What changed in this filing

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Item 1. Business

2021-07-08 compared with 2020-08-11 · 137 added, 138 removed, 24 unchanged (92% of the section changed)

Universal Security

Instruments, Inc.

Universal Security Instruments, Inc.

(“we”

or “the Company”) designs and markets a variety of popularly-priced safety

products consisting primarily of smoke alarms, carbon monoxide alarms and related products.

Most of our products require minimal

installation and are designed for easy installation by the consumer without professional assistance, and are sold through retail

We also market products to the electrical distribution trade through our wholly-owned subsidiary, USI Electric, Inc.

or “the Company”) designs and markets a variety of popularly-priced safety products consisting primarily

of smoke alarms, carbon monoxide alarms and related products.

Most of our products require minimal installation and are designed for easy

installation by the consumer without professional assistance, and are sold through retail stores.

We also market products to the electrical

distribution trade through our wholly-owned subsidiary, USI Electric, Inc.

(“USI Electric”).

The electrical distribution trade includes electrical and lighting distributors as well as manufactured

housing companies.

Products sold by USI Electric usually require professional installation.

In 1989 we formed Eyston

Company Limited (Eyston), a limited liability company under the laws of Hong Kong, as a 50% joint venture partner with a Hong Kong-based

partner, to manufacture various products in the Peoples Republic of China (the “Hong Kong Joint Venture”).

imports almost all of its products from the People’s Republic of China (PRC), and, until March 31, 2020, the Company

was a 50% owner of Eyston Company Limited, the Company’s Hong Kong Joint Venture, which manufactures almost all of the Company’s

products in the PRC.

The electrical distribution

trade includes electrical and lighting distributors as well as manufactured housing companies.

Products sold by USI Electric usually require

professional installation.

1989 we formed Eyston Company Limited (Eyston), a limited liability company under the laws of Hong Kong, as a 50% joint venture partner

with a Hong Kong-based partner, to manufacture various products in the Peoples Republic of China (the “Hong Kong Joint Venture”).

Effective, March 31, 2020 we sold our 50% interest in Eyston, however Eyston continues to be the Company’s principal supplier

of safety alarms.

The Company imports almost all of its other products from foreign suppliers.

In light of the shutdowns,

quarantines and other restrictions and delays in operations and travel caused by or related to COVID-19 in Hong Kong, the PRC and

the United States, the Company has experienced delays in shipping and receiving of products.

As the Company’s products are

sold primarily to the construction industry and do-it-yourself centers, restrictions and limitations imposed by the COVID-19 pandemic

have had a negative impact on the Company’s sales.

The Company is not yet able to quantify the full impact of the COVID-19

pandemic on its sales and financial results, but believes that the pandemic was a factor in significantly lower sales for the fourth

quarter of its fiscal year ended March 31, 2020 when compared to sales for the 2019 period.

As previously disclosed in a filing

of Form 8-K, this filing of Form 10-K originally due on June 29, 2020, was delayed by the effects related to the

COVID-19 pandemic.

Effective, March 31,

2020 we sold our 50% interest in the Hong Kong Joint Venture in exchange for $4,000,000.

The proceeds of the sale were used to

reduce our outstanding trade account payable balance owed to the Hong Kong Joint Venture.

Subsequent to March 31, 2020 Eyston will

continue to be the Company’s principal supplier of safety alarms and the Company will pay for these purchases upon evidence

of shipment from the factory.

We import all of our products from foreign suppliers.

For the fiscal year ended March 31, 2020, approximately

82.7% of our purchases were imported from Eyston.

Our sales for the year

ended March 31, 2020 were $14,803,024 compared to $17,588,040 for the year ended March 31, 2019.

We reported a net loss

of $5,813,891 in fiscal 2020 compared to a net loss of $1,347,986 in fiscal 2019, an increase in the net loss of $4,465,905 (331.3%).

The net loss is primarily due to the loss arising from the sale of the Company’s interest in the Hong Kong Joint Venture,

the Company’s interest in the loss from investment in the Hong Kong joint venture’s operations, and operating losses

from the Company’s domestic operations during the fiscal year ended March 31, 2020.

quarantines and other restrictions and delays in operations and travel caused by or related to COVID-19 in the PRC and the United States,

the Company has experienced delays in shipping and receiving of products.

As the Company’s products are sold primarily to the construction

industry and do-it-yourself centers, restrictions and limitations imposed by the COVID-19 pandemic have had an impact on the Company’s

sales We are not yet able to quantify the full impact of the COVID-19 pandemic on our sales and financial results, but we believe that

during the first half of calendar 2020 (our fourth quarter of fiscal 2020 and first quarter of fiscal 2021) sales were negatively impacted

by lower sales resulting from steps taken to combat the spread of COVID-19.

Sales in our second and third fiscal quarters ended September 30,

2020, and December 31, 2020 increased significantly when compared to sales for the comparable 2019 periods due to the Company’s

ability to fill orders from inventory for a large national retailer new customer, when the national retailer’s usual supplier was

unable to fill the orders due to delays caused by the pandemic.

Our sales growth was also due to sales of two products to another large

national retailer which purchased certain of our models as a 1,350 store test, which were completed in the fourth quarter of the fiscal

year ending March 31, 2021.

Our sales for the year ended

March 31, 2021 were $17,520,151 compared to $14,803,024 for the year ended March 31, 2020.

We reported net earnings of $268,343 in fiscal

2021 compared to a net loss of $5,813,891 in fiscal 2020, an increase in net earnings of $6,082,234 (104.6%).

The net earnings for the

fiscal year ended March 31, 2021 are attributed to increased sales and gross margins, and to the forgiveness of debt associated with the

Paycheck Protection Program loan under the Cares Act.

The net loss for the fiscal year ended March 31, 2020 is primarily due to the loss

arising from the sale of the Company’s interest in the Hong Kong Joint Venture, the Company’s interest in the loss from investment

in the Hong Kong joint venture’s operations, and operating losses from the Company’s domestic operations.

The Company was incorporated

in Maryland in 1969.

Our principal executive office is located at 11407 Cronhill Drive, Suite A, Owings Mills, Maryland 21117,

and our telephone number is 410-363-3000.

Our principal executive office is located at 11407 Cronhill Drive, Suite A, Owings Mills, Maryland 21117, and

our telephone number is 410-363-3000.

Information about us may be obtained from our website www.universalsecurity.com.

of our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, are available

free of charge on our website as soon as they are filed with the Securities and Exchange Commission (SEC) through a link to the

SEC’s EDGAR reporting system.

our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, are available free of

charge on our website as soon as they are filed with the Securities and Exchange Commission (SEC) through a link to the SEC’s EDGAR

reporting system.

Simply select the “Investor Relations”

menu item, and then click on the “SEC

Filings”

menu item, and then click on the “SEC Filings”

The SEC’s EDGAR reporting system can also be accessed directly at www.sec.gov .

Safety Products

We market a line of

residential smoke and carbon monoxide alarms under the trade names “UNIVERSAL”

We market a line of residential

smoke and carbon monoxide alarms under the trade names “UNIVERSAL”

and “USI Electric”

of which are manufactured by Eyston.

Our line of safety

alarms consists of units powered by replaceable batteries, ten year sealed batteries, or are 120 volt with battery backup.

replaceable battery products contain different types of batteries with different battery lives, and some include alarm silencers.

The smoke alarms marketed to the electrical distribution trade also include hearing impaired and heat alarms with a variety of

We also market door chimes, ventilation products, ground fault circuit interrupters (GFCI’s), and other electrical

both of which are manufactured

Our line of safety alarms

consists of units powered by replaceable batteries, ten year sealed batteries, or are 120 volt with battery backup.

Our replaceable battery

products contain different types of batteries with different battery lives, and some include alarm silencers.

The smoke alarms marketed

to the electrical distribution trade also include hearing impaired and heat alarms with a variety of features.

We also market door chimes,

ventilation products, ground fault circuit interrupters (GFCI’s), and other electrical devices.

Our wholly-owned subsidiary, USI Electric, Inc.,

2 unchanged sentences

Import Matters

We import all of our

As an importer, we are subject to numerous tariffs which vary depending on types of products and country of origin, changes

in economic and political conditions in the country of manufacture, potential trade restrictions, and currency fluctuations.

Substantially

all of our safety products are imported from the People’s Republic of China.

These products are currently subject to tariffs

ranging from ten to twenty-five percent.

We have attempted to

protect ourselves from fluctuations in currency exchange rates to the extent possible by negotiating commitments in U.S.

Our inventory purchases are also subject to delays in delivery due to problems with shipping and docking facilities, as well as

other problems associated with purchasing products abroad.

As previously discussed,

in light of the shutdowns, quarantines and other restrictions and delays in operations and travel caused by or related to COVID-19

in Hong Kong, the PRC and the United States, the Company has experienced delays in shipping and receiving of products.

We import all of our products.

As an importer, we are subject to numerous tariffs which vary depending on types of products and country of origin, changes in economic

and political conditions in the country of manufacture, potential trade restrictions, and currency fluctuations.

Substantially all of

our safety products are imported from the People’s Republic of China.

These products are currently subject to tariffs ranging from

ten to twenty-five percent.

We have attempted to protect

ourselves from fluctuations in currency exchange rates to the extent possible by negotiating commitments in U.S.

Our inventory

purchases are also subject to delays in delivery due to problems with shipping and docking facilities, as well as other problems associated

with purchasing products abroad.

As previously discussed, in

light of the shutdowns, quarantines and other restrictions and delays in operations and travel caused by or related to COVID-19 in Hong

Kong, the PRC and the United States, the Company has experienced delays in shipping and receiving of products.

Sales and Marketing;

We sell our products

to various customers, and our total sales market can be divided generally into two categories;

sales by the Company to retailers,

including wholesale distributors, chain, discount, television retailers and home center stores, catalog and mail order companies

and other distributors (“retailers”), and sales by our USI Electric subsidiary to the electrical distribution trade

(primarily electrical and lighting distributors and manufactured housing companies) and foreign customers.

Products marketed by

the Company have historically been retailed to “do-it-yourself”

We sell our products to various

customers, and our total sales market can be divided generally into two categories;

sales by the Company to retailers, including wholesale

distributors, chain, discount, television retailers and home center stores, catalog and mail order companies and other distributors (“retailers”),

and sales by our USI Electric subsidiary to the electrical distribution trade (primarily electrical and lighting distributors and manufactured

housing companies) and foreign customers.

Products marketed by the Company have historically been retailed to “do-it-yourself”

consumers by these retailers.

Products marketed by

our USI Electric subsidiary to the electrical distribution trade typically require professional installation.

We do not currently

market a significant portion of our products directly to end users.

A significant portion

of our sales are made by approximately 40 independent sales organizations, compensated by commission, which represents approximately

100 sales representatives, some of which have warehouses where USI Electric products are maintained for sale.

In addition, the

Company has established a national distribution system with eight regional stocking warehouses throughout the United States which

generally enables customers to receive their orders the next day without paying for overnight freight charges.

Our agreements with

these sales organizations are generally cancelable by either party upon 30 days’

We do not believe that the loss

of any one of these organizations would have a material adverse effect upon our business.

Sales are also made directly by the officers

and full-time employees of the Company and our USI Electric subsidiary, seven of whom have other responsibilities for the Company.

Sales outside the United States are made by our officers and through exporters, and amounted to less than five percent of total

net sales in fiscal years 2020 and 2019.

We also market our

products through our website and through our own sales catalogs and brochures, which are mailed directly to trade customers.

customers, in turn, may advertise our products in their own catalogs and brochures and in their ads in newspapers and other media.

We also exhibit and sell our products at various trade shows, including the annual National Hardware Show.

Our backlog of orders

as of March 31, 2020 was approximately $507,000.

Products marketed by our USI Electric subsidiary to the electrical distribution trade typically require

professional installation.

We do not currently market a significant portion of our products directly to end users.

A significant portion of our

sales are made by approximately 40 independent sales organizations, compensated by commission, which represents approximately 100 sales

representatives, some of which have warehouses where USI Electric products are maintained for sale.

In addition, the Company has established

a national distribution system with eight regional stocking warehouses throughout the United States which generally enables customers

to receive their orders the next day without paying for overnight freight charges.

Our agreements with these sales organizations are generally

cancelable by either party upon 30 days’

We do not believe that the loss of any one of these organizations would have a

material adverse effect upon our business.

Sales are also made directly by the officers and full-time employees of the Company and our

USI Electric subsidiary, seven of whom have other responsibilities for the Company.

Sales outside the United States are made by our officers

and through exporters, and amounted to less than five percent of total net sales in fiscal years 2021 and 2020.

We also market our products

through our website and through our own sales catalogs and brochures, which are mailed directly to trade customers.

Our customers, in

turn, may advertise our products in their own catalogs and brochures and in their ads in newspapers and other media.

We also exhibit and

sell our products at various trade shows, including the annual National Hardware Show.

Our backlog of orders as of

March 31, 2021 was approximately $3,905,000.

Our backlog as of March 31, 2020 was approximately $507,000.

This decrease

in backlog is primarily due to the timing of orders of our safety products.

The increase in backlog

is primarily due to delays in unloading of freight at California ports of entry caused by or related to COVID-19 issues.

Hong Kong Joint Venture

Through March 31, 2020 we held a fifty

percent interest in Eyston Company Limited, the Hong Kong Joint Venture, which has manufacturing facilities in the People’s

Republic of China, for the manufacturing of certain of our electronic and electrical products.

Effective, March 31, 2020 we sold

our fifty percent interest in the Hong Kong Joint Venture in exchange for $4,000,000.

The proceeds from the sale were used to

reduce our trade accounts payable due to the Hong Kong Joint Venture by $4,000,000.

In addition, the Company and the HKJV agreed

to convert $839,831 of trade accounts payable to an interest only note payable requiring monthly interest only payments.

2020 the Company and the HKJV formalized these terms into a note payable agreement with a maturity date of April 19, 2022.

to March 31, 2020 Eyston will continue to be the Company’s principal supplier of safety alarms and the Company will pay

for these purchases upon evidence of shipment from the factory.

During the fiscal years ended March 31, 2020 and 2019, 82.7% and

87.2%, respectively, of our total inventory purchases were made from Eyston.

Through March 31, 2020 we held a fifty percent

interest in Eyston Company Limited, the Hong Kong Joint Venture, which has manufacturing facilities in the People’s Republic of

China, for the manufacturing of certain of our electronic and electrical products.

Effective, March 31, 2020 we sold our fifty percent

interest in the Hong Kong Joint Venture in exchange for $4,000,000.

The proceeds from the sale were used to reduce our trade accounts

payable due to the Hong Kong Joint Venture by $4,000,000.

In addition, the Company and the HKJV agreed to convert $1,081,440 of trade

accounts payable to an interest only note payable requiring monthly interest only payments.

In April, 2020 the Company and the HKJV formalized

these terms into a note payable agreement with a maturity date of April 19, 2022.

Subsequent to March 31, 2020 Eyston will continue to

be the Company’s principal supplier of safety alarms and the Company will pay for these purchases upon evidence of shipment from

During the fiscal years ended March 31, 2021 and 2020, 77.6% and 82.7% of our total inventory purchases were made from Eyston,

respectively.

Other Suppliers

Certain private label

products are manufactured for us by other foreign suppliers.

Certain private label products

are manufactured for us by foreign suppliers.

We believe that our relationships with our suppliers are good.

loss of any of our suppliers would have a short-term adverse effect on our operations, but replacement sources for these other

suppliers could be developed.

In fiscal years 2020

and 2019, sales of safety products accounted for substantially all of our total sales.

In the sale of smoke alarms and carbon monoxide

alarms, we compete in all of our markets with First Alert and Walter Kidde Portable Equipment, Inc.

These companies have greater

financial resources and financial strength than we have.

However, we believe that our safety products compete favorably in the

market primarily on the basis of styling, features and pricing.

The safety industry in general involves

changing technology.

The success of our products may depend on our ability to improve and update our products in a timely manner

and to adapt to new technological advances.

The loss of any of our suppliers

would have a short-term adverse effect on our operations, but replacement sources for these other suppliers could be developed.

In fiscal years 2021 and 2020,

sales of safety products accounted for substantially all of our total sales.

In the sale of smoke alarms and carbon monoxide alarms, we

compete in all of our markets with First Alert and Walter Kidde Portable Equipment, Inc.

These companies have greater financial resources

and financial strength than we have.

However, we believe that our safety products compete favorably in the market primarily on the basis

of styling, features and pricing.

The safety industry in general involves changing

The success of our products may depend on our ability to improve and update our products in a timely manner and to adapt to

new technological advances.

As of March 31, 2021,

2020, we had thirteen employees, nine of whom are engaged in administration and sales, and the balance of whom are engaged in product

we had thirteen employees, nine of whom are engaged in administration and sales, and the balance of whom are engaged in product development.

Our employees are not unionized, and we believe that our relations with our employees are satisfactory.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business