102109--7/13/2007--UNIVERSAL_SECURITY_INSTRUMENTS

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{capital, credit, financial}

{stock, price, share}

{provision, law, control}

{operation, international, foreign}

{condition, economic, financial}

{product, liability, claim}

{operation, natural, condition}

{product, market, service}

{competitive, industry, competition}

{personnel, key, retain}

{property, intellectual, protect}

{acquisition, growth, future}

{interest, director, officer}

{product, candidate, development}

{regulation, government, change}

An investment in our Common Stock is subject to risks inherent to our business. The material risks and uncertainties that management believes affect the Company are described below. Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair the Company s business operations. Risk Factors Relating To Our Business Generally Our success depends to a very large degree on our relationship with and the success of our Hong Kong Joint Venture. Our reliance on the Hong Kong Joint Venture exposes us to uncertainties and risks from abroad which could negatively affect our operations and sales. The lack of availability of inventory could adversely affect our financial results. Our Hong Kong Joint Venture is subject to political and economic factors unique to China. We are subject to risks in connection with the importation of our products from foreign countries. Our newly acquired Canadian mechanical steel tubing subsidiary will need to increase production to be profitable We rely on our key personnel and the loss of one or more of those personnel could have a material adverse effect on our business, financial condition and results of operations. Our competition is both intense and varied and our failure to effectively compete could adversely affect our prospects. The security products marketplace is dynamic and challenging because of the introduction of new products and services. Adverse changes in national or regional U.S. economic conditions could adversely affect our financial results. Our products must meet specified quality and safety standards to enter and stay on the market. Our products expose us to the potential of product liability claims. We may be unable to successfully execute our merchandising and marketing strategic initiatives. We are and could become subject to litigation regarding intellectual property rights, which could seriously harm our business. If governmental regulations change or are applied differently, our business could suffer. Risk Factors Relating to our Articles of Incorporation and our Stock The liability of our directors is limited. It is unlikely that we will issue dividends on our common stock in the foreseeable future. The exercise of outstanding options will dilute the percentage ownership of our stockholders, and any sales in the public market of shares of our common stock underlying such options may adversely affect prevailing market prices for our common stock. It may be difficult for a third party to acquire us, which could affect our stock price.

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102109--7/13/2007--UNIVERSAL_SECURITY_INSTRUMENTS_INC