What changed in UNIVERSAL SAFETY PRODUCTS, INC.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of UNIVERSAL SAFETY PRODUCTS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+51 added−64 removedSource: 10-K (2023-07-14) vs 10-K (2022-07-14)
Top changes in UNIVERSAL SAFETY PRODUCTS, INC.'s 2023 10-K
51 paragraphs added · 64 removed · 45 edited across 1 sections
- Item 2. Properties+51 / −64 · 45 edited
Item 2. Properties
Properties — owned and leased real estate
45 edited+6 added−19 removed18 unchanged
Item 2. Properties
Properties — owned and leased real estate
45 edited+6 added−19 removed18 unchanged
2022 filing
2023 filing
Biggest changeWe believe that the following critical accounting policies affect management’s more significant judgments and estimates used in the preparation of its consolidated financial statements. For a detailed discussion on the application of these and other accounting policies, see Note A to the consolidated financial statements, included in this Annual Report.
Biggest changeFor a detailed discussion on the application of these and other accounting policies, see Note A to the consolidated financial statements included in this Annual Report. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates.
This determination was made based on the Company’s history of losses from operations and the uncertainty as to whether the Company will generate sufficient taxable income to use the deferred tax assets prior to their expiration. Accordingly, a valuation allowance was established to fully offset the value of the deferred tax assets.
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.
The Company has accumulated net operating losses and other income tax credits for which a full valuation allowance has been established. Accordingly, income taxes or deferred income tax benefits indicated by the provision for income taxes as shown on the Consolidated Statements of Operations for the fiscal years ended March 31, 2022, and 2021 varies from the expected statutory rate.
The Company has accumulated net operating losses and other income tax credits for which a full valuation allowance has been established. Accordingly, income taxes or deferred income tax benefits indicated by the provision for income taxes as shown on the Consolidated Statements of Operations for the fiscal years ended March 31, 2023, and 2022 varies from the expected statutory rate.
Grossblatt receives travel mileage and other credit card benefits from these charges. The maximum amount outstanding and due to Mr. Grossblatt at any point during the fiscal year ended March 31, 2022, and 2021 may include amounts submitted for personal expense reimbursement and amounts paid by Mr.
Grossblatt receives travel mileage and other credit card benefits from these charges. The maximum amount outstanding and due to Mr. Grossblatt at any point during the fiscal year ended March 31, 2023, and 2022 may include amounts submitted for personal expense reimbursement and amounts paid by Mr.
Our operating results for the fiscal years ended March 31, 2022, and 2021 continue to be dependent upon the economic conditions of the U.S. housing market. Management believes that with an improved housing market and sales of our sealed products, the Company will improve profitability.
Our operating results for the fiscal years ended March 31, 2023, and 2022 continue to be dependent upon the economic conditions of the U.S. housing market. Management believes that with an improved housing market and sales of our sealed products, the Company will continue to improve profitability.
Management expects our product offerings including sealed battery alarm and ground fault circuit interrupter products will compete on price and functionality with similar products offered by our larger competitors. While we believe there will be market acceptance of our products, we cannot be assured of this.
Management expects our product offerings, including sealed battery alarm and ground fault circuit interrupter products, will compete in price and functionality with similar products offered by our larger competitors. While we believe there will be market acceptance of our products, we cannot be assured of this.
Footnote F to the financial statements provides a reconciliation of the amount of tax that would be expected at statutory rates and the amount of tax expense or benefit provided at the effective rate of tax for each fiscal period. Net (Loss) Income.
Footnote E to the financial statements provides a reconciliation of the amount of tax that would be expected at statutory rates and the amount of tax expense or benefit provided at the effective rate of tax for each fiscal period. Net Income (Loss).
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 allowances to cover anticipated doubtful accounts based upon historical experience. 10 Table of Contents Inventories: Inventories are valued at the lower of cost or net realizable value.
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 allowances to cover anticipated doubtful accounts based upon historical experience. Inventories: Inventories are valued at the lower of cost or net realizable value.
Our consolidated financial statements detail our sales and other operational results. Accordingly, the following discussion and analysis of the fiscal years ended March 31, 2022, and 2021 relate to the operational results of the Company and its consolidated subsidiaries.
Our consolidated financial statements detail our sales and other operational results. Accordingly, the following discussion and analysis of the fiscal years ended March 31, 2023, and 2022 relate to the operational results of the Company and its consolidated subsidiaries.
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. General We are in the business of marketing and distributing safety and security products which are primarily manufactured in the PRC.
We do not undertake and specifically disclaim any obligation to update any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. General We are in the business of marketing and distributing safety and security products which are primarily manufactured in the Peoples Republic of China (PRC).
Our operating results for the fiscal years ended March 31, 2022, and 2021 continue to be dependent upon the economic conditions of the U.S. housing market.
Our operating results for the fiscal years ended March 31, 2023, and 2022 continue to be dependent upon the economic conditions of the U.S. housing market.
During the fiscal year ended March 31, 2022, and 2021, inventory purchases and other company expenses of approximately $1,582,000 and $1,206,000, respectively, were charged to credit card accounts of Harvey B. Grossblatt, the Company’s Chief Executive Officer and certain of his immediate family members. The Company subsequently reimbursed these charges in full. Mr.
During the fiscal year ended March 31, 2023, and 2022, inventory purchases and other company expenses of approximately $1,748,000 and $1,582,000, respectively, were charged to credit card accounts of Harvey B. Grossblatt, the Company’s Chief Executive Officer and certain of his immediate family members. The Company subsequently reimbursed these charges in full. Mr.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Common Stock Our common stock, $.01 par value (the “Common Stock”) trades on the NYSE MKT LLC exchange, under the symbol UUU. As of March 31, 2022, there were 133 record holders of the Common Stock.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Common Stock Our common stock, $.01 par value (the “Common Stock”) trades on the NYSE MKT LLC exchange, under the symbol UUU. As of March 31, 2023, there were 127 record holders of the Common Stock.
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 fulfillment cost and are recorded in selling, general and administrative expense.
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 of completing the sale and are recorded in selling, general and administrative expense.
Advances from Merchant are at the sole discretion of Merchant based on their assessment of the Company’s receivables, inventory and financial condition at the time of each request for an advance. The unused availability of this facility totaled approximately $11,000 on March 31, 2022.
Advances from Merchant are at the sole discretion of Merchant based on their assessment of the Company’s receivables, inventory and financial condition at the time of each request for an advance. The unused availability of this facility totaled approximately $852,000 on March 31, 2023.
The closing price for the Common Stock on that date was $4.25. We have not paid any cash dividends on our common stock, and it is our present intention to retain all cash flow for use in future operations. ITEM 7 .
The closing price for the Common Stock on that date was $2.32. We have not paid any cash dividends on our common stock, and it is our present intention to retain all cash flow for use in future operations. ITEM 7 .
The Company acquires all the smoke alarm and carbon monoxide alarm safety products that it sells from Eyston Company, Ltd. Products manufactured for us by Eyston amounted to approximately 83.6% and 77.6% of our purchases for the fiscal years ended March 31, 2022, and 2021, respectively.
The Company acquires all the smoke alarm and carbon monoxide alarm safety products that it sells from Eyston Company, Ltd. Products manufactured for us by Eyston amounted to approximately 88.5% and 83.6% of our purchases for the fiscal years ended March 31, 2023, and 2022, respectively.
At March 31, 2022, and 2021, the Company had accounts receivable due from Eyston of $358,958 and $381,401, respectively. New Accounting Standards See Note A, Recently issued accounting pronouncements, in the Notes to the Consolidated Financial Statements for a discussion of recently adopted new accounting guidance and new accounting guidance not yet adopted. ITEM 8 .
At March 31, 2023, and 2022, the Company had accounts receivable due from Eyston of $75,947 and $358,958, respectively. New Accounting Standards See Note A, Recently issued accounting pronouncements, in the Notes to the Consolidated Financial Statements for a discussion of recently adopted new accounting guidance and new accounting guidance not yet adopted. ITEM 8 .
We base these estimates on historical experiences and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We base these estimates on historical experiences and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources.
For the fiscal years ended March 31, 2022, and 2021, the Company incurred net interest expense of $147,840 and $86,841, respectively, related to borrowing costs associated with interest paid on amounts borrowed from our factor and on extended trade payables due to Eyston.
For the fiscal years ended March 31, 2023, and 2022, the Company incurred net interest expense of $237,686 and $147,840, respectively, related to borrowing costs associated with interest paid on amounts borrowed from our factor and on extended trade payables due to Eyston.
Should our products not achieve the level of acceptance we anticipate, this could have a significant impact on our future operations, and our sales may decline, potentially impacting our ability to continue operating in our current fashion.
Should our products not achieve the level of acceptance we anticipate, this could have a significant effect on our future operations, and our sales may decline, affecting our ability to continue operating in our current fashion.
Our overall sales are primarily dependent upon the strength of the U.S. housing market. As stated elsewhere in this report, our USI Electric subsidiary markets our products to the electrical distribution trade (primarily electrical and lighting distributors and manufactured housing companies); every downturn in new home construction and new home sales negatively impacts sales by our USI Electric subsidiary.
Our overall sales are primarily dependent upon the strength of the U.S. housing market. As stated elsewhere in this report, our USI Electric subsidiary markets our products to the electrical distribution trade (primarily electrical and lighting distributors and manufactured housing companies); conditions that impact new home construction and new home sales directly impacts sales by our USI Electric subsidiary.
The increase in interest expense resulted from increased borrowing from our factor during the fiscal year ended March 31, 2022, to fund inventory purchases and operating cash requirements. Income Taxes. For the fiscal years ended March 31, 2022, and 2021 our statutory Federal tax rate was 21.0%.
The increase in interest expense resulted primarily from increases in interest rates on borrowing from our factor during the fiscal year ended March 31, 2023, to fund inventory purchases and operating cash requirements. Income Taxes. For the fiscal years ended March 31, 2023, and 2022 our statutory Federal tax rate was 21.0%.
As a percentage of net sales, these expenses were 28.3% for the fiscal year ended March 31, 2022, and 28.7% for the fiscal year ended March 31, 2021. These expenses decreased as a percentage of net sales as they do not increase in direct proportion to increases in sales.
As a percentage of net sales, these expenses were 22.4% for the fiscal year ended March 31, 2023, and 28.3% for the fiscal year ended March 31, 2022. These expenses decreased as a percentage of net sales as they do not change in direct proportion to increases in sales.
Monthly rental expense, with common area maintenance, currently approximates $14,500 and increases 3.0% per year. Effective March 2003, we entered into an operating lease for office space in Naperville, Illinois. This lease, consisting of 3,400 square feet, was renewed and extends through February 2023. The monthly rental, with common area maintenance, approximated $4,900 per month during the current fiscal year.
Monthly rental expense, with common area maintenance, currently approximates $15,000 and increases 3.0% per year. Effective March 2003, we entered into an operating lease for office space in Naperville, Illinois. This lease, consisting of 3,400 square feet, is continued on a month-to-month basis. The monthly rental, with common area maintenance, was approximately $4,900 per month during the current fiscal year.
The importation of certain wiring devices, carbon-monoxide alarms, and photo-electric alarms are currently subject to tariffs of 25%. Comparison of Results of Operations for the Years Ended March 31, 2022 and 2021 Sales. In fiscal year 2022, our net sales were $19,549,785 compared to sales in the prior year of $17,520,151, an increase of $2,029,634 (11.6%).
The importation of certain wiring devices, carbon-monoxide alarms, and photo-electric alarms are currently subject to tariffs of 25%. 6 Table of Contents Comparison of Results of Operations for the Years Ended March 31, 2023 and 2022 Sales. In fiscal year 2023, our net sales were $22,178,873 compared to sales in the prior year of $19,549,785, an increase of $2,629,088 (13.4%).
Gross profit percentage is calculated as net sales less cost of goods sold expressed as a percentage of net sales. Our gross profit percentage for the fiscal year ended March 31, 2022, was 30.9% compared to 32.2% in fiscal 2021.
The increase in sales was primarily due to increased sales to existing retail customers. Gross Profit. Gross profit percentage is calculated as net sales less cost of goods sold expressed as a percentage of net sales. Our gross profit percentage for the fiscal year ended March 31, 2023, was 28.6% compared to 30.9% in fiscal 2022.
These judgments are based on our historical experience, terms of existing contracts, current economic trends in the industry, information provided by our customers, and information available from outside sources, as appropriate.
By their nature, these judgments are subject to an inherent degree of uncertainty and actual results could differ from these estimates. These judgments are based on our historical experience, terms of existing contracts, current economic trends in the industry, information provided by our customers, and information available from outside sources, as appropriate.
Operating activities used cash principally to increase trade accounts receivable and amounts due from factor of $1,506,650, to increase inventories by $1,977,868, a net loss of $78,150, and is partially offset by an increase in accounts payable and accrued expenses of $1,669,566, and a decrease in prepaid expenses of $95,357.
Operating activities used cash principally to increase trade accounts receivable and amounts due from factor of $1,506,650, to increase inventories by $1,977,868, a net loss of $78,150, and is partially offset by an increase in accounts payable and accrued expenses of $1,669,566, and a decrease in prepaid expenses of $95,357. 7 Table of Contents Our investing activities did not provide or use cash during the fiscal years ended March 31, 2023, or 2022.
We have not created, and are not party to, any special-purpose or off balance sheet entities for the purpose of raising capital, incurring debt or operating parts of our business that are not consolidated into our financial statements and do not have any arrangements or relationships with entities that are not consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availability of our capital resources.
We have not created, and are not party to, any special-purpose or off balance sheet entities for the purpose of raising capital, incurring debt or operating parts of our business that are not consolidated into our financial statements and do not have any arrangements or relationships with entities that are not consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availability of our capital resources. 9 Table of Contents 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.
Cash flows and credit availability is expected to be adequate to fund operations for one year from the issuance date of this report. Related Party Transactions Pursuant to its written charter, the Audit Committee of the Board of Directors of the Company reviews and approves all transactions with related persons that are required to be disclosed under applicable regulation.
Related Party Transactions Pursuant to its written charter, the Audit Committee of the Board of Directors of the Company reviews and approves all transactions with related persons that are required to be disclosed under applicable regulation.
As of March 31, 2022, working capital (computed as the excess of current assets over current liabilities) decreased by $1,112,654 from $5,564,601 on March 31, 2021, to $4,451,947 on March 31, 2022. Our operating activities used cash of $1,860,051 for the year ended March 31, 2022.
As of March 31, 2023, working capital (computed as the excess of current assets over current liabilities) increased by $724,528 from $4,451,947 on March 31, 2022, to $5,176,475 on March 31, 2023. Our operating activities provided cash of $1,491,943 for the year ended March 31, 2023.
After a review of projected taxable income and the components of the deferred tax asset in accordance with applicable accounting guidance it was determined that it is more likely than not that the tax benefits associated with the remaining components of the deferred tax assets will not be realized.
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.
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 consolidated financial position, results of operations, or cash flows. 5 Table of Contents Subsequent to March 31, 2022, the Company became aware of a lawsuit filed by Thomas Henderson against Universal Security Instruments, Inc. and its directors in the U.S.
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 consolidated financial position, results of operations, or cash flows. 5 Table of Contents PART II ITEM 5 .
The decrease in overall research and development expense for the 2022 period compared to the 2021 period was due to decreased independent testing of products. Interest Expense (Net).
Engineering and product development expense for the fiscal year ended March 31, 2022, was $438,200. The decrease in overall engineering and product development expense for the 2023 period compared to the 2022 period was due to reduced payroll expenditures and decreased independent testing of products. Interest Expense (Net).
The Company had one customer in the fiscal year that ended March 31, 2022, that represented 13.6% of the Company’s accounts receivable on March 31, 2022. The Company had a different customer during the fiscal year ended March 31, 2021 that represented 21.9% of the Company’s net sales.
The Company had no customers in the fiscal year ended March 31, 2023, that represented greater than 10% of the Company’s accounts receivable, and one customer in the fiscal year ended 2022, that represented 13.6% of the Company’s accounts receivable on March 31, 2022.
Financing activities used cash of $1,321,362 during the fiscal year ended March 31, 2021, resulting primarily from the net repayment of amounts due to our Factor. Our overall sales are primarily dependent upon the strength of the U.S. housing market.
During the fiscal year ended March 31, 2022, financing activities provided cash of $2,138,182 reflecting the increase in net borrowing from the Factor. Our overall sales are primarily dependent upon the strength of the U.S. housing market.
Financial Condition, Liquidity and Capital Resources The Company reported a net loss of $78,150 and net income of $268,343 for the years ended March 31, 2022 and 2021, respectively.
The net loss for the fiscal year ended March 31, 2022, is attributed to increased legal and consulting expense associated with the terminated proposed Merger. Financial Condition, Liquidity and Capital Resources The Company reported net income of $720,411, and a net loss of $78,150 for the years ended March 31, 2023, and 2022, respectively.
In light of shutdowns, quarantines and other restrictions and delays in operations caused by or related to COVID-19 in the PRC and the United States, the Company has experienced delays in shipping and receiving of products. We are not yet able to quantify the full impact of the COVID-19 pandemic on our sales and financial results.
Other than as reflected in our financial statements, we are not yet able to quantify the full impact of the COVID-19 pandemic on our sales and financial results.
These expenses increased as a dollar amount due primarily due to increases in legal and consulting fees associated with a proposed Merger. Research and Development. Research and development expense for the fiscal year ended March 31, 2022, was $438,200. Research and development expense for the fiscal year ended March 31, 2021, was $471,545.
These expenses decreased as a dollar amount due primarily due to decreases in salaries and wages which decreased by approximately $181,000 resulting from the federal employee retention credit program, and legal and consulting fees associated with the terminated proposed Merger. Engineering and Product Development. Engineering and product development expense for the fiscal year ended March 31, 2023, was $402,692.
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 had no customers in the fiscal year that ended March 31, 2022, that represented greater than 10% of the Company’s net sales.
The Company had one customer during the fiscal year ended March 31, 2023, that represented 18.2% of the Company’s net sales, and no customers in the fiscal year that ended March 31, 2022, that represented greater than 10% of the Company’s net sales.
Grossblatt for inventory purchases or other company expenses and amounted to approximately $211,000 and $158,000, respectively, and the amount outstanding at March 31, 2022 and 2021 is approximately $44,000 and $51,000, respectively. 9 Table of Contents Critical Accounting Policies Management’s discussion and analysis of our consolidated financial statements and results of operations is based upon our consolidated financial statements included as part of this document.
Grossblatt for inventory purchases or other company expenses and amounted to approximately $217,000 and $211,000, respectively, and the amount outstanding at March 31, 2023 and 2022 is approximately $0 and $44,000, respectively.
While sales increased when compared to sales for the comparable 2021 period, delivery schedules have been delayed and freight costs have increased significantly. Our sales growth has been due primarily to increased sales to electrical distributors reflecting increased housing demand and increased retail sales to large national retailers.
Sales during our fiscal year ended March 31, 2023, increased when compared to sales for the comparable 2022 period, primarily due to less delays in unloading freight at California ports of entry thereby improving delivery schedules. However, domestic freight costs have increased. Our sales growth has been due primarily to increased retail sales to large national retailers.
The decrease in 2022 gross margin is attributed to the increase in freight and demurrage charges caused by global supply chain problems. Selling, General and Administrative Expense. Selling, general and administrative expenses increased to $5,524,343 in fiscal 2022 from $5,034,380 in fiscal 2021.
The decrease in 2023 gross margin is attributed to variations in the mix of products sold as certain products are subject to tariff charges that directly impact gross margin. Selling, General and Administrative Expense. Selling, general and administrative expenses decreased to $4,974,453 in fiscal 2023 from $5,524,343 in fiscal 2022.
We reported a net loss of $78,150 for the fiscal year 2022, compared to net income of $268,343 for fiscal 2021, a decrease of $346,493 (129.1%) in net income. The net loss for the fiscal year ended March 31, 2022, is attributed to decreased gross margins arising from increases in freight, customs, and duty expenditures.
We reported net income of $720,411 for the fiscal year 2023, compared to a net loss of $78,150 for fiscal 2022, an increase of $798,561 (1,021.8%) in net income.
Removed
District Court for the Southern District of New York, Civil Action No. 22cv4354. To our knowledge, none of the defendants has yet been served.
Added
In light of shutdowns, quarantines and other restrictions and delays in operations caused by or related to COVID-19 in the PRC and the United States, the Company experienced delays in shipping and receiving of products during the fiscal year ended March 31, 2022, and continues to experience shortages of critical components for manufacturing of our products through and subsequent to March 31, 2023.
Removed
The plaintiff claims to be a shareholder in the Company and alleges that the registration statement on Form S-4 filed by the Company on May 16, 2022 (which, when declared effective, will also be the merger proxy statement distributed to the shareholders of the Company and of Infinite Reality in connection with the proposed Merger) is materially deficient and misleading in omitting material information and, therefore, violates the provisions of the Securities Exchange Act of 1934 (the “Exchange Act”) and the regulations promulgated thereunder.
Added
The increase in net income for the fiscal year ended March 31, 2023, is primarily due to increases in sales to retail as previously discussed above and to decreased expenditures related to a terminated proposed Merger and payroll expenditures as compared to the prior fiscal year.
Removed
The suit seeks to enjoin the Merger, direct the defendants to comply with the provisions of the Exchange Act, award costs and fees to the plaintiff, and grant such other relief as the court may deem just and proper.
Added
Operating activities provided cash principally from a decrease in inventories of $2,165,429, net income of $720,411, and decreases in accounts receivable and amounts due from factor of $425,165. Operating activities used cash principally due to repayment of accounts payable and accrued expenses of $1,918,493. Our operating activities used cash of $1,860,051 for the year ended March 31, 2022.
Removed
The Company believes that the suit is wholly without merit and, once served, the Company will aggressively defend the suit. 6 Table of Contents PART II ITEM 5 .
Added
Financing activities used cash of $1,779,176 reflecting the decrease in net borrowing from the Factor of $697,736 and the repayment of the Note Payable to Eyston in the amount of $1,081,440 during the fiscal year ended March 31, 2023.
Removed
The increase in sales was primarily due to increased sales to new retail customers reflecting demand attributable to disruptions in the supply chain of those retail customers caused by or related to COVID 19 issues. 7 Table of Contents Gross Profit.
Added
Critical Accounting Policies Management’s discussion and analysis of our consolidated financial statements and results of operations is based upon our consolidated financial statements included as part of this document.
Removed
In addition, the Company has incurred increased legal and consulting expense associated with a proposed Merger. Also, contributing to net income for the fiscal year ended March 31, 2021, is the forgiveness of $221,400 of debt related to the Paycheck Protection Program under the CARES Act.
Added
Actual results may differ from these estimates under different assumptions or conditions. 8 Table of Contents We believe that the following critical accounting policies affect management’s more significant judgments and estimates used in the preparation of its consolidated financial statements.
Removed
Our operating activities provided cash of $1,388,172 for the year ended March 31, 2021.
Removed
Operating activities provided cash principally from a decrease in inventories of $942,766, an increase in accounts payable and accrued expenses of $751,252, net income of $268,343, plus non-cash depreciation of an operating lease asset of $158,576, and an increase in the allowance for doubtful accounts receivable of $100,000.
Removed
Operating activities used cash principally from an increase in prepaid expenses of $223,554, a decrease in the operating lease liability of $158,576, an increase in accounts receivable and amounts due from factor of $236,930, less non-cash forgiveness of $221,400 from the Paycheck Protection Program Loan under the CARES Act.
Removed
Our investing activities did not provide or use cash during the fiscal years ended March 31, 2022, or 2021. 8 Table of Contents Financing activities provided cash of $2,138,182 reflecting the increase in net borrowing from the Factor.
Removed
The Company has a history of sales that are insufficient to generate profitable operations and has limited sources of financing. Management’s plan in response to these conditions continues to be to increase sales resulting from the delivery of the Company’s line of sealed battery ionization smoke alarms, carbon monoxide products, and ground fault circuit interrupters.
Removed
In addition, the Company has a short-term note payable due to its principal supplier (Eyston Company Ltd.) that requires monthly payments beginning April, 2022 of $100,000 per month and until the principal balance of approximately $1,081,000 is repaid.
Removed
The Company has a long history of working closely with Eyston and believes that forbearance or extension of the payment terms of the short-term note payable can be achieved if required to meet short-term cash flow requirements.
Removed
Further, the Company’s factor has withheld financing on approximately $560,000 of the Company’s accounts receivable subject to resolution of delivery disputes with a major customer. The resolution of these items has been ongoing and subsequent to March 31, 2022, the customer has been making payments as proof of delivery is confirmed.
Removed
The Company expects that all amounts in dispute will be resolved satisfactorily and that availability of approximately $560,000 in operating cash flow will become available under the factoring agreement subsequent to March 31, 2022.
Removed
Finally, the Company has filed requests for refunds of customs payments with US Customs and Border Protection for approximately $300,000 (including interest expected) for overpayments of duty. The Company expects this refund to be available during the second quarter of fiscal year 2023.
Removed
The Company has seen positive results on this plan as reflected by increased sales of its product offerings. Management expects sales growth to continue going forward.
Removed
Though no assurances can be given, if management’s plan continues to be successful over the next twelve months, the Company anticipates that it should be able to meet its cash needs for the next twelve months following the issuance date of this report.
Removed
Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty and actual results could differ from these estimates.