DeFi Capital Markets, Inc 10-Q, filed Aug 21, 2023
DeFi Capital Markets, Inc. (DCM)
About this 10-Q
DeFi Capital Markets, Inc filed this 10-Q on August 21, 2023, covering the quarter ended June 30, 2023.
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $6.7M
- up 44.5% from $4.64M a year earlier
- Net income
- $165.13K
- compared with a net loss of $106.14K a year earlier
- Diluted EPS
- $0.07
- compared with -$0.05 a year earlier
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended
OR
SECURITIES EXCHANGE ACT OF 1934
Commission file number
(Exact name of registrant as specified in its charter)
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incorporation or organization) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
Inapplicable
(Former name, former address and former fiscal year if changed from last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
At August 21, 2023, the number of shares outstanding of the registrant’s common stock was
TABLE OF CONTENTS
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| | Condensed Consolidated Balance Sheets at June 30, 2023 (unaudited) and March 31, 2023 | 3 | |
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| | Notes to Condensed Consolidated Financial Statements (unaudited) | 8 | |
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 13 | ||
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PART I - FINANCIAL INFORMATION
ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS | | (unaudited) | | (audited) | ||
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CURRENT ASSETS |
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Cash | | $ | | $ | | |
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Trade, net of provision for credit losses of $ | |
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Receivables - other | |
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Amount due from factor | |
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Inventories – finished goods | |
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TOTAL CURRENT ASSETS | |
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INTANGIBLE ASSETS - NET | |
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PROPERTY AND EQUIPMENT – NET | | | | | | |
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TOTAL ASSETS | | $ | | | $ | |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | |
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CURRENT LIABILITIES | |
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Line of credit - factor | | $ | | $ | | |
Short-term portion of operating lease liability | | | | | | |
Accounts payable - trade | |
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Accounts payable – Eyston Company Ltd. | |
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Accrued liabilities: | |
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Accrued payroll and employee benefits | |
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Accrued commissions and other | |
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TOTAL CURRENT LIABILITIES | |
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LONG-TERM PORTION OF OPERATING LEASE LIABILITY | | | | |
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TOTAL LONG-TERM LIABILITIES | | | | | | |
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COMMITMENTS AND CONTINGENCIES | |
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SHAREHOLDERS’ EQUITY | |
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Common stock, $ | |
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Additional paid-in capital | |
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Accumulated Deficit | |
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TOTAL SHAREHOLDERS’ EQUITY | |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three Months Ended June 30, | ||||
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Net sales | | $ | | | $ | |
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Cost of goods sold | |
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GROSS PROFIT | |
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Selling, general and administrative expense | |
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Engineering and product development expense | |
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Operating income (loss) | |
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Other expense: | |
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Interest expense | |
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Net income (loss) before taxes | | | | | | ( |
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Provision for income taxes | | | | | | — |
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NET INCOME (LOSS) | | $ | | | $ | ( |
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Earnings (Loss) per share: | |
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Basic and diluted | | $ | | | $ | ( |
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Shares used in computing Earnings (Loss) per share: | |
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Weighted average basic and diluted shares outstanding | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
THREE MONTHS ENDED JUNE 30, 2023
(Unaudited)
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Balance at April 1, 2023 |
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Net Income | | | | | | | | | | | | | | |
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Balance at June 30, 2023 | | | | $ | | | $ | | | $ | ( | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
THREE MONTHS ENDED JUNE 30, 2022
(Unaudited)
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Balance at April 1, 2022 |
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Net loss | | | | | | | | | | | ( | | | ( |
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Balance at June 30, 2022 | | | | $ | | | $ | | | $ | ( | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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OPERATING ACTIVITIES: |
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Net Income (Loss) | | $ | | | $ | ( |
Adjustments to reconcile net Income (Loss) to net cash provided by (used in) operating activities: | |
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Depreciation and amortization | |
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Changes in operating assets and liabilities: | |
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(Increase) Decrease in accounts receivable and amount due from factor | |
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Decrease (Increase) in inventories, prepaid expenses, and other | |
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | |
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FINANCING ACTIVITIES: | |
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Repayments of Note Payable – Eyston Company Ltd. | |
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Net (repayment) borrowing - Line of Credit – Factor | | | ( | | | |
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NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | |
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NET INCREASE (DECREASE) IN CASH | |
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Cash at beginning of period | |
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CASH AT END OF PERIOD | | $ | | | $ | |
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SUPPLEMENTAL INFORMATION: | | | | | | |
Interest paid | | $ | | | $ | |
Income taxes paid | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Statement of Management
The condensed consolidated financial statements include the accounts of Universal Security Instruments, Inc. (USI or the Company) and its wholly owned subsidiaries. Except for the condensed consolidated balance sheet as of March 31, 2023, which was derived from audited financial statements, the accompanying condensed consolidated financial statements are unaudited. Significant inter-company accounts and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the interim condensed 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 accounting principles generally accepted in the United States of America (US-GAAP) have been condensed or omitted. The interim condensed consolidated financial statements should be read in conjunction with the Company’s March 31, 2023, audited financial statements filed with the Securities and Exchange Commission on Form 10-K as filed on July 14, 2023. The interim operating results are not necessarily indicative of the operating results for the full fiscal year.
Line of Credit – Factor
In 2015, the Company entered into the Factoring Agreement (the Agreement) with Merchant for the purpose of factoring the Company’s trade accounts receivable and to provide financing secured by finished goods inventory. Under the Agreement the Company may borrow eighty percent (
The Agreement has been extended and now expires on January 6, 2024. and provides for continuation of the program for successive periods until terminated by one of the parties to the Agreement. As of June 30, 2023, the Company had borrowings under the Agreement of approximately $
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with US-GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.
Revenue Recognition
The Company’s primary source of revenue is the sale of safety and security products based upon purchase orders or contracts with customers. Revenue is recognized at a point in time once the Company has determined that the customer has obtained control over the product. Control is typically deemed to have been transferred to the customer when the product is shipped or delivered to the customer. Customers may not return, exchange or refuse acceptance of goods without our approval. Generally, the Company does not grant extended payment terms. Shipping and handling costs associated with outbound freight, after control over a product has transferred to a customer, are accounted for as a cost to complete the sale and are recorded in selling, general and administrative expense. Remaining performance obligations represent the transaction price of firm orders for satisfied or partially satisfied performance obligations on contracts with an original expected duration of one year or more. The Company's contracts are predominantly short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in ASC Topic 606 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.
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The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for products sold. Purchase orders may contain stand-alone pricing applied to each of the multiple products ordered. Revenue is recorded at the transaction price net of estimates of variable consideration. The Company uses the expected value method based on historical data in considering the impact of estimates of variable consideration, which may include trade discounts, allowances, product returns (including rights of return) or warranty replacements. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.
We have established a provision to cover anticipated credit losses based upon historical experience.
Disaggregation of Revenue
The Company presents below revenue associated with sales of products acquired from Eyston Company Ltd. (Eyston) separately from revenue associated with sales of ground fault circuit interrupters (GFCI’s) and ventilation fans. The Company believes this disaggregation best depicts how our various product lines perform and are affected by economic factors. Revenue recognized by these categories for the three months ended June 30, 2023, and 2022 are as follows:
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Sales of products acquired from Eyston | | $ | | | $ | |
Sales of GFCI’s and ventilation fans | |
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Concentrations
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. The Company acquires all of the smoke alarm and carbon monoxide alarm safety products that it sells from Eyston Company, Ltd. The Company had two customers in the three-month period ended June 30, 2023, that represented
Related Party Transactions
During the three-month periods ended June 30, 2023, and 2022, inventory purchases and other company expenses of approximately $
Receivables
Receivables are recorded when the Company has an unconditional right to consideration. We have established a provision for credit losses based upon historical experience.
Income Taxes
We calculate our interim tax provision in accordance with the guidance for accounting for income taxes in interim periods. We estimate the annual effective tax rate and apply that tax rate to our ordinary quarterly pre-tax income. The tax expense or benefit related to discrete events during the interim period is recognized in the interim period in which those events occurred.
The Company recognizes a liability or asset for the deferred tax consequences of temporary differences between the tax basis of assets or liabilities and their reported amounts in the condensed consolidated financial statements. These temporary differences may result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled.
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Management reviews net operating loss carry forwards and income tax credit carry forwards to evaluate if those amounts are recoverable. 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. 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. Our ability to realize the tax benefits associated with the deferred tax assets depends primarily upon the timing of future taxable income and the expiration dates of the components of the deferred tax assets. If sufficient future taxable income is generated, we may be able to offset a portion of future tax expenses.
The Company follows ASC 740-10 which provides guidance for tax positions related to the recognition and measurement of a tax position taken or expected to be taken in a tax return and requires that we recognize in our condensed consolidated financial statements the impact of a tax position, if that position is more likely than not to be sustained upon an examination, based on the technical merits of the position. Interest and penalties, if any, related to income tax matters are recorded as income tax expenses.
Accounts Receivable and Amount Due From Factor
The Company assigns the majority of its short-term receivables arising in the ordinary course of business to our factor. At the time a receivable is assigned to our factor the credit risk associated with the credit worthiness of the debtor is assumed by the factor. The Company continues to bear any credit risk associated with sales to customers that are denied credit by the factor, dispute delivery, and/or have warranty issues related to the products sold.
Management assesses the credit risk of both its trade accounts receivable and its financing receivables based on the specific identification of accounts. A provision for credit losses is provided based on that assessment. Changes in the provision are charged to operations in the period the change is determined. Amounts ultimately determined to be uncollectible are eliminated from the receivable accounts and from the provision for credit losses in the period that the receivables’ status is determined to be uncollectible.
Based on the nature of the factoring agreement and prior experience,
Earnings 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. There were
Contingencies
From time to time, the Company is involved in various claims and routine litigation matters. In the opinion of management, after consultation with legal counsel, the outcomes of such matters are not anticipated to have a material adverse effect on the Company’s condensed consolidated financial position, results of operations, or cash flows in future years.
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Leases
The Company is a lessee in lease agreements for office space. Certain of the Company’s leases contain provisions that provide for one or more options to terminate or extend the lease at the Company’s sole discretion. The Company’s leases are comprised of fixed lease payments, with its real estate leases including lease payments subject to a rate or index which may be variable. Certain real estate leases also include executory costs such as common area maintenance (non-lease component). As a practical expedient permitted under ASC 842, the Company has elected to account for the lease and non-lease components as a single lease component. The Company utilizes certain practical expedients for short-term leases, including the election not to reassess its prior conclusions about lease identification, lease classification and initial direct costs, as well as the election not to separate lease and non-lease components for arrangements where the Company is a lessee. Lease payments, which may include lease components and non-lease components, are included in the measurement of the Company’s lease liabilities to the extent that such payments are either fixed amounts or variable lease amounts based on a rate or index (fixed in substance) as stipulated in the lease contract.
Effective March 2022, we extended our operating lease for a
None of the Company’s lease agreements contain any residual value guarantees or material restrictive covenants. As a result of the Company’s election of the package of
Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments as specified in the lease. Right-of-use assets and lease liabilities related to the Company’s operating leases are recognized at the lease commencement date based on the present value of the remaining lease payments over the lease term and amounted to approximately $
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The future minimum payments under operating leases that expire in 2026 were as follows for the fiscal periods ended March 31:
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2024 |
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2026 | | | |
Total operating lease payments | | $ | |
Less: amounts representing interest |
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Present value of net operating lease payments |
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Less: current portion |
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Long-term portion of operating lease obligations |
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Recently Adopted Accounting Standards
Changes to US-GAAP are established by the Financial Accounting Standards Board (FASB) in the form of Accounting Standards Updates (ASU’s) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASU’s. Management adopted ASU 2016-13 related to credit losses effective April 1, 2023. Management determined that adoption of the guidance of the ASU did not have a material impact on the consolidated financial statements on the date of adoption or for the three-month period ended June 30, 2023.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As used throughout this Report, “we,” “our,” “the Company” “USI” and similar words refers to Universal Security Instruments, Inc.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain forward-looking statements reflecting our current expectations with respect to our operations, performance, financial condition, and other developments. These forward-looking statements may generally be identified by the use of the words “may”, “will”, “believes”, “should”, “expects”, “anticipates”, “estimates”, and similar expressions. These statements are necessarily estimates reflecting management’s best judgment based upon current information and involve a number of risks and uncertainties. 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 could affect our financial performance and could cause our actual results for future periods to differ materially from those anticipated or projected. While it is impossible to identify all such factors, such factors include, but are not limited to, those risks identified in our periodic reports filed with the Securities and Exchange Commission.
OVERVIEW
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, 2023, and 2022.
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 ability to acquire certain electronic components. The Company is not yet able to quantify the full impact of the COVID-19 pandemic on its sales and financial results.
The Company has developed products based on new smoke and gas detection technologies, with what the Company believes are improved sensing technology and product features. Most of our new technologies and features have been trademarked under the trade name IoPhic.
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.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2023 and 2022
Sales. Net sales for the three months ended June 30, 2023, were $6,698,771 compared to $4,635,304 for the comparable three months in the prior year, an increase of $2,063,467 (44.5%). The Company is experiencing supply chain constrictions in key components of its products such as computer chips. However, the Company experienced an increase in sales principally due to the Company’s ability to fulfill orders from existing inventory and due to the abatement in delays in unloading inventory at California ports of entry.
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 25.5% and 30.7% of sales for the quarters ended June 30, 2023, and 2022, respectively. Gross margins were negatively impacted in the period ended June 30, 2023, principally due to the mix of products sold.
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Expenses. Selling, general and administrative expenses were $1,422,939 for the three months ended June 30, 2023, to $1,382,603 for the comparable three months in the prior year. As a percentage of net sales, these expenses decreased to 21.2% for the three-month period ended June 30, 2023, from 29.8% for the 2022 period. These expenses decreased as a percentage of net sales since selling, general, and administrative expenses do not fluctuate in direct proportion to sales. Certain expenses, individually immaterial, including selling administrative expense, insurance expense, and audit and accounting expense increased as a dollar amount from the prior year’s comparable period, while expenses attributable to a potential merger in the prior year’s comparable period decreased as a dollar amount.
Engineering and Product Development. Engineering and product development expenses were $64,963 for the three-month period ended June 30, 2023, compared to $89,262 for the comparable quarter of the prior year.
Interest Expense. Our interest expense was $50,496 for the quarter ended June 30, 2023, compared to interest expense of $55,496 for the quarter ended June 30, 2022. 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.
Net Income (Loss). We reported net income of $165,130 for the quarter ended June 30, 2023, compared to a net loss of $106,138 for the corresponding quarter of the prior fiscal year, a $271,268 (255.6%) increase in net income. The primary reason for the increase in the net income is that supply chain disruptions have been minimized by fulfilling orders from existing inventory during the three months ended June 30, 2023, resulting in higher sales.
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. Operating activities used cash of $562,395 for the three months ended June 30, 2022. This was primarily due to a increase in inventories, prepaid expenses and other of $574,655, and a decrease in accounts payable and accrued expenses of $318,965, a net loss of $106,138, and offset by a decrease in accounts receivable and due from factor of $432,250.
There were no investing activities for the three months ended June 30, 2023, or 2022.
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. Financing activities provided cash of $379,541 during the three months ended June 30, 2022, which is comprised of borrowings net of advances from the factor of $679,541, and repayment of a note payable to Eyston Company Ltd. of $300,000 for the three months ended June 30, 2022.
Liquidity and Capital Resources
The Company believes its balances of cash, funds available to borrow under the terms of its factoring agreement, and cash generated by ongoing operations will be sufficient to satisfy its cash requirements over the next twelve months and beyond. The Company’s contractual cash requirements have not changed materially since it filed its Form 10-K for the period ended March 31, 2023.
CRITICAL ACCOUNTING POLICIES
In the notes to the consolidated financial statements, and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K, we have disclosed those accounting policies that we consider to be significant in determining our results of Operations and financial condition. There have been no material changes to those policies that we consider to be significant since the filing of our Form 10-K. The accounting principles used in preparing our unaudited condensed consolidated financial statements conform in all material respects to accounting principles generally accepted in the United States of America.
ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures (as such item is defined in Rules 13a – 15(e) and 15d – 15(e) of the Exchange Act) that is designed to provide reasonable assurance that information, which is required to be disclosed by us in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time
14
periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated and communicated to management in a timely manner. Our Chief Executive Officer and Chief Financial Officer have evaluated this system of disclosure controls and procedures in accordance with applicable Securities and Exchange Commission guidance as of the end of the period covered by this annual report and have concluded that disclosure controls and procedures were not effective.
A material weakness arose in the management review controls over classification of and disclosure of amounts within the financial statements. The Company plans to remediate the material weakness by clarification of the classification of amounts and inclusion of the required disclosures.
A material weakness in the management review controls over the classification of and accounting for income taxes. The Company plans to remediate the material weakness by clarification of the classification of amounts and inclusion of the required disclosures.
Changes in Internal Control over Financial Reporting
There have been no other changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended June 30, 2023.
PART II - OTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS |
From time to time, the Company is involved in various lawsuits and legal matters. It is the opinion of management, based on the advice of legal counsel, that these matters will not have a material adverse effect on the Company’s financial statements.
15
ITEM 6. | EXHIBITS |
Exhibit No. |
| |
3.1 | | |
3.2 | | |
3.3 | | |
10.1 | | |
10.2 | | |
10.3 | | |
10.4 | | |
10.5 | | Amended and Restated Employment Agreement dated July 18, 2007 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 December 31, 2007, File No. 1-31747), as amended by Addendum dated November 13, 2007 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 15, 2007, File No. 1-31747), by Addendum dated September 8, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 8, 2008, File No. 1-31747), by Addendum dated March 11, 2010 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 12, 2010, File No. 1-31747), by Addendum dated July 19, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 20, 2012, File No. 1-31747), by Addendum dated July 3, 2013 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 8, 2013, File No. 1-31747), and by Addendum dated July 21, 2014 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 21, 2014, File No. 1-31747) ), by addendum dated July 23, 2015 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 28, 2015, File No. 1-31747), by addendum dated July 12, 2016 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 12, 2016, File No. 1-31747), by addendum dated July 18, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 20, 2017, File No. 1-31747), and by addendum dated July 9, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 9, 2018, File No. 1-31747), by addendum dated July 12, 2019 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 16, 2019, file No. 1-31747), by addendum dated July 27, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 27, 2020, file No. 1-31747). by addendum dated July 18, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 28, 2021, file No. 1-31747), by addendum dated July 22, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 28, 2022, file No. 1-31747), and by addendum dated June 12, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 12, 2023, file No. 1-31747). |
31.1 | | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer* |
31.2 | | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer* |
32.1 | | |
99.1 | | |
101 | | Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of June 30, 2023 and March 31, 2023, (ii) Condensed Consolidated Statements of Operations for the three months ended June 30, 2023 and 2022, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2023 and 2022, (v) Condensed Consolidated Statements of Shareholders’ Equity for the three months ended June 30, 2023 and 2022, and (vi) Notes to Condensed Consolidated Financial Statements* |
*Filed herewith
16
SIGNATURES
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. | |
| (Registrant) | |
| | |
Date: August 21, 2023 | By: | /s/ Harvey B. Grossblatt |
| | Harvey B. Grossblatt |
| | President, Chief Executive Officer |
| | |
| By: | /s/ James B. Huff |
| | James B. Huff |
| | Vice President, Chief Financial Officer |
17
Exhibit 31.1
CERTIFICATION
I, Harvey B. 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 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 report;
3.Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Exhibit 31.2
CERTIFICATION
I, James B. Huff, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Universal Security Instruments, Inc.;
2.Based on my knowledge, this 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 report;
3.Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
August 21, 2023 | | /s/ James B. Huff |
| James B. Huff | |
| Chief Financial Officer | |
Exhibit 32.1
SECTION 1350 CERTIFICATIONS
In connection with the Quarterly Report of Universal Security Instruments, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2023 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 the Report fairly presents, in all material respects, the financial condition and result of operations of the Company for the periods reflected therein. |
| /s/ James B. Huff | |
| James B. Huff | |
| Chief Financial Officer | |
Exhibit 99.1
For Immediate Release
Contact: Harvey Grossblatt, CEO
Universal Security Instruments, Inc.
(410) 363-3000, Ext. 224
or
Zachary Mizener
Lambert & Co.
(315) 529-2348
Universal Security Instruments Reports First-Quarter Results
OWINGS MILLS, Md. August 18, 2023 - Universal Security Instruments, Inc. (NYSE Amex: UUU) today announced results for its fiscal quarter ended June 30, 2023.
The Company reported sales of $6,698,771 for the quarter ended June 30, 2023, versus $4,635,304 for the comparable period of last year. The Company reported net income of $165,130 or $0.07 per basic and diluted share, compared to a net loss of $106,138, or $0.05 per basic and diluted share, for the same period last year.
Harvey Grossblatt - President and CEO said “positive sales trends continued in the June 30, 2023 quarter despite supply chain difficulties in obtaining components on a timely basis.”
UNIVERSAL SECURITY INSTRUMENTS, INC. is distributor of safety and security devices. Founded in 1969, the Company has an over 55-year heritage of developing innovative and easy-to-install products, including smoke, fire and carbon monoxide alarms. For more information on Universal Security Instruments, visit our website at www.universalsecurity.com.
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"Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Certain matters discussed in this news release may constitute forward-looking statements within the meaning of the federal securities laws that inherently include certain risks and uncertainties. Actual results could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, among other items, currency fluctuations, the impact of current and future laws and governmental regulations, and other factors which may be identified from time to time in our Securities and Exchange Commission filings and other public announcements. 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. We will revise our outlook from time to time and frequently will not disclose such revisions publicly.
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UNIVERSAL SECURITY INSTRUMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| Three Months Ended June 30, |
| ||||
| | 2023 |
| 2022 | | ||
Sales | | $ | 6,698,771 | | $ | 4,635,304 | |
| | | | | | | |
Net Income (Loss): | | | 165,130 | | | (106,138) | |
Net Income (Loss) per share – basic and diluted | | | 0.07 | | | (0.05) | |
Weighted average number of common shares outstanding: | | | | | | | |
Basic and diluted | | | 2,312,887 | | | 2,312,887 | |
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
|
| June 30, 2023 |
| June 30, 2022 | | ||
Cash | | $ | 240,817 | | $ | 255,881 | |
Accounts receivable and amount due from factor | | | 4,670,947 | | | 3,657,863 | |
Inventory | | | 2,878,373 | | | 6,753,229 | |
Prepaid expense | | | 280,594 | | | 291,829 | |
| | | | | | | |
TOTAL CURRENT ASSETS | | | 8,070,731 | | | 10,958,802 | |
| | | | | | | |
PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS–NET | | | 313,550 | | | 477,007 | |
OTHER ASSETS | | | — | | | 4,000 | |
TOTAL ASSETS | | $ | 8,384,281 | | $ | 11,439,809 | |
| | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | |
| | | | | | | |
Line of credit – factor | | $ | 1,370,299 | | $ | 2,836,627 | |
Note payable – Eyston Company Ltd. | | | — | | | 781,440 | |
Short-term portion of operating lease liability | | | 153,095 | | | 145,787 | |
Accounts payable | | | 831,915 | | | 2,532,534 | |
Accrued liabilities | | | 372,366 | | | 325,399 | |
TOTAL CURRENT LIABILITIES | | | 2,727,675 | | | 6,621,787 | |
| | | | | | | |
LONG-TERM OPERATING LEASE LIABILITY | | | 132,659 | | | 285,754 | |
TOTAL LONG-TERM LIABILITIES | | | 132,659 | | | 285,754 | |
| | | | | | | |
SHAREHOLDERS’ EQUITY: | | | | | | | |
Common stock, $.01 par value per share; authorized 20,000,000 shares; issued and outstanding 2,312,887 at June 30, 2023 and 2022 | | | 23,129 | | | 23,129 | |
Additional paid-in capital | | | 12,885,841 | | | 12,885,841 | |
Accumulated Deficit | | | (7,385,023) | | | (8,376,702) | |
| | | | | | | |
TOTAL SHAREHOLDERS’ EQUITY | | | 5,523,947 | | | 4,532,268 | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 8,384,281 | | $ | 11,439,809 | |