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 June 30, 2000
( ) 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 (1) 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
August 9, 2000 Common Stock, $.01 par value 912,270
UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
INDEX
Part I - FINANCIAL INFORMATION
Item l. Financial Statements
Consolidated balance sheets at June 30, 2000 and March
31, 2000
Consolidated statements of operations for the three
months ended June 30, 2000 and 1999
Consolidated statements of cash flows for the three
months ended June 30, 2000 and 1999
Notes to consolidated financial statements
Item 2. Management's discussion and analysis of results
of operations and financial condition
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
ASSETS
June 30, 2000 March 31, 2000
<S> <C> <C>
CURRENT ASSETS
Cash $ 106,206 $ 92,017
Accounts receivable:
Trade (less allowance for
doubtful accounts of $100,000
at June 30, 2000 and
March 31, 2000) 1,291,093 595,880
Officers and employees 3,250 4,845
1,294,343 600,725
Inventories:
Finished goods 2,322,881 1,912,987
Raw materials-foreign locations 3,962 25,071
2,326,843 1,938,058
Prepaid expenses 99,288 91,754
TOTAL CURRENT ASSETS 3,826,680 2,722,554
INVESTMENT IN JOINT VENTURE 2,504,187 2,377,766
PROPERTY, PLANT AND EQUIPMENT - NET 355,156 363,920
OTHER ASSETS 12,305 12,305
TOTAL ASSETS $6,698,328 $5,476,545
See notes to consolidated financial statements.
</TABLE>
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2000 March 31, 2000
<S> <C> <C>
CURRENT LIABILITIES
Short-term borrowings $ 1,735,674 $ 817,714
Accounts payable 674,615 399,100
Accrued liabilities 121,125 121,497
Current obligations under
capital lease 15,730 15,730
TOTAL CURRENT LIABILITIES 2,547,144 1,354,041
LONG-TERM OBLIGATIONS UNDER
CAPITAL LEASE 56,467 60,260
SHAREHOLDERS' EQUITY
Common stock, $.01 par value
per share; authorized
20,000,000 shares; issued
912,270 shares at June 30,
2000 and March 31, 2000 9,123 9,123
Additional paid-in capital 10,533,310 10,533,310
Retained earnings (deficit) (6,447,716) (6,480,189)
TOTAL SHAREHOLDERS' EQUITY 4,094,717 4,062,244
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 6,698,328 $ 5,476,545
See notes to consolidated financial statements.
</TABLE>
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
For the Three Months Ended
June 30, 2000 June 30, 1999
<S> <C> <C>
Net sales $2,051,116 $2,058,352
Cost of goods sold 1,490,720 1,587,036
GROSS PROFIT 560,396 471,316
Research and development expense 50,559 64,090
Selling, general and administrative
expense 563,323 608,557
Operating (loss) (53,486) (201,331)
Other income (expense):
Interest income 233 987
Interest expense (40,695) (48,914)
Gain on sale of building 804,861
Other (13,946)
(40,462) 742,988
(LOSS) EARNINGS BEFORE EQUITY
IN EARNINGS OF JOINT VENTURE (93,948) 541,657
Equity in earnings of joint venture 126,421 109,212
NET EARNINGS $ 32,473 $ 650,869
Per common share amounts:
Basic $ .04 $ .73
Diluted $ .03 $ .67
Weighted average number of common
shares outstanding
Basic 912,270 892,350
Diluted 959,466 965,027
See notes to consolidated financial statements.
</TABLE>
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
For the Three Months Ended
June 30, 2000 June 30, 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 32,473 $ 650,869
Adjustments to reconcile net
earnings to net cash (used in)
provided by operating activities:
Depreciation and amortization 12,928 8,807
Undistributed earnings of
joint venture (126,421) (109,212)
Gain on sale of building - (804,861)
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable (693,618) (676,067)
(Increase) in inventories and
prepaid expenses (396,319) (361,494)
Increase (decrease) in accounts payable
and accrued expenses 275,143 423,581
NET CASH USED IN
OPERATING ACTIVITIES (895,814) (868,377)
INVESTING ACTIVITIES
Proceeds from sale of building - 2,079,785
Property, plant and equipment (4,164) (1,040)
NET CASH (USED IN) PROVIDED
BY INVESTING ACTIVITIES (4,164) 2,078,745
FINANCING ACTIVITIES
Net borrowings (repayment) of short-term debt 917,960 59,152
Principal payments on long-term debt (3,793) -
Debt related to assets held for sale - (1,246,973)
Issuance of common stock - 10,415
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 914,167 (1,177,406)
INCREASE IN CASH 14,189 32,962
Cash at beginning of period 92,017 193,107
CASH AT END OF PERIOD $ 106,206 $ 226,069
Supplemental information:
Interest paid $ 40,695 $ 48,914
Income taxes paid - -
See notes to consolidated financial statements.
</TABLE>
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Statement of Management - The financial information included herein is
unaudited and does not include all disclosures normally included in
financial statements presented in accordance with generally accepted
accounting principles. The interim financial information should be read in
connection with the financial statements and related notes in the Company's
annual report on Form 10-K for the year ended March 31, 2000. The results
for the interim period are not necessarily indicative of the results
expected for the year. The accompanying interim information reflects all
adjustments (consisting of normal recurring adjustments), which are, in the
opinion of management, necessary for a fair statement of the results for
the interim periods.
Income Taxes - No income tax expense has been provided for the quarter
ended June 30, 2000 as a result of the carryforward of prior years'
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 income statement information of the Hong Kong joint venture for
the quarters ended June 30, 2000 and 1999:
<TABLE>
2000 1999
<S> <C> <C>
Net sales $1,981,215 $1,774,875
Gross profit 557,073 521,145
Net income 252,842 218,425
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Three Months Ended June 30, 2000 Compared to
Three Months Ended June 30, 1999
Sales - Net sales for the three months ended June 30, 2000 were
$2,051,116 compared to $2,058,352 for the comparable three months
in the prior fiscal year, a decrease of $7,236. Net sales of
security products decreased by $18,926 as compared to the quarter
ended June 30, 1999. Net sales of other products increased by
$11,690, as compared to the quarter ended June 30, 1999.
Net Income - The Company reported a net profit of $32,473 for the
quarter ended June 30, 2000 compared to net profit of $650,869
for the corresponding quarter of the prior fiscal year. Included
in the June 30, 1999 results was a gain of $804,861 due to the
sale of the Company's headquarters facility. After deducting this
gain, the net loss would have been $153,992. The primary reason
for the decrease in losses was higher gross margins.
Expenses - Research, selling, general and administrative expenses
decreased by $58,765 from the comparable three months in the
prior year. As a percentage of sales, research, selling, general
and administrative expenses were 30% for the three months ended
June 30, 2000 and 33% for the same period in the last fiscal
year. The decrease in expenses was mainly due to lower operating
costs associated with the Company's move to its new
headquarters.
Interest Expense and Income - The Company's interest expense, net
of interest income, decreased from $47,927 for the quarter ended
June 30, 1999 to $40,462 for the quarter ended June 30, 2000. The
lower interest expenses resulted from lower levels of borrowing.
Financial Condition and Liquidity - Cash needs of the Company are
currently met by funds generated from operations and the
Company's line of credit with a financial institution, which
supplies both short-term borrowings and letters of credit to
finance foreign inventory purchases. The Company's maximum bank
line of credit is currently the lower of $7,500,000 or specified
percentages of the Company's accounts receivable and inventory.
Approximately $1,761,633 has been utilized in letter of credit
commitments and short-term borrowings as of June 30, 2000. As of
June 30, 2000, the amount available for additional borrowings
under the line was approximately $240,000 based on the specified
percentages.
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The outstanding principal balance of the revolving credit line is
payable upon demand. The interest rate on the revolving credit
line is equal to 1-1/2% in excess of the prime rate of interest
charged by the Company's lender. The loan is collateralized by
the Company's accounts receivable, inventory and a 1.5 acre
parcel of the Company's real estate.
Operating activities used cash of $895,814 for the quarter ended
June 30, 2000. This was primarily due to an increase in accounts
receivable of $693,618, increase in inventories and prepaid
expenses of $396,319, partially offset by an increase in accounts
payable and accrued expenses of $275,143. For the same period
last year, operating activities used cash of $868,377.
Investing activities used cash of $4,164 in the current quarter.
For the same period last year, investing activities provided cash
of $2,078,745. This resulted from the proceeds of the sale of the
building.
Financing activities provided cash of $914,167, primarily due to
the increase of short-term debt of $917,960. For the same period
last year, financing activities used cash of $1,177,406.
Accounts receivable increased due to the addition of a different
customer base which requires extended dating terms.
The Company believes that its line of credit 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 joint venture for the
three months ended June 30, 2000 were $1,981,215 compared to
$1,774,875 for the comparable three months in the prior fiscal
year. The increase in sales was primarily due to increased sales
of smoke alarms.
Net income was $252,842 for the quarter ended June 30, 2000
compared to $218,425 in the comparable quarter last year. The
increase in net income resulted 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 quarter ended June
30, 2000, working capital increased by $480,863 from $2,432,197
on March 31, 2000 to $2,913,060 on June 30, 2000. During the
quarter ended June 30, 1999, working capital increased by
$726,005 from $2,069,790 on March 31, 1999 to $2,795,795 on June
30, 1999.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
PART II
Item 6. Exhibits and Reports on Form 8-K
None.
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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: August 9,2000 Harvey Grossblatt
HARVEY GROSSBLATT
President, Chief Accounting Officer
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