UNIVERSAL SECURITY INSTRUMENTS INC

Previous wording

We are in the business of marketing and distributing safety and security products. Our financial statements detail our sales and other operational results for the three-month periods ended June 30, 2024, and 2023.

Current wording

We are in the business of marketing and distributing safety and security products. Our financial statements detail our sales and other operational results for the three and six-month periods ended September 30, 2024, and 2023.

Previous wording

Changes in international trade duties and other aspects of international trade policy, both in the U.S. and abroad, could materially impact the cost of our products. All of our products are imported from the Peoples Republic of China (PRC). To date, only certain of our products such as Carbon Monoxide and Photoelectric alarms, and wiring devices, have been subjected to tariffs of 25%. We are monitoring these developments and will determine our strategies as additional information becomes available. Any increase in tariffs that is not offset by an increase in our sales prices could have an adverse effect on our business, financial position, results of operations or cash flows.

Current wording

Changes in international trade duties and other aspects of international trade policy, both in the U.S. and abroad, could materially impact the cost of our products. All of our products are imported from the Peoples Republic of China (PRC). To date, only certain of our products such as Carbon Monoxide and Photoelectric alarms, and certain wiring devices, have been subjected to tariffs of 25%. We are monitoring these developments and will determine our strategies as additional information becomes available. Any increase in tariffs that is not offset by an increase in our sales prices could have an adverse effect on our business, financial position, results of operations or cash flows.

Previous wording

Expenses. Selling, general and administrative expenses were $1,397,421 for the three months ended June 30, 2024, and $1,422,939 for the comparable three months in the prior year. As a percentage of net sales, these expenses increased to 30.4% for the three-month period ended June 30, 2024, from 21.2% for the 2023 period. These expenses increased as a percentage of net sales since selling, general, and administrative expenses do not fluctuate in direct proportion to sales.

Current wording

Expenses. Selling, general and administrative expenses were $1,209,352 for the three months ended September 30, 2024, compared to $1,334,351 for the comparable three months in the prior year. As a percentage of net sales, these expenses decreased to 16.8% for the three-month period ended September 30, 2024, from 35.9% for the 2023 period. These expenses decreased as a percentage of net sales principally since selling, general, and administrative expenses do not increase or decrease in direct proportion to changes in sales. These expenses decreased as a dollar amount principally due to the timing of expenditures related to efforts in the current quarter and the comparable quarter of the prior year to pursue strategic alternatives and merger activities.

Previous wording

Engineering and Product Development. Engineering and product development expenses were $87,601 for the three-month period ended June 30, 2024, compared to $64,963 for the comparable quarter of the prior year.

Current wording

Engineering and product development expenses were $110,371 for the three-month period ended September 30, 2024, and $131,415 for the comparable quarter of the prior year, a $21,044 (16.0%) decrease. These expenses decreased primarily due to a reduction in product development costs.

Previous wording

Interest Expense. Our interest expense was $44,888 for the quarter ended June 30, 2024, compared to interest expense of $50,496 for the quarter ended June 30, 2023. Interest expense is dependent upon the total amounts borrowed from the Factor and interest rates during the period as compared to the corresponding period of the prior year.

Current wording

Interest Expense. Our interest expense was $89,642 for the quarter ended September 30, 2024, compared to interest expense of $33,509 for the quarter ended September 30, 2023. Interest expense is dependent upon the total amounts borrowed from the Factor and changes in interest rates during the period as compared to the corresponding period of the prior year.

Previous wording

Net (Loss) Income. We reported a net loss of $442,206 for the quarter ended June 30, 2024, compared to a net income of $165,130 for the corresponding quarter of the prior fiscal year, a $607,336 (367.8%) decrease in net income. The primary reason for the decrease in the net income is the Company’s inability to purchase a sufficient supply of components to allow the Company to fulfil orders during the three months ended June 30, 2024, resulting in lower sales and lower gross margins as discussed above.

Current wording

Net Income (Loss). We reported net income of $576,978 for the quarter ended September 30, 2024, compared to a net loss of $186,425 for the corresponding quarter of the prior fiscal year, a $763,403 (409.5%) increase in net income. Net income increased principally due to the timing of orders to a large retailer as discussed above.

Previous wording

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 23.7% and 25.5% of sales for the quarters ended June 30, 2024, and 2023, respectively. Gross margins were negatively impacted in the periods ended June 30, 2024, and 2023 principally due to the mix of products sold and higher ocean freight costs.

Current wording

Gross Profit Margin. The gross profit margin is calculated as net sales less cost of goods sold expressed as a percentage of net sales. The Company’s gross profit margin was 26.1% for the period ended September 30, 2024, and 29.0% for the period ended September 30, 2023. Gross margins for the six-month period ended September 30, 2024, decreased principally due to an increase in the allowance for excess and obsolete inventory recorded during the period ended September 30, 2024. Gross margins are also impacted by variations in the mix of products sold and due to continued increases in the cost of certain electronic components.

Previous wording

Operating activities used cash of $1,198,108 for the three months ended June 30, 2024. This was primarily due to an increase in inventories, prepaid expenses and other of $260,271, a decrease in accounts payable and accrued liabilities of $852,240, and a net loss of $442,206, and offset by a decrease in accounts receivable and amount due from factor of $354,990. Operating activities provided cash of $178,366 for the three months ended June 30, 2023. This was primarily due to a decrease in inventories, prepaid expenses and other of $1,070,043, and net income of $165,130, and offset by an increase in accounts receivable and amount due from factor of $1,005,999, and a decrease in accounts payable and accrued expenses of $54,123.

Current wording

Operating activities used cash of $3,278,163 for the six months ended September 30, 2024. This was primarily due to an increase in accounts receivable and amount due from factor of $3,150,214, and an increase in inventories and prepaid expenses of $1,154,669, and partially offset by an increase in accounts payable and accrued expenses of $888,890 and net income of $134,772. Operating activities provided cash of $650,519 for the six months ended September 30, 2023. This was primarily due to a decrease in accounts receivable and amount due from factor of $534,490, and an increase in accounts payable and accrued expenses and of $1,239,275, and partially offset by an increase in inventories, prepaid expenses of $1,105,053 and a net loss of $21,295.

Previous wording

There were no investing activities for the three months ended June 30, 2024, or 2023.

Current wording

There were no investing activities for the six months ended September 30, 2024, or 2023.

Previous wording

Financing activities provided cash of $1,454,566 during the three months ended June 30, 2024, which is comprised of borrowings net of advances from the factor. Financing activities used cash of $89,051 during the three months ended June 30, 2023, which is comprised of advances net of borrowings from the factor.

Current wording

Financing activities provided cash of $3,447,281 during the six months ended September 30, 2024, which is comprised of borrowings net of repayments to the factor. Financing activities used cash of $547,203 during the six months ended September 30, 2023, which is comprised of repayments net of borrowings from the factor.