Universal Security Instruments(UUU) - 2020 Q2 - Quarterly Report

Financial Performance - Net sales for the three months ended September 30, 2019 were $3,622,269, a decrease of $903,983 (20.0%) compared to the same period in 2018[57] - For the six months ended September 30, 2019, net sales were $7,965,560, a decrease of $606,688 (7.1%) from the same period in 2018[63] - The Hong Kong Joint Venture reported net sales of $1,770,656 for the three months ended September 30, 2019, a decrease of 62.2% compared to the prior year[69] Profitability - Gross profit margin decreased to 30.1% for the quarter ended September 30, 2019, down from 32.2% in the prior year, primarily due to tariffs and product mix[58] - The gross profit margin for the six months ended September 30, 2019 was 29.3%, down from 31.5% in the prior year[64] - The company reported a net loss of $700,814 for the quarter, an increase of $579,490 (477.6%) compared to the prior year[62] - Net loss for the six months ended September 30, 2019 was $1,309,768, an increase of $749,611 (133.8%) compared to the same period in 2018[68] Expenses - Selling, general and administrative expenses increased to $1,134,909 for the three months ended September 30, 2019, representing 31.3% of net sales, up from 24.3% in 2018[59] - Research and development expenses rose by $55,815 (46.5%) to $176,733 for the quarter, driven by costs related to revised smoke alarm testing standards[60] - Interest expense for the six months ended September 30, 2019 was $213,028, up from $177,353 in the same period of the previous year[67] Lease Accounting - The Company adopted the new lease accounting standard ASC 842 on April 1, 2019, with no net cumulative effect adjustment to retained earnings[80] - Right-of-use assets and lease liabilities related to the Company's operating leases amount to $475,538 at the date of adoption[83] - The Company has elected to account for lease and non-lease components as a single lease component under ASC 842[81] - Lease expense for operating leases is recognized on a straight-line basis over the lease term, including options to extend or terminate[82] - The Company’s leases include fixed lease payments and may also include variable payments based on a rate or index[81] - None of the Company's lease agreements contain residual value guarantees or material restrictive covenants[82] - The Company uses its incremental borrowing rate to determine the present value of lease payments when implicit rates are not provided[83] - The Company has options to renew certain leases at its sole discretion[81] - Lease payments are included in the measurement of the Company's lease liabilities to the extent they are fixed or variable based on a rate or index[81] - The Company elected practical expedients that allow for the carryforward of historical lease classification[82]