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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                For the Quarterly period ended September 30, 2005

                                       OR

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

                        Commission file number 001-31747

                      UNIVERSAL SECURITY INSTRUMENTS, INC.

             (Exact name of registrant as specified in its charter)

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

7-A Gwynns Mill Court
Owings Mills, Maryland                                         21117
(Address of principal executive offices)                     (Zip Code)

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

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

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

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

At November  14,  2005,  the number of shares  outstanding  of the  registrant's
common stock was 1,673,498.


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<PAGE>

                                TABLE OF CONTENTS

Part I - Financial Information                                              Page
                                                                            ----

      Item 1. Consolidated Financial Statements (unaudited):

              Consolidated Balance Sheets at September 30, 2005
              and March 31, 2005                                               3

              Consolidated Statements of Earnings for the Three
              Months Ended September 30, 2005 and 2004                         4

              Consolidated Statements of Earnings for the Six
              Months Ended September 30, 2005 and 2004                         5

              Consolidated Statements of Cash Flows for the Six
              Months Ended September 30, 2005 and 2004                         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       13

      Item 4. Controls and Procedures                                         13

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                                                      17


<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                    ASSETS                                      September 30, 2005   March 31, 2005
                                                                                ------------------   --------------
<S>                                                                             <C>                  <C>
CURRENT ASSETS
Cash                                                                            $          131,833   $       59,287
Accounts receivable:
  Trade (less allowance for doubtful accounts of $15,000)                                1,168,005        1,014,757
  Employees                                                                                 22,283           21,503
                                                                                ------------------   --------------
                                                                                         1,190,288        1,036,260

Amount due from factor                                                                   4,806,123        3,394,084
Inventory                                                                                3,963,827        4,834,486
Prepaid expenses                                                                           286,798          145,394
                                                                                ------------------   --------------

TOTAL CURRENT ASSETS                                                                    10,378,869        9,469,511

DEFERRED TAX ASSET                                                                         551,780          351,780

INVESTMENT IN JOINT VENTURE                                                              6,869,364        6,131,481

PROPERTY AND EQUIPMENT - NET                                                                71,882           81,690

OTHER ASSETS                                                                                15,486           15,486

TOTAL ASSETS                                                                    $       17,887,381   $   16,049,948
                                                                                ==================   ==============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable                                                                $        1,819,248   $    1,725,402
Accrued liabilities:
  Patent litigation reserve                                                                635,318          806,679
  Payroll, commissions and other                                                           436,365          620,199
                                                                                ------------------   --------------

TOTAL CURRENT LIABILITIES                                                                2,890,931        3,152,280
                                                                                ------------------   --------------

COMMITMENTS AND CONTINGENCIES                                                                   --               --

SHAREHOLDERS' EQUITY
Common stock, $.01 par value per share; authorized 20,000,000 shares;
  issued and outstanding 1,673,498 and 1,652,998 shares at September 30, 2005
  and March 31, 2005, respectively                                                          16,735           16,530
Additional paid-in capital                                                              11,515,556       11,469,444
Retained earnings                                                                        3,464,159        1,411,694
                                                                                ------------------   --------------
TOTAL SHAREHOLDERS' EQUITY                                                              14,996,450       12,897,668
                                                                                ------------------   --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      $       17,887,381   $   16,049,948
                                                                                ==================   ==============
</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,
                                                        --------------------------
                                                            2005           2004
                                                        -----------    -----------
<S>                                                     <C>            <C>
Net sales                                               $ 7,119,100    $ 6,622,221
Cost of goods sold                                        4,840,262      4,500,443
                                                        -----------    -----------

GROSS PROFIT                                              2,278,838      2,121,778

Research and development expense                             49,636         79,995
Selling, general and administrative expense               1,700,809      1,641,124
                                                        -----------    -----------

Operating income                                            528,393        400,659

Other expense:
   Interest expense                                         (15,103)       (18,683)
                                                        -----------    -----------


INCOME BEFORE EARNINGS FROM JOINT VENTURE                   513,290        381,976

Earnings from Joint Venture:
   Equity in earnings of Joint Venture                      549,405        661,860
                                                        -----------    -----------

NET INCOME BEFORE TAXES                                   1,062,695      1,043,836

Provision for income tax (benefit) expense                 (100,000)            --
                                                        -----------    -----------

NET INCOME                                              $ 1,162,695    $ 1,043,836
                                                        ===========    ===========

Net income per common share amounts:
  Basic                                                 $      0.69    $      0.66
  Diluted                                               $      0.64    $      0.59
Weighted average number of common shares outstanding:
  Basic                                                   1,673,498      1,580,149
  Diluted                                                 1,824,937      1,757,998
</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,
                                                        ----------------------------
                                                            2005            2004
                                                        ------------    ------------
<S>                                                     <C>             <C>

Net sales                                               $ 14,042,910    $ 11,497,003
Cost of goods sold                                         9,715,118       7,890,512
                                                        ------------    ------------

GROSS PROFIT                                               4,327,792       3,606,491

Research and development expense                             101,814         146,221
Selling, general and administrative expense                3,588,869       2,822,482
                                                        ------------    ------------

Operating income                                             637,109         637,788

Other expense:
   Interest expense                                          (23,377)        (31,454)
                                                        ------------    ------------

INCOME BEFORE EARNINGS FROM JOINT VENTURE                    613,732         606,334

Earnings from Joint Venture:
   Equity in earnings of Joint Venture                     1,251,305       1,171,281
                                                        ------------    ------------

NET INCOME BEFORE TAXES                                 $  1,865,037    $  1,777,615

Provision for income tax (benefit) expense                  (187,428)             --
                                                        ------------    ------------

                                                        $  2,052,465    $  1,777,615
                                                        ============    ============

Net income per common share amounts:
  Basic                                                 $       1.23    $       1.13
  Diluted                                               $       1.13    $       1.01
Weighted average number of common shares outstanding:
  Basic                                                    1,663,318       1,572,558
  Diluted                                                  1,817,759       1,761,141
</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,
                                                                                         2005           2004
                                                                                     -----------    -----------
<S>                                                                                  <C>            <C>
OPERATING ACTIVITIES
Net income                                                                           $ 2,052,465    $ 1,777,615
Adjustments  to reconcile net income to net cash provided by (used in)
  operating activities:
   Depreciation and amortization                                                          13,818         12,363
   Earnings of the Joint Venture                                                      (1,251,303)    (1,171,281)
   Changes in operating assets and liabilities:
      (Increase) in accounts receivable and amounts due from factor                   (1,566,067)    (1,369,578)
      Decrease (increase) in inventories and prepaid expenses                            729,255       (267,468)
      (Decrease) increase in accounts payable and accrued expenses                      (261,349)       861,294
      (Increase) in deferred tax asset                                                  (200,000)            --
                                                                                     -----------    -----------

NET CASH USED IN OPERATING ACTIVITIES                                                   (483,181)      (157,055)

INVESTING ACTIVITIES:
   Dividends received from Joint Venture                                                 513,420             --
   Purchase of property and equipment                                                     (4,010)        (1,901)
                                                                                     -----------    -----------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                      509,410         (1,901)

FINANCING ACTIVITIES:
   Proceeds from issuance of common stock from exercise of employee stock options         46,317         55,842
   Principal payments on capital lease                                                        --         (4,474)
                                                                                     -----------    -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                                 46,317         51,368
                                                                                     -----------    -----------

INCREASE  (DECREASE) IN CASH                                                              72,546       (107,588)

Cash at beginning of period                                                               59,287        188,190
                                                                                     -----------    -----------

CASH AT END OF PERIOD                                                                $   131,833    $    80,602
                                                                                     ===========    ===========

Supplemental information:
   Interest paid                                                                     $    23,377    $    31,454
   Income tax paid                                                                            --             --

Non-cash financing activities:
   Repayment of trade payables due the Joint Venture in lieu of cash distribution             --        458,940
</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,  2005
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 in the three and six month  periods
ended September 30, 2005,  principally as a result of the  carryforward of prior
years'  operating  losses.  The valuation  allowance  previously  established to
offset tax benefits  associated  with our net operating loss  carryforwards  and
other  deferred  tax  assets  was  reduced  during  the six month  period  ended
September  30,  2005 by  $200,000,  resulting  in a net  income  tax  benefit of
$187,428. The valuation allowance is heavily influenced by historical results of
operations  and  management   believes  recent  operating  results  support  the
recognition of a portion of the income tax benefits  associated with realization
of net  operating  loss  carryforwards  and other  deferred tax assets.  We will
continue to monitor the remaining  valuation allowance of $576,523 which offsets
future tax benefits  associated with net operating loss  carryforwards and other
deferred tax assets  until  circumstances  indicate  the  allowance is no longer
required.

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 Peoples'
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, 2005 and
2004:

                                      2005          2004
                                  -----------   -----------
      Net sales                   $11,603,563   $13,058,422
      Gross profit                  3,993,796     4,223,978
      Net income                    2,222,036     2,561,766
      Total current assets          7,227,911     6,994,456
      Total assets                 16,665,745    14,507,826
      Total current liabilities     4,630,962     4,798,055


During the six months  ended  September  30,  2005 and 2004,  respectively,  the
Company purchased $6,014,577 and $4,699,666 of products from the Hong Kong Joint
Venture.  At September 30, 2005 and 2004, the Company had amounts payable to the
Hong Kong Joint  Venture of $500,000.  For the six month period ended  September
30, 2005,  the Company has adjusted its equity in earnings of the Joint  Venture
to reflect a reduction  of  $135,149 in  inter-company  profit in  inventory  as
required by US GAAP.

Recent Accounting Pronouncements

In May 2005, the Financial  Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting Standards ("SFAS") No. 154, "Accounting for Changes and
Error  Corrections - a replacement of Accounting  Opinions Board ("APB") Opinion
No.  20  and  FASB  Statement  No.  3."  SFAS  No.  154  requires  retrospective
application to changes in accounting  principles  for prior  periods'  financial
statements,  unless it is impracticable to determine either the  period-specific
effects or the  cumulative  effect of the change.  SFAS No. 154 is effective for
accounting  changes and  corrections  of errors made in fiscal  years  beginning
after  December  15, 2005,  and earlier  adoption is  permitted  for  accounting
changes and  corrections  of errors made in fiscal  years  beginning  after this
statement  was issued.  The Company has adopted  SFAS No. 154 as of its issuance
and will apply its provisions to any changes in accounting  principle that occur
in future  periods.  The  Company's  adoption of SFAS No. 154 is not expected to
have an impact on the Company's financial condition or results of operations.


                                       7
<PAGE>

In December 2004, the Financial Accounting Standards Board, or FASB, issued FASB
Statement No. 123R,  "Share-Based  Payment," which requires companies to expense
the value of employee  stock options and similar  awards.  The effective date of
FASB 123R is for interim and annual periods beginning after June 15, 2005.

In March 2005, the SEC issued Staff Accounting Bulletin No. 107 ("SAB No. 107"),
which  provides  guidance  on the  implementation  of SFAS No.  123R,  including
guidance  related  to  share-based   payment   transactions  with  nonemployees,
valuation methods, the accounting for certain redeemable  financial  instruments
issued  under   share-based   payment   arrangements,   the   classification  of
compensation  expense,  and the accounting for income tax effects of share-based
payment arrangements under SFAS No. 123R.

In April 2005, the SEC delayed the  implementation  date for SFAS No. 123R until
an issuer's first annual period that begins after June 15, 2005. Therefore,  the
Company is required to adopt SFAS No. 123R effective April 1, 2006, using one of
three implementation alternatives.  The Company anticipates that the adoption of
SFAS  No.  123R  may  have  a  significant  impact  on the  Company's  financial
statements.  The  Company  is  currently  in the  process of  determining  which
implementation  alternative  to use and what the  overall  accounting  impact of
adopting SFAS No. 123R may be.

Reclassifications

Certain  prior year  amounts  have been  reclassified  in order to conform  with
current year presentation.

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, 2005 and 2004 is as follows:

<TABLE>
<CAPTION>
                                           Three Months Ended        Six months Ended
                                              September 30,            September 30,
                                          ---------------------   ---------------------
                                             2005        2004        2005        2004
                                          ---------   ---------   ---------   ---------
<S>                                       <C>         <C>         <C>         <C>
Weighted average number of common
  shares outstanding for basic EPS        1,673,498   1,580,149   1,663,318   1,572,558

Shares issued upon the assumed
  exercise of outstanding stock options     151,439     177,849     154,441     188,583
                                          ---------   ---------   ---------   ---------

Weighted average number of common
  and common equivalent shares
  outstanding for diluted EPS             1,824,937   1,757,998   1,817,759   1,761,141
                                          =========   =========   =========   =========
</TABLE>


Basic and diluted weighted  average number of common shares  outstanding for the
three and six month periods ended  September 30, 2004 have been restated to show
the effect of a 4-for-3 stock dividend paid on April 5, 2004 to  shareholders of
record on March 15, 2004.

At  September  30, 2005,  and 2004 there were no  securities  outstanding  whose
issuance  would  have  an  anti-dilutive   effect  on  the  earnings  per  share
calculation.


                                       8
<PAGE>

Stock Based Compensation

During the period ended September 30, 2005 and 2004, the Company granted options
for the purchase of 0 and 1,000 shares, respectively,  to employees. The options
issued during the six months ended  September 30, 2004,  are  exercisable  at an
average price of $13.00 per share,  expiring in 2009,  and vest over a four year
period from the date of grant.

On July 12, 2005, the Company settled the litigation with a former director.  As
a part of this settlement, the Company accepted the June 6, 2002 exercise by the
former  director of the option to purchase 20,000 shares at an exercise price of
$2.25 per share.  The exercise  price for these  shares was paid  simultaneously
with the closing of the settlement agreement.

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. The following  table  illustrates the
effect on net income and  earnings  per share as if the fair value based  method
had been applied to all outstanding and unvested awards in each period.

<TABLE>
<CAPTION>
                                                       Three Months Ended          Six months Ended
                                                          September 30,              September 30,
                                                     -----------------------   ------------------------
                                                        2005         2004         2005         2004
                                                     ----------   ----------   ----------   -----------
<S>                                                  <C>          <C>          <C>          <C>
Net income, as reported                              $1,162,695   $1,043,836   $2,052,465   $ 1,777,615

Deduct: Total stock-based employee compensation
  expense determined under fair value based method
  for all awards, net of related tax effects            (25,962)     (15,520)     (51,924)      (31,040)
                                                     ----------   ----------   ----------   -----------

Pro forma net income                                 $1,136,733   $1,028,316   $2,000,541   $ 1,746,575
                                                     ==========   ==========   ==========   ===========

Earnings per share:
Basic - as reported                                  $     0.69   $     0.66   $     1.23   $      1.13
                                                     ==========   ==========   ==========   ===========
Basic - pro forma                                    $     0.68   $     0.65   $     1.20   $      1.11
                                                     ==========   ==========   ==========   ===========
Diluted - as reported                                $     0.64   $     0.59   $     1.13   $      1.01
                                                     ==========   ==========   ==========   ===========
Diluted - pro forma                                  $     0.62   $     0.58   $     1.10   $      0.99
                                                     ==========   ==========   ==========   ===========
</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, 2005 and 2004

      Sales.  Net sales for the  three  months  ended  September  30,  2005 were
$7,119,100  compared to $6,622,221 for the comparable  three months in the prior
fiscal year, an increase of $496,879 (7.5%). The primary reason for the increase
in sales was an  increase  in volume of sales of smoke  alarm,  GFCI and  carbon
monoxide alarm units.

      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 was 32% of sales for the quarters ended September 30, 2005 and 2004.

      Expenses.   Research   and   development,   and   selling,   general   and
administrative expenses increased by $29,326 from the comparable three months in
the prior year. As a percentage of net sales, these expenses were reduced to 25%
for the three month period ended September 30, 2005, from 26% for the comparable
2004  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.

      Interest Expense and Income. Our interest expense, net of interest income,
decreased to $15,103 for the quarter  ended  September 30, 2005 from $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  $1,162,695  for the quarter  ended
September 30, 2005 compared to net income of  $1,043,836  for the  corresponding
quarter of the prior  fiscal  year.  The primary  reason for the increase in net
income is our  increased  earnings  from  domestic  operations  and  income  tax
benefits totaling $231,314,  offset by a decrease in earnings from our Hong Kong
Joint Venture of $112,455 from the same period of the prior year.

Six Months Ended September 30, 2005 and 2004

      Sales.  Net  sales  for the six  months  ended  September  30,  2005  were
$14,042,910  compared to $11,497,003  for the comparable six months in the prior
fiscal  year,  an  increase of  $2,545,907  (22%).  The  primary  reason for the
increase in sales was an increase  in volume of sales of smoke  alarm,  GFCI and
carbon monoxide alarm units.


                                       10
<PAGE>

      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 0.6% from 31.4% for the period ended September 30,
2004 to 30.8% for the current  period  ended  September  30,  2005.  The primary
reason for this was higher costs of goods sold which costs were not reflected in
the pricing of our products.

      Expenses.   Research   and   development,   and   selling,   general   and
administrative  expenses increased by $721,980 from the comparable six months in
the prior year. As a percentage of sales,  these expenses were 26.3% for the six
month period ended September 30, 2005 from 25.8% for the comparable 2004 period.
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  vary
directly with sales volume and, therefore, of the $721,980 increase in expenses,
commissions  and freight  expense of $371,729 is  attributable  to higher  sales
volume during the 2005 period. (ii) Professional fees associated with litigation
and auditing costs  increased by $339,929 for the 2005 period as compared to the
same period in the previous year. The Company  believes  professional  fees will
decrease  during  the  remainder  of the  current  fiscal  year  as  outstanding
litigation issues are resolved.

      Interest Expense and Income. Our interest expense, net of interest income,
decreased to $23,377 for the six months ended  September 30, 2005,  from $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 $2,052,465 for the six months ended
September 30, 2005 compared to net income of  $1,777,615  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),  an  increase  in  earnings  of the Hong Kong  Joint  Venture of
$80,024 from the same period of the prior year, and income tax benefits from the
reduction in the valuation allowance provided on deferred tax assets.

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
$6,122,000  available  under the Factoring  Agreement  (including the amount due
from factor of  $4,806,123),  of which $0 was borrowed as of September 30, 2005.
The interest  rate under the  Factoring  Agreement on the  uncollected  factored
accounts receivable and any additional  borrowings is equal to the prime rate of
interest charged by our lender.  At September 30, 2005, the prime rate was 6.5%.
Borrowings are collateralized by all of our accounts receivable and inventory.

      Our non-factored accounts receivable as of the end of our last fiscal year
(net of allowances for doubtful  accounts) were $1,014,757,  and were $1,168,005
as of September 30, 2005. The increase in non-factored 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 $145,394, and were $286,798 as of September 30,
2005.  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  $483,181  for the six  months  ended
September  30,  2005.  This was  primarily  due to net income being offset by an
increase in accounts  receivable and amounts due from factor of  $1,566,067,  an
increase in accounts payable and accrued  expenses of $261,349,  and an increase
in the deferred tax asset of $200,000,  offset by a decrease in inventories  and
prepaid expenses of $729,255.

      Investing  activities  provided  cash of $509,410  in the current  quarter
primarily as a result of dividends received from the Joint Venture. For the same
period last year, investing activities used cash of $1,901.

      Financing  activities  provided  cash of  $46,317  from  the  exercise  of
employee  stock  options.  For the same period last year,  financing  activities
provided cash of $51,368, primarily from the exercise of employee stock options.


                                       11
<PAGE>

      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.

HONG KONG JOINT VENTURE

      Net Sales.  Net sales of the Hong Kong Joint Venture for the three and six
months ended September 30, 2005 were $5,590,351 and  $11,603,563,  respectively,
compared to $6,216,118 and $13,058,422, respectively, for the comparable periods
in the prior fiscal year. The 10.1% and 11.1% respective  decreases in net sales
for the  three and six  month  periods  were due to  reduced  volume of  product
shipped due to a temporary  reduction  in  manufacturing  capacity  arising as a
result of a lack of available trained labor.

      Net Income.  Net income for the three and six months ended  September  30,
2005 was $1,021,841  and  $2,222,036,  respectively,  compared to $1,323,720 and
$2,561,766,  respectively,  in the  comparable  periods last year. The 22.8% and
13.2%  respective  decreases  in net income for the three and six month  periods
were due to reduced sales volume as noted above.

      Gross Margins.  Gross margins of the Hong Kong Joint Venture for the three
month period ended  September 30, 2005  increased to 33.5% from 32% for the 2004
period.  For the six month period ended  September 30, 2005,  gross margins were
34.4% which was an increase  over the 32.3%  gross  margin of the prior  period.
Since  gross  margins  depend on sales  volume of various  products,  changes in
product sales mix caused these changes in gross margins.

      Expenses.  Selling,  general and administrative expenses were $821,963 and
$1,708,232,  respectively,  for the three and six month periods ended  September
30, 2005,  compared to $758,793 and $1,623,462,  in the prior year's  respective
periods.  As a percentage  of sales,  expenses  were 14.7% for the three and six
month  periods ended  September 30, 2005,  compared to 12% for the three and six
month periods ended  September  30, 2004.  The increase in selling,  general and
administrative expense was due to increased costs.

      Interest Income and Expense. Interest expense, net of interest income, was
$4,648 and  $11,498,  respectively,  for the three and six month  periods  ended
September  30,  2005,  compared  to  interest  expense of $11,714  and  $21,494,
respectively, for the prior year's periods. The decrease in net interest expense
is primarily due to increased  interest income from bonds owned by the Hong Kong
Joint Venture.

      Liquidity.  Cash needs of the Hong Kong Joint Venture are currently met by
funds generated from operations. During the six months ended September 30, 2005,
working  capital  increased by $1,003,182  from  $1,593,767 on March 31, 2005 to
$2,596,949 on September 30, 2005.

CRITICAL ACCOUNTING POLICIES

      Management's   discussion  and  analysis  of  our  consolidated  financial
statements  and results of operations  are based on our  Consolidated  Financial
Statements  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,
2005. 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:


                                       12
<PAGE>

      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.  Accordingly,  based on current results
of  operations,  the balance of the  valuation  allowance  for our remaining net
deferred tax assets at September 30, 2005 has been reduced to $576,523.

      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, 2005.

ITEM 4. CONTROLS AND PROCEDURES

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


                                       13
<PAGE>

      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.


                                       14
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      On June 10, 2003,  Leviton  Manufacturing  Co., Inc.  filed a second civil
suit against the Company and its USI Electric  subsidiary  in the United  States
District Court for the District of Maryland (Case No.  03cv1701),  alleging this
time that the  Company's  GFCI units  infringe one or more of its more  recently
issued  patents for reset lockout  technology  related to but not required by UL
Standard  943 for ground GFCI units,  effective  January  2003  ("Leviton  II").
Leviton also asserted  trade dress and unfair  competition  claims which largely
correspond to the claim in the previously reported "Leviton l" suit. 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.  The Court has  bifurcated  the action into liability and
damage phases, linked the supplier's Declaratory Judgment action with the action
against the Company,  and consolidated Leviton I with Leviton II. In March 2005,
the court  dismissed one of the Leviton patents from the suit and in April 2005,
issued a claims  construction  order that favors the  position  of the  Company.
Discovery  has closed and summary  judgment  motions have been fully briefed and
are pending  disposition by the Court. The Company moved for summary judgment of
noninfringement  of the five  remaining  patents  and for  judgment on the trade
dress claims.  Leviton  opposed  summary  judgment on the trade dress claims and
cross-moved  for a  judgment  of  infringement  on two  claims  from  one of its
asserted patents.

      On June 11, 2003, Walter Kidde Portable Equipment, Inc. filed a civil suit
against the Company in the United States  District Court for the Middle District
of North Carolina (Case No.  03cv00537),  alleging that certain of the Company's
AC  powered/battery  backup  smoke  detectors  infringe on a patent  acquired by
Kidde. The plaintiff is seeking  injunctive  relief and damages to be determined
at trial.  Summary  judgment  motions  have been fully  briefed and the case was
scheduled  for a jury trial in October.  At the pretrial  conference,  the Judge
ordered a continuance  for Kidde to make a showing of ownership of the patent at
the  time the suit was  filed.  All  other  proceedings  are  stayed  pending  a
determination of whether Kidde had a standing to sue the Company at the time the
suit was filed.  The  Company  and its  counsel  believe  that the  Company  has
significant  defenses  relating  to the  patent  in  suit.  In the  event  of an
unfavorable  outcome,  the  amount  of any  potential  loss  to  USI is not  yet
determinable.

      From time to time,  the Company is involved in various  lawsuits and legal
matters. It is the opinion of management,  based on the advice of legal counsel,
that these  matters  will not have a material  adverse  effect on the  Company's
financial statements.

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

      On October 5, 2005, the Company held its Annual  Meeting of  Stockholders.
The only matter submitted to the stockholders for a vote was the election of one
director  in the Class of 2008.  The nominee  was Harvey B.  Grossblatt.  At the
Meeting,  at least 1,219,905 shares were voted in favor of the nominee,  no more
than 335,535 shares were voted to withhold  approval of any nominee's  election,
and 36,738 shares abstained. As a result, the nominee was elected.

      Directors  not up for  re-election  and  continuing  in  office  after the
Meeting are: Cary Luskin, Ronald A. Seff, M.D. and Howard Silverman, Ph.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  (incorporated  by  reference  to  Exhibit  10.5 to the  Company's
         Quarterly  Report on Form 10-Q for the period ended September 30, 2004,
         File No. 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.
         0-7885)

10.7     Amended and Restated  Employment  Agreement dated July 18, 2005 between
         the Company and Harvey B. Grossblatt*

10.8     Settlement  Agreement  with  respect  to Michael  Kovens vs.  Universal
         Security Instruments,  Inc. et al (incorporated by reference to Exhibit
         10.8 to the  Company's  Quarterly  Report on Form  10-Q for the  period
         ended June 30, 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 November 14, 2005*

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

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


                                       17