No. 0-7885)
10.2 Hong Kong Joint Venture Agreement, as amended (confidential
treatment of Name requested and filed separately with the
Commission)(incorporated by reference to Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the year ended March
31, 1994, and Exhibit 10.3 to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 2001, File
No. 0-7885)
10.3 Amended Factoring Agreement with CIT Group (successor to
Congress Talcott, Inc.) dated November 14, 1999
(incorporated by reference to Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the year ended March 31, 2002,
File No. 0-7885)
10.4 Amendment to Factoring Agreement with CIT Group (incorporated
by reference to Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 2002,
File No. 0-7885)
10.5 Lease between Universal Security Instruments, Inc. and
National Instruments Company dated October 21, 1999 for
its office and warehouse located at 7-A Gwynns Mill Court,
Owings Mills, Maryland 21117 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended March 31, 2000, File No. 0-7885)
10.6 Employment Agreement dated April 1, 2002 between the Company
and Harvey B. Grossblatt (incorporated by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the year ended March 31, 2002, File No. 0-7885)
10.7 Amendment to Employment Agreement dated as of April 1, 2002
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 September 30, 2002, File
No. 0-7885)
99.1 Certification Required Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
99.2 February 14, 2003 Letter to Stockholders and Press Release*
(b) Reports on Form 8-K
None
*Filed herewith
- 15 -
UNIVERSAL SECURITY INSTRUMENTS, INC.
SIGNATURE
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.
Dated: February 14, 2003 Harvey Grossblatt
HARVEY GROSSBLATT
President, Chief Financial Officer
smb
10-Q.DEC
- 16 -
CERTIFICATION
I, Stephen C. Knepper, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of
Universal Security Instruments. Inc.;
2. Based on my knowledge, this Quarterly 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 Quarterly
Report;
3. Based on my knowledge, the financial statements, and
other financial information included in this Quarterly 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 Quarterly Report;
4. The Registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this Quarterly Report (the
"Evaluation Date"); and
c) presented in this Quarterly Report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
- 17 -
5. The Registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, 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 in the design or
operation of internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officers and I have
indicated in this Quarterly Report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: February 14, 2003 /s/ Stephen C. Knepper
Stephen C. Knepper
Chief Executive Officer
- 18 -
CERTIFICATION
I, Harvey 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 Quarterly 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 Quarterly
Report;
3. Based on my knowledge, the financial statements, and
other financial information included in this Quarterly 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 Quarterly Report;
4. The Registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this Quarterly Report (the
"Evaluation Date"); and
c) presented in this Quarterly Report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
- 19 -
5. The Registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, 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 in the design or
operation of internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officers and I have
indicated in this Quarterly Report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: February 14, 2003 /s/ Harvey Grossblatt
Harvey Grossblatt
Chief Financial Officer
- 20 -
Exhibit 99.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Universal Security
Instruments, Inc. (the "Company") on Form 10-Q for the period
ending December 31, 2002 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 this Form 10-Q fairly
presents, in all material respects, the financial
condition and result of the Company as of, and for,
the periods reflected therein.
Date: February 14, 2003 /s/ Stephen C. Knepper
Stephen C. Knepper
Chairman,
Chief Executive Officer
/s/ Harvey B. Grossblatt
Harvey B. Grossblatt
President,
Chief Financial Officer
Exhibit 99.2
February 13, 2003
Dear Partners/Shareholders:
It is my pleasure to share with you our results for the third quarter
ended December 31, 2002 - a very strong quarter indeed!
As the numbers indicate, we have continued to deliver on our stated
goal of growing revenues while staying efficient and substantially
building overall profitability. For the quarter, sales rose 43% to
$4,252,447 versus $2,965,386 a year ago. At the same time, earnings
accelerated to $673,365, or $0.61 per basic share, ($.55 per diluted
share), versus last year's $36,433, or $0.04 per basic share and
diluted share.
For the nine-month period, earnings have dramatically increased to
$1,880,434, or $1.77 per basic share, ($1.65 per diluted share), versus
last year's $122,335, or $0.13 per basic share and diluted share, and
a sales increase for the nine months of 54% to $12,094,645 versus
$7,873,998 for the same period a year ago.
Both Universal and our Joint Venture continued to increase worldwide
market share during the period. In addition, our new carbon monoxide
alarm is doing very well in a high-growth product segment, and we
expect to introduce additional models in 2003. We are very excited
about these new products and see them playing a leading role in
advancing our growth strategy into our new year and beyond.
When I was re-elected as your Chairman of the Board in the Fall of
2001, I pledged to you, my partners, that Universal's new management
team would be "intently focused on improving results at every level of
our Company."
While we are pleased with our path so far, our focus is squarely on the
future and the many opportunities we see on the horizon. I can assure
you - from Asia to Owings Mills - the Universal Security Instruments'
team is intently focused on growing our global businesses. We look
forward to reporting our fourth quarter and year-end results for the
period ended March 31, 2003.
As always, should you have any questions, please don't hesitate to
contact me.
Respectfully,
Stephen C. Knepper
Chairman
____________________________________________________________________
Statements contained in this document that are not historical facts are
forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Although UNIVERSAL SECURITY
INSTRUMENTS, INC. believes that the expectations reflected in such
forward-looking statements are reasonable, the forward-looking
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those projections.
7-A GWYNNS MILL COURT OWINGS MILLS, MARYLAND 21117-3586 U.S.A.
TELEPHONE DIRECT DIAL: (410) 363-3000, EXTENSION 235
FAX: (410) 363-2218 E-MAIL: [email protected]
Visit Us on the Web! www.universalsecurity.com
Exhibit 99.2
For Immediate Release
Contact: Harvey Grossblatt, President
Universal Security Instruments, Inc.
410-363-3000, Ext. 224
or
Don Hunt, Brian Edwards
Lambert, Edwards & Associates, Inc.
616-233-0500
Universal Security Instruments Announces Significantly Higher
Third-Quarter Sales & Earnings
Sales Grow 43%; Earnings Per Share Rise to $0.61 Vs. $0.04
OWINGS MILLS, MD, February 13, 2003: Universal Security Instruments,
Inc. (OTC-BB: USEC) today announced continued top and bottom-line
growth during its third quarter, posting significantly higher sales and
earnings for the period ended December 31, 2002. The Company cited
strong market share increases, successful introduction of new products
and continued growth at its Hong Kong joint venture.
The Owings Mills, MD-based designer and marketer of safety and security
equipment reported net earnings rose to $673,365, or $0.61 per basic
share ($0.55 per diluted share), and net sales rose 43% to $4,252,447,
compared with net earnings of $36,433, or $0.04 per basic and diluted
share, and net sales of $2,965,386 for last year's third quarter.
For the nine months ended December 31, 2002, net sales rose 54% to
$12,094,645, versus $7,873,998 for the same period last year. The
Company reported net earnings rose to $1,880,434, or $1.77 per basic
share ($1.65 per diluted share), compared to net earnings of $122,335,
or $0.13 per basic and diluted share, for the same period last year.
"We are very pleased with our results for the third quarter - one of
the best quarterly performances for Universal in our 33-year history.
During the past nine months we have continued to grow the top line
while staying efficient and building overall profitability," said Steve
Knepper, chairman of the board and chief executive officer of Universal
Security Instruments, Inc.
"Our success can be attributed to a number of factors, including
Universal's steadily increasing profile and positive reputation in the
marketplace, the introduction of new products, and a strong continued
contribution from our 50%-owned Hong Kong joint venture. The
competitive landscape for our smoke alarms and new carbon monoxide
alarms continues to favor our unique combination of value, reliability
and customer-focused support," Knepper added.
UNIVERSAL SECURITY INSTRUMENTS, INC., founded in 1969, is a
Maryland-based manufacturer and worldwide marketer of safety and
security products directly and through its 50%-owned Hong Kong joint
venture.
-- more --
7-A GWYNNS MILL COURT * OWINGS MILLS, MARYLAND 21117, USA
* DIRECT DIAL: (410) 363-3000
Visit us on the Web! www.universalsecurity.com
Universal/Page 2
UNIVERSAL SECURITY INSTRUMENTS, INC.
ANNOUNCES RESULTS FOR THE
THIRD QUARTER ENDED DECEMBER 31:
UNAUDITED
2002 2001
Sales $4,252,447 $2,965,386
Net income* 673,365 36,433
Income per share:
Basic .61 .04
Diluted .55 .04
Weighted average number of
common shares outstanding:
Basic 1,110,149 930,305
Diluted 1,226,243 949,963
RESULTS FOR THE NINE MONTHS ENDED DECEMBER 31:
UNAUDITED
2002 2001
Sales $12,094,645 $7,873,998
Net income* 1,880,434 122,335
Income per share:
Basic 1.77 .13
Diluted 1.65 .13
Weighted average number of
common shares outstanding:
Basic 1,059,708 918,282
Diluted 1,139,544 927,439
*Due to the tax benefit carryforward of prior years' operating losses,
no tax liability was incurred.
OTC:USEC
_________________________________________________
Statements contained in this press release that are not historical
facts are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Although UNIVERSAL
SECURITY INSTRUMENTS, INC. believes that the expectations reflected in
such forward-looking statements are reasonable; the forward-looking
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those projections.