8-K
UNIVERSAL SAFETY PRODUCTS, INC. (UUU)
UNITED STATES SECURITIES AND EXCHANGECOMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 27, 2020
UNIVERSAL SECURITY INSTRUMENTS, INC.
(Exact name of registrant as specified in its charter)
| Maryland | 001-31747 | 52-0898545 |
|---|---|---|
| (State or Other Jurisdiction | (Commission File Number) | (IRS Employer |
| of Incorporation) | Identification No.) |
11407 Cronhill Drive, Suite A, Owings Mills, Maryland 21117
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (410) 363-3000
Inapplicable
(Former Name or Former Address if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written<br>communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting<br>material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement<br>communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ¨ | Pre-commencement<br>communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock | UUU | NYSE MKT LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨
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. ¨
INFORMATION TO BE INCLUDED IN THE REPORT
| Item 1.01. | Entry into a Material Definitive Agreement. |
|---|
On April 27, 2020, the Registrant entered into a Share Purchase Agreement with Lai Kwan Limited (“LKL”), the Registrant’s joint venture partner is Eyston Company Limited, the Registrant’s 50% owned Hong Kong Joint Venture (“Eyston”), effective March 31, 2020, with respect to the purchase by LKL of the Registrant’s 50% interest in Eyston in consideration for the cancellation of $4,000,000 of the Registrant’s $5,081,440 in accounts payable owed by the Registrant to Eyston (the “Repayment Agreement”). Under the terms of the Repayment Agreement, LKL purchased the Registrant’s 50% interest in Eyston and used the $4,000,000 to pay a like amount of the Registrant’s debt to Eyston. The remaining $1,081,440 of the Registrant’s debt to Eyston was converted into a term loan from Eyston to the Registrant, together with interest at the prime rate for U.S. Dollar loans as announced by Shanghai Commercial Bank in Hong Kong on the first day of each calendar month plus 2.0%. Interest is payable monthly, and the entire principal balance plus all accrued and unpaid interest is due on or before April 19, 2022.
The Registrant and Eyston intend that the Registrant will remain a customer of Eyston (accounting for approximately 90% of Eyston’s sales in Eyston’s fiscal year ended March 31, 2020), and Eyston will continue to manufacture and sell products to the Company with customary payment terms.
| Item 2.01. | Completion of Acquisition or Disposition of Assets. |
|---|
The disclosure required by this item is included in Item 1.01 and is incorporated herein by reference.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangementof a Registrant. |
|---|
The disclosure required by this item is included in Item 1.01 and is incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
|---|---|
| (c) | Exhibits |
| --- | --- |
The following exhibits are filed herewith:
Exhibit No.
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: May 1, 2020 | By: | /s/ Harvey B. Grossblatt |
| Harvey B. Grossblatt | ||
| President |
EXHIBIT 10.1
SHARE PURCHASE AGREEMENT
Upon being duly signed by both parties, this Agreement shall supersede the 2002 JOINT VENTURE AGREEMENT signed on October 22, 2002 and all its addendums, memorandums and amendments, the 2002 JOINT VENTURE AGREEMENT and all its addendums, memorandums and amendments shall cease to have legal effect. The two parties hereby waive and release against each other and forever discharge any claims arising out of or in connection with the 2002 JOINT VENTURE AGREEMENT and all its addendums, memorandums and amendments.
Universal Security Instruments, Inc. ("Seller") of 11407 Cronhill Drive, Suite A, Owings Mills, Maryland 21117, U.S.A., in consideration of the sum of US Dollars 4,000,000 (Four Million) paid to Seller by Lai Kwan Limited (" Purchaser")of B2, 3/F,. Fortune Factory Building, 40 Lee Chung Street, Chai Wan, Hong Kong, do hereby sell and transfer one ordinary issued share of Eyston Company Limited (Certificate of Incorporation no. 257536) to Lai Kwan Limited on March 31, 2020. The said transferred share represents 50% of all ordinary issued shares of Eyston Company Limited. Universal Security Instruments, Inc. shall cease to be shareholder of Eyston Company Limited and Eyston Company Limited shall be a wholly owned subsidiary of Lai Kwan Limited.
The proceeds (USD Four Million) of Universal Security Instruments, Inc. from selling the said share of Eyston Company Limited shall be used to repay its outstanding loan and credit line balance of Eyston Company Limited simultaneously.
Universal Security Instruments, Inc. hereby acknowledge and recognize that the proceeds (USD Four Million) from the said share selling transaction had been received, and both parties acknowledge and recognize Universal Security Instruments, Inc. had used the proceeds (USD Four Million) to repay its outstanding loan and credit line balance of Eyston Company Limited.
The stamp duty and related penalties, if any, shall be shared equally by both parties. This Agreement shall be governed by and construed in accordance with the laws of Hong Kong.
| For and on behalf of | For and on behalf of |
|---|---|
| Universal Security Instruments, Inc. | Lai Kwan Limited |
| /s/ | /s/ |
| Sign by: Harvey Barry Grossblatt | Sign by: Lam, Wai Wing Malcolm |
| Position: President and CEO | Position: Director |
| Date: April 27, 2020 | Date: April 10, 2020 |
EXHIBIT 10.2
Term Loan Agreement
Lender: Eyston Company Limited of B2, 3/F., Fortune Factory Building, 40 Lee Chung Street, Chai Wan, Hong Kong.
Debtor: Universal Security Instruments Inc. of 11407 Cronhill Drive, Suite A, Owings Mills, Maryland 21117, U.S.A.
Both parties hereby acknowledge and recognize the Debtor owes the Lender a debt with an amount of USD1,081,439.59 (the “Debt”) as of April 20, 2020. Both parties hereby agree to convert the Debt into a variable interest rate term loan (“Term Loan") with the following details:
Term Loan principal amount: USD1,081,439.59
Term Loan period: Two years starting April 20, 2020 and ending April 19, 2022.
Term Loan pay back: The Debtor shall pay back this Term Loan to the Lender in-full on or before April 19, 2022.
Term Loan interest payment: Interest to be paid monthly by the Debtor to the Lender on or before the end of each calendar month, subject to the variable interest rate as described below. Term Loan interest rate: The variable annualized interest rate in each month is the USD prime rate, as announced or published on the first day of each calendar month by Shanghai Commercial Bank Limited in Hong Kong, plus two percent.
The Debtor hereby guarantees the promptly repayment of the full amount of principal and interest of the Term Loan as and when the same will, in any manner, be or become due, according to the terms and conditions provided by this Agreement. The Debtor agrees not to pledge, hypothecate, mortgage, sell or otherwise transfer all or substantially all of its assets without the prior written consent of the Lender, provided, however, that in connection with the Debtor's factoring relationship or other commercial lender financing provided to the Debtor, the Debtor may assign its accounts and may grant the lender or factor a continuing security interest in its assets as heretofore granted. To the extent permitted by law, the Debtor waives all defenses, counterclaims or offsets that are legally available to the Debtor with respect to the repayment of the Debtor.
This Agreement shall be construed in accordance with, and governed by, the laws of the Hong Kong Special Administrative Region of the People's Republic of China. Any dispute arising hereunder may only be brought with the Courts of the preference of the Lender. This Agreement may not be assigned or transferred without written consent of the Lender.
| For and on behalf of | For and on behalf of |
|---|---|
| Universal Security Instruments, Inc. | Eyston Company Limited |
| /s/ | /s/ |
| Sign by: Harvey Barry Grossblatt | Sign by: Lam, Wai Wing Malcolm |
| Position: President and CEO | Position: Director |
| Date: April 27, 2020 | Date: April 27, 2020 |