3 unchanged sentences
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, including Risk Factors discussed in earlier filings, and other risks could affect our financial performance and could cause our actual results for future periods to differ materially from those anticipated or projected.
−Removed: 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.
−Removed: We are in the business of marketing and distributing safety and security products which are primarily manufactured in the PRC.
+Added: We do not undertake and specifically disclaim any obligation to update any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
+Added: We are in the business of marketing and distributing safety and security products which are primarily manufactured in the Peoples Republic of China (PRC).
Our consolidated financial statements detail our sales and other operational results.
Accordingly, the following discussion and analysis of the fiscal years ended March 31, 2023, and 2022 relate to the operational results of the Company and its consolidated subsidiaries.
−Removed: In light of shutdowns, quarantines and other restrictions and delays in operations 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.
−Removed: We are not yet able to quantify the full impact of the COVID-19 pandemic on our sales and financial results.
−Removed: While sales increased when compared to sales for the comparable 2021 period, delivery schedules have been delayed and freight costs have increased significantly.
−Removed: Our sales growth has been due primarily to increased sales to electrical distributors reflecting increased housing demand and increased retail sales to large national retailers.
+Added: In light of shutdowns, quarantines and other restrictions and delays in operations caused by or related to COVID-19 in the PRC and the United States, the Company experienced delays in shipping and receiving of products during the fiscal year ended March 31, 2022, and continues to experience shortages of critical components for manufacturing of our products through and subsequent to March 31, 2023.
+Added: Other than as reflected in our financial statements, we are not yet able to quantify the full impact of the COVID-19 pandemic on our sales and financial results.
+Added: Sales during our fiscal year ended March 31, 2023, increased when compared to sales for the comparable 2022 period, primarily due to less delays in unloading freight at California ports of entry thereby improving delivery schedules.
+Added: However, domestic freight costs have increased.
+Added: Our sales growth has been due primarily to increased retail sales to large national retailers.
Our overall sales are primarily dependent upon the strength of the U.S.
1 unchanged sentence
As stated elsewhere in this report, our USI Electric subsidiary markets our products to the electrical distribution trade (primarily electrical and lighting distributors and manufactured housing companies);
−Removed: every downturn in new home construction and new home sales negatively impacts sales by our USI Electric subsidiary.
+Added: conditions that impact new home construction and new home sales directly impacts sales by our USI Electric subsidiary.
Our operating results for the fiscal years ended March 31, 2023, and 2022 continue to be dependent upon the economic conditions of the U.S.
4 unchanged sentences
In fiscal year 2023, our net sales were $22,178,873 compared to sales in the prior year of $19,549,785, an increase of $2,629,088 (13.4%).
−Removed: The increase in sales was primarily due to increased sales to new retail customers reflecting demand attributable to disruptions in the supply chain of those retail customers caused by or related to COVID 19 issues.
+Added: The increase in sales was primarily due to increased sales to existing retail customers.
Gross Profit.
1 unchanged sentence
Our gross profit percentage for the fiscal year ended March 31, 2023, was 28.6% compared to 30.9% in fiscal 2022.
−Removed: The decrease in 2022 gross margin is attributed to the increase in freight and demurrage charges caused by global supply chain problems.
+Added: The decrease in 2023 gross margin is attributed to variations in the mix of products sold as certain products are subject to tariff charges that directly impact gross margin.
Selling, General and Administrative Expense.
−Removed: Selling, general and administrative expenses increased to $5,524,343 in fiscal 2022 from $5,034,380 in fiscal 2021.
+Added: Selling, general and administrative expenses decreased to $4,974,453 in fiscal 2023 from $5,524,343 in fiscal 2022.
As a percentage of net sales, these expenses were 22.4% for the fiscal year ended March 31, 2023, and 28.3% for the fiscal year ended March 31, 2022.
−Removed: These expenses decreased as a percentage of net sales as they do not increase in direct proportion to increases in sales.
−Removed: These expenses increased as a dollar amount due primarily due to increases in legal and consulting fees associated with a proposed Merger.
−Removed: Research and Development.
−Removed: Research and development expense for the fiscal year ended March 31, 2022, was $438,200.
−Removed: Research and development expense for the fiscal year ended March 31, 2021, was $471,545.
−Removed: The decrease in overall research and development expense for the 2022 period compared to the 2021 period was due to decreased independent testing of products.
+Added: These expenses decreased as a percentage of net sales as they do not change in direct proportion to increases in sales.
+Added: These expenses decreased as a dollar amount due primarily due to decreases in salaries and wages which decreased by approximately $181,000 resulting from the federal employee retention credit program, and legal and consulting fees associated with the terminated proposed Merger.
+Added: Engineering and Product Development.
+Added: Engineering and product development expense for the fiscal year ended March 31, 2023, was $402,692.
+Added: Engineering and product development expense for the fiscal year ended March 31, 2022, was $438,200.
+Added: The decrease in overall engineering and product development expense for the 2023 period compared to the 2022 period was due to reduced payroll expenditures and decreased independent testing of products.
Interest Expense (Net).
For the fiscal years ended March 31, 2023, and 2022, the Company incurred net interest expense of $237,686 and $147,840, respectively, related to borrowing costs associated with interest paid on amounts borrowed from our factor and on extended trade payables due to Eyston.
−Removed: The increase in interest expense resulted from increased borrowing from our factor during the fiscal year ended March 31, 2022, to fund inventory purchases and operating cash requirements.
+Added: The increase in interest expense resulted primarily from increases in interest rates on borrowing from our factor during the fiscal year ended March 31, 2023, to fund inventory purchases and operating cash requirements.
Income Taxes.
2 unchanged sentences
Accordingly, income taxes or deferred income tax benefits indicated by the provision for income taxes as shown on the Consolidated Statements of Operations for the fiscal years ended March 31, 2023, and 2022 varies from the expected statutory rate.
−Removed: Footnote F to the financial statements provides a reconciliation of the amount of tax that would be expected at statutory rates and the amount of tax expense or benefit provided at the effective rate of tax for each fiscal period.
−Removed: Net (Loss) Income.
−Removed: We reported a net loss of $78,150 for the fiscal year 2022, compared to net income of $268,343 for fiscal 2021, a decrease of $346,493 (129.1%) in net income.
−Removed: The net loss for the fiscal year ended March 31, 2022, is attributed to decreased gross margins arising from increases in freight, customs, and duty expenditures.
−Removed: In addition, the Company has incurred increased legal and consulting expense associated with a proposed Merger.
−Removed: Also, contributing to net income for the fiscal year ended March 31, 2021, is the forgiveness of $221,400 of debt related to the Paycheck Protection Program under the CARES Act.
+Added: Footnote E to the financial statements provides a reconciliation of the amount of tax that would be expected at statutory rates and the amount of tax expense or benefit provided at the effective rate of tax for each fiscal period.
+Added: Net Income (Loss).
+Added: We reported net income of $720,411 for the fiscal year 2023, compared to a net loss of $78,150 for fiscal 2022, an increase of $798,561 (1,021.8%) in net income.
+Added: The increase in net income for the fiscal year ended March 31, 2023, is primarily due to increases in sales to retail as previously discussed above and to decreased expenditures related to a terminated proposed Merger and payroll expenditures as compared to the prior fiscal year.
+Added: The net loss for the fiscal year ended March 31, 2022, is attributed to increased legal and consulting expense associated with the terminated proposed Merger.
Financial Condition, Liquidity and Capital Resources
−Removed: The Company reported a net loss of $78,150 and net income of $268,343 for the years ended March 31, 2022 and 2021, respectively.
−Removed: As of March 31, 2022, working capital (computed as the excess of current assets over current liabilities) decreased by $1,112,654 from $5,564,601 on March 31, 2021, to $4,451,947 on March 31, 2022.
+Added: The Company reported net income of $720,411, and a net loss of $78,150 for the years ended March 31, 2023, and 2022, respectively.
+Added: As of March 31, 2023, working capital (computed as the excess of current assets over current liabilities) increased by $724,528 from $4,451,947 on March 31, 2022, to $5,176,475 on March 31, 2023.
+Added: Our operating activities provided cash of $1,491,943 for the year ended March 31, 2023.
+Added: Operating activities provided cash principally from a decrease in inventories of $2,165,429, net income of $720,411, and decreases in accounts receivable and amounts due from factor of $425,165.
+Added: Operating activities used cash principally due to repayment of accounts payable and accrued expenses of $1,918,493.
Our operating activities used cash of $1,860,051 for the year ended March 31, 2022.
Operating activities used cash principally to increase trade accounts receivable and amounts due from factor of $1,506,650, to increase inventories by $1,977,868, a net loss of $78,150, and is partially offset by an increase in accounts payable and accrued expenses of $1,669,566, and a decrease in prepaid expenses of $95,357.
−Removed: Our operating activities provided cash of $1,388,172 for the year ended March 31, 2021.
−Removed: Operating activities provided cash principally from a decrease in inventories of $942,766, an increase in accounts payable and accrued expenses of $751,252, net income of $268,343, plus non-cash depreciation of an operating lease asset of $158,576, and an increase in the allowance for doubtful accounts receivable of $100,000.
−Removed: Operating activities used cash principally from an increase in prepaid expenses of $223,554, a decrease in the operating lease liability of $158,576, an increase in accounts receivable and amounts due from factor of $236,930, less non-cash forgiveness of $221,400 from the Paycheck Protection Program Loan under the CARES Act.
Our investing activities did not provide or use cash during the fiscal years ended March 31, 2023, or 2022.
−Removed: Financing activities provided cash of $2,138,182 reflecting the increase in net borrowing from the Factor.
−Removed: Financing activities used cash of $1,321,362 during the fiscal year ended March 31, 2021, resulting primarily from the net repayment of amounts due to our Factor.
+Added: Financing activities used cash of $1,779,176 reflecting the decrease in net borrowing from the Factor of $697,736 and the repayment of the Note Payable to Eyston in the amount of $1,081,440 during the fiscal year ended March 31, 2023.
+Added: During the fiscal year ended March 31, 2022, financing activities provided cash of $2,138,182 reflecting the increase in net borrowing from the Factor.
Our overall sales are primarily dependent upon the strength of the U.S.
4 unchanged sentences
housing market.
−Removed: Management believes that with an improved housing market and sales of our sealed products, the Company will improve profitability.
−Removed: Management expects our product offerings including sealed battery alarm and ground fault circuit interrupter products will compete on price and functionality with similar products offered by our larger competitors.
+Added: Management believes that with an improved housing market and sales of our sealed products, the Company will continue to improve profitability.
+Added: Management expects our product offerings, including sealed battery alarm and ground fault circuit interrupter products, will compete in price and functionality with similar products offered by our larger competitors.
While we believe there will be market acceptance of our products, we cannot be assured of this.
−Removed: Should our products not achieve the level of acceptance we anticipate, this could have a significant impact on our future operations, and our sales may decline, potentially impacting our ability to continue operating in our current fashion.
+Added: Should our products not achieve the level of acceptance we anticipate, this could have a significant effect on our future operations, and our sales may decline, affecting our ability to continue operating in our current fashion.
Our short-term borrowings to finance operations, trade accounts receivable, and foreign inventory purchases are provided pursuant to the terms of our Factoring Agreement with Merchant Factors Corporation (Merchant or Factor).
2 unchanged sentences
The unused availability of this facility totaled approximately $852,000 on March 31, 2023.
−Removed: The Company has a history of sales that are insufficient to generate profitable operations and has limited sources of financing.
−Removed: Management’s plan in response to these conditions continues to be to increase sales resulting from the delivery of the Company’s line of sealed battery ionization smoke alarms, carbon monoxide products, and ground fault circuit interrupters.
−Removed: In addition, the Company has a short-term note payable due to its principal supplier (Eyston Company Ltd.) that requires monthly payments beginning April, 2022 of $100,000 per month and until the principal balance of approximately $1,081,000 is repaid.
−Removed: The Company has a long history of working closely with Eyston and believes that forbearance or extension of the payment terms of the short-term note payable can be achieved if required to meet short-term cash flow requirements.
−Removed: Further, the Company’s factor has withheld financing on approximately $560,000 of the Company’s accounts receivable subject to resolution of delivery disputes with a major customer.
−Removed: The resolution of these items has been ongoing and subsequent to March 31, 2022, the customer has been making payments as proof of delivery is confirmed.
−Removed: The Company expects that all amounts in dispute will be resolved satisfactorily and that availability of approximately $560,000 in operating cash flow will become available under the factoring agreement subsequent to March 31, 2022.
−Removed: Finally, the Company has filed requests for refunds of customs payments with US Customs and Border Protection for approximately $300,000 (including interest expected) for overpayments of duty.
−Removed: The Company expects this refund to be available during the second quarter of fiscal year 2023.
−Removed: The Company has seen positive results on this plan as reflected by increased sales of its product offerings.
−Removed: Management expects sales growth to continue going forward.
−Removed: Though no assurances can be given, if management’s plan continues to be successful over the next twelve months, the Company anticipates that it should be able to meet its cash needs for the next twelve months following the issuance date of this report.
−Removed: Cash flows and credit availability is expected to be adequate to fund operations for one year from the issuance date of this report.
Related Party Transactions
23 unchanged sentences
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.
−Removed: After a review of projected taxable income and the components of the deferred tax asset in accordance with applicable accounting guidance it was determined that it is more likely than not that the tax benefits associated with the remaining components of the deferred tax assets will not be realized.
−Removed: This determination was made based on the Company’s history of losses from operations and the uncertainty as to whether the Company will generate sufficient taxable income to use the deferred tax assets prior to their expiration.
+Added: After a review of projected taxable income, the components of the deferred tax asset, and the current global economic conditions including unresolved supply chain issues related to the acquisition of electronic microchips, it was determined that it is more likely than not that the tax benefits associated with the remaining components of the deferred tax assets will not be realized.
+Added: This determination was made based on the Company’s prior history of losses from operations and the uncertainty as to whether the Company will generate sufficient taxable income to use the deferred tax assets prior to their expiration.
Accordingly, a valuation allowance was established to fully offset the value of the deferred tax assets.
9 unchanged sentences
Generally, the Company does not grant extended payment terms.
−Removed: Shipping and handling costs associated with outbound freight, after control over a product has transferred to a customer, are accounted for as a fulfillment cost and are recorded in selling, general and administrative expense.
+Added: Shipping and handling costs associated with outbound freight, after control over a product has transferred to a customer, are accounted for as a cost of completing the sale and are recorded in selling, general and administrative expense.
The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for products sold.
10 unchanged sentences
The Company is primarily a distributor of safety products for use in home and business under both its trade names and private labels for other companies.
−Removed: The Company had no customers in the fiscal year that ended March 31, 2022, that represented greater than 10% of the Company’s net sales.
−Removed: The Company had one customer in the fiscal year that ended March 31, 2022, that represented 13.6% of the Company’s accounts receivable on March 31, 2022.
−Removed: The Company had a different customer during the fiscal year ended March 31, 2021 that represented 21.9% of the Company’s net sales.
+Added: The Company had one customer during the fiscal year ended March 31, 2023, that represented 18.2% of the Company’s net sales, and no customers in the fiscal year that ended March 31, 2022, that represented greater than 10% of the Company’s net sales.
+Added: The Company had no customers in the fiscal year ended March 31, 2023, that represented greater than 10% of the Company’s accounts receivable, and one customer in the fiscal year ended 2022, that represented 13.6% of the Company’s accounts receivable on March 31, 2022.
The Company acquires all the smoke alarm and carbon monoxide alarm safety products that it sells from Eyston Company, Ltd.
8 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.