UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter ended September 30, 2002
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________________ to _________________
Commission file number 0-7885
UNIVERSAL SECURITY INSTRUMENTS, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-0898545
State of Incorporation I.R.S. Employer Identification Number
7-A Gwynns Mill Court, Owings Mills, MD 21117
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 410-363-3000
Indicate by check mark whether the registrant (l) has filed all
reports required to be filed by Section 13 and 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been
subject to the filing requirements for at least the past 90 days.
YES X NO _______
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Date Class Shares Outstanding
November 13, 2002 Common Stock, $.01 par value 1,119,232
UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
INDEX
Part I - FINANCIAL INFORMATION
Item l. FINANCIAL STATEMENTS (unaudited)
Consolidated balance sheets at September 30, 2002 and
March 31, 2002
Consolidated statements of operations for the six months
ended September 30, 2002 and 2001 and three months ended
September 30, 2002 and 2001
Consolidated statements of cash flows for the six months
ended September 30, 2002 and 2001
Notes to consolidated financial statements
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Item 4. CONTROLS AND PROCEDURES
Part II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE
CERTIFICATIONS
- 2 -
UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
PART I
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
Sept 30, 2002 March 31, 2002
CURRENT ASSETS
Cash $ 145,586 $ 19,383
Accounts receivable:
Trade (less allowance for
doubtful accounts of $0
and $68,358 at September
30 and March 31, 2002,
respectively) 787,252 193,488
Employees 19,687 1,115
806,939 194,603
Inventory 2,173,509 1,557,994
Prepaid expenses 107,093 109,238
TOTAL CURRENT ASSETS 3,233,127 1,881,218
INVESTMENT IN JOINT VENTURE 3,333,632 2,990,067
PROPERTY, PLANT AND EQUIPMENT - NET 285,784 301,082
OTHER ASSETS 8,294 10,095
TOTAL ASSETS $6,860,837 $5,182,462
See notes to consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Sept 30, 2002 March 31, 2002
CURRENT LIABILITIES
Amount due factor $ - $ 216,959
Accounts payable 1,075,165 787,492
Accrued liabilities 533,071 451,092
Current maturities of capital
lease obligations 15,730 15,730
TOTAL CURRENT LIABILITIES 1,623,966 1,471,273
LONG-TERM CAPITAL LEASE OBLIGATIONS 22,330 29,916
SHAREHOLDERS' EQUITY
Common stock, $.01 par value
per share; authorized
20,000,000 shares; issued
1,088,732 shares at September 30,
2002 and 1,009,770 shares at
March 31, 2002 10,887 10,098
Additional paid-in capital 10,974,089 10,648,679
Accumulated deficit (5,770,435) (6,977,504)
TOTAL SHAREHOLDERS' EQUITY 5,214,541 3,681,273
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 6,860,837 $ 5,182,462
See notes to consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Six Months Ended
Sept 30, 2002 Sept 30, 2001
Net sales $7,842,198 $4,908,612
Cost of goods sold 5,472,826 3,607,746
GROSS PROFIT 2,369,372 1,300,866
Research and development expense 132,981 104,913
Selling, general and
administrative expense 1,903,720 1,364,067
Operating income (loss) 332,671 (168,114)
Other income (expense):
Interest expense (73,269) (120,270)
Other 750 -
(72,519) (120,270)
INCOME (LOSS) BEFORE
EARNINGS OF JOINT VENTURE 260,152 (288,384)
Earnings from joint venture:
Equity in earnings of joint venture 1,052,130 374,286
Cost allocatable to joint venture (105,213) -
NET INCOME $1,207,069 $ 85,902
Per common share amounts:
Basic 1.17 .09
Diluted 1.09 .09
Weighted average number of common
shares outstanding
Basic 1,034,488 912,270
Diluted 1,105,055 925,187
See notes to consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended
Sept 30, 2002 Sept 30, 2001
Net sales $4,091,272 $2,653,482
Cost of goods sold 2,805,125 1,904,898
GROSS PROFIT 1,286,147 748,584
Research and development expense 72,581 55,814
Selling, general and
administrative expense 954,505 732,341
Operating income (loss) 259,061 (39,571)
Other income (expense):
Interest expense (36,332) (60,886)
Other 750
(35,582) (60,886)
INCOME (LOSS) BEFORE EQUITY
IN EARNINGS OF JOINT VENTURE 223,479 (100,457)
Equity in earnings of joint venture 406,650 124,000
NET INCOME $ 630,129 $ 23,543
Per common share amounts:
Basic .60 .03
Diluted .55 .03
Weighted average number of common
shares outstanding
Basic 1,054,205 912,270
Diluted 1,152,001 926,041
See notes to consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Six Months Ended
Sept 30, 2002 Sept 30, 2001
OPERATING ACTIVITIES
Net income $1,207,069 $ 85,902
Adjustments to reconcile net income
to net cash (used in) operating activities:
Depreciation and amortization 19,463 20,390
Stock issued to directors in lieu of fees 30,000 0
Earnings of joint venture (946,917) (374,286)
Changes in operating assets and liabilities:
(Increase) in accounts receivable (612,336) (1,238,015)
(Increase) decrease in inventories and
prepaid expenses (613,373) 749,151
Decrease in other assets 1,801
Increase (decrease) in accounts payable
and accrued expenses 303,640 (183,606)
Decrease in amount due factor (216,959) 15
NET CASH (USED IN) OPERATING ACTIVITIES (827,612) (940,449)
INVESTING ACTIVITIES
Distribution by joint venture 708,566 600,000
Purchase of property, plant and equipment (4,165)
NET CASH PROVIDED BY INVESTING ACTIVITIES 704,401 600,000
FINANCING ACTIVITIES
Issuance of common stock from exercise of
employee stock options 7,000
Issuance of common stock 250,000
Net borrowings of short-term debt - 331,986
Payments on long-term obligations (7,586) (7,586)
NET CASH PROVIDED BY FINANCING ACTIVITIES 249,414 324,400
INCREASE (DECREASE) IN CASH 126,203 (16,049)
Cash at beginning of period 19,383 34,642
CASH AT END OF PERIOD $ 145,586 $ 18,593
Supplemental information:
Interest paid $ 73,269 $ 120,270
Income taxes paid - -
Non-cash financing activities:
Issuance of 13,488 shares of common stock
in satisfaction of amounts payable 39,200 -
Issuance of 6,974 shares of common stock
as directors' fees $ 30,000 $ -
See notes to consolidated financial statements.
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UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Statement of Management - The consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiaries. Significant intercompany accounts and transactions
have been eliminated in consolidation. In the opinion of the
Company's management, the interim 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 generally accepted accounting principles in the
United States of America have been condensed or omitted. The
interim consolidated financial statements should be read in
conjunction with the Company's March 31, 2002 audited financials
statements filed with the Securities and Exchange Commission on
Form 10-K. The interim operating results are not necessarily
indicative of the operating results for the full fiscal year.
Income Taxes - No income tax expense has been provided for the
three and six month periods ended September 30, 2002 as a result
of the carryforward of prior years' operating losses.
Joint Venture - The Company maintains a 50% interest in a joint
venture with a Hong Kong corporation (Hong Kong Joint Venture)
which has manufacturing facilities in the People's Republic of
China, for the manufacturing of smoke and carbon monoxide alarms.
The following represents unaudited summarized income statement
information of the Hong Kong Joint Venture for the six months
ended September 30, 2002 and 2001:
2002 2001
Net sales $11,728,014 $5,010,988
Gross profit 3,951,259 1,505,815
Net income 2,692,827 748,572
Total current assets 7,544,756 3,872,322
Total assets 9,949,935 6,029,363
Total liabilities 2,751,807 1,599,858
- 8 -
During the six month periods ended September 30, 2002 and 2001,
the Company purchased products for resale from the Hong Kong
Joint Venture of approximately $3,615,994 and $2,390,000,
respectively. At September 30, 2002 and 2001, the Company had
amounts payable to the Hong Kong Joint Venture of $458,575 and
$322,734, respectively. On August 21, 2001, the Company agreed to
amend the Joint Venture Agreement. As part of this amendment, the
Hong Kong Joint Venture agreed to declare a dividend of
$1,200,000, of which the $600,000 due to the Company was applied
to settle amounts due by the Company to the Hong Kong Joint
Venture. The Company has reduced its equity in earnings of the
Joint Venture to reflect primarily the elimination of
intercompany profits.
In 2002, the Company has amended its employment agreements so
that bonus payments shall be allocated between domestic
operations and Joint Venture operations. The Company recorded
$105,213 of costs allocatable to the joint venture in the
accompanying statement of operations for the six months ended
September 30, 2002.
Net Income 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.
A reconciliation of the weighted average shares of common stock
utilized in the computation of basic and diluted earnings per
share for the three and six month periods ended September 30,
2002 and 2001 is as follows:
Three months ended September 30,
2002 2001
Weighted average number of
common shares outstanding
for basic EPS 1,054,205 912,270
Shares issued upon the assumed
exercise of outstanding
stock options 97,796 13,771
Weighted average number of common
and common equivalent shares
outstanding for diluted EPS 1,152,001 926,041
- 9 -
Six months ended September 30,
2002 2001
Weighted average number of
common shares outstanding
for basic EPS 1,034,488 912,270
Shares issued upon the assumed
exercise of outstanding
stock options 70,567 12,917
Weighted average number of common
and common equivalent shares
outstanding for diluted EPS 1,105,055 925,187
Contingencies - The Company has outstanding letters of credit in
the amount of $441,871 as of September 30, 2002.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Six Months Ended September 30, 2002 Compared to
Six Months Ended September 30, 2001
Sales - Net sales for the six months ended September 30, 2002
rose 60% to $7,841,198 compared to $4,908,612 for the comparable
six months in the prior fiscal year, an increase of $2,933,586.
Net sales of security products increased by $2,924,376 and net
sales of certain other products increased by $9,210. Security
sales increased primarily as a result of higher demand for
security products sold by the Company's subsidiary, USI ELECTRIC,
Inc. The increase in sales of certain other products resulted
primarily from increased demand.
Net Income - The Company reported net income of $1,207,069 for
the six months ended September 30, 2002 compared to net income of
$85,902 for the corresponding six months of the prior fiscal
year. The increase in net income resulted from both higher Joint
Venture earnings and operating income.
Expenses - Research, selling, general and administrative expenses
increased by $567,721 from the comparable six months in the prior
year. As a percentage of sales, research, selling, general and
administrative expenses were 26% for the six months ended
September 30, 2002 and 30% for the same period in the prior
fiscal year. The decrease in research, selling and administrative
expense as a percent of sales was due to higher sales volume and
variable costs which did not increase at the same rate as sales.
- 10 -
Interest Expense - The Company's interest expense, was $73,269
for the six months ended September 30, 2002 compared to $120,270
for the same period in 2001. The decrease in interest expense
resulted from the lower levels of debt and lower interest rates.
Three Months Ended September 30, 2002 Compared to
Three Months Ended September 30, 2001
Sales - Net sales for the three months ended September 30, 2002
were $4,091,272 compared to $2,653,482 for the comparable three
months in the prior fiscal year, an increase of $1,437,790. Net
sales of security products increased by $1,539,112 and sales of
other products decreased by $101,322. The increase in security
sales resulted primarily from increased demand for smoke alarms
sold by the Company's subsidiary, USI ELECTRIC, INC. The decrease
in other sales resulted from lower demand for certain of the
Company's other products.
Net Income - The Company reported net income of $630,129 for the
quarter ended September 30, 2002 compared to net income of
$23,543 for the corresponding quarter of the prior fiscal year.
The increase in net income resulted from both higher Joint
Venture earnings and operating income.
Expenses - Research, selling, general and administrative expenses
increased by $238,931 from the comparable three months in the
prior year. As a percentage of sales, research, selling, general
and administrative expenses were 25% for the three months ended
September 30, 2002 and 30% for the same period in the last fiscal
year. The decrease in research, selling and administrative
expense as a percent of sales was due to higher sales volume and
variable costs which did not increase at the same rate as sales.
Interest Expense - The Company's interest expense was $36,332 for
the quarter ended September 30, 2002 compared to $60,866 for the
comparable period in 2001. The decrease in interest expense
resulted from lower interest rates and lower levels of debt.
Financial Condition and Liquidity - Cash needs of the Company are
currently met by funds generated from operations and the
Company's Factoring Agreement which supplies both short-term
borrowings and letters of credit to finance foreign inventory
purchases. The Company's maximum amount available under the
- 11 -
Factoring Agreement is currently $7,500,000. However, based on
specified percentages of the Company's accounts receivable and
inventory and letter of credit commitments, at September 30,
2002, the Company had $1,452,781 available under the Factoring
Agreement, of which $441,781 had been utilized in letter of
credit borrowings as of September 30, 2002. Any outstanding
principal balance due under the Factoring Agreement is payable
upon demand. The interest rate under the Factoring Agreement on
the uncollected factored accounts receivable and any additional
borrowings is equal to 1% in excess of the prime rate of interest
charged by the Company's lender, which was 5.75% at September
30, 2002. The borrowings are collateralized by all the Company's
accounts receivable, inventory and a 1.5 acre parcel of land
which is adjacent to the Company's prior headquarters.
Operating activities used cash of $827,612 for the quarter ended
September 30, 2002. This was primarily due to an increase in
accounts receivable of $612,336 and inventory of $583,373 that
was partially offset by an increase in accounts payable and
accrued expenses of $303,640. For the same period last year,
operating activities used cash of $940,449.
Investing activities provided cash of $704,401 in the current
quarter and provided cash of $600,000 in the same period last
year. The primary source in both periods was distributions from
the Company's Joint Venture.
Financing activities provided cash of $249,414. The primary
reason was the issuance of common stock for $250,000. For the
same period last year, financing activities provided cash of
$324,400.
The Company believes that funds available under the Factoring
Agreement, Joint Venture distributions and its working capital
provide it with sufficient resources to meet its requirements for
liquidity and working capital in the ordinary course of its
business over the next twelve months.
Hong Kong Joint Venture - Net sales of the Hong Kong Joint
Venture for the six months and three months ended September 30,
2002 were $11,728,014 and $6,717,026, respectively, compared to
$5,010,988 and $2,377,623, respectively, for the comparable six
months and three months in the prior fiscal year. The increase
in sales was primarily due to increased sales of smoke alarms
to non-related customers.
- 12 -
Net income for the six months and three months ended September
30, 2002 was $2,692,827 and $1,312,301, respectively, compared to
$748,572 and $247,999, respectively, in the comparable six months
and three months last year.
Cash needs of the Hong Kong Joint Venture are currently met by
funds generated from operations. During the six months ended
September 30, 2002, working capital increased by $991,342 from
$3,844,654 on March 31, 2002 to $4,835,996 on September 30, 2002.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
No material changes have occurred in the quantitative and
qualitative market risk disclosures of the Company as presented
in the Company's Annual Report Form 10-K for the year ended March
31, 2002.
Item 4. CONTROLS AND PROCEDURES
Based on the evaluation of the Company's disclosure controls and
procedures by Stephen C. Knepper, the Company's Chief Executive
Officer, and Harvey B. Grossblatt, the Company's Chief Financial
Officer, as of a date within 90 days of the filing date of this
quarterly report, such officers have concluded that the Company's
disclosure controls and procedures are effective in ensuring that
information required to be disclosed by the Company in the
reports that it files or submits under the Securities and
Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported, within the time period specified by the
Securities and Exchange Commission's rules and forms.
There were no significant changes in the Company's internal
controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
- 13 -
PART II
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the six months ended September 30, 2002, the Company
issued an aggregate of 71,462 shares of its Common Stock for
cash, in exchange for directors' services and in the satisfaction
of amounts payable at March 31, 2002 as follows. These shares
were issued pursuant to an exemption from registration from the
Securities Act of 1933 pursuant to Section 4(2) and/or Regulation
D.
Date of Number of Class of Cash Other
Issuance of Shares Persons Proceeds Consideration
05/07/02 10,000 Employee $ - 27,200(2)
06/28/02 31,334 Director $ 97,500 20,000(1)
06/28/02 3,488 Director $ - 12,000(2)
09/24/02 26,640 Director $152,500 10,000(1)
(1) Issued in lieu of annual Director's fees during the six
months ended September 30, 2002.
(2) Issued in satisfaction of amounts accrued at March 31, 2002.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No.
3.1 Articles of Incorporation, as amended (incorporated by
reference to Exhibit 3.1 to the Company's Quarterly Report
on Form 10-Q for the period ended December 31, 1998, File
No. 0-7885)
3.2 Articles Supplementary, filed October 14, 2002
(incorporated by reference to Exhibit 3.1 to the Company's
Current Report on Form 8-K filed October 31, 2002, File
No. 0-7885)
3.3 Bylaws, as amended*
10.1. Non-Qualified Stock Option Plan, as amended (incorporated
by reference to Exhibit 10.1 to the Company's Annual
Report on Form 10-K for the year ended March 31, 1999,
File No. 0-7885)
- 14 -
10.2 Hong Kong Joint Venture Agreement, as amended
(confidential treatment of Name requested and filed
separately with the Commission)(incorporated by reference
to Exhibit 10.2 to the Company's Annual Report on Form
10-K for the year ended March 31, 1994, and Exhibit 10.3
to the Company's Quarterly Report on Form 10-Q for the
period ended September 30, 2001, File No. 0-7885)
10.3 Amended Factoring Agreement with CIT Group (successor to
Congress Talcott, Inc.) dated November 14, 1999
(incorporated by reference to Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the year ended
March 31, 2002, File No. 0-7885)
10.4 Amendment to Factoring Agreement with CIT Group*
10.5 Lease between Universal Security Instruments, Inc. and
National Instruments Company dated October 21, 1999 for
its office and warehouse located at 7-A Gwynns Mill Court,
Owings Mills, Maryland 21117 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended March 31, 2000, File No. 0-7885)
10.6 Employment Agreement dated April 1, 2002 between the
Company and Harvey B. Grossblatt (incorporated by
reference to Exhibit 10.5 to the Company's Annual Report
on Form 10-K for the year ended March 31, 2002, File No.
0-7885)
10.7 Amendment to Employment Agreement dated as of April 1,
2002 between the Company and Harvey B. Grossblatt*
99.1 Certification Required Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
99.2 November 13, 2002 Letter to Stockholders and Press
Release*
(b) Reports on Form 8-K
None
*Filed herewith
- 15 -
UNIVERSAL SECURITY INSTRUMENTS, INC.
SIGNATURE
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.
Dated: November 14, 2002 Harvey Grossblatt
HARVEY GROSSBLATT
President, Chief Financial Officer
smb
10-Q.SEPT
- 16 -
CERTIFICATION
I, Stephen C. Knepper, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of
Universal Security Instruments. Inc.;
2. Based on my knowledge, this Quarterly 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 Quarterly
Report;
3. Based on my knowledge, the financial statements, and
other financial information included in this Quarterly 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 Quarterly Report;
4. The Registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this Quarterly Report (the
"Evaluation Date"); and
c) presented in this Quarterly Report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
- 17 -
5. The Registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, 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 in the design or
operation of internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officers and I have
indicated in this Quarterly Report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 /s/ Stephen C. Knepper
Stephen C. Knepper
Chief Executive Officer
- 18 -
CERTIFICATION
I, Harvey 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 Quarterly 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 Quarterly
Report;
3. Based on my knowledge, the financial statements, and
other financial information included in this Quarterly 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 Quarterly Report;
4. The Registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this Quarterly Report (the
"Evaluation Date"); and
c) presented in this Quarterly Report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
- 19 -
5. The Registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, 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 in the design or
operation of internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officers and I have
indicated in this Quarterly Report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 /s/ Harvey Grossblatt
Harvey Grossblatt
Chief Financial Officer
- 20 -
Exhibit 3.3
BY-LAWS
UNIVERSAL SECURITY INSTRUMENTS, INC.
(As amended through October 14, 2002)
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting.
The annual meeting of the stockholders of
the Corporation shall be held at the principal office of the
Corporation in Owings Mills, Maryland, on such date in the month
of September as may be selected by the Board of Directors at
10:30 o'clock a.m. (or such other time and place as may be fixed
by the Board of Directors) for the election of directors and for
the transaction of general business. Such annual meetings shall
be general meetings, that is to say, open for the transaction of
any business within the powers of the Corporation without special
notice of such business, except in any case in which special
notice is required by statute.
Section 2. Special Meetings.
Special meetings of the stockholders of
the Corporation may be called at any time by either the Chairman
of the Board or the President and shall be called by the
President or the Secretary at the request in writing of a
majority of the Board of Directors, or at the request in writing
of the holders of a majority of all the shares outstanding and
entitled to vote. Such request shall state the purpose of the
meeting and notice thereof shall be given as provided in Section
3 of this Article I. No business other than that stated in the
notice of the meeting shall be transacted at any special meeting
of the stockholders, however called. Special meetings of the
stockholders shall be held at the principal office of the
Corporation, or at such other place designated in the notice to
stockholders.
Section 3. Notice of Meetings.
Not less than ten (10) days and not more
than ninety (90) days written or printed notice of every annual
meeting and of every special meeting of the stockholders shall be
given to each holder of stock having voting rights whose name
appears as a holder of record upon the books of the Corporation
at the close of business on the date fixed by the Board of
Directors for the determination of stockholders entitled to
notice of such meeting, and, if no such date shall have been
fixed by the Board for such purpose, then to the holders of
record on the date when such notice shall be given. Such notices
of annual or special meetings shall state the place, day and hour
of such meeting, and, in the case of special meetings, shall also
state the business proposed to be transacted thereat. Such
notice shall be given to each stockholder by mailing it postage
prepaid and addressed to him at his address as it appears upon
the records of the Corporation. No notice of the time, place or
purpose of any meeting of stockholders, whether prescribed by
law, by the Charter, or by these By-Laws, need be given to any
stockholder who attends in person, or by proxy, or who, in
writing executed and filed with the records of the meeting either
before or after the holding thereof, waives such notice. No
notice of any meeting, regular or special, be given to any
stockholder who is not entitled to vote thereat.
Section 4. Quorum.
At any meeting of stockholders, the
presence, in person or by proxy, of shareholders entitled to cast
a majority of votes thereat shall constitute a quorum for the
election of directors or for the transaction of other business;
but, in the absence of a quorum, the stockholders entitled to
vote who shall be present in person or by proxy at any meeting
(or adjournment thereof), may, by vote of a majority of shares so
present and entitled to vote, adjourn the meeting from time to
time, but not for a period of over thirty (30) days at any one
time, by announcement at the meeting until a quorum shall attend.
At any such adjourned meeting at which a quorum shall be present,
any business may be transacted at the meeting as originally
notified.
Section 5. Organization.
The Chairman of the Board shall call
meetings of the Stockholders to order and shall act as
Chairman of such meetings. The Board of Directors or Stockholders
may appoint any stockholder to act as Chairman of any meeting in
the absence of the Chairman of the Board and President. The
Secretary of the Corporation shall act as Secretary at all
meetings of Stockholders, but, in the absence of the Secretary,
the presiding officer may appoint any person to act as Secretary
of the meeting.
Section 6. Proxies.
Stockholders may vote either in person or by
proxy, but no proxy which is dated more than eleven months before
the meeting at which it is offered shall be accepted unless such
proxy shall on its face name a longer period for which it is to
remain in force. Every proxy shall be in writing subscribed by a
stockholder, or by his duly authorized attorney, and shall be
dated; but need not be sealed, witnessed or acknowledged.
Section 7. Voting.
At every meeting of the stockholders,
every stockholder of the Corporation shall be entitled to one (1)
vote for each share of voting stock registered in his name on the
books of the Corporation on the date for the determination of
voting rights thereat. The affirmative vote of the holders of a
majority of the stock issued and entitled to vote shall be
sufficient and necessary to elect directors or for the taking or
authorization of any action by the stockholders.
Section 8. List of Stockholders.
Prior to each meeting of the
stockholders, the Secretary shall prepare a full, true and
complete list in alphabetical order of all stockholders entitled
to vote at such meeting, indicating the number of shares held by
each, and shall be responsible for the production of such list at
the meeting.
Section 9. Stockholder Proposals.
Nominations by stockholders of persons
for election to the Board of Directors of the Corporation and the
proposal by stockholders of business to be considered by the
stockholders at an annual meeting of stockholders may be made by
any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice provided for in this
By-Law, who is entitled to vote at the meeting and who complies
with the notice procedures set forth in this By-Law.
For nominations or other business to be
properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be
timely, a stockholder's notice shall be delivered to the
Secretary at the principal executive offices of the Corporation
not later than the close of business on the 120th day prior to
the first anniversary of the mailing of the proxy statement with
respect to preceding year's annual meeting; provided, however
that in the event that the date of the annual meeting is more
than 30 days before or after the first anniversary date of the
preceding year's annual meeting, notice by the stockholder to be
timely must be so delivered not later than the close of business
on the 90th day prior to such annual meeting. In no event shall
be public announcement of an adjournment of an annual meeting
commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (including such person's written
consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to any other business
that the stockholder proposed to bring before the meeting, a
brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination
or proposal is made; (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (ii) the class and number of shares of
the Corporation which are owned beneficially and of record by
such stockholder and such beneficial owner.
Notwithstanding anything in the second
sentence of the previous paragraph of this By-Law to the
contrary, in the event that the number of directors to be elected
to the Board of Directors of the Corporation is increased and
there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased
Board of Directors at least 100 days prior to the first
anniversary of the preceding year's annual meeting, a
stockholder's notice required by this By-Law shall also be
considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to
the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made
by the Corporation.
Only such persons who are nominated in
accordance with the procedures set forth in these By-Laws shall
be eligible to serve as directors and only such business shall be
conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in
these By-Laws. Except as otherwise provided by law, the Charter
or these By-Laws, the Chairman of the meeting shall have the
power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed,
as the case may be, in accordance with the procedures set forth
in these By-Laws and, if any proposed nomination or business is
not in compliance with these By-Laws, to declare that such
defective proposal or nomination shall be disregarded.
Notwithstanding the foregoing provisions
of these By-Laws, a stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in
these By-Laws. Nothing in these By-Laws shall be deemed to
affect any rights of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
For purposes of these By-Laws, "public
announcement" shall mean disclosure in a press release reported
by the Dow Jones News Services, Associated Press or comparable
national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the Exchange Act.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Election and Powers.
The business and property of the
Corporation shall be conducted and managed by its Board of
Directors which shall consist of not less than three (3) members
nor more than fifteen (15) members. The Board of Directors may
increase or decrease the number of directors (but the number of
Directors shall not be more than 15 or less than 3) at any
meeting called for that purpose. The members of the Board of
Directors shall be elected at the annual meeting of stockholders
by holders of stock represented in person or by proxy at such
meeting and entitled to vote thereat. Each director elected at
any annual meeting shall hold office until his successor shall
have been elected and qualified or until he shall die or resign,
or shall have been removed.
Section 2. First Regular Meeting.
After each meeting of stockholders at
which a Board of Directors shall have been elected, the Board of
Directors so elected shall meet for the purpose or organization
and the transaction of other business, at such time and place as
may be designated by the Chairman of the Board.
Section 3. Additional Regular Meetings.
Regular meetings of the Board of
Directors shall be held at such times as may be fixed by
resolution of the Board.
Section 4. Special Meetings.
Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the
Board, the President, or by a majority of the Directors either in
writing or by vote.
Section 5. Place of Meetings.
Subject to the provisions of Section 2 of
this Article II, the Board of Directors may hold its regular
meetings at such place or places as it may from time to time
determine. Each special meeting of the Board of Directors shall
be held at such place as shall be designated in the notice of the
meeting.
Section 6. Notice of Meeting.
Notice of the place, day and time of
every regular and special meeting shall be given to each
director, either:
1. By notice in writing mailed to him
postage prepaid not later than the second day before the day set
for the meeting and addressed to him at his last known post
office address according to the records of the Corporation; or
2. By notice in writing delivered
personally or at his usual place of business not later than the
day before the day fixed for the meeting; or
3. By oral personal or telephone
communication or by fax not later than the day before the day set
for the meeting.
provided, however, that no notice need be given to any director
with respect to the first regular Board of Directors meeting
following the meeting of the stockholders at which a Board of
Directors shall be elected. No notice of any meeting need be
given to any director, who, in writing executed and filed with
the records of the meeting either before or after the holding
thereof, waives such notice.
Section 7. Quorum.
A majority of the Board of Directors
shall be necessary and sufficient to constitute a quorum for the
transaction of business at every meeting of the Board of
Directors.
Section 8. Voting.
The affirmative vote of a majority of the
directors present at any meeting of the Board of Directors at
which a quorum is present shall be sufficient and necessary for
the taking or authorization of any action by the Board of
Directors.
Section 9. Organization.
At all meetings of the Board of Directors
the Chairman of the Board, or in his absence, the President shall
preside. The Secretary of the Corporation shall act as Secretary
at all meetings of the Board, and in his absence the Chairman of
the meeting may designate any person to act as Secretary.
Section 10. Removal.
At any meeting of the stockholders called
for the purpose, any director may, by the vote of a majority of
all the shares of stock outstanding and entitled to vote, be
removed from office, with or without cause, and another may be
appointed in the place of the person so removed, to serve for the
remainder of his term.
Section 11. Vacancies.
In case of any vacancy in the Board of
Directors through death, resignation, or any cause other than
removal by the stockholders, the remaining directors may elect a
successor to hold office for the unexpired portion of the term of
the person whose place shall be vacant and until his successor
shall have been duly chosen and qualified.
Section 12. Compensation.
Directors, as such, shall not receive any
stated compensation for their services, but by resolution of the
Board of Directors and a fixed sum and expenses of attendance, if
any, may be allowed for attendance at any regular or special
meeting thereof. Nothing in this Section shall be construed to
preclude a director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 13. Executive Committee.
The Board of Directors may designate by
vote of a majority of the whole Board, three or more directors to
constitute an executive committee, and may designate one of such
members to act as Chairman. Vacancies in the Executive Committee
may be filled by the remaining members of the Executive Committee
at a meeting at which a quorum is present. The Executive
Committee may exercise such powers of the Board of Directors in
the management of business and affairs of the Corporation as the
Board may from time to time confer upon it, and shall have the
power to authorize the seal of the Corporation to be affixed to
all papers which may require it. A majority of the members of
the Executive Committee may determine its action and fix the time
and place of its meetings unless otherwise provided by the Board
of Directors.
Section 14. Other Committees.
The Board of Directors may designate, by
resolution, one or more directors to constitute a committee,
other than an executive committee, such other committee to serve
at the pleasure of the Board of Directors.
Section 15. Nomination of Directors.
Nominations for directors to be elected
at the Corporation's annual meeting of stockholders shall be made
by the Board of Directors of the Corporation. Nominations for
directors to be elected at the Corporation's annual meeting of
stockholders may be made by stockholders in accordance with the
procedures set forth in Article I Section 9 of these By-Laws.
Only such persons who are nominated in accordance with the
procedures set forth in these By-Laws shall be eligible to serve
as directors.
Section 16. Qualification of Directors.
Unless waived by the affirmative vote a
majority of directors then in office, no individual may be
nominated or serve as a director unless: (i) such individual has
continuously been the record and beneficial owner (as defined in
Rule 13d-3 promulgated under the Exchange Act) of at least one
percent of the issued and outstanding shares of voting stock of
the Corporation for a period of at least one year immediately
preceding the nomination of such individual as a director; and
(ii) such individual's principal residence was in the State of
Maryland during the entire year immediately preceding the
nomination of such individual as a director. The Board of
Directors may require such evidence of any proposed nominee's
satisfaction of each of the foregoing qualifications as it deems
necessary.
ARTICLE III
OFFICERS
Section 1. Officers.
The officers of the Corporation shall be
a Chairman of the Board, a Vice Chairman of the Board (if elected
by the Board of Directors), a President, one or more Vice
Presidents (if elected by the Board of Directors), a Secretary
and a Treasurer, all of whom shall be elected by, and be subject
to the control of, the Board of Directors. The officers shall be
elected annually by the Board of Directors at its first meeting
following the annual meeting of stockholders, subject to changes
or additions at other regular or special meetings of the Board of
Directors. Each of such officers shall hold office for a term of
one year, and thereafter until his successor is elected and
qualified or until his death, resignation or removal. The Board
of Directors may appoint such other officers and assistant
officers as it deems necessary, who shall have such authority and
perform such duties as the Board may from time to time prescribe.
Section 2. Chairman of the Board.
The Chairman of the Board shall be a
director of the Corporation and the chief executive officer of
the Corporation. He shall preside at all meetings of the
stockholders and of the Board of Directors. He shall supervise,
control and direct all of the business and affairs of the
Corporation. He shall have authority to sign and execute in the
name of the Corporation all authorized deeds, contracts and other
instruments.
Section 3. Vice Chairman of the Board.
The Vice Chairman of the Board shall be a
director of the Corporation. In the event of the absence of the
Chairman of the Board, the Vice Chairman shall perform all of the
duties of the Chairman and when so acting have all of the powers
of the Chairman. He shall have authority to sign and execute in
the name of the Corporation all authorized deeds, contracts and
other instruments.
Section 4. President.
In the absence of the Chairman and Vice
Chairman of the Board, he shall preside at all meetings of the
stockholders and of the Board of Directors. He shall be
responsible for the day-to-day operations of the Corporation
subject to the supervision and control of the Board of Directors
and the Chairman of the Board. He shall have authority to sign
and execute in the name of the Corporation all authorized deeds,
contracts and other instruments.
Section 5. Vice President.
In the absence of the President, the Vice
Presidents (in the order designated at the time of their
election, or in the absence of any designation, in the order of
their election) shall perform all the duties of the President and
when so acting, shall have the powers of the President. The Vice
Presidents shall also have such additional powers and duties as
may be assigned to each of them by the Board of Directors.
Section 6. Secretary.
The Secretary shall keep the minutes of
the meetings of the stockholders and of the Board of Directors in
books provided for the purpose; he shall see that all notices are
duly given in accordance with the provisions of the By-Laws or as
required by law; he shall be the custodian of the records and of
the corporate seal or seals of the Corporation; he shall see that
the corporate seal is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly
authorized, and when so affixed may attest the same; he may sign,
with the President or Chairman of the Board, certificates of
stock of the Corporation; and, in general, he shall perform all
duties ordinarily incident to the office of a Secretary of a
corporation, and such other duties as, from time to time, may be
assigned to him by the Board of Directors, or by the President.
Section 7. Treasurer.
The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements
of the Corporation, and shall deposit, or cause to be deposited,
in the name of the Corporation all moneys or other valuable
effects in such banks, trust companies, or other depositories as
shall, from time to time, be selected by the Board of Directors;
he shall render to the President and to the Board of Directors,
whenever requested, an account of the financial condition of the
Corporation; he may sign, with the President, or Chairman of the
Board, certificates of stock of the Corporation; and, in general,
shall perform all duties ordinarily incident to the office of a
treasurer of a corporation, and such other duties as may be
assigned to him by the Board of Directors or by the President.
Section 8. Assistant Officers.
The Board of Directors may elect one or
more Assistant Secretaries and one or more Assistant Treasurers.
Each such Assistant Secretary and Assistant Treasurer shall hold
office for such period and shall have such authority and perform
such duties as the Board of Directors may prescribe.
Section 9. Compensation.
The Board of Directors shall have power
to fix the compensation of all officers of the Corporation. It
may authorize any officer upon whom the power of appointing
subordinate officers may have been conferred to fix the
compensation of such subordinate officers.
Section 10. Reimbursement.
Any payments made to an officer of the
Corporation such as a salary, commission, bonus, interest or
rent, or entertainment expense incurred by him, which shall be
disallowed in whole or in part as a deductible expense by the
Internal Revenue Service, shall be reimbursed by such officer to
the Corporation to the full extent of such disallowance. It
shall be the duty of the directors, as a Board, to enforce
payment of each amount disallowed. In lieu of payment by the
officer, subject to the determination of the directors,
proportionate amounts may be withheld from his future
compensation payments until the amount owed to the Corporation
has been recovered.
Section 11. Officers Holding More Than One
Office.
Two or more officers (except that of
President and Vice President, Secretary and Assistant Secretary,
and Treasurer and Assistant Treasurer) may be held by the same
person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity.
Section 12. Removal.
The Board of Directors shall have power
at any regular or special meeting to remove any officer with or
without cause, and such action shall be conclusive on the officer
so removed. The Board of Directors may authorize any officer to
remove subordinate officers.
Section 13. Vacancies.
The Board of Directors at any regular or
special meeting shall have power to fill a vacancy occurring in
any office for the unexpired portion of the term.
ARTICLE IV
STOCK
Section 1. Certificates.
Each stockholder shall be entitled to a
stock certificate or certificates certifying the number and kind
of shares owned. The certificates shall be signed by the
President or Chairman of the Board and by the Secretary or
Treasurer and shall be sealed with the seal of the Corporation.
The Corporation may treat the holder of
record of any share or shares of stock as the holder in fact
thereof and shall not be bound to recognize any equitable or
other claim to or interest in any such share or shares on the
part of any other person, save as expressly provided by the laws
of Maryland.
The name and address of the person to
whom the shares represented thereby are issued with the number of
shares and date of issue shall be entered on the records of the
Corporation.
All certificates surrendered to the
Corporation shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares
shall have been surrendered and cancelled, except that in the
case of a lost, destroyed or mutilated certificate a new one may
be issued therefor upon such terms and indemnity to the
Corporation as may be prescribed by the Board of Directors.
Section 2. Transfer.
Transfer of shares of the
Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by his legal
representative, or by his attorney thereunto authorized by power
of attorney duly exercised and filed with the Secretary of the
Corporation, and on surrender for cancellation of the certificate
for such shares.
Section 3. Rules and Regulations.
The Board of Directors shall have
authority to make all such rules and regulations as they may deem
expedient concerning the issue, transfer and registration of
stock certificates and may appoint a transfer agent and a
registrar of transfers.
Section 4. Closing of Transfer Books or
Fixing of Record Date.
The Board of Directors may fix, in
advance, a date as the record date for the purpose of determining
shareholders entitled to notice of, or to vote at, any meeting of
shareholders, or shareholders entitled to receive payment of any
dividend or the allotment of any rights, or in order to make a
determination of shareholders for any other proper purpose. Such
date, in any case, shall not be more than sixty (60) days, and in
case of a meeting of shareholders not less than ten (10) days,
prior to the date on which the meeting or particular action
requiring such determination of shareholders is to be held or
taken.
ARTICLE V
SUNDRY PROVISIONS
Section 1. Dividends.
Subject to the applicable provisions of
law and of the Charter, the Board of Directors may in its
discretion declare what, if any, dividends shall be paid or upon
any class of such stock, the date when such dividends shall be
payable, and the date for the determination of holders of record
to whom such dividends shall be payable.
Section 2. Working Capital.
The Board of Directors shall, from time
to time, and in its discretion, fix and vary the amount of
working capital of the Corporation and determine what portion of
the surplus shall be reserved as working capital or declared as
dividends and distributed to the stockholders.
Section 3. Negotiable Instruments and Other
Evidences of Indebtedness.
All checks, drafts or orders for the
payment of money, notes and other evidences of indebtedness,
issued in the name of the Corporation, shall be signed by such
officer or officers as may be designated from time to time by
resolution of the Board of Directors. No checks shall be signed
in blank.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall
be as provided by the Board of Directors.
Section 5. Seal.
The seal of the Corporation shall be
circular in form, with the name of the Corporation inscribed
around the outer edge, and in the center shall inscribed the
words "MARYLAND" and the year of incorporation.
Section 6. Amendments.
The Board of Directors shall have the
exclusive power to adopt, alter or repeal any provision of these
By-Laws and to make new By-Laws, by vote of a majority of all the
directors then in office.
Section 7. Contracts.
No contract or other transaction between
this Corporation and any other corporation and no act of this
Corporation shall in any way be affected or invalidated by the
fact that any of the directors of this Corporation are
pecuniarily or otherwise interested in or are directors or
officers of such other corporation; any director, individually or
any firm of which any director may be a member, may be a party
to, or may be pecuniarily or otherwise interested in, any
contract or transaction of this Corporation, provided that the
fact that he or such firm is so interested shall be disclosed or
shall have been known to the Board of Directors or a majority
thereof; and any director of this Corporation who is also a
director or officer of such other corporation or who is so
interested may be counted in determining the existence of a
quorum at any meeting of the Board of Directors of this
Corporation, which shall authorize any such contract or
transaction, and may vote thereat to authorize any such contract
or transaction, with the like force and effect as if he were not
such director or officer of such other corporation or not so
interested.
Section 8. Voting Upon Stocks or Other
Ownership Interests.
Unless otherwise ordered by the Board of
Directors, the President and the Chairman of the Board, or either
of them, shall have full power and authority on behalf of the
Corporation to attend and to vote and to grant proxies to be used
at any meetings, or for written consents, of stockholders or
other equity owners of any corporation or other entity in which
the corporation may own an interest.
ARTICLE VI
INDEMNIFICATION
Section l. Definitions.
As used in this Article VI, any word or
words that are defined in Section 2-418 of the Corporations and
Associations Article of the Annotated Code of Maryland (the
"Indemnification Section"), as amended from time to time, shall
have the same meaning as provided in the Indemnification Section.
Section 2. Indemnification of Directors and
Officers.
The Corporation shall indemnify and
advance expenses to a director or officer of the Corporation in
connection with a proceeding to the fullest extent permitted by
and in accordance with the Indemnification Section.
Section 3. Indemnification of Other Agents
and Employees.
With respect to an employee or agent,
other than a director or officer of the Corporation, the
Corporation may, as determined by and in the discretion of the
Board of Directors of the Corporation, indemnify and advance
expenses to such employees or agents in connection with a
proceeding to the extent permitted by and in accordance with the
Indemnification Section.
END OF BY-LAWS
Exhibit 10.4
The CIT Group/
Commercial Services, Inc.
1211 Avenue of the Americas
New York, NY 10036
September 30, 2002
UNIVERSAL SECURITY INSTRUMENTS, INC.
7 Gwynns Mill Court
Owings Mills, Maryland 21117-3586
Ladies and Gentlemen:
We refer to the Factoring Agreement between us dated February 28, 1995, as
supplemented and amended (the "Agreement"). Capitalized terms used and not
otherwise defined herein shall have the same meanings given them in the
Agreement.
This shall confirm that pursuant to mutual consent and understanding,
effective as of September 30, 2002, the interest as referred to in Paragraph
6(a) of the Agreement shall be, and hereby is, amended from one and
one-quarter percent (1-1/4%) above the Chase Rate to one percent (1%) above
the Chase Rate.
To compensate us for the use of our in-house legal department and facilities
in documenting this agreement, you agree to pay us a Documentation Fee equal
to $125.00. Said amount shall be due and payable upon the date hereof and may
at our option be charged to your account under the Agreement on the due date
thereof.
Except as herein specifically provided, the Agreement remains in full force
and effect in accordance with its terms. If you are in agreement with the
foregoing, please so indicate by signing and returning to us the enclosed copy
of this letter.
Very truly yours,
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By: /s/ Charles M. Carbone
Name: Charles M. Carbone
Title: Vice President
Read and Agreed to:
UNIVERSAL SECURITY INSTRUMENTS, INC.
By: /s/ Harvey Grossblatt
Name: Harvey Grossblatt
Title: President
Exhibit 10.7
ADDENDUM TO EMPLOYMENT AGREEMENT
THIS ADDENDUM TO EMPLOYMENT AGREEMENT (the "Addendum") is made this 21st
day of October, 2002, to be effective as of April 1, 2002, by and between
UNIVERSAL SECURITY INSTRUMENTS, INC., a Maryland corporation (the "Company")
and HARVEY B. GROSSBLATT (the "Executive").
INTRODUCTORY STATEMENT
The Company and Executive entered into an Employment Agreement dated as
of April 1, 2002 (the "Original Agreement"). The parties desire to extend the
term of the Original Agreement, and amend certain other provisions of the
Original Agreement to be effective from and after April 1, 2002.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
A. All capitalized terms not otherwise defined in this Addendum shall
have the meanings set forth in the Original Agreement.
B. Section 1(b) of the Original Agreement is hereby amended in it
entirety to read as follows:
(b) Term of Employment. Subject to Section 7, the Company shall
employ the Executive pursuant to the terms hereof for the period commencing as
of the date hereof and ending on June 30, 2005 (the "Term"). The period
during which the Executive is employed pursuant to this Agreement, including
any renewal thereof shall be referred to as the "Employment Period.".
C. Section 3(b) of the Original Agreement is hereby amended by adding
the following at the end thereof:
To the extent the Company reports income from both its
domestic operations (currently shown on the Company's
annual consolidated statements of operations as
"Operating income") and Hong Kong Joint Venture
(currently shown on the Company's annual consolidated
statements of operations as "Equity in earnings of Hong
Kong joint venture"), the Bonus expense shall be
allocated between such two components in the respective
proportions as such components bear to the consolidated
Net Income (currently shown on the Company's annual
consolidated statements of operations).
D. In all other respects, the Original Agreement, as amended hereby,
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the day
and year first above written.
UNIVERSAL SECURITY INSTRUMENTS, INC.
By: /s/ Stephen C. Knepper /s/ Harvey B. Grossblatt
Stephen C. Knepper, Chairman Harvey B. Grossblatt
Exhibit 99.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Universal Security
Instruments, Inc. (the "Company") on Form 10-Q for the period
ending September 30, 2002 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 this Form 10-Q fairly
presents, in all material respects, the financial
condition and result of the Company as of, and for,
the periods reflected therein.
Date: November 14, 2002 /s/ Stephen C. Knepper
Stephen C. Knepper
Chairman,
Chief Executive Officer
/s/ Harvey B. Grossblatt
Harvey B. Grossblatt
President,
Chief Financial Officer
Exhibit 99.2
November 13, 2002
Dear Partners/Shareholders:
We are very pleased to share with you results for our second
quarter ended September 30, 2002. The Universal Security team
executed its plan soundly and with near precision across all
operational areas for the quarter. As a result, we have achieved
one of the finest quarters in the Company's history.
Perhaps more significantly, we have now delivered four consecutive
quarters of outstanding results in a highly challenging overall
economic environment. This sustained performance should send a
strong signal about our current momentum and direction in the
marketplace.
For the second quarter, sales rose 54% to $4,091,272 versus
$2,653,482 a year ago. Earnings continue to dramatically increase
to $630,129, or $0.60 per basic share ($0.55 per diluted share),
versus last year's $23,543, or $0.03 per basic and diluted share.
Management believes these results indicate that the Company is very
well on track -- as I wrote in my last letter to you. For the six
months ended September 30, 2002, sales rose 60% to $7,842,198
versus $4,908,612 for the same period last year. The Company
reported net earnings of $1,207,069, or $1.17 per basic share
($1.09 per diluted share), compared to earnings of $85,902, or
$0.09 per basic and diluted share, for the same period last year.
Our performance reflects the success of the business model we
implemented late last year, focusing on:
* Aggressively building market share
* Increasing operational efficiency
* Fully leveraging the opportunities offered by our Hong Kong
joint venture
Our 50%-owned Hong Kong joint venture has given us key competitive
advantages in product quality, reliability and pricing. In
implementing the new Universal business model, we have been able to
realize significant additional financial benefits from our Hong
Kong operations. As Universal and our joint venture both continue
to increase sales in all the markets we serve, revenue has
increased at our production facility in southern China which in
turn has contributed to higher overall profitability. Successful
expansion by Universal and our joint venture into new markets,
including Europe, Australia and elsewhere, has also led to lower
component costs and increased margins.
Universal Security increased its gross margins by 11% versus the
same quarter a year ago. We have also reduced our percentage of
sales, general and administrative expense to 23% from 28% for the
same quarter last year. We continue to exceed our expectations
and anticipate strong performance. In addition, as previously
announced, we are currently exploring the possibility of an initial
public offering of the joint venture company on the Hong Kong Stock
Exchange (GEM Section). More information on that process will be
released as available.
Universal's recent success has not gone unnoticed by the business
press. In recent months, we have received coverage from the
television program Business Now, as well as significant stories in
The Washington Post and Baltimore Business Journal. Our best story
is our performance and operating results.
Looking ahead, we are very pleased to let you know that USI has
been chosen by Rexel, Inc. (one of the largest distributors to the
electrical trade in the United States) and have been featured,
along with a very limited number of other well respected brands,
for a promotion with Rexel from October 1st through December 31st.
Customers of Rexel will receive free the USI ELECTRIC red fire
engine, which we all feel will make an ideal Holiday gift. This is
part of the truck series that Rexel is giving away, combined with
the purchase of USI ELECTRIC products. We were quite thrilled to be
selected as this continues to raise our visibility in the
electrical industry.
Everyone at Universal Security is highly focused on building on our
success during the second half of our fiscal year. I can assure
you that your management team is committed, enthusiastic and
productive. We very much look forward to reporting our third
quarter results for the period ending December 31st .
As always, should you have any questions, please don't hesitate to
contact me at any time.
Respectfully,
Stephen C. Knepper, Chairman
__________________________________________________________
Statements contained in this document that are not historical facts
are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Although
UNIVERSAL SECURITY INSTRUMENTS, INC. believes that the expectations
reflected in such forward-looking statements are reasonable, the
forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from those
projections.
Exhibit 99.2
For Immediate Release
Contact: Harvey Grossblatt, President
Universal Security Instruments, Inc.
410-363-3000
or
Don Hunt, Brian Edwards
Lambert, Edwards & Associates, Inc.
616-233-0500
Universal Security Instruments Posts Sharply Higher Second-Quarter
Sales & Earnings
Sales Grow 54%; Earnings Per Share Rise to $0.60 Vs. $0.03
OWINGS MILLS, MD, November 13, 2002 - Universal Security
Instruments, Inc. (OTC-BB: USEC) today announced significantly
higher sales and earnings for its second quarter ended September
30, 2002, citing strong overall sales, increased market share and
continued growth at its Hong Kong joint venture.
The Owings Mills, MD-based designer and marketer of safety and
security equipment posted net earnings of $630,129, or $0.60 per
basic share ($0.55 per diluted share), on net sales which rose 54%
to $4,091,272, compared with net earnings of $23,543, or $0.03 per
basic and diluted share, on net sales of $2,653,482 for last year's
second quarter.
For the six months ended September 30, 2002, sales rose 60% to
$7,842,198, versus $4,908,612 for the same period last year. The
Company reported net earnings of $1,207,069 or $1.17 per basic
($1.09 per diluted share), compared to earnings of $85,902, or
$0.09 per basic and diluted share, for the same period last year.
"Our second-quarter and six-month results directly reflect the
fundamental improvements our executive team made to Universal's
business model last year. At that time, we pledged to refocus on
building market share, increasing operational efficiency and
leveraging our 50%-owned Hong Kong joint venture. We have executed
well in each of these areas and the bottom-line results have
followed, despite a highly challenging economic environment," said
Steve Knepper, chairman of the board and chief executive officer of
Universal Security Instruments.
"Our efforts to increase Universal's domestic market share have
resulted in increased revenues for our Hong Kong joint venture. As
both Universal and our joint venture company have increased total
sales and market penetration in North America, Europe, Australia
and elsewhere, revenue has increased at our production facility in
southern China. Growth in these markets has also lowered costs and
increased margins.
"In addition, as previously announced, we are currently exploring
the possibility of an initial public offering of the joint venture
company on the Hong Kong Stock Exchange (GEM Section). We will
make additional future announcements on this process as
appropriate."
Knepper added that Universal increased its gross margins by 11%
during the second quarter while reducing sales, general and
administrative expense to approximately 23% of total revenue,
compared to 28% for the same quarter last year.
"Looking ahead, we continue to see significant opportunity in all
our markets. Our new carbon monoxide alarm has received good
initial response. Production is being increased and the Company
believes this will be an important new product category going
forward into 2003."
UNIVERSAL SECURITY INSTRUMENTS, INC., founded in 1969, is a
Maryland-based manufacturer and worldwide marketer of safety and
security products directly and through its 50%-owned Hong Kong
joint venture.
UNIVERSAL SECURITY INSTRUMENTS, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended September 30,
2002 2001
Sales $ 4,091,272 $2,653,482
Net income* 630,129 23,543
Income per share
Basic .60 .03
Diluted .55 .03
Weighted average number of common
shares outstanding
Basic 1,054,205 912,270
Diluted 1,152,001 926,041
Six Months Ended September 30,
2002 2001
Sales $ 7,842,198 $4,908,612
Net income* 1,207,069 85,902
Income per share
Basic 1.17 .09
Diluted 1.09 .09
Weighted average number of common
shares outstanding
Basic 1,034,488 912,270
Diluted 1,105,055 925,187
* Due to the tax benefit carryforward of prior years' operating
losses, no tax liability was incurred.
_______________________________________________________
Statements contained in this press release that are not historical
facts are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Although
UNIVERSAL SECURITY INSTRUMENTS, INC. believes that the expectations
reflected in such forward-looking statements are reasonable; the
forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from those
projections.