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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

      [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                For the Quarterly period ended December 31, 2004

                                       OR

      |_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER 001-31747

                      UNIVERSAL SECURITY INSTRUMENTS, INC.

             (Exact name of registrant as specified in its charter)

MARYLAND                                         52-0898545
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                   Identification No.)

7-A GWYNNS MILL COURT
OWINGS MILLS, MARYLAND                           21117
(Address of principal executive offices)         (Zip Code)

Registrant's telephone number, including area code: (410) 363-3000

                                  Inapplicable
               (Former name, former address and former fiscal year
                         if changed from last report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes |X| No |_|

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act. Yes |_| No |X|

At February  11,  2005,  the number of shares  outstanding  of the  registrant's
common stock was 1,637,464.

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                                      -1-
<PAGE>

                                TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION                                             PAGE

   ITEM 1.   Consolidated Financial Statements (unaudited):

             Consolidated Balance Sheets at December 31, 2004
             and March 31, 2004                                               3

             Consolidated Statements of Earnings for the Three and
             Nine Months Ended December 31, 2004 and 2003                     4

             Consolidated Statements of Cash Flows for the Nine
             Months Ended December 31, 2004 and 2003                          5

             Notes to Consolidated Financial Statements                       6

   ITEM 2.   Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                        9

   ITEM 3.   Quantitative and Qualitative Disclosure About Market Risk       13

   ITEM 4.   Controls and Procedures                                         13


PART II - OTHER INFORMATION

   ITEM 1.   Legal Proceedings                                               14

   ITEM 2.   Unregistered Sales of Equity Securities and Use of Proceeds     14

   ITEM 4.   Submission of Matters to a Vote of Security Holders             14

   ITEM 6.   Exhibits                                                        14

             Signatures                                                      16


                                      -2-
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

              UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                  ASSETS                                       December 31, 2004       March 31, 2004
                                                                               -----------------       --------------
<S>                                                                                <C>                 <C>
CURRENT ASSETS
Cash                                                                               $     61,068        $    188,190
Accounts receivable:
  Trade (less allowance for doubtful accounts of $15,000)                               750,772              90,852
Employees                                                                                11,922              23,770
                                                                                   ------------        ------------
                                                                                        762,694             114,622
Amount due from factor                                                                2,479,111           3,111,003
Inventory                                                                             4,895,497           2,867,650
Prepaid expenses                                                                        237,628             107,052
                                                                                   ------------        ------------

TOTAL CURRENT ASSETS                                                                  8,435,998           6,388,517
                                                                                                             56,899
DEFERRED TAX ASSET                                                                       44,699

INVESTMENT IN JOINT VENTURE                                                           5,972,252           4,832,286

PROPERTY AND EQUIPMENT - NET                                                             82,352              93,431
                                                                                                                  0
OTHER ASSETS                                                                             15,486              15,486
                                                                                   ------------        ------------

TOTAL ASSETS                                                                       $ 14,550,787        $ 11,386,619
                                                                                   ============        ============

                   LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable                                                                   $  1,553,387        $  1,517,305
Accrued liabilities:
    Patent litigation reserve                                                           516,051             237,545
    Payroll, commissions and other                                                      496,344             426,273
Current obligations under capital lease                                                      --               7,224
                                                                                   ------------        ------------
TOTAL CURRENT LIABILITIES                                                             2,565,782           2,188,347
                                                                                   ------------        ------------

COMMITMENTS AND CONTINGENCIES                                                                --                  --

SHAREHOLDERS' EQUITY
Common stock, $.01 par value per share; authorized 20,000,000 shares;
issued
    and outstanding 1,630,345 and 1,552,896 shares at December 31, 2004 and              16,305              15,529
    March 31, 2004, respectively
Additional paid-in capital                                                           11,403,676          11,188,903
Returned earnings (deficit)                                                             565,024          (2,006,160)
                                                                                   ------------        ------------
TOTAL SHAREHOLDERS' EQUITY                                                           11,985,005           9,198,272
                                                                                   ------------        ------------
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                        $ 14,550,787        $ 11,386,619
                                                                                   ============        ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      -3-
<PAGE>

              UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          Three Months Ended December 31,       Nine Months Ended December 31,
                                                          -------------------------------       ------------------------------
                                                              2004               2003               2004               2003
                                                          ------------       ------------       ------------       ------------
<S>                                                       <C>                <C>                <C>                <C>
Net sales                                                 $  5,849,144       $  3,838,192       $ 17,346,147       $ 13,258,624
Cost of goods sold                                           4,023,316          2,607,525         11,913,828          8,992,005
                                                          ------------       ------------       ------------       ------------

GROSS PROFIT                                                 1,825,828          1,230,667          5,432,319          4,266,619

Research and development expense                                61,116             68,130            207,337            198,607
Selling, general and administrative expense                  1,703,826          1,083,574          4,526,308          3,586,002
                                                          ------------       ------------       ------------       ------------

Operating income                                                60,886             78,963            698,674            482,010

Other (expense):
   Interest expense                                            (25,789)           (26,884)           (57,243)           (90,256)
                                                          ------------       ------------       ------------       ------------

INCOME BEFORE EARNINGS FROM JOINT VENTURE
                                                                35,097             52,079            641,431            391,754

Earnings from Joint Venture:
   Equity in earnings of Joint Venture                         758,472            441,713          1,929,753          1,694,983
                                                          ------------       ------------       ------------       ------------

NET INCOME                                                $    793,569       $    493,792       $  2,571,184       $  2,086,737
                                                          ============       ============       ============       ============

Net income per common share amounts:
  Basic                                                   $       0.49       $       0.33       $       1.62       $       1.39
  Diluted                                                 $       0.45       $       0.29       $       1.45       $       1.22
Weighted average number of common shares outstanding
  Basic                                                      1,621,582          1,514,276          1,588,959          1,505,033
  Diluted                                                    1,777,876          1,724,693          1,769,927          1,714,545
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      -4-
<PAGE>

              UNIVERSAL SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      Nine Months Ended December 31,
                                                                                      ------------------------------
                                                                                         2004              2003
                                                                                      -----------       -----------
<S>                                                                                   <C>               <C>
OPERATING ACTIVITIES
Net income                                                                            $ 2,571,184       $ 2,086,737
Adjustments to reconcile net income to net cash (used in) provided by operating
activities:
   Depreciation and amortization                                                           16,300            25,058
   Stock issued in lieu of directors' fee                                                  10,000            10,000
   Gain on sale of land                                                                        --          (175,965)
   State income tax refunds                                                                12,200                --
   Earnings of the Joint Venture                                                       (1,929,753)       (1,694,983)
   Change in allowance for doubtful accounts                                                   --            60,000
   Changes in operating assets and liabilities:
     (Increase) in accounts receivable and amounts due from factor                        (16,180)       (1,916,810)
     (Increase) decrease in inventories and prepaid expenses                           (2,158,422)          328,366
      Increase in accounts payable and accrued expenses                                   833,599           991,236
                                                                                      -----------       -----------

NET CASH (USED IN) OPERATING ACTIVITIES                                                  (661,072)         (286,361)

INVESTING ACTIVITIES:
    Cash dividends from Joint Venture                                                     330,846                --
    Purchase of property and equipment                                                     (5,221)           (6,336)
    Gross proceeds from sale of land                                                           --           350,000
                                                                                      -----------       -----------

NET CASH PROVIDED BY INVESTING ACTIVITIES                                                 325,625           343,664

FINANCING ACTIVITIES:
    Proceeds from issuance of common stock from exercise of employee stock                215,549           123,095
options
    Principal payments on capital lease                                                    (7,224)          (11,379)
    Retirement of common stock                                                                 --            (1,426)
                                                                                      -----------       -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                                 208,325           110,290
                                                                                      -----------       -----------

(DECREASE) INCREASE  IN CASH                                                             (127,122)          167,593

Cash at beginning of period                                                               188,190            51,112
                                                                                      -----------       -----------

CASH AT END OF PERIOD                                                                 $    61,068       $   218,705
                                                                                      ===========       ===========

Supplemental information:
  Interest paid                                                                       $    57,243       $    90,256
  Income tax paid                                                                              --                --

Non-cash financing activities:
  Repayment of trade payables due the Joint Venture in lieu of cash distribution          458,940           874,904
  Issuance of 950 shares in 2004 and 756 shares in 2003 of common stock as
  directors' fees                                                                          10,000            10,000
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      -5-
<PAGE>

              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   inter-company   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,  2004
audited financial  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 nine month  periods
ended December 31, 2004,  principally 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 ("Joint Venture") that has manufacturing  facilities in the People's
Republic of China,  for the  manufacturing of security  products.  The following
represents summarized balance sheet and income statement information of the Hong
Kong Joint Venture for the nine months ended December 31, 2004 and 2003:

                                               2004             2003
                                           -----------      -----------

            Net sales                      $20,513,915      $18,862,545
            Gross profit                     6,777,440        5,822,631
            Net income                       4,150,916        3,319,731
            Total current assets             7,132,753        7,215,778
            Total assets                    15,486,646       12,248,733
            Total current liabilities        4,819,232        2,580,509

During the nine  months  ended  December  31, 2004 and 2003,  respectively,  the
Company purchased $8,011,032 and $5,276,159 of products from the Hong Kong Joint
Venture.  At December 31, 2004 and 2003, the Company had amounts  payable to the
Hong Kong Joint Venture of $500,000 and $554,874,  respectively. For the quarter
ended  December 31, 2004, the Company has adjusted its equity in earnings of the
Joint Venture to reflect the elimination of $36,240 of  inter-company  profit as
required by US GAAP.

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.


                                      -6-
<PAGE>

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 nine month
periods ended December 31, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                Three Months Ended           Nine months Ended
                                                ------------------           -----------------
                                                   December 31,                  December 31,
                                                   ------------                  ------------
                                              2004           2003           2004           2003
                                           ---------      ---------      ---------      ---------
<S>                                        <C>            <C>            <C>            <C>
Weighted average number of common
shares outstanding for basic EPS           1,621,582      1,514,276      1,588,959      1,505,033

Shares issued upon the assumed
exercise of outstanding stock options        156,294        210,417        180,968        209,512
                                           ---------      ---------      ---------      ---------

Weighted average number of common
and common equivalent shares
outstanding for diluted EPS                1,777,876      1,724,693      1,769,927      1,714,545
</TABLE>

During the current quarter,  47,616 shares were issued in October 2004 and 2,000
shares were issued in November 2004.  The basic  weighted  average common shares
outstanding  for the quarter  ended  December 31, 2004 equals  1,621,582  shares
computed as follows:

10/01/2004 - 10/15/2004    (1,580,729 x 15/92)        257,728
10/16/2004 - 11/15/2004    (1,628,345 x 31/92)        548,682
11/16/2004 - 12/15/2004    (1,630,345 x 46/92)        815,172
                                                    ---------
                                                    1,621,582

During the nine months ended December 31, 2004, 23,333 shares were issued in May
2004, 1,167 shares were issued in June 2004, 47,616 shares were issued in
October 2004, and 2,000 shares were issued in November 2004. The basic weighted
average common shares outstanding for the nine month period ended December 31,
2004 equals 1,588,958 shares computed as follows:

04/01/2004 - 05/15/2004    (1,552,896 x 45/275)       254,110
05/16/2004 - 06/15/2004    (1,576,229 x 31/275)       177,684
06/15/2004 - 07/15/2004    (1,577,396 x 31/275)       177,815
07/16/2004 - 10/15/2004    (1,580,729 x 91/275)       523,078
10/16/2004 - 11/15/2004    (1,628,345 x 31/275)       183,559
11/16/2004 - 12/15/2004    (1,630,345 x 46/275)       272,712
                                                    ---------
                                                    1,588,958

Basic and diluted weighted  average number of common shares  outstanding for the
three and nine month periods ending December 31, 2003 have been restated to show
the  effect  of a  four-for-three  stock  dividend  paid  on  April  5,  2004 to
shareholders  of  record  on March  15,  2004.  The  basic  and  diluted  shares
outstanding  at December  31,  2003 as restated  are  1,514,276  and  1,724,693,
respectively computed as follows:

<TABLE>
                       Three Months Ended 12/31/03           Nine Months Ended 12/31/03
                       ---------------------------           --------------------------
<S>                <C>                                    <C>
Basic              (1,135,707 / 3 x 4)    1,514,276       (1,128,775 / 3 x 4) = 1,505,033
Diluted            (1,293,520 / 3 x 4)    1,724,693       (1,285,909 / 3 x 4) = 1,714,545
</TABLE>

At  December  31,  2004,  and 2003 there were no  securities  outstanding  whose
issuance  would  have  an  anti-dilutive   effect  on  the  earnings  per  share
calculation.  All share  and per  share  amounts  included  in the  consolidated
financial  statements  have been  retroactively  adjusted to reflect the 4-for-3
stock  dividend  paid on April 5,  2004 to  shareholders  of record on March 15,
2004.


                                      -7-
<PAGE>

STOCK BASED COMPENSATION

During the nine months  ended  December 31, 2004 and 2003,  the Company  granted
options for the purchase of 7,500 and 8,000 shares, respectively,  to employees.
These  options  are  exercisable  at an  average  price of $11.50 and $14.04 per
share,  respectively,  expiring in 2008, and vested over a four year period from
the date of grant.

The Company uses the intrinsic value method as defined by Accounting  Principles
Board  Opinion  No. 25 to account for  stock-based  employee  compensation.  The
Company  has  adopted  the  disclosure   requirements  of  Financial  Accounting
Standards   Board  (FASB)   Statement  No.  123,   Accounting  for   Stock-Based
Compensation, as amended by FASB No. 148 during fiscal 2003. The following table
illustrates the effect on net income and earnings per share as if the fair value
based method had been  applied to all  outstanding  and unvested  awards in each
period.

<TABLE>
<CAPTION>
                                                             Three Months Ended                    Nine months Ended
                                                             ------------------                    -----------------
                                                                 December 31,                        December 31,
                                                                 ------------                        ------------
                                                           2004               2003               2004               2003
                                                      -------------      -------------      -------------      -------------
<S>                                                   <C>                <C>                <C>                <C>
Net income, as reported                               $     793,569      $     493,792      $   2,571,184      $   2,086,737

Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects
                                                            (19,534)           (21,009)           (47,839)           (63,028)
                                                      -------------      -------------      -------------      -------------
  Pro forma net income                                $     774,035      $     472,783      $   2,523,345      $   2,023,709
                                                      =============      =============      =============      =============
Earnings per share:
Basic - as reported                                   $        0.49      $        0.33      $        1.62      $        1.39
                                                      =============      =============      =============      =============
Basic - pro forma                                     $        0.48      $        0.31      $        1.59      $        1.34
                                                      =============      =============      =============      =============
Diluted - as reported                                 $        0.45      $        0.29      $        1.45      $        1.22
                                                      =============      =============      =============      =============
Diluted - pro forma                                   $        0.44      $        0.27      $        1.43      $        1.18
                                                      =============      =============      =============      =============
</TABLE>

All  share  and  per  share  amounts  included  in  the  consolidated  financial
statements  have been  retroactively  adjusted  to  reflect  the  4-for-3  stock
dividend paid on April 5, 2004 to shareholders of record on March 15, 2004.

RECENT ACCOUNTING PRONOUNCEMENTS

In December  2004,  the FASB issued SFAS  No.123  (revised  2004),  "Share-Based
Payment".  This  statement  will provide  investors and other users of financial
statements  with more complete and neutral  financial  information  by requiring
that the  compensation  cost relating to  share-based  payment  transactions  be
recognized in financial statements. That cost will be measured based on the fair
value of the equity or liability  instruments  issued.  This statement  covers a
wide range of share-based  compensation  arrangements  including  share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans,  and replaces FASB SFAS No. 123,  "Accounting for
Stock-Based Compensation",  and supersedes APB Opinion No. 25. Statement 123, as
originally issued in 1995,  established as preferable a fair-value-based  method
of accounting for share-based payment transactions with employees. However, that
statement  permitted  entities the option of continuing to apply the guidance in
APB No. 25, as long as the footnotes to financial  statements  disclosed the pro
forma net income under the fair-value-based  method. Public entities (other than
those  filing as small  business  issuers)  will be  required  to apply SFAS No.
123(R) as of the first interim or annual reporting period that begins after June
15,  2005.  The Company  has  evaluated  the impact of the  adoption of SFAS No.
123(R),  and does not believe the impact will be  significant  to the  Company's
overall results of operations or financial position.


                                      -8-
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

      As used  throughout  this Report,  "we," "our," "the  Company" and similar
words refers to Universal Security Instruments, Inc.

FORWARD-LOOKING STATEMENTS

      This  Quarterly  Report  on Form  10-Q  contains  certain  forward-looking
statements  reflecting our current  expectations with respect to our operations,
performance,  financial condition, and other developments. These forward-looking
statements  may generally be  identified by the use of the words "may",  "will",
"believes",  "should",  "expects",   "anticipates",   "estimates",  and  similar
expressions.  These statements are necessarily estimates reflecting management's
best judgment based upon current  information  and involve a number of risks and
uncertainties.  We  caution  readers  not to place  undue  reliance  on any such
forward-looking  statements,  which speak only as of the date made,  and readers
are advised that various  factors  could affect our  financial  performance  and
could cause our actual  results  for future  periods to differ  materially  from
those  anticipated  or  projected.  While it is  impossible to identify all such
factors,  such factors could include:  (i) our and our Hong Kong Joint Venture's
respective  ability  to  maintain  operating  profitability,   (ii)  competitive
practices in the industries in which we compete, (iii) our dependence on current
management,  (iv) the  impact  of  current  and  future  laws  and  governmental
regulations  affecting us and our Hong Kong Joint Venture,  (v) general economic
conditions,  (vi) other factors which may be identified from time to time in our
Securities and Exchange Commission filings and other public  announcements,  and
(vii) currency  fluctuations.  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.

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003

      Sales.  Net  sales for the  three  months  ended  December  31,  2004 were
$5,849,144  compared to $3,838,192 for the comparable  three months in the prior
fiscal year, an increase of  $2,010,952  (52.4%).  Net sales of safety  products
increased by $2,071,903 as compared to the quarter ended  December 31, 2003. Net
sales of other products  decreased by $60,951,  as compared to the quarter ended
December 31, 2003.  The primary reason for the increase in safety sales was that
sales were up across our core product  lines,  including  ground  fault  circuit
interrupters  (GFCI),  smoke  and  carbon  monoxide  alarms  and  chimes.  Other
products'  sales  decreased  primarily  due to a decrease  in volume of sales of
audio tapes.

      Gross Profit  Margin.  The gross profit  margin is calculated as net sales
less cost of goods sold expressed as a percentage of net sales. Our gross profit
margin decreased 2.5%, to 31.2% of sales for the quarter ended December 31, 2004
from 32.0% for the corresponding quarter last year. The decrease in gross profit
margin resulted from a change in the mix of products sold.

      Expenses.  Selling,  general  and  administrative  expenses  increased  by
$620,252 from the comparable  three months in the prior year. As a percentage of
net sales,  these  expenses  increased to 29.1% for the three month period ended
December 31, 2004,  from 28.2% for the comparable  2003 period.  The increase in
selling  and  general  administrative  expense  as a percent of sales was due to
higher sales volume and variable costs that increase with sales. Various expense
categories  contributed to the increased  dollar amount of the expense,  but the
following major account  classifications were significant factors in this dollar
increase:  (i)  Commissions  and  freight  charges,  as a  percentage  of sales,
remained  consistent  with  commissions  and freight  charges of the prior year;
however,  these expenses vary directly with sales volume and, therefore,  of the
$620,252  increase in expenses,  $234,142 is  attributable  to  commissions  and
freight  charges  from  higher  sales  volume  during  the  2004  period.   (ii)
Professional fees (principally associated with the previously reported suit by a
former director and chief executive  officer) increased by $343,104 for the 2004
period as  compared  to the same  quarter  in the  previous  year.  The  Company
believes that  professional fees will continue at an increased level as compared
to the previous fiscal year until  outstanding  litigation  matters are resolved
and Sarbanes-Oxley compliance costs level off.

      Interest Expense and Income. Our interest expense, net of interest income,
decreased  to $25,789 for the quarter  ended  December 31, 2004 from $26,884 for
the quarter  ended  December  31, 2003.  The lower  interest  expenses  resulted
primarily  from a  decrease  in the  average  balance of  borrowings  during the
current quarter.


                                      -9-
<PAGE>

      Net Income.  We  reported  net income of  $793,569  for the quarter  ended
December  30,  2004  compared to net income of  $493,792  for the  corresponding
quarter of the prior  fiscal  year.  The primary  reason for the increase in net
income is the increased earnings of $316,759 from our Hong Kong Joint Venture.

      NINE MONTHS ENDED DECEMBER 31, 2004 AND 2003

      Sales.  Net  sales  for the nine  months  ended  December  31,  2004  were
$17,346,147  compared to $13,258,624 for the comparable nine months in the prior
fiscal year, an increase of  $4,087,523  (30.8%).  Net sales of safety  products
increased by $4,202,077 as compared to the nine months ended  December 31, 2003.
Net sales of other  products  decreased  by  $114,554,  as  compared to the nine
months ended  December 31, 2003.  The primary  reason for the increase in safety
sales was that sales were up across our core  product  lines,  including  ground
fault circuit  interrupters (GFCI), smoke and carbon monoxide alarms and chimes.
Other products'  sales decreased  primarily due to a decrease in volume of sales
of audio tapes.

      Gross Profit  Margin.  The gross profit  margin is calculated as net sales
less cost of goods sold  expressed as a percentage  of net sales.  The Company's
gross profit margin  decreased  2.8% to 31.3% for the period ended  December 31,
2004 from 32.2% for the period ended  December 31, 2003.  The primary reason for
this was a change in the mix of products sold.

      Expenses.  Selling,  general  and  administrative  expenses  increased  by
$940,306 from the  comparable  nine months in the prior year. As a percentage of
sales,  these  expenses  were  reduced to 26.1% for the nine month  period ended
December 31, 2004 from 27.0% for the  comparable  2003  period.  The decrease in
selling  and  general  administrative  expense  as a percent of sales was due to
higher sales volume and variable costs that did not increase at the same rate as
sales. Various expense categories  contributed to the increased dollar amount of
the expense,  but the following major account  classifications  were significant
factors in this  dollar  increase:  (i)  Commissions  and  freight  charges as a
percentage of sales remained  consistent with commissions and freight charges of
the prior year;  however,  these  expenses  vary directly with sales volume and,
therefore,  of the $940,306  increase in expenses,  $684,896 is  attributable to
commissions and freight charges from higher sales volume during the 2004 period.
(ii) Professional fees (principally associated with the previously reported suit
by a former director and chief executive  officer) increased by $386,574 for the
2004 period as compared to the same  period in the  previous  year.  The Company
believes that  professional fees will continue at an increased level as compared
to the previous fiscal year until  outstanding  litigation  matters are resolved
and Sarbanes-Oxley  compliance costs level off. (iv) Finally,  selling,  general
and  administrative  expenses  for the 2003 period were  reduced by the $146,836
gain  (net of  selling  expenses)  from  the sale of a  parcel  of  land,  which
reduction is not repeated in the 2004 period.

      Interest Expense and Income. Our interest expense, net of interest income,
decreased to $57,243 for the nine months ended  December 31, 2004,  from $90,256
for the nine  months  ended  December  31,  2003.  The lower  interest  expenses
resulted primarily from a reduction in the average balance of borrowings for the
nine month period.

      Net Income. We reported net income of $2,571,184 for the nine months ended
December 31, 2004  compared to net income of  $2,086,737  for the  corresponding
period of the prior  fiscal  year.  The primary  reasons for the increase in net
income are  increased  sales  without a  corresponding  increase  in  associated
expenses (i.e., while the expenses increased,  they did not increase at the same
rate as sales), and by an increase in earnings of the Hong Kong Joint Venture of
$234,770 from the same period of the prior year.

FINANCIAL CONDITION AND LIQUIDITY

      Our cash needs are  currently  met by funds from our  Factoring  Agreement
which  supplies  both  short-term  borrowings  and  letters of credit to finance
foreign  inventory  purchases.  The maximum amount available under the Factoring
Agreement is currently  $7,500,000.  However,  based on specified percentages of
our accounts receivable and inventory and letter of credit  commitments,  we had
$4,677,178  available  under the  Factoring  Agreement of which  $1,201,178  was
borrowed  as of  December  31,  2004.  The  interest  rate  under the  Factoring
Agreement on the  uncollected  factored  accounts  receivable and any additional
borrowings  is equal to the prime rate of  interest  charged by our  lender.  At
December 31, 2004, the prime rate was 5.25%.  Borrowings are  collateralized  by
all of our accounts receivable and inventory.


                                      -10-
<PAGE>

      On December 17, 2004, the Company  obtained an unsecured  $250,000 line of
credit  from a  commercial  bank.  Amounts  borrowed on this line of credit bear
interest  at the prime rate of interest  as  published  from time to time by The
Wall Street Journal.  The agreement requires,  among other provisions,  that the
Company maintain a zero balance on the facility for thirty consecutive days each
year. At December 31, 2004 no amounts have been borrowed or are  outstanding  on
this line of credit.

      Our  accounts  receivable  as of the end of our last  fiscal  year (net of
allowances for doubtful accounts) were $90,852, and were $750,772 as of December
31, 2004. The increase in trade accounts receivable during the first nine months
of the current fiscal year is due to increased sales, primarily direct shipments
from our  foreign  manufacturers,  directly to  customers  for which we bear the
credit  risk.  Our  prepaid  expenses as of the end of our last fiscal year were
$107,052,  and were  $237,628 as of December 31,  2004.  The increase in prepaid
expenses  during the first nine months of the current  fiscal year is  primarily
due to the timing of premium payments to various insurance carriers.

      Operating  activities  used cash of $661,072 for the period ended December
31,  2004.  This was  primarily  due to an  increase  in  inventory  and prepaid
expenses  of  $2,158,422,  and equity in the  earnings  from our Hong Kong Joint
Venture of $1,929,753,  which were  partially  offset by an increase in accounts
payable  and  accrued  expenses  of  $833,599.  For the same  period  last year,
operating activities used cash of $286,361.

      Investing  activities  provided  cash of $325,625  in the current  period,
primarily from dividends received from our Hong Kong Joint Venture. For the same
period last year, investing activities provided cash of $343,664, primarily from
the sale of the 1.5 acre parcel of land.

      Financing activities provided cash of $208,325 primarily from the exercise
of employee stock options.  For the same period last year,  financing activities
provided cash of $110,290.

      We  believe  that  funds   available   under  the   Factoring   Agreement,
distributions  from the Hong Kong Joint Venture,  working  capital,  and our new
line of credit provide us with sufficient resources to meet our requirements for
liquidity  and working  capital in the ordinary  course of our business over the
next twelve months and over the long term.

HONG KONG JOINT VENTURE

      Net Sales. Net sales of the Hong Kong Joint Venture for the three and nine
months ended December 31, 2004 were  $7,436,845 and  $20,513,915,  respectively,
compared to $5,783,901 and $18,862,545, respectively, for the comparable periods
in the prior  fiscal year.  Sales of the Hong Kong Joint  Venture to the Company
amounted to  $3,312,469  (44.5%) and  $8,011,032  (39.1%) for the three and nine
month  periods ended  December 31, 2004 and  $1,116,825  (19.3%) and  $5,277,394
(28.0%) for the same periods of the prior year.

      Net Income.  Net income for the three and nine months  ended  December 31,
2004 was  $1,589,425  and  $4,150,916,  respectively,  compared to $753,266  and
$3,319,731, respectively, in the comparable periods last year. The 111% increase
in net income for the  quarter  was due to  increased  sales and an  increase in
investment income

      Gross Margins.  Gross margins of the Hong Kong Joint Venture for the three
month  period ended  December 31, 2004  increased to 34.6% from 28% for the 2003
period.  For the nine month  period  ended  December  31,  2004,  gross  margins
increased to 33% from 31% for the 2003  period.  Since gross  margins  depend on
sales  volume of various  products,  changes in product  sales mix caused  these
changes in gross margins.

      Expenses.  Selling,  general and administrative expenses were $992,921 and
$2,519,160,  respectively,  for the three and nine month periods ended  December
31, 2004,  compared to $667,976 and $2,248,257,  in the prior year's  respective
periods. As a percentage of sales, expenses were 13% and 12%, respectively,  for
the three and nine month  periods ended  December 31, 2004,  compared to 12% and
12%, respectively, for the three and nine month periods ended December 31, 2003.
The increase in selling, general and administrative expense was primarily due to
increased  professional fees associated with the pursuit of legal action against
a company in Germany which the Hong Kong Joint Venture believes is infringing on
patents and copyrights of the Hong Kong Joint Venture.

      Interest Income and Expense. Interest income, net of interest expense, was
$23,407 and $61,057,  respectively,  for the three and nine month  periods ended
December 31, 2004, compared to interest expense of $490 and $562,  respectively,
for the prior year's  periods.  The increase in interest income is primarily due
to bond interest income.


                                      -11-
<PAGE>

      Liquidity.  Cash needs of the Hong Kong Joint Venture are currently met by
funds generated from operations. During the nine months ended December 31, 2004,
working  capital  increased  by $994,864  from  $1,318,657  on March 31, 2004 to
$2,313,521 on December 31, 2004.

      We  previously  announced  that the Hong  Kong  Joint  Venture  was  being
positioned for a possible  initial public  offering (IPO) and is proceeding with
the  application  process for an IPO and listing on the Hong Kong Stock Exchange
Main Board. The Hong Kong Joint Venture recently  determined it would wait until
the  completion  of the audit with respect to its current  fiscal  year,  ending
March 31, 2005, in order to pursue a listing.  No  assurances  can be given that
these steps will result in an initial  public  offering  for the Hong Kong Joint
Venture.  We will  report  further  developments  at such time as  permitted  in
accordance with Hong Kong and U.S. regulations.

CRITICAL ACCOUNTING POLICIES

      Management's   discussion  and  analysis  of  our  consolidated  financial
statements  and results of operations  are based on our  Consolidated  Financial
Statement  included  as  part  of  this  document.   The  preparation  of  these
consolidated  financial  statements  requires  management to make  estimates and
judgments that affect the reported amounts of assets, liabilities,  revenues and
expenses and related  disclosures of contingent  assets and  liabilities.  On an
ongoing  basis,  we evaluate  these  estimates,  including  those related to bad
debts,  inventories,  income taxes, and  contingencies  and litigation.  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 believe 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
on these and other accounting policies, see Note A to the consolidated financial
statements  included  in Item 8 of the Form  10-K for the year  ended  March 31,
2004. 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.
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.  Our
critical accounting policies include:

      Our revenue  recognition  policies are in compliance with Staff Accounting
Bulletin No. 101, "Revenue  Recognition in Financial  Statements"  issued by the
Securities and Exchange Commission. We recognize sales upon shipment of products
net of applicable  provisions for any discounts or  allowances.  We believe that
the  shipping  date  from our  warehouse  is the  appropriate  point of  revenue
recognition since upon shipment we have substantially  completed our obligations
which entitle us to receive the benefits  represented  by the revenues,  and the
shipping date provides a consistent point within our control to measure revenue.
Customers  may not return,  exchange or refuse  acceptance  of goods without our
approval. We have established  allowances to cover anticipated doubtful accounts
based upon historical experience.

      Inventories  are valued at the lower of market or cost. Cost is determined
on the first-in first-out method. We have recorded a reserve for obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. Management reviews the reserve quarterly.

      We  currently  have  significant  deferred tax assets  resulting  from tax
credit carryforwards,  net operating loss carryforwards and deductible temporary
differences,  which  will  reduce  taxable  income  in future  periods.  We have
provided a  valuation  allowance  on future  tax  benefits  such as foreign  tax
credits, foreign net operating losses, capital losses and net operating losses.

      A valuation allowance is required when it is more likely than not that all
or a portion of a deferred tax assets will not be realized. Forming a conclusion
that a valuation  allowance is not needed is difficult  when there is a negative
evidence such as cumulative losses and losses in recent years. Cumulative losses
weigh heavily in the overall assessment. As a result of management's assessment,
we  established  a full  valuation  allowance for our remaining net deferred tax
assets at December 31, 2004.


                                      -12-
<PAGE>

      We are subject to lawsuits and other claims,  related to patents and other
matters.  Management  is  required  to  assess  the  likelihood  of any  adverse
judgments or outcomes to these matters,  as well as potential ranges of probable
losses.  A determination of the amount of reserves  required,  if any, for these
contingencies  is based on a careful  analysis of each individual issue with the
assistance of outside  legal  counsel.  The required  reserves may change in the
future due to new  developments  in each matter or changes in approach such as a
change in settlement strategy in dealing with these matters.

      We   generally   provide   warranties   from  one  to  ten  years  to  the
non-commercial  end user on all products sold. The manufacturers of our products
provide us with a one-year  warranty on all  products  we  purchase  for resale.
Claims for warranty  replacement of products beyond the one-year warranty period
covered by the  manufacturers  are  immaterial  and we do not  record  estimated
warranty expense or a contingent liability for warranty claims.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

      No material  changes have  occurred in our  quantitative  and  qualitative
market risk disclosures as presented in our Annual Report Form 10-K for the year
ended March 31, 2004.

ITEM 4. CONTROLS AND PROCEDURES

      We  maintain  a system  of  disclosure  controls  and  procedures  that is
designed to provide reasonable assurance that information,  which is required to
be disclosed  by us in the reports  that we file or submit under the  Securities
and Exchange Act of 1934, as amended,  is recorded,  processed,  summarized  and
reported  within  the time  periods  specified  in the  rules  and  forms of the
Securities and Exchange  Commission,  and is  accumulated  and  communicated  to
management in a timely manner.  Our Chief Executive  Officer and Chief Financial
Officer have evaluated  this system of disclosure  controls and procedures as of
the end of the period  covered by this  quarterly  report,  and believe that the
system is  effective.  There have been no changes in our  internal  control over
financial  reporting  during the most recent fiscal quarter that have materially
affected,  or are reasonably likely to materially  affect,  our internal control
over financial reporting.

      Management is aware that there is a lack of  segregation  of duties at the
Company due to the small number of employees dealing with general administrative
and  financial  matters.  However,  at this time  management  has  decided  that
considering  the employees  involved and the control  procedures  in place,  the
risks  associated  with  such  lack of  segregation  are  insignificant  and the
potential  benefits  of adding  employees  to  clearly  segregate  duties do not
justify  the  expenses   associated   with  such   increases.   Management  will
periodically review this situation.

      We were  advised  that as of March  31,  2004 the  independent  registered
public  accounting  firm for the Hong Kong Joint Venture had identified  certain
internal control  deficiencies at the Hong Kong Joint Venture which the auditors
consider to be  "significant  deficiencies"  that, in the aggregate,  constitute
"material  weaknesses"  under  U.S.  accounting  standards.   These  significant
deficiencies  arose from (i) the lack of  appropriately  skilled and experienced
accounting  staff at the Hong Kong Joint Venture,  (ii) a lack of segregation of
duties due to the small number of administrative staff employed by the Hong Kong
Joint  Venture,  and (iii) because the Hong Kong Joint Venture uses  primarily a
manual accounting system. As a result of these factors,  account reconciliations
have not been  completed  in a timely  manner and there is a lack of evidence of
review of several items, including payment vouchers.

      During the nine month period ended  December 31, 2004, the Hong Kong Joint
Venture added a senior accounting  supervisor and automated  certain  accounting
systems.  Our  management  believes  that  this has  remediated  several  of the
significant deficiencies at the Hong Kong Joint Venture, but we will continue to
monitor the Hong Kong Joint  Venture's  progress  pending  further review by the
independent  registered  accounting firm in conjunction with their audit for the
fiscal year ending March 31,  2005.  The Hong Kong Joint  Venture's  independent
auditors  have advised the Hong Kong Joint Venture that these  internal  control
deficiencies do not affect the results reported in the Hong Kong Joint Venture's
consolidated financial statements as of December 31, 2004.


                                      -13-
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      As previously reported, on September 3, 2003, the Company was advised that
Michael Kovens, a then-director,  principal  stockholder and the former Chairman
and chief executive  officer of the Company  ("Kovens"),  had filed an action in
Baltimore County Circuit Court (Case No. C-03-9639)  against the Company and the
other  directors  seeking:  (i) to enjoin the  Company  from  holding its Annual
Meeting of  Stockholders  on September 8, 2003 until Kovens was able to nominate
directors  for  election at the Annual  Meeting;  (ii) to require the Company to
provide Kovens with certain  confidential  information to which Kovens claims he
is entitled under Maryland law; (iii) to enjoin the Company from voting as proxy
any shares  issued by the Company since Kovens was replaced as Chairman and CEO;
(iv) to void the employment agreement between the Company and its president, and
to enjoin the Company  from  enforcing a "Change of  Control"  provision  in the
Company's  president's  employment  agreement;  (v) to void all issuances by the
Company of restricted  stock and options from and after October 1, 2001; (vi) to
void any Bylaw amendments adopted by the Company from and after October 1, 2001;
(vii) to enforce the exercise of an option by Kovens to purchase  20,000  shares
of the Company's common stock at $2.25 per share which the Company maintains has
expired;  (viii) to void the election by the  Company,  pursuant to the Maryland
General  Corporation Law, to be governed by certain  provisions of Maryland law;
and (ix) other unspecified relief.

      The Court  refused to issue a temporary  restraining  order  requested  by
Kovens to enjoin the Company  and the other  directors  from  holding the Annual
Meeting,   enforcing  the  "Change  of  Control"   provision  in  the  Company's
president's employment agreement,  and taking other unspecified actions.  Kovens
filed an amended  complaint on May 28, 2004, and a second  amended  complaint on
August 13, 2004. On January 11, 2005, the Court  dismissed Count I of the Second
Amended  Complaint,  which sought injunctive and declaratory  relief against the
Company.  A third  amended  complaint  was filed on January 21, 2005.  The third
amended  complaint  names the Company,  Harvey B.  Grossblatt  and the Estate of
Stephen C. Knepper as the only  defendants,  and makes two claims.  In the first
claim,  Kovens alleges that Messrs.  Grossblatt and Knepper breached a fiduciary
duty owed to Kovens.  Kovens seeks  compensatory  damages against Grossblatt and
the Estate in the amount of $20  million and  injunctive  and  equitable  relief
against the Company for essentially  the same matters  requested in the original
complaint.  In the second claim,  Kovens is seeking an additional  $500,000 from
the  Company  with  respect to the  exercise  of the option for the  purchase of
20,000 shares at $2.25 per share (mentioned  above) which the Company  maintains
has  expired.  The  Company,  in  accordance  with its charter  and  bylaws,  is
providing a defense for the directors named in the third amended  complaint and,
subject to the provisions of applicable  law, is obligated to indemnify them for
any loss they might  ultimately  incur.  The Company believes that the action as
filed is wholly without merit,  and the Company intends to  aggressively  defend
the action. The case is set for trial beginning on May 11, 2005.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

      On October 5, 2004,  the Company  issued 950 shares of its Common Stock to
one of its directors in lieu of an annual $10,000  director's  fee. These shares
were issued pursuant to an exemption from  registration  from the Securities Act
of 1933 pursuant to Section 4(2) and Regulation D thereunder.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      On October 5, 2004, we held our Annual Meeting of Stockholders.  Reference
is made to the Quarterly Report on Form 10-Q for our quarter ended September 30,
2004 with respect to the voting results of the Annual Meeting.

ITEM 6. EXHIBITS

Exhibit No.

3.1   Articles of  Incorporation  (incorporated  by reference  to the  Company's
      Quarterly Report on Form 10-Q for the period ended December 31, 1988, File
      No. 0-7885)

3.2   Articles Supplementary,  filed October 14, 2003 (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)


                                      -14-
<PAGE>

3.3   Bylaws,  as amended  (incorporated  by  reference  to  Exhibit  3.3 to the
      Company's  Quarterly  Report on Form 10-Q for the  period  ended  June 30,
      2004, File No. 0-7885)

10.1  Non-Qualified Stock Option Plan, as amended  (incorporated by reference to
      Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period
      ended September 30, 2003, File No. 0-7885)

10.2  Hong Kong Joint Venture Agreement,  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, 2003, 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,
      2003, File No. 0-7885)

10.4  Amendment to Factoring Agreement with CIT Group (incorporated by reference
      to Exhibit  10.4 to the  Company's  Quarterly  Report on Form 10-Q for the
      period ended September 30, 2002, File No. 0-7885)

10.5  Amendment to Factoring  Agreement with CIT Group dated  September 28, 2004
      (incorporated  by  reference to Exhibit  10.5 to the  Company's  Quarterly
      Report on Form 10-Q for the period  ended  September  30,  2004,  File No.
      0-7885)

10.6  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)

10.7  Amended and Restated Employment  Agreement dated April 1, 2003 between the
      Company and Harvey B.  Grossblatt  (incorporated  by  reference to Exhibit
      10.8 to the Company's  Annual Report on Form 10-K for the year ended March
      31, 2003, File No. 0-7885)

31.1  Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer*

31.2  Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer*

32.1  Section 1350 Certifications*

99.1  Press Release dated February 14, 2005*

*Filed herewith


                                      -15-
<PAGE>

                                   SIGNATURES

      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                    UNIVERSAL SECURITY INSTRUMENTS, INC.
                                    (Registrant)


Date: February 14, 2005             By: /s/ Harvey B. Grossblatt
                                        ----------------------------------------
                                        Harvey B. Grossblatt
                                        President, Chief Executive Officer


                                        By: /s/ James B. Huff
                                        ----------------------------------------
                                        James B. Huff
                                        Vice President, Chief Financial Officer


                                      -16-