================================================================================

                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 September 30, 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 |X| No |_|

At November  15,  2004,  the number of shares  outstanding  of the  registrant's
common stock was 1,627,728.

================================================================================



<PAGE>

                                TABLE OF CONTENTS
                                -----------------


Part I - Financial Information                                             Page
                                                                           ----

   Item 1.    Consolidated Financial Statements (unaudited):

              Consolidated Balance Sheets at September 30, 2004
              and March 31, 2004                                            3

              Consolidated Statements of Earnings for the Three
              Months Ended September 30, 2004 and 2003                      4

              Consolidated Statements of Earnings for the Six
              Months Ended September 30, 2004 and 2003                      5

              Consolidated Statements of Cash Flows for the Six
              Months Ended September 30, 2004 and 2003                      6

              Notes to Consolidated Financial Statements                    7

   Item 2.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                    10

   Item 3.    Quantitative and Qualitative Disclosure About Market Risk    14

   Item 4.    Controls and Procedures                                      14



Part II - Other Information

   Item 1.    Legal Proceedings                                            15

   Item 4.    Submission of Matters to a Vote of Security Holders          15

   Item 6.    Exhibits                                                     16

              Signatures


<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS
                  --------------------

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

<TABLE>
<CAPTION>
                                  ASSETS                                  September 30, 2004   March 31, 2004
                                                                          ------------------   --------------

<S>                                                                            <C>             <C>
CURRENT ASSETS
Cash                                                                           $     80,602    $    188,190
Accounts receivable:
  Trade (less allowance for doubtful accounts of $15,000)                         1,007,158          90,852
Employees                                                                            24,286          23,770
                                                                               ------------    ------------
                                                                                  1,031,444         114,622
Amount due from factor                                                            3,563,759       3,111,003
Inventory                                                                         2,928,642       2,867,650
Prepaid expenses                                                                    313,528         107,052
                                                                               ------------    ------------

TOTAL CURRENT ASSETS                                                              7,917,975       6,388,517

DEFERRED TAX ASSET                                                                   56,899          56,899

INVESTMENT IN JOINT VENTURE                                                       5,544,627       4,832,286

PROPERTY AND EQUIPMENT - NET                                                         82,969          93,431

OTHER ASSETS                                                                         15,486          15,486
                                                                               ------------    ------------

TOTAL ASSETS                                                                   $ 13,617,956    $ 11,386,619
                                                                               ============    ============

                   LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable                                                               $  1,860,574    $  1,517,305
Accrued liabilities:
    Patent litigation reserve                                                       374,172         159,197
    Payroll, commissions and other                                                  348,731         504,621
Current obligations under capital lease                                               2,750           7,224
                                                                               ------------    ------------
TOTAL CURRENT LIABILITIES                                                         2,586,227       2,188,347
                                                                               ------------    ------------


COMMITMENTS AND CONTINGENCIES                                                            --              --

SHAREHOLDERS' EQUITY
Common stock, $.01 par value per share; authorized 20,000,000 shares; issued
    and outstanding 1,580,729 and 1,552,896 shares at September 30, 2004 and
    March 31, 2004, respectively                                                     15,809          15,529
Additional paid-in capital                                                       11,244,465      11,188,903
Accumulated deficit                                                                (228,545)     (2,006,160)
                                                                               ------------    ------------
TOTAL SHAREHOLDERS' EQUITY                                                       11,031,729       9,198,272
                                                                               ------------    ------------
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                    $ 13,617,956    $ 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
                                                                  September 30,
                                                              2004             2003
                                                              ----             ----
<S>                                                       <C>             <C>
Net sales                                                 $  6,622,221    $  4,988,483
Cost of goods sold                                           4,500,443       3,412,776
                                                          ------------    ------------

GROSS PROFIT                                                 2,121,778       1,575,707

Research and development expense                                79,995          65,860
Selling, general and administrative expense                  1,641,124       1,285,187
                                                          ------------    ------------


Operating income                                               400,659         224,660

Other (expense):
   Interest expense                                            (18,683)        (30,663)
                                                          ------------    ------------


INCOME BEFORE EARNINGS FROM JOINT VENTURE
                                                               381,976         193,997

Earnings from Joint Venture:
   Equity in earnings of Joint Venture                         661,860         546,449
                                                          ------------    ------------


NET INCOME                                                $  1,043,836    $    740,446
                                                          ============    ============

Net income per common share amounts:
  Basic                                                   $       0.66    $       0.49
  Diluted                                                 $       0.59    $       0.43
Weighted average number of common shares outstanding
  Basic                                                      1,580,149       1,503,457
  Diluted                                                    1,757,998       1,724,693
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      -4-
<PAGE>


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

<TABLE>
<CAPTION>
                                                            Six Months Ended
                                                            ----------------
                                                              September 30,
                                                              -------------
                                                            2004           2003
                                                       ------------    -----------
<S>                                                    <C>             <C>
Net sales                                              $ 11,497,003    $ 9,420,433
Cost of goods sold                                        7,890,512      6,384,481
                                                       ------------    -----------

GROSS PROFIT                                              3,606,491      3,035,952

Research and development expense                            146,221        130,477
Selling, general and administrative expense               2,822,482      2,502,427
                                                       ------------    -----------


Operating income                                            637,788        403,048

Other (expense):
   Interest expense                                         (31,454)       (63,372)
                                                       ------------    -----------

INCOME BEFORE EARNINGS FROM JOINT VENTURE
                                                            606,334        339,676

Earnings from Joint Venture:
   Equity in earnings of Joint Venture                    1,171,281      1,253,269
                                                       ------------    -----------



NET INCOME                                             $  1,777,615    $ 1,592,945
                                                       ============    ===========

Net income per common share amounts:
  Basic                                                $       1.13    $      1.06
  Diluted                                              $       1.01    $      0.93
Weighted average number of common shares outstanding
  Basic                                                   1,572,558      1,500,412
  Diluted                                                 1,761,141      1,706,021
</TABLE>


          See accompanying notes to consolidated financial statements.

                                      -5-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                     Six Months Ended September 30,
                                                                                          2004             2003
                                                                                          ----             ----
<S>                                                                                  <C>             <C>
OPERATING ACTIVITIES
Net income                                                                           $  1,777,615    $ 1,592,945
Adjustments to reconcile net income to net cash (used in) provided by operating
activities:
   Depreciation and amortization                                                           12,363         17,013
   Gain on sale of land                                                                        --       (175,965)
   Earnings of the Joint Venture                                                       (1,171,281)    (1,253,269)
   Change in allowance for doubtful accounts                                                   --         60,000
   Changes in operating assets and liabilities:
     (Increase) in accounts receivable and amounts due from factor                     (1,369,578)      (595,872)
     (Increase) in inventories and prepaid expenses                                      (267,468)       (18,312)
      Increase in accounts payable and accrued expenses                                   861,294        656,162
                                                                                     ------------    -----------

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                                      (157,055)       282,702

INVESTING ACTIVITIES:
    Purchase of property and equipment                                                     (1,901)        (5,489)
    Gross proceeds from sale of land                                                           --        350,000
                                                                                     ------------    -----------

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                                        (1,901)       344,511

FINANCING ACTIVITIES:
    Proceeds from issuance of common stock from exercise of employee stock options         55,842         21,560
    Principal payments on capital lease                                                    (4,474)        (7,586)
    Retirement of common stock                                                                 --         (1,426)
                                                                                     ------------    -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                                  51,368         12,548
                                                                                     ------------    -----------

(DECREASE) INCREASE  IN CASH                                                             (107,588)       639,761

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

CASH AT END OF PERIOD                                                                $     80,602    $   690,873
                                                                                     ============    ===========

Supplemental information:
  Interest paid                                                                      $     31,454    $    63,372
  Income tax paid                                                                              --             --

Non-cash financing activities:
  Repayment of trade payables due the Joint Venture in lieu of cash distribution          458,940        592,188
</TABLE>


          See accompanying notes to consolidated financial statements

                                      -6-
<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 six month  periods
ended September 30, 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 consumer  electronic  products.  The
following represents  summarized balance sheet and income statement  information
of the Hong Kong Joint  Venture for the six months ended  September 30, 2004 and
2003:

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

      Net sales                      $13,058,422         $13,078,644
      Gross profit                     4,223,978          4,188,176
      Net income                       2,561,766          2,566,465
      Total current assets             6,994,456          9,909,010
      Total assets                    14,507,826         12,694,320
      Total current liabilities        4,798,055          3,232,572

During the six months  ended  September  30,  2004 and 2003,  respectively,  the
Company purchased $4,699,686 and $4,159,596 of products from the Hong Kong Joint
Venture.  At September 30, 2004 and 2003, the Company had amounts payable to the
Hong Kong Joint Venture of $500,000 and $490,071,  respectively. For the quarter
ended September 30, 2004, the Company has adjusted its equity in earnings of the
Joint Venture to reflect the elimination of $10,958 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.

A reconciliation of the weighted average shares of common stock utilized in the
computation of basic and diluted earnings per share for the three and six month
periods ended September 30, 2004 and 2003 is as follows:


                                       -7-
<PAGE>


<TABLE>
<CAPTION>
                                                   Three Months Ended       Six months Ended
                                                   ------------------       ----------------
                                                      September 30,           September 30,
                                                      -------------           -------------
                                                    2004        2003        2004        2003
                                                ----------- ----------- ----------- -----------

<S>                                               <C>         <C>         <C>         <C>
Weighted average number of common                 1,580,149   1,503,457   1,572,558   1,500,412
shares outstanding for basic EPS

Shares issued upon the assumed                      177,849     221,236     188,583     205,609
                                                ----------- ----------- ----------- -----------
exercise of outstanding stock options

Weighted average number of common                 1,757,998   1,724,693   1,761,141   1,706,021
and common equivalent shares
outstanding for diluted EPS
</TABLE>

During the current  quarter  3,333  shares  were issued in July 2004.  The basic
weighted  average common shares  outstanding for the quarter ended September 30,
2004 equals 1,580,149 shares computed as follows:

7/01/2004 - 7/16/2004    (1,577,396 x 16/92)         274,329
7/16/2004 - 9/30/2004    (1,580,729 x 76/92)       1,305,820
                                                   ---------
                                                   1,580,149

During the six months ended September 30, 2004, 23,333 shares were issued in May
2004 and 1,167  shares  were  issued in June 2004.  The basic  weighted  average
common  shares  outstanding  for the six-month  period ended  September 30, 2004
equals 1,572,558 shares computed as follows:

4/01/2004 - 5/15/2004    (1,552,896 x 45/183)        381,860
5/16/2004 - 6/15/2004    (1,576,229 x 31/183)        267,011
6/15/2004 - 7/15/2004    (1,577,396 x 31/183)        267,209
7/16/2004 - 9/30/2004    (1,580,729 x 76/183)        656,478
                                                  ----------
                                                   1,572,558

Basic and diluted weighted  average number of common shares  outstanding for the
three and six month periods ending September 30, 2004 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 September  30, 2003 as restated  are  1,503,457  and  1,724,693,
respectively computed as follows:

Basic                    (1,127,593 / 3 x 4)       1,503,457
Diluted                  (1,293,520 / 3 x 4)       1,724,693

At  September  30, 2004,  and 2003 there were no  securities  outstanding  whose
issuance  would  have  an  anti-dilutive   effect  on  the  earnings  per  share
calculation.


Stock Based Compensation

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.


                                      -8-
<PAGE>

<TABLE>
<CAPTION>
                                                        Three Months Ended               Six months Ended
                                                            September 30,                 September 30,
                                                        2004          2003          2004          2003
                                                    -----------   -----------   -----------   -----------
<S>                                                 <C>           <C>           <C>           <C>
Net income, as reported                             $ 1,043,836   $   740,446   $ 1,777,615   $ 1,592,945

Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects

                                                        (15,520)      (18,757)      (31,040)      (37,514)
                                                    -----------   -----------   -----------   -----------
  Pro forma net income                              $ 1,028,316   $   721,689   $ 1,746,575   $ 1,555,431
                                                    ===========   ===========   ===========   ===========

Earnings per share:
Basic - as reported                                 $      0.66   $      0.49   $      1.13   $      1.06
                                                    ===========   ===========   ===========   ===========
Basic - pro forma                                   $      0.65   $      0.48   $      1.11   $      1.04
                                                    ===========   ===========   ===========   ===========
Diluted - as reported                               $      0.59   $      0.43   $      1.01   $      0.93
                                                    ===========   ===========   ===========   ===========
Diluted - pro forma                                 $      0.58   $      0.42   $      0.99   $      0.91
                                                    ===========   ===========   ===========   ===========
</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.


                                      -9-
<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 September 30, 2004 and 2003

      Sales.  Net sales for the  three  months  ended  September  30,  2004 were
$6,622,221  compared to $4,988,483 for the comparable  three months in the prior
fiscal year, an increase of $1,633,738  (32.75%).  Net sales of safety  products
increased by $1,694,601 as compared to the quarter ended September 30, 2003. Net
sales of other products  decreased by $60,863,  as compared to the quarter ended
September 30, 2003.  The primary  reason for the increase in safety sales was an
increase in volume of sales of smoke  alarm,  GFCI,  and carbon  monoxide  alarm
units. 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  increased 0.5%, to 32% of sales for the quarter ended September 30, 2004
from 31.5% for the corresponding quarter last year. The increase in gross profit
margin resulted from higher sales volume without a corresponding increase in the
fixed costs component of the cost of goods sold.

      Expenses. Research and development and selling, general and administrative
expenses  increased by $370,072  from the  comparable  three months in the prior
year. As a percentage of net sales,  these  expenses were reduced to 26% for the
three month period ended  September 30, 2004, from 27.1% for the comparable 2003
period. The decrease in research,  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 $370,072  increase in
expenses, $87,735 is attributable to higher sales volume during the 2004 period.
(ii) Research and development  expenses  increased by $14,135 due to new product
development.   (iii)   Professional   fees   associated   with   litigation  and
Sarbanes-Oxley  related  compliance and auditing costs  increased by $55,287 for
the 2004  period as  compared  to the same  quarter in the  previous  year.  The
Company  believes  professional  fees  will  continue  at  least  at  the  level
experienced during the current fiscal year until the  Sarbanes-Oxley  compliance
costs level off and outstanding  litigation  issues are resolved.  (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.

+
                                      -10-
<PAGE>

      Interest Expense and Income. Our interest expense, net of interest income,
decreased  from $30,663 for the quarter ended  September 30, 2003 to $18,683 for
the quarter  ended  September 30, 2004.  The lower  interest  expenses  resulted
primarily from a reduction in the average balance of borrowings.

      Net Income.  We reported net income of  $1,043,836  for the quarter  ended
September  30, 2004  compared to net income of  $740,446  for the  corresponding
quarter of the prior  fiscal year.  The primary  reasons for the increase in net
income are our increased  gross profit and  increased  earnings of $115,411 from
our Hong Kong Joint Venture.

Six Months Ended September 30, 2004 and 2003

      Sales.  Net  sales  for the six  months  ended  September  30,  2004  were
$11,497,003  compared to $9,420,433  for the  comparable six months in the prior
fiscal  year,  an increase of  $2,076,570  (22%).  Net sales of safety  products
increased by $2,205,117 as compared to the six months ended  September 30, 2003.
Net sales of other products decreased by $128,547, as compared to the six months
ended  September 30, 2003.  The primary  reason for the increase in safety sales
was an increase in volume of sales of smoke  alarm,  GFCI,  and carbon  monoxide
alarm units.  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 0.8% from 32.2% for the period ended September 30,
2003 to 31.4% for the current  period  ended  September  30,  2004.  The primary
reason for this was higher costs of goods sold for safety  products  which costs
were not reflected in the pricing of our products.

      Expenses. Research and development and selling, general and administrative
expenses increased by $335,799 from the comparable six months in the prior year.
As a percentage of sales, these expenses were reduced to 25.8% for the six month
period ended September 30, 2004 from 27.9% for the comparable  2003 period.  The
decrease in research, 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 $335,799 increase in expenses,  $82,774 is
attributable  to higher sales volume  during the 2004 period.  (ii) Research and
development expenses increased by $15,744 due to new product development.  (iii)
Professional  fees  associated  with  litigation  and   Sarbanes-Oxley   related
compliance  and  auditing  costs  increased  by $43,471  for the 2004  period as
compared  to the  same  period  in  the  previous  year.  The  Company  believes
professional  fees will  continue at least at the level  experienced  during the
current  fiscal  year until the  Sarbanes-Oxley  compliance  costs level off and
outstanding litigation issues are resolved. (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  from $63,372 for the six months ended  September 30, 2003, to $31,454
for the six  months  ended  September  30,  2004.  The lower  interest  expenses
resulted primarily from a reduction in the average balance of borrowings.

      Net Income.  We reported net income of $1,777,615 for the six months ended
September 30, 2004 compared to net income of  $1,592,945  for the  corresponding
period of the prior  fiscal  year.  The primary  reason for the  increase in net
income  is  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),  partially  offset by a decrease  in  earnings  of the Hong Kong
Joint Venture of $81,988 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
$4,628,466  available  under  the  Factoring  Agreement  of which  $675,466  was
borrowed  as of  September  30,  2004.  The  interest  rate under the  Factoring
Agreement on the  uncollected  factored  accounts  receivable and any additional
borrowings is equal to 1% in excess of the prime rate of interest charged by our
lender.  At September 30, 2004,  the prime rate was 4.5%.  Beginning  October 1,
2004,  the interest rate under the  Factoring  Agreement has been lowered to the
prime rate.  Borrowings are collateralized by all of our accounts receivable and
inventory.


                                      -11-
<PAGE>

      Our  accounts  receivable  as of the end of our last  fiscal  year (net of
allowances  for doubtful  accounts)  were  $90,852,  and were  $1,007,158  as of
September 30, 2004. The increase in trade accounts  receivable  during the first
six months of the current fiscal year is due to increased sales 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  $313,528 as of September  30,  2004.  The
increase in prepaid  expenses  during the first six months of the current fiscal
year is due to the timing of premium payments to various insurance carriers.

      Operating activities used cash of $157,055 for the quarter ended September
30,  2004.  This was  primarily  due to an increase in accounts  receivable  and
amount due from factor of  $1,369,578,  and equity in the earnings from our Hong
Kong Joint Venture of $1,171,281,  which were partially offset by an increase in
accounts  payable and accrued  expenses  of  $861,294.  For the same period last
year, operating activities provided cash of $282,702.

      Investing activities used cash of $1,901 in the current quarter, primarily
to  acquire  equipment.  For the same  period  last year,  investing  activities
provided  cash of  $344,511,  primarily  from the sale of the 1.5 acre parcel of
land.

      Financing  activities provided cash of $51,368 primarily from the exercise
of employee stock options.  For the same period last year,  financing activities
provided cash of $12,548.

      We  believe  that  funds   available   under  the   Factoring   Agreement,
distributions  from the Hong Kong Joint Venture,  and working capital 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.

      On August 4, 2004,  Stephen C. Knepper,  our Chairman and Chief  Executive
Officer,  died suddenly and unexpectedly.  While Mr. Knepper's  contributions to
the Company and our success cannot be overstated,  management  believes that Mr.
Knepper's  passing  will not have a  material  adverse  effect on our growth and
results of operations.

HONG KONG JOINT VENTURE

      Net Sales.  Net sales of the Hong Kong Joint Venture for the three and six
months ended September 30, 2004 were $6,216,118 and  $13,058,422,  respectively,
compared to $6,317,099 and $13,078,644, respectively, for the comparable periods
in the prior  fiscal  year.  The 1.6%  decrease in net sales for the three month
period was due to changes in the sales product mix.

      Net Income.  Net income for the three and six months ended  September  30,
2004 was $1,323,720  and  $2,561,766,  respectively,  compared to $1,290,429 and
$2,566,465, respectively, in the comparable periods last year. The 2.3% increase
in net income for the quarter was due to changes in the sales product mix and an
increase in investment income.

      Gross Margins.  Gross margins of the Hong Kong Joint Venture for the three
month period  ended  September  30, 2004  decreased to 32% from 35% for the 2003
period.  For the six month period ended  September 30, 2004,  gross margins were
32%. 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 $758,793 and
$1,623,462,  respectively,  for the three and six month periods ended  September
30, 2004,  compared to $880,139 and $1,570,281,  in the prior year's  respective
periods. As a percentage of sales, expenses were 12% and 12%, respectively,  for
the three and six month  periods ended  September 30, 2004,  compared to 14% and
12%, respectively, for the three and six month periods ended September 30, 2003.
The  decrease in selling,  general and  administrative  expense was due to lower
depreciation expenses.

                                      -12-
<PAGE>

      Interest Income and Expense. Interest income, net of interest expense, was
$11,714 and $21,494,  respectively,  for the three and six month  periods  ended
September 30, 2004, compared to interest expense of $298 and $854, respectively,
for the prior year's  periods.  The increase in interest income is primarily due
to bond interest income.

      Liquidity.  Cash needs of the Hong Kong Joint Venture are currently met by
funds generated from operations. During the six months ended September 30, 2004,
working  capital  increased  by $877,744  from  $1,318,657  on March 31, 2004 to
$2,196,401 on September 30, 2004.

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 September 30, 2004.

                                      -13-
<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  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 operating  effectively to ensure  appropriate  disclosure.  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 reevaluate this situation.

      We  have  also  been  advised  that  the  independent   registered  public
accounting firm for the Hong Kong Joint Venture has 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.  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 September 30, 2004.
The Hong Kong Joint Venture is in the process of addressing  these  deficiencies
and Company  management  will continue to monitor the Hong Kong Joint  Venture's
progress in this area.


                                      -14-
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

      As we previously reported in our Annual Report on Form 10-K for the fiscal
year ended March 31, 2004,  Leviton  Manufacturing  Co., Inc. filed a civil suit
against the Company and our USI Electric  subsidiary  on June 13,  2003,  in the
United States  District Court for the District of Maryland (Case No.  03cv1701),
alleging that our ground fault circuit  interrupter (GFCI) units infringe one or
more patents,  and also asserted trade dress and unfair competition claims which
largely  correspond  to the claim in an  earlier  pending  suit filed by Leviton
against the Company.  The plaintiff is seeking  injunctive relief and damages to
be determined at trial. On July 23, 2003, the GFCI manufacturer, Shanghai Meihao
Electric,  Inc, filed an action for  declaratory  judgment of  non-infringement,
invalidity,  and  unenforceability of the asserted patents, and we moved to stay
the litigation until the ruling on the declaratory  judgment suit. In July 2004,
the court denied the motion but agreed to  consolidate  the actions.  We and our
counsel  believe  that  we  have  meritorious  defenses  to the  claim  and  are
aggressively  defending the suit. In the event of an  unfavorable  outcome,  the
amount of any potential loss to USI is not yet determinable.

      As we previously reported in our Annual Report on Form 10-K for the fiscal
year ended March 31, 2004, Maple Chase Company filed a civil suit on February 2,
2004 in the United States  District Court for the Northern  District of Illinois
(Case No. 03cv07205),  against the Company, our USI Electric subsidiary, and one
former  and one  present  Illinois-based  sales  representative,  alleging  that
certain of our smoke  detectors  infringe on a patent owned by Maple Chase.  The
defendants have answered and counterclaimed against Maple Chase. In an effort to
bring about a conclusion to the litigation,  we sought and successfully obtained
reexamination  of the asserted  patent in the United States Patent and Trademark
Office  (USPTO)  based on the  references  cited and  analysis  presented by the
Company.  The reexamination will now proceed and we expect the court to stay the
litigation  pending the  outcome of the  reexamination.  Due to the  preliminary
status of the litigation and the outcome of  proceedings  before the USPTO,  the
amount, if any, of potential loss to us is not yet determinable. We believe that
we have meritorious and substantial technical defenses to the action and that we
are entitled to a number of legal and equitable  defenses due to the long period
of inaction and acquiescence by Maple Chase and its  predecessors.  We intend to
vigorously defend the suit and press our pending counterclaims.

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

      On October 5, 2004, the Company held its Annual  Meeting of  Stockholders.
The only matter submitted to the stockholders for a vote was the election of two
directors  in the Class of 2007.  The  nominees  were  Cary  Luskin  and  Howard
Silverman,  Ph.D. At the Meeting,  at least 1,104,415 shares were voted in favor
of each nominee,  no more than 368,111 shares were voted to withhold approval of
any nominee's election,  and 13,449 shares abstained.  As a result, the nominees
were elected.

      Directors  not up for  re-election  and  continuing  in  office  after the
Meeting are: Harvey B. Grossblatt and Ronald A. Seff, M.D.


                                      -15-
<PAGE>

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)
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*
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 November 15, 2004*

*Filed herewith


                                      -16-
<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: November 15, 2004             By:          /s/ Harvey B. Grossblatt
                                           -------------------------------------
                                           Harvey B. Grossblatt
                                           President, Chief Executive Officer



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


                                      -17-