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**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

**FORM      10-Q**

**x      QUARTERLY REPORT      PURSUANT TO SECTION 13 OR 15(d) OF**

**THE      SECURITIES EXCHANGE ACT OF 1934**

**Commission      file number **
**001-31747**

**UNIVERSAL      SECURITY INSTRUMENTS, INC.**

| **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)          |

**(410)      363-3000**

** **
** **

** **

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**TABLE      OF CONTENTS**

| **Part                  I - Financial Information** | **Page**                                                                           |
|-----------------------------------------------------|------------------------------------------------------------------------------------|
|                                                |                                                                               |   |
| **Item                  1.**                        | Consolidated                  Financial Statements (unaudited):                    |   |
|                                                |                                                                               |   |
|                                                | Consolidated                  Balance Sheets at December 31, 2006                  |   |
|                                                | and                  March 31, 2006                                                | 3 |
|                                                |                                                                               |   |
|                                                | Consolidated                  Statements of Earnings for the Three                 | 4 |
|                                                |                                                                               |   |
|                                                | Months                  Ended December 31, 2006 and 2005                           |   |
|                                                |                                                                               |   |
|                                                | Consolidated                  Statements of Earnings for the Nine                  | 5 |
|                                                | Months                  Ended December 31, 2006 and 2005                           |   |
|                                                |                                                                               |   |
|                                                | Consolidated                  Statements of Cash Flows for the Nine                | 6 |
|                                                | Months                  Ended December 31, 2006 and 2005                           |   |
|                                                |                                                                               |   |
|                                                | Notes                  to Consolidated Financial Statements                        | 7 |
|                                                |                                                                               |   |
| **Item                  2.**                        | Management’s                  Discussion and Analysis of Financial Condition |   |
|                                                | and                  Results of Operations                                         | 13 |
|                                                |                                                                               |   |
| **Item                  3.**                        | Quantitative                  and Qualitative Disclosure About Market Risk         | 17 |
|                                                |                                                                               |   |
| **Item                  4.**                        | Controls                  and Procedures                                           | 17 |
|                                                |                                                                               |   |
| **Part                  II - Other Information**    |                                                                               |
|                                                |                                                                               |   |
| **Item                  1.**                        | Legal                  Proceedings                                                 | 18 |
|                                                |                                                                               |   |
| **Item                  4.**                        | Submission                  of Matters to a Vote of Security Holders               | 19 |
|                                                |                                                                               |   |
| **Item                  6.**                        | Exhibits                                                                           | 19 |
|                                                |                                                                               |   |
|                                                | Signatures                                                                         | 20 |

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**PART      I - FINANCIAL INFORMATION**

**ITEM      1.**

**UNIVERSAL      SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES**

**CONSOLIDATED      BALANCE SHEETS**

**(Unaudited)**

|                                                                                                                                                                                                                                                         |   | December                31, 2006 |       | March                31, 2006 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|------------|-------------------------------|--------|
| **ASSETS**                                                                                                                                                                                                                                                   |   |                             |       |                          |   |
| CURRENT                ASSETS                                                                                                                                                                                                                                |   |                             |       |                          |   |
| Cash                and cash equivalents                                                                                                                                                                                                                     |   | $                                | 533,882    |                          | $      | 3,015,491 |   |
| Accounts              receivable:                                                                                                                                                                                                                            |   |                             |       |                          |   |   |   |
| Trade                less allowance for doubtful accounts of $15,000                                                                                                                                                                                         |   |                             | 2,175,104  |                          |   | 1,106,435 |   |
| Employees                                                                                                                                                                                                                                                    |   |                             | 24,373     |                          |   | 23,656 |   |
|                                                                                                                                                                                                                                                         |   |                             | 2,199,477  |                          |   | 1,130,091 |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| Amount                due from factor                                                                                                                                                                                                                        |   |                             | 4,201,034  |                          |   | 4,259,131 |   |
| Inventories,                net of allowance for obsolete inventory of $40,000                                                                                                                                                                               |   |                             | 9,854,960  |                          |   | 4,062,086 |   |
| Prepaid                expenses                                                                                                                                                                                                                              |   |                             | 383,026    |                          |   | 196,863 |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| TOTAL                CURRENT ASSETS                                                                                                                                                                                                                          |   |                             | 17,172,379 |                          |   | 12,663,662 |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| DEFERRED                TAX ASSET                                                                                                                                                                                                                            |   |                             | 948,935    |                          |   | 476,384 |   |
| INVESTMENT                IN JOINT VENTURE                                                                                                                                                                                                                   |   |                             | 9,031,410  |                          |   | 7,140,859 |   |
| PROPERTY                AND EQUIPMENT - NET                                                                                                                                                                                                                  |   |                             | 2,679,077  |                          |   | 62,212 |   |
| GOODWILL                                                                                                                                                                                                                                                     |   |                             | 1,508,718  |                          |   | - |   |
| OTHER                ASSETS                                                                                                                                                                                                                                  |   |                             | 15,486     |                          |   | 15,486 |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| TOTAL                ASSETS                                                                                                                                                                                                                                  |   | $                                | 31,356,005 |                          | $      | 20,358,603 |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| **LIABILITIES                AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                                                |   |                             |       |                          |   |   |   |
| CURRENT                LIABILITIES                                                                                                                                                                                                                           |   |                             |       |                          |   |   |   |
| Note                payable - bank                                                                                                                                                                                                                           |   |                             | 1,803,473  |                          |   | - |   |
| Notes                payable - other                                                                                                                                                                                                                         |   |                             | 266,599    |                          |   | - |   |
| Lease                obligation                                                                                                                                                                                                                              |   |                             | 59,532     |                          |   | - |   |
| Accounts                payable                                                                                                                                                                                                                              |   |                             | 3,620,956  |                          |   | 1,604,845 |   |
| Accrued                liabilities:                                                                                                                                                                                                                          |   |                             |       |                          |   |   |   |
| Patent                litigation and settlement reserve                                                                                                                                                                                                      |   |                             | 671,192    |                          |   | 556,787 |   |
| Payroll,                commissions and other                                                                                                                                                                                                                |   |                             | 1,477,973  |                          |   | 590,402 |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| TOTAL                CURRENT LIABILITIES                                                                                                                                                                                                                     |   |                             | 7,899,725  |                          |   | 2,752,034 |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| LEASE                OBLIGATION                                                                                                                                                                                                                              |   |                             | 55,810     |                          |   | - |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| COMMITMENTS                AND CONTINGENCIES                                                                                                                                                                                                                 |   |                             | -          |                          |   | - |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| Minority                interest                                                                                                                                                                                                                             |   |                             | -          |                          |   | - |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| SHAREHOLDERS’                EQUITY                                                                                                                                                                                                                    |   |                             |       |                          |   |   |   |
| Common                stock, $.01 par value per share; authorized 20,000,000 shares; issued                and                outstanding 2,420,573 and 2,258,409 shares at December 31, 2006 and                March                31, 2006, respectively |   |                             | 18,181     |                          |   | 16,940 |   |
| Additional                paid-in capital                                                                                                                                                                                                                    |   |                             | 12,767,187 |                          |   | 11,577,583 |   |
| Retained                earnings                                                                                                                                                                                                                             |   |                             | 10,711,308 |                          |   | 6,012,046 |   |
| Other                comprehensive income (loss)                                                                                                                                                                                                             |   |                             | (96,206    | )                             |   | - |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| TOTAL                SHAREHOLDERS’ EQUITY                                                                                                                                                                                                              |   |                             | 23,400,470 |                          |   | 17,606,569 |   |
|                                                                                                                                                                                                                                                         |   |                             |       |                          |   |   |   |
| TOTAL                LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                                                              |   | $                                | 31,356,005 |                          | $      | 20,358,603 |   |

*See      accompanying notes to consolidated financial statements.*

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**UNIVERSAL      SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF EARNINGS**

**(Unaudited)**

|                                                                 |   | Three                Months Ended December                31, |      |
|----------------------------------------------------------------------|--------|---------------------------------------------------------------|-----------|
|                                                                 |   |  2006                                                    |      |  2005 |   |
|                                                                 |   |                                                          |      |   |   |
| Net                sales                                             |   | $                                                             | 8,620,893 |   | $ | 7,353,597 |   |
| Cost                of goods sold                                    |   |                                                          | 5,825,551 |   |   | 4,804,297 |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| GROSS                PROFIT                                          |   |                                                          | 2,795,342 |   |   | 2,549,300 |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| Research                and development expense                      |   |                                                          | 85,599    |   |   | 57,492 |   |
| Selling,                general and administrative expense           |   |                                                          | 1,949,952 |   |   | 1,675,332 |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| Operating                income                                      |   |                                                          | 759,791   |   |   | 816,476 |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| Other                income (expense):                               |   |                                                          |      |   |   |   |   |
| Interest                income                                       |   |                                                          | 3,141     |   |   | - |   |
| Interest                expense                                      |   |                                                          | (51,663   | ) |   | (23,783 | ) |
|                                                                 |   |                                                          |      |   |   |   |   |
| INCOME                BEFORE EARNINGS FROM AFFILIATES                |   |                                                          | 711,269   |   |   | 792,693 |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| Equity                in earnings of Joint Venture                   |   |                                                          | 995,097   |   |   | 525,021 |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| Loss                on currency translation                          |   |                                                          | (17,906   | ) |   | - |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| NET                INCOME BEFORE TAXES and MINORITY INTEREST         |   |                                                          | 1,688,460 |   |   | 1,317,714 |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| Provision                for income tax (benefit)                    |   |                                                          | (731      | ) |   | (139,095 | ) |
|                                                                 |   |                                                          |      |   |   |   |   |
| NET                INCOME BEFORE MINORITY INTEREST                   |   |                                                          | 1,689,191 |   |   | 1,456,809 |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| Minority                interest                                     |   |                                                          | 23,692    |   |   | - |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| NET                INCOME                                            |   | $                                                             | 1,712,883 |   | $ | 1,456,809 |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| Net                income per common share amounts:                  |   |                                                          |      |   |   |   |   |
| Basic                                                                |   | $                                                             | 0.71      |   | $ | 0.65 |   |
| Diluted                                                              |   | $                                                             | 0.68      |   | $ | 0.60 |   |
|                                                                 |   |                                                          |      |   |   |   |   |
| Weighted                average number of common shares outstanding: |   |                                                          |      |   |   |   |   |
| Basic                                                                |   |                                                          | 2,417,972 |   |   | 2,231,331 |   |
| Diluted                                                              |   |                                                          | 2,514,536 |   |   | 2,436,136 |   |

*See      accompanying notes to consolidated financial statements.*

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**UNIVERSAL      SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF EARNINGS**

**(Unaudited)**

|                                                                 |   | Nine                Months Ended December                31, |       |
|----------------------------------------------------------------------|--------|--------------------------------------------------------------|------------|
|                                                                 |   | 2006                                                         |       | 2005 |   |
|                                                                 |   |                                                         |       |   |   |
| Net                sales                                             |   | $                                                            | 24,655,342 |   | $ | 21,396,507 |   |
| Cost                of goods sold                                    |   |                                                         | 16,479,066 |   |   | 14,519,415 |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| GROSS                PROFIT                                          |   |                                                         | 8,176,276  |   |   | 6,877,092 |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| Research                and development expense                      |   |                                                         | 223,539    |   |   | 159,306 |   |
| Selling,                general and administrative expense           |   |                                                         | 5,528,408  |   |   | 5.264.201 |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| Operating                income                                      |   |                                                         | 2,424,329  |   |   | 1,453,585 |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| Other                income (expense):                               |   |                                                         |       |   |   |   |   |
| Interest                income                                       |   |                                                         | 31,217     |   |   | - |   |
| Interest                expense                                      |   |                                                         | (51,663    | ) |   | (47,160 | ) |
|                                                                 |   |                                                         |       |   |   |   |   |
| INCOME                BEFORE EARNINGS FROM AFFILIATES                |   |                                                         | 2,403,883  |   |   | 1,406,425 |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| Equity                in earnings of Joint Venture                   |   |                                                         | 3,164,817  |   |   | 1,776,326 |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| Loss                on currency translation                          |   |                                                         | (17,906    | ) |   | - |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| NET                INCOME BEFORE TAXES and MINORITY INTEREST         |   |                                                         | 5,550,794  |   |   | 3,182,751 |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| Provision                for income tax expense (benefit)            |   |                                                         | 875,224    |   |   | (326,523 | ) |
|                                                                 |   |                                                         |       |   |   |   |   |
| NET                INCOME BEFORE MINORITY INTEREST                   |   | $                                                            | 4,675,570  |   | $ | 3,509,274 |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| Minority                interest                                     |   |                                                         | 23,692     |   |   | - |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| NET                INCOME                                            |   | $                                                            | 4,699,262  |   | $ | 3,509,274 |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| Net                income per common share amounts:                  |   |                                                         |       |   |   |   |   |
| Basic                                                                |   | $                                                            | 1.97       |   | $ | 1.58 |   |
| Diluted                                                              |   | $                                                            | 1.88       |   | $ | 1.45 |   |
|                                                                 |   |                                                         |       |   |   |   |   |
| Weighted                average number of common shares outstanding: |   |                                                         |       |   |   |   |   |
| Basic                                                                |   |                                                         | 2,380,163  |   |   | 2,222,297 |   |
| Diluted                                                              |   |                                                         | 2,499,175  |   |   | 2,423,900 |   |

*See      accompanying notes to consolidated financial statements.*

----

**UNIVERSAL      SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**(Unaudited)**

|                                                                                                                          |   | Nine                  Months Ended December 31, |       |
|-------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                                                                                          |   |  2006                                      |       |  2005 |   |
| OPERATING                  ACTIVITIES                                                                                         |   |                                            |       |   |   |
| Net                  income                                                                                                   |   | $                                               | 4,699,262  |   | $ | 3,509,274 |   |
| Adjustments                  to reconcile net income to net cash (used in) provided by operating                  activities: |   |                                            |            |   |   |  |   |
| Depreciation                  and amortization                                                                                |   |                                            | 108,538    |   |   | 20,891 |   |
| Earnings                  of the Joint Venture                                                                                |   |                                            | (3,164,817 | ) |   | (1,776,322 | ) |
| Changes                  in operating assets and liabilities:                                                                 |   |                                            |            |   |   |  |   |
| Decrease                  (increase) in accounts receivable and amounts due from                  factor                      |   |                                            | 302,094    |   |   | (715,787 | ) |
| Increase                  in inventories and prepaid expenses                                                                 |   |                                            | (3,853,840 | ) |   | (364,533 | ) |
| Increase                  (decrease) in accounts payable and accrued expenses                                                 |   |                                            | 695,424    |   |   | (125,851 | ) |
| Increase                  in deferred tax asset                                                                               |   |                                            | (458,596   | ) |   | (348,604 | ) |
|                                                                                                                          |   |                                            |            |   |   |  |   |
| NET                  CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                                                          |   |                                            | (1,671,935 | ) |   | 199,068 |   |
|                                                                                                                          |   |                                            |            |   |   |  |   |
| INVESTING                  ACTIVITIES:                                                                                        |   |                                            |            |   |   |  |   |
| Dividends                  received from Joint Venture                                                                        |   |                                            | 1,274,266  |   |   | 771,677 |   |
| Purchase                  of property and equipment                                                                           |   |                                            | (468,453   | ) |   | (5,994 | ) |
| Acquisition                  of subsidiaries                                                                                  |   |                                            | (1,784,120 | ) |   | - |   |
|                                                                                                                          |   |                                            |            |   |   |  |   |
| NET                  CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                                                          |   |                                            | (978,307   | ) |   | 765,683 |   |
|                                                                                                                          |   |                                            |            |   |   |  |   |
| FINANCING                  ACTIVITIES:                                                                                        |   |                                            |            |   |   |  |   |
| Tax                  benefit from exercise of stock options                                                                   |   |                                            | 739,000    |   |   | - |   |
| Borrowings                  net of repayments from Foreign Commercial Bank                                                    |   |                                            | 148,475    |   |   | - |   |
| Payments                  of notes payable acquired in acquisition                                                            |   |                                            | (1,043,389 | ) |   | - |   |
| Payments                  of lease obligation                                                                                 |   |                                            | (31,092    | ) |   |  |   |
| Proceeds                  from issuance of common stock from exercise of employee stock                  options              |   |                                            | 451,845    |   |   | 46,318 |   |
|                                                                                                                          |   |                                            |            |   |   |  |   |
| NET                  CASH PROVIDED BY FINANCING ACTIVITIES                                                                    |   |                                            | 264,839    |   |   | 46,318 |   |
|                                                                                                                          |   |                                            |            |   |   |  |   |
| Impact                  of foreign currency                                                                                   |   |                                            | (96,206    | ) |   | - |   |
|                                                                                                                          |   |                                            |            |   |   |  |   |
| (DECREASE)                  INCREASE IN CASH                                                                                  |   |                                            | (2,481,609 | ) |   | 1,011,069 |   |
|                                                                                                                          |   |                                            |            |   |   |  |   |
| Cash                  at beginning of period                                                                                  |   |                                            | 3,015,491  |   |   | 59,287 |   |
|                                                                                                                          |   |                                            |            |   |   |  |   |
| CASH                  AT END OF PERIOD                                                                                        |   | $                                               | 533,882    |   | $ | 1,070,356 |   |
|                                                                                                                          |   |                                            |            |   |   |  |   |
| Supplemental                  information:                                                                                    |   |                                            |            |   |   |  |   |
| Interest                  paid                                                                                                |   | $                                               | 51,663     |   | $ | 47,160 |   |

*See      accompanying notes to consolidated financial statements.*

----

**UNIVERSAL      SECURITY INSTRUMENTS, INC. AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**Statement      of Management**

**Acquisition**

|                                        |   | Nine                Months EndedDecember                31, |      |
|---------------------------------------------|--------|-------------------------------------------------------------|-----------|
|                                        |   | 2006                                                        |      | 2005 |   |
|                                        |   |                                                        |      |   |   |
| Revenue                                     |   | $                                                           | 9,136,000 |   | $ | 8,305,000 |   |
| Net                (loss)                   |   |                                                        | (100,000  | ) |   | (90,900 | ) |
| Earnings                per share (diluted) |   |                                                        | ($0.04    | ) |   | (0.04 | ) |

**Purchase      Price Allocation**

| Assets                  acquired        |   |    |            |   |
|-----------------------------------------|--------|---------|-----------------|--------|
| Cash                                    |   | $       | 48,378          |   |
| Accounts                  receivable    |   |    | 1,171,616       |   |
| Inventory                               |   |    | 1,825,917       |   |
| Property                  and equipment |   |    | 1,968,735       |   |
| Other                                   |   |    | 82,335          |   |
|                                    |   |  $ | 5.096,981  |   |

----

| Liabilities                  Assumed           |   |   |       |
|------------------------------------------------|--------|--------|------------|
| Debt                                           |   | $      | (2,775,573 | ) |
| Accounts                  payable and accruals |   |   | (2,088,979 | ) |
| Minority                  interest             |   |   | (4,800     | ) |
|                                           |   | $      | (4,879,352 | ) |
| Goodwill                                       |   |   | 1,556,491  |   |
| Total                  consideration           |   | $      | 1,784,120  |   |

**Goodwill.      **

**Income      Taxes**

**Joint      Venture**

|                                       |   | 2006   |       | 2005   |   |
|--------------------------------------------|--------|--------|------------|--------|--------|
|                                       |   |   |       |   |   |
| Net                  sales                 |   | $      | 31,566,816 |   | $      | 18,610,343 |   |
| Gross                  profit              |   |   | 10,859,898 |   |   | 6,495,286 |   |
| Net                  income                |   |   | 7,096,898  |   |   | 3,559,233 |   |
| Total                  current assets      |   |   | 13,832,205 |   |   | 7,415,265 |   |
| Total                  assets              |   |   | 24,958,330 |   |   | 18,056,986 |   |
| Total                  current liabilities |   |   | 7,601,540  |   |   | 5,192,751 |   |

**Foreign      Currency Translation**

----

**Capital      Lease Obligation**

| 2007                                                          |   | $      | 28,440  |   |
|---------------------------------------------------------------|--------|--------|---------|--------|
| 2008                                                          |   |   | 59,532  |   |
| 2009                                                          |   |   | 44,649  |   |
| Total                  minimum lease payments                 |   |   | 132,621 |   |
|                                                          |   |   |    |   |
| Less:                  amount representing interest at 8.043% |   |   | 17,279  |   |
|                                                          |   |   | 115,342 |   |
| Less:                  current portion                        |   |   | 59,532  |   |
|                                                          |   | $      | 55,810  |   |

**Business      Segments **

|                                                  |   | U.S.                  Operations |      |   |   | Canadian                  Operations |   |
|-------------------------------------------------------|--------|----------------------------------|-----------|--------|--------|--------------------------------------|--------|
| Sales                                                 |   | $                                | 7,078,827 |   |   |                                 |   | $ | 1,542,066 |   |
| Cost                  of sales                        |   |                             | 4,335,645 |   |   | 1,489,906                            |   |   |   |   |
| Gross                  profit                         |   |                             | 2,743,182 |   |   |                                 |   |   | 52,160 |   |
| Selling,                  general and administrative  |   |                             | 1,712,997 |   |   |                                 |   |   | 322,554 |   |
| Operating                  income (loss)              |   |                             | 1,030,185 |   |   |                                 |   |   | (270,394 | ) |
| Equity                  in earnings of Joint Venture  |   |                             | 995,097   |   |   |                                 |   |   | - |   |
| Interest                  income (expense)            |   |                             | 3,141     |   |   |                                 |   |   | (51,663 | ) |
| Net                  income (loss) before taxes       |   |                             | 2,028,423 |   |   |                                 |   |   | (322,057 | ) |
| Currency                  translation adjustment      |   |                             | -         |   |   |                                 |   |   | (17,906 | ) |
| Provision                  for income taxes (benefit) |   |                             | 268,154   |   |   |                                 |   |   | (268,885 | ) |
| Net                  income (loss)                    |   | $                                | 1,760,269 |   |   |                                 |   | $ | (71,078 | ) |

----

**Net      Income Per Common Share**

|                                                                                                                                    |   | Three                Months EndedDecember                31, |      | Nine                Months EndedDecember                31, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|-----------|-------------------------------------------------------------|--------|
|                                                                                                                                    |   | 2006                                                         |      | 2005                                                        |   | 2006 |   | 2005 |   |
| Weighted                average number of common shares outstanding for basic EPS                                                       |   |                                                         | 2,417,972 |                                                        |   | 2,231,331 |   |   | 2,380,163 |   |   | 2,222,297 |   |
| Shares                issued upon the assumed exercise of outstanding stock                options                                      |   |                                                         | 96,564    |                                                        |   | 204,805 |   |   | 119,012 |   |   | 201,603 |   |
| Weighted                average number of common and common equivalent shares outstanding                for                diluted EPS |   |                                                         | 2,514,536 |                                                        |   | 2,436,136 |   |   | 2,499,175 |   |   | 2,423,900 |   |

**Line      of Credit**

**Notes      Payable - Other**

**Stock      Based Compensation**

*Adoption      of SFAS No. 123R. *
*      Share-Based Payment*
*      Accounting for Stock Issued to Employees*

----

*Fair      Value Determination.*

*Stock      Option Activity.*

*Stock      Compensation Expense.*

*      Accounting for Stock-Based Compensation,*
*      Accounting for Stock-Based Compensation - Transition and      Disclosure*

|                                                                                                                                                                                                    |   | Three                Months EndedDecember                31, |      | Nine                Months EndedDecember                31, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|-----------|-------------------------------------------------------------|--------|
|                                                                                                                                                                                                    |   | 2005                                                         |      | 2005                                                        |   |
|                                                                                                                                                                                                    |   |                                                         |      |                                                        |   |
| Net                income, as reported                                                                                                                                                                  |   | $                                                            | 1,456,809 |                                                        | $      | 3,509,274 |   |
| Deduct:                Total stock-based employee compensation expense determined under                fair                value based method for all awards, net of related tax                effects |   |                                                         | (25,962   | )                                                           |   | (77,885 | ) |
| Pro                forma net income                                                                                                                                                                     |   | $                                                            | 1,430,847 |                                                        | $      | 3,431,389 |   |
| Earnings                per share:                                                                                                                                                                      |   |                                                         |      |                                                        |   |   |   |
| Basic                - as reported                                                                                                                                                                      |   | $                                                            | 0.65      |                                                        | $      | 1.58 |   |
| Basic                - pro forma                                                                                                                                                                        |   | $                                                            | 0.64      |                                                        | $      | 1.54 |   |
| Diluted                - as reported                                                                                                                                                                    |   | $                                                            | 0.60      |                                                        | $      | 1.45 |   |
| Diluted                - pro forma                                                                                                                                                                      |   | $                                                            | 0.59      |                                                        | $      | 1.42 |   |

----

**Recent      Accounting Pronouncements**

*Accounting      for Uncertainty in Income Taxes: an interpretation of FASB Statement No.      109*
*Accounting      for Income Taxes*

**Reclassifications**

----

**ITEM      2.**

**FORWARD-LOOKING        STATEMENTS**

**OVERVIEW**

**RESULTS        OF        OPERATIONS**

**Three      Months Ended December 31, 2006 and 2005**

*Sales.*

*Gross      Profit Margin.*

----

*Expenses.*

*Interest      Expense and Income.*

*Income      Taxes.*

*Net      Income.*

**Nine      Months Ended December 31, 2006 and 2005**

*Sales.*

*Gross      Profit Margin.*

----

*Expenses.*

*Interest      Expense and Income.*

*Income      Taxes.*

*Net      Income.*

**FINANCIAL        CONDITION        AND        LIQUIDITY**

----

**JOINT        VENTURE**

*Net      Sales.*

*Net      Income.*

*Gross      Margins.*

*Expenses.*

*Interest      Income and Expense.*

*Liquidity.*

**CRITICAL        ACCOUNTING        POLICIES**

----

*Revenue      Recognition in Financial Statements*

**ITEM      3.**

**ITEM      4.**

----

**PART      II - OTHER INFORMATION**

**ITEM      1.**

----

**ITEM      4.**

**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 , 1988, File No.                    1-31747)                                                                                                                                                                                                                                                                                    |
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 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. 1-31747)                                                                                                                                                                                                                                     |
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 3.3                            |   | Bylaws,                    as amended (incorporated by reference to Exhibit 3.3 to the Company’s                    Quarterly Report on Form10-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                    December 31, 2003, File No. 1-31747)                                                                                                                                                                                                                    |
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.2                           |   | Joint                    Venture Agreement, as amended (incorporated by reference to Exhibit                    10.2                    to Amendment No. 1 on Form 10-K/A to the Company’s Annual Report on Form                    10-K for the year ended March 31, 2006, File No.                    1-31747)                                                                                                                                                                               |
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 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. 1-31747)                                                                                                                         |
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 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 December 31, 2002, File No. 1-31747)                                                                                                                                                                                                                |
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 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 December 31, 2004, File                    No.                    1-31747)                                                                                                                                                                    |
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 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. 1-31747) |
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.7                           |   | Amended                    and Restated Employment Agreement dated July 18, 2005 between                    the Company                    and Harvey B. Grossblatt (incorporated by reference to Exhibit                    10.7 to the                    Company’s Quarterly Report on Form 10-Q for the period ended December                    31,                    2005, File No. 1-31747)                                                                                            |
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 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, 2007*                                                                                                                                                                                                                                                                                                                                                                                                                                            |

----

**SIGNATURES**

|                                 |                                                                |                                                    |
|--------------------------------------|---------------------------------------------------------------------|---------------------------------------------------------|
|                                 | **UNIVERSAL                SECURITY INSTRUMENTS, INC.**(Registrant) |
|                            |                                                           |                                               |
| Date:              February 14, 2007 | By:                                                       | /s/ Harvey              B.              Grossblatt |
|                                 | Harvey              B. Grossblatt                                   |
|                                 | President, Chief Executive              Officer                     |
|   |                                                                                   |                                       |
|--------|----------------------------------------------------------------------------------------|--------------------------------------------|
|   |                                                                                   |
|   | By:                                                                          | /s/              James B. Huff   |
|   | James                  B. HuffVice                  President, Chief Financial Officer |
|   |                                                                                   |

----