Universal Security Instruments Inc (UUU)

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On October 28, 2020, Universal Security Instruments, Inc. (“USI” or the “Company”) received a letter, dated October 27, 2020, addressed to USI’s Board of Directors, from David Lazar, CEO of Activist Investing LLC. A copy of Mr. Lazar’s letter is attached to this Report as Exhibit 99.1.



Mr. Lazar’s letter makes several allegations against the Company and its management. USI strongly denies each and every allegation contained in Mr. Lazar’s letter and strongly believes that Mr. Lazar grossly mischaracterizes USI’s financial situation and prospects.



As previously disclosed, on August 31, 2020, the Company received a letter from NYSE American LLC (the “NYSE”) stating that the NYSE has determined that the Company is not in compliance with the NYSE’s continued listing standards, and requiring the Company to submit a plan (“Plan”) to regain compliance with the continued listing standards by February 28, 2022. If the Plan is accepted by the NYSE, the Company’s NYSE listing will continue, subject to the NYSE’s periodic review for Plan compliance. If the Plan is accepted by the NYSE, but the Company is not in compliance with the NYSE’s continued listing standards by February 28, 2022, or if the Company does not make progress consistent with the Plan, then the NYSE staff will initiate delisting proceedings as appropriate. The Company has submitted its Plan to the NYSE in a timely manner and is waiting to hear back from the NYSE. The Company’s Plan is predicated on the Company continuing in its current business, and the Company believes that it will regain compliance with the NYSE’s continued listing standards before the delisting deadline set by the NYSE.



Since May 14, 2020 (approximately three weeks prior to Mr. Lazar’s first purchase of USI’s stock as listed in Mr. Lazar’s Schedule 13D), Mr. Lazar introduced to USI at least six candidates for consideration as possible merger partners for the purpose of changing USI’s business so that USI will continue as a NYSE-listed company but with a different business. Management and USI’s outside counsel have devoted numerous hours to presentations and discussions with several of these possible candidates. Several of these candidates withdrew from further discussion due to their internal plans changing, and only one of these candidates eventually presented (on October 8, 2020) a detailed proposal for a possible merger in the form of a draft Agreement and Plan of Merger (the “Proposed Merger Agreement”). Since October 8, 2020, management and outside counsel have been engaged in lengthy and good faith negotiations with counsel to this candidate to finalize the Proposed Merger Agreement and address not only the basic merger, but also the disposition or spin-off of USI’s current operating business, the tax consequences to USI’s current shareholders, and the tax consequences if USI’s current operating business is spun-off and continued by a new company owned by USI’s current shareholders. Management intends to present the draft Proposed Merger Agreement to USI’s Board for consideration within the next few days and will publicly disclose any action taken by the Company as required by applicable rules and regulations of the Securities and Exchange Commission regulations and the NYSE.
Universal Security Instruments, Inc.

11407 Cronhill Drive, Suites A-D

Owings Mills, MD 21117-3586

Attn: The Board of Directors





Gentlemen:



Activist Investing LLC, together with its affiliates (collectively, “Activist Investing”), are the beneficial owners of approximately 9.9% of the outstanding shares of Universal Security Instruments, Inc. (“UUU” or the “Company”), making us the Company’s largest shareholder. However, our significant stake in UUU should not be mistaken as a vote of confidence in the Company’s management or its Board of Directors. On the contrary, we view your record in financial management, strategy and corporate governance as the cause of significant concern, and fear that instead of acting in the best interest of all UUU shareholders, you only represent the narrow interest of management.



Over the course of the past several months, we have repeatedly encouraged you to consider strategic options to reverse the Company’s long and consistent destruction of shareholder value. Unfortunately, we have found you to be insufficiently responsive as the urgency of taking decisive action has increased. In recent weeks, a serious candidate for a strategic transaction emerged – a biopharmaceutical company with a promising therapeutic for COVID-19. To our dismay, you have failed to act in what we would consider to be a timely or commercially reasonable manner with respect to this particular opportunity. Given its dire financial situation, we are now more alarmed than ever that the Company will soon find itself delisted from the New York Stock Exchange and on a path towards bankruptcy. Unless you act now, we believe that it will be up to shareholders to take immediate action to halt any further destruction of value. Time is of the essence.





Sincerely,

/s/ David Lazar


David Lazar

CEO, Activist Investing