UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended ~~September~~December 3031, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-31747

UNIVERSAL SAFETY PRODUCTS, 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.)
11407 Cronhill Drive, Suite A
Owings Mills, Maryland		21117
(Address of principal executive offices)		(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock	UUU	NYSE MKT LLC

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At ~~November~~February 19, ~~2025~~2026, the number of shares outstanding of the registrant’s common stock was 2,~~312~~717,887.

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TABLE OF CONTENTS

Part I - Financial Information			Page

	Item 1.	Condensed Consolidated Financial Statements:

		Condensed Consolidated Balance Sheet at ~~September~~December 3031, 2025 (unaudited) and March 31, 2025	3

		Condensed Consolidated Statements of Operations for the Three Months Ended ~~September~~December 3031, 2025, and 2024 (unaudited)	4

		Condensed Consolidated Statements of Operations for the ~~Six~~Nine Months Ended ~~September~~December 3031, 2025, and 2024 (unaudited)	5

		Condensed Consolidated Statements of Shareholders’ Equity for the ~~Six~~Nine Months Ended ~~September~~December 3031, 2025, (unaudited)	6

		Condensed Consolidated Statements of Shareholders’ Equity for the ~~Six~~Nine Months Ended ~~September~~December 3031, 2024, (unaudited)	7

		Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~September~~December 3031, 2025, and 2024 (unaudited)	8

		Notes to Condensed Consolidated Financial Statements (unaudited)	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1516

	Item 4.	Controls and Procedures	1819

Part II - Other Information

	Item 1.	Legal Proceedings	1920

	Item 5.	Other Information	1920

	Item 6.	Exhibits	1920

		Signatures	2021

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PART I - FINANCIAL INFORMATION

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


ASSETS	(unaudited)		(audited)
	~~September~~December 3031, 2025		March 31, 2025
CURRENT ASSETS
Cash and cash equivalents	$	54,~~225~~292,~~625~~476	$	348,074

Accounts receivable:
Trade, net of provision for credit losses of $870,000 at September 30, 2025 and $470,000 at March 31, 2025		628,382		580,574
Trade, net of provision for credit losses of $650,000 at December 31, 2025 and $470,000 at March 31, 2025		277,292		580,574
Other receivables		8,~~300~~566		8,500
		~~636~~285,~~682~~858		589,074

Amount due from factor		7046,~~782~~487		3,666,790
Inventories – finished goods		~~672~~753,~~359~~509		3,024,114
Assets – Held for Sale		—		1,681,937
Deferred tax asset		—		361,000
Prepaid expenses		~~164~~121,~~388~~712		145,290

TOTAL CURRENT ASSETS		65,~~769~~500,~~836~~042		9,816,279


TOTAL ASSETS	$	65,~~769~~500,~~836~~042	$	9,816,279

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Line of credit - factor	$	—7,417	$	2,100,458
Short-term portion of operating lease liability		—		13,330
Convertible Debenture		1,~~762~~882,~~355~~450		—
Derivative Component of Convertible Debenture		~~814~~949,000		—
Accounts payable - trade		~~268~~285,~~071~~333		1,094,546
Accounts payable – Eyston Company, Ltd.		—		1,145,843
Accrued liabilities:
Accrued payroll and employee benefits		9378,~~945~~851		108,096
Accrued commissions and other		~~170~~26,000		190,295

TOTAL CURRENT LIABILITIES		3,~~108~~229,~~371~~051		4,652,568

COMMITMENTS AND CONTINGENCIES		—		—

SHAREHOLDERS’ EQUITY
Common stock, $.01 par value per share; authorized 20,000,000 shares; 2,312,887 shares issued and outstanding at September 30, 2025 and March 31, 2025		23,129		23,129
Common stock, $.01 par value per share; authorized 20,000,000 shares; 2,312,887 shares issued and outstanding at December 31, 2025 and March 31, 2025		23,129		23,129
Additional paid-in capital		1213,~~885~~782,~~841~~541		12,885,841
Accumulated Deficit		(911,~~247~~534,~~505~~679)		(7,745,259)

TOTAL SHAREHOLDERS’ EQUITY		32,~~661~~270,~~465~~991		5,163,711
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	65,~~769~~500,~~836~~042	$	9,816,279

The accompanying notes are an integral part of these condensed consolidated financial statements.

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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended ~~September~~December 3031,
	2025		2024

Net sales	$	~~759~~22,~~999~~549	$	75,~~203~~535,~~269~~148

Cost of goods sold		~~300~~299,~~857~~547		54,~~205~~513,~~326~~137

GROSS PROFIT		459,142		1,997,943
GROSS (LOSS) PROFIT		(276,998)		1,022,011

Selling, general and administrative expense		1,~~311~~896,~~187~~159		1,~~209~~762,~~352~~446
Engineering and product development expense		7614,~~682~~193		~~110~~130,~~371~~395

Operating (loss) income		(928,727)		678,220
Operating loss		(2,187,350)		(870,830)

Other income (expense):
Other expense:
Gain on sale of assets		—		—
Change in fair value of derivative component of convertible debt		(135,000)		—
Change in fair value of derivative component of convertible debt		(47,000)		—
Interest expense - net		(78,824)		(77,409)
Interest expense - net		(11,053)		(89,642)

Net (loss) income before taxes		(986,780)		588,578
Net loss before taxes		(2,401,174)		(948,239)

Provision for income tax expense		(13,000)		(11,600)
Provision for income tax benefit		(114,000)		(11,600)

NET (LOSS) INCOME	$	(999,780)	$	576,978
NET LOSS	$	(2,287,174)	$	(936,639)

(Loss) earnings per share:
Loss per share:
Basic	$	(0.43)	$	0.25
Basic and diluted	$	(0.99)	$	(0.40)
Diluted		(0.43)		0.25

Shares used in computing loss (earnings) per share:
Shares used in computing loss per share:
Weighted average basic shares outstanding		2,312,887		2,312,887
Weighted average basic and diluted shares outstanding		2,312,887		2,312,887
Weighted average diluted shares outstanding		2,312,887		2,312,887

The accompanying notes are an integral part of these condensed consolidated financial statements.

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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	~~Six~~Nine Months Ended ~~September~~December 3031,
	2025		2024

Net sales	$	4,~~584~~606,~~246~~795	$	1117,~~801~~336,~~785~~933

Cost of goods sold		3,~~430~~730,~~969~~516		813,~~716~~229,~~138~~275

GROSS PROFIT		1876,~~153,277~~279		34,~~085~~107,~~647~~658

Selling, general and administrative expense		24,~~424~~320,~~490~~649		24,~~606~~369,~~773~~219
Engineering and product development expense		~~188~~202,~~689~~882		~~197~~328,~~972~~367

Operating (loss) income		(1,459,902)		280,902
Operating loss		(3,647,252)		(589,928)

Other income (expense):
Gain on sale of asset		2,820,668		—
Change in fair value of derivative component of convertible debt		(47182,000)		—
Interest expense - net		(786,~~225~~049)		(~~134~~211,~~530~~939)

Net Income before income taxes		1,306,541		146,372
Net Loss before income taxes		(1,094,633)		(801,867)

Provision for income tax expense		~~496~~382,000		~~11,600~~—

NET INCOME	$	810,541	$	134,772
NET LOSS	$	(1,476,633)	$	(801,867)

Earnings per share:
Loss per share:
Basic	$	0.35	$	0.06
Basic and diluted	$	(0.64)	$	(0.35)
Diluted		0.33		0.06


Shares used in computing loss per share:
Shares used in computing earnings per share:
Weighted average basic and diluted shares outstanding		2,312,887		2,312,887
Weighted average basic shares outstanding		2,312,887		2,312,887
Weighted average diluted shares outstanding		2,487,431		2,312,887

The accompanying notes are an integral part of these condensed consolidated financial statements.

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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

~~SIX~~NINE MONTHS ENDED ~~SEPTEMBER~~DECEMBER 3031, 2025

(Unaudited)


				Additional
	Common	Stock		Paid-In		Accumulated
	Shares	Amount		Capital		Deficit		Total

Balance at April 1, 2025	2,312,887	$	23,129	$	12,885,841	$	(7,745,259)	$	5,163,711

Net income							1,810,321		1,810,321

Balance at June 30, 2025	2,312,887	$	23,129	$	12,885,841	$	(5,934,938)	$	6,974,032

Cash Dividend							(2,312,787)		(2,312,787)
Net loss							(999,780)		(999,780)

Balance at September 30, 2025	2,312,887	$	23,129	$	12,885,841	$	(9,247,505)	$	3,661,465

Stock based compensation					896,700				896,700
Net loss							(2,287,174)		(2,287,174)

Balance at December 31, 2025	2,312,887	$	23,129	$	13,782,541	$	(11,534,679)	$	2,270,991

The accompanying notes are an integral part of these condensed consolidated financial statements.

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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

~~SIX~~NINE MONTHS ENDED ~~SEPTEMBER~~DECEMBER 3031, 2024

(Unaudited)


				Additional
	Common	Stock		Paid-In		Accumulated
	Shares	Amount		Capital		Deficit		Total

Balance at April 1, 2024	2,312,887	$	23,129	$	12,885,841	$	(7,945,943)	$	4,963,027

Net loss							(442,206)		(442,206)

Balance at June 30, 2024	2,312,887	$	23,129	$	12,885,841	$	(8,388,149)	$	4,520,821

Net income							576,978		576,978

Balance at September 30, 2024	2,312,887	$	23,129	$	12,885,841	$	(7,811,171)	$	5,097,799

Net loss							(936,639)		(936,639)

Balance at December 31, 2024	2,312,887	$	23,129	$	12,885,841	$	(8,747,810)	$	4,161,160

The accompanying notes are an integral part of these condensed consolidated financial statements.

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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	~~Six~~Nine Months Ended ~~September~~December 3031,
	2025		2024

OPERATING ACTIVITIES:
Net Income	$	810,541	$	134,772
Net Loss	$	(1,476,633)	$	(801,867)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Gain on sale of asset		(2,820,668)		—
Depreciation and amortization		—		3,058
Stock based compensation		896,700
Depreciation and amortization		—		4,313
Allowance for excess and obsolete inventory		—		300,000
Increase in allowance for credit losses		~~400~~180,000		—
Deferred income taxes		361,000		—
Change in fair value of derivative component of convertible debt		47182,000		—
Interest accrued on convertible debt		70,957		—
Amortization of non-cash interest on convertible debt		78,493		—
Decrease in lease obligation		(13,330)		—

Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable and amount due from factor		3,148,400		(3,150,214)
Decrease in accounts receivable and amount due from factor		3,743,519		32,581
Decrease (Increase) in inventories and assets held for sale		42,~~033~~270,~~692~~605		(1,~~528~~486,~~972~~415)
(Increase) Decrease in prepaid expenses		(19,098)		74,303
Decrease (Increase) in prepaid expenses		23,578		(19,098)
(Increase) Decrease in accounts payable and accrued liabilities		(2,~~006~~148,~~764~~596)		~~888~~1,~~890~~233,487

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		31,~~940~~347,~~773~~625		(3736,~~278,163~~999)

INVESTING ACTIVITIES:
Proceeds from sale of assets		4,955,108		—
Decrease in trade accounts payable related to closing costs on sale		(452,503)		—
Decrease in inventories and intangible assets - held for sale		(1,681,937)		—

NET CASH PROVIDED BY INVESTING ACTIVITIES		24,~~820~~502,~~668~~605		—

FINANCING ACTIVITIES:
Cash dividend paid		(2,312,787)		—
Issuance of Convertible Debt		2,~~529~~500,~~355~~000		—
Net (repayment) borrowing - Line of Credit – Factor		(2,~~100~~093,~~458~~041)		3730,~~447,281~~800

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(1,~~883~~905,~~890~~828)		3730,~~447,281~~800

NET INCREASE IN CASH		4,877,551		169,118
NET INCREASE (DECREASE) IN CASH		3,944,402		(6,199)

Cash at beginning of period		348,074		65,081
Cash AT BEGINNING OF PERIOD		348,074		65,081

CASH AT END OF PERIOD	$	54,~~225~~292,~~625~~476	$	~~234~~58,~~199~~882

SUPPLEMENTAL INFORMATION:
Interest paid	$	727,~~225~~908	$	~~134~~211,~~530~~939
Non-cash transfer of inventory related to sale of a portion of the business		1,681,937		—

The accompanying notes are an integral part of these condensed consolidated financial statements.

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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Statement of Management

Universal Safety Products, Inc., formerly “Universal Security Instruments, Inc.” (“we” or “the Company”) designs and markets a variety of popularly priced safety products which, during the period covered by this Quarterly Report, consisted primarily of smoke alarms, carbon monoxide alarms and related products. Most of our products require minimal installation and are designed for easy installation by the consumer without professional assistance and are sold through retail stores. We also market products to the electrical distribution trade through our wholly owned subsidiary, Universal Safety Electric, Inc., formerly, USI Electric, Inc. (“Universal Electric”). The electrical distribution trade includes electrical and lighting distributors as well as manufactured housing companies. Products sold by Universal Electric usually require professional installation. On July 7, 2025, we established a wholly owned subsidiary, Universal DEFI, LLC, to facilitate future growth opportunities. As of ~~September~~December 3031, 2025, Universal DEFI, LLC has conducted no material operations.

Management had been seeking access to additional funding or other resources, or the right strategic business combination, which would allow the Company to drive long-term value for its shareholders while taking advantage of growth opportunities that the Company seeks to execute. In furtherance thereof, as previously announced on October 31, 2024, the Company entered into an Asset Purchase Agreement with Feit Electric Company, Inc. (“Feit”) pursuant to which Feit agreed to acquire the smoke and carbon monoxide alarm portion of the Company’s business and the non-tangible assets of the Company, including but not limited to the trade name of Universal Security Instruments, Inc. and Universal Electric, Inc. The Closing was subject to the approval of the transaction by the requisite vote of the shareholders of the Company. A special meeting of the shareholders to approve the sale and related actions was held on April 15, 2025, and the asset sale was approved. Accordingly on May 22, 2025, the Company closed on the asset sale to Feit pursuant to the terms of the Asset Purchase Agreement. The assets held for sale in accordance with the Asset Purchase Agreement at March 31, 2025, are shown separately in the financial statements accompanying this Quarterly Report and are valued at the lower of the assets carrying value or fair value less selling cost. The Company currently intends to continue importing and marketing its product lines other than smoke alarms and carbon monoxide alarms and is exploring other business opportunities to drive long-term value for our shareholders.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Universal Electric. and Universal DEFI, LLC. Except for the condensed consolidated balance sheet as of March 31, 2025, which was derived from audited financial statements, the accompanying condensed consolidated financial statements are unaudited. Significant inter-company accounts and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the interim condensed 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 accounting principles generally accepted in the United States of America (US-GAAP) have been condensed or omitted. The interim condensed consolidated financial statements should be read in conjunction with the Company’s March 31, 2025, audited financial statements filed with the Securities and Exchange Commission on Form 10-K as filed on July 29, 2025. The interim operating results are not necessarily indicative of the operating results for the full fiscal year.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with US-GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

Revenue Recognition

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contracts with an original expected duration of one year or more. The Company’s contracts are predominantly short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in ASC Topic 606 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for products sold. Purchase orders may contain stand-alone pricing applied to each of the multiple products ordered. Revenue is recorded at the transaction price net of estimates of variable consideration. The Company uses the expected value method based on historical data in considering the impact of estimates of variable consideration, which may include trade discounts, allowances, product returns (including rights of return) or warranty replacements. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.Recognition

The Company’s primary source of revenue is the sale of safety and security products based upon purchase orders or contracts with customers. Revenue is recognized at a point in time once the Company has determined that the customer has obtained control over the product. Control is typically deemed to have been transferred to the customer when the product is shipped or delivered to the customer. Customers may not return, exchange or refuse acceptance of goods without our approval. Generally, the Company does not grant extended payment terms. Shipping and handling costs associated with outbound freight, after control over a product has transferred to a customer, are accounted for as a cost to complete the sale and are recorded in selling, general and administrative expense. Remaining performance obligations represent the transaction price of firm orders for satisfied or partially satisfied performance obligations on contracts with an original expected duration of one year or more. The Company’s contracts are predominantly short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in ASC Topic 606 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for products sold. Purchase orders may contain stand-alone pricing applied to each of the multiple products ordered. Revenue is recorded at the transaction price net of estimates of variable consideration. The Company uses the expected value method based on historical data in considering the impact of estimates of variable consideration, which may include trade discounts, allowances, product returns (including rights of return) or warranty replacements. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

Disaggregation of Revenue

The Company presents below revenue associated with sales of products acquired from Eyston Company Ltd. (Eyston) separately from revenue associated with sales of ground fault circuit interrupters (GFCI’s) and ventilation fans. The Company believes this disaggregation best depicts how our various product lines perform and are affected by economic factors. Revenue recognized by these categories for the three and ~~six~~nine months ended ~~September~~December 3031, 2025, and 2024 are as follows:

Three months ended

~~Six~~Nine months ended

~~Sept.~~December 3031, 2025

~~Sept.~~December 3031, 2024

~~Sept.~~December 3031, 2025

~~Sept.~~December 3031, 2024

Sales of products acquired from Eyston

~~568,484~~—

64,~~556~~929,~~544~~918

4,170,877

1015,~~491~~420,~~034~~952

Sales of GFCI’s and ventilation fans

~~191~~22,~~515~~549

~~646~~605,~~725~~230

~~413~~435,~~369~~918

1,~~310~~915,~~751~~981

~~759~~22,~~999~~549

75,~~203~~535,~~269~~148

4,~~584~~606,~~246~~795

1117,~~801~~336,~~785~~933

Accounts Receivable, Amount Due From Factor, and Allowance for Credit Losses

Receivables are recorded when the Company has an unconditional right to consideration. We have established a provision for credit losses based upon historical experience and the consideration of current and future economic conditions.

The Company assigns the majority of its trade receivables on a pre-approved non-recourse basis to Merchant Factors Corporation (Merchant or Factor) under a factoring agreement on an ongoing basis. At the time a receivable is assigned to our ~~factor~~Factor the credit risk associated with the credit worthiness of the debtor is assumed by the ~~factor~~Factor. The Company continues to bear any credit risk associated with sales to customers that are denied credit by the ~~factor~~Factor, dispute delivery, and/or have warranty issues related to the products sold.

Management considers amounts due from the Company’s ~~factor~~Factor to be “financing receivables”. Trade accounts receivable, foreign receivables, and receivables from our suppliers are not considered to be financing receivables.

Management assesses the credit risk of both its trade accounts receivables and its financing receivables based on the specific identification of accounts. A provision for credit losses is provided based on that assessment. Changes in the provision are charged to operations in the period the change is determined. Amounts ultimately determined to be uncollectible are eliminated from the receivable accounts and from the provision for credit losses in the period that the receivables’ status is determined to be uncollectible. Management considers the following factors when determining the collectability of specific customer accounts: customer creditworthiness, past transaction history with the customer, current industry trends, and changes in customer payment terms. Our normal collection cycle ranges between thirty and forty days. Estimated uncollectible amounts are charged to earnings and a credit to a valuation allowance. Balances which remain outstanding after reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Historically, the level of uncollectible accounts has not been significant. Based on the nature of the factoring agreement and prior experience, no provision for credit losses related to Amounts Due from Factor has been provided. At September 30, 2025, and March 31, 2025, a provision for credit losses of $470,000 has been provided for uncollectible trade accounts receivable.

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Management assesses the credit risk of both its trade accounts receivables and its financing receivables based on the specific identification of accounts. A provision for credit losses is provided based on that assessment. Changes in the provision are charged to operations in the period the change is determined. Amounts ultimately determined to be uncollectible are eliminated from the receivable accounts and from the provision for credit losses in the period that the receivables’ status is determined to be uncollectible. Management considers the following factors when determining the collectability of specific customer accounts: customer creditworthiness, past transaction history with the customer, current industry trends, and changes in customer payment terms. Our normal collection cycle ranges between thirty and forty days. Estimated uncollectible amounts are charged to earnings and a credit to a valuation allowance. Balances which remain outstanding after reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Historically, the level of uncollectible accounts has not been significant. Based on the nature of the factoring agreement and prior experience, no provision for credit losses related to Amounts Due from Factor has been provided. At December 31, 2025, and March 31, 2025, a provision for credit losses of $650,000 and $470,000, respectively, has been provided for uncollectible trade accounts receivable.

Concentrations

The Company is primarily a distributor of safety products for use in home and business under both its trade names and private labels for other companies. The Company had three customers in the ~~six~~nine-month period ended ~~September~~December 3031, 2025, that represented 13.87%, 12.98%, and 10.54% of the Company’s net sales, ~~and~~with no single customer representing ~~more~~a ~~than~~material ~~10%~~amount of the Company’s net sales for the three-month period ended ~~September~~December 3031, 2025. The Company had three customers that represented 2524.69%, 1319.30%, and 1115.4%, respectively, of the total trade accounts receivable at ~~September~~December 3031, 2025.

The Company had two customers in the ~~six~~nine-month period ended ~~September~~December 3031, 2024, that represented 3023.09%, and 1314.10% of the Company’s net sales, with the same two customers representing 4910.27% and 15.08% of the Company’s net sales for the three-month period ended ~~September~~December 3031, 2024. These customers represented 5015.9% and 1316.25%, respectively, of the total trade accounts receivable at ~~September~~December 3031, 2024.

Line of Credit – Factor

The Company entered into an Agreement with Merchant Financial Group (Merchant) for the purpose of factoring the Company’s trade accounts receivable. Under the Agreement the Company may borrow eighty percent (80%) of eligible accounts receivable. The Agreement, as supplemented, provides for additional financing at the sole discretion of Merchant to be secured by inventory. The Agreement, which expires on January 6, ~~2026~~2028, provides for continuation of the program for successive two-year periods until terminated by one of the parties to the Agreement. The amount available to borrow from Merchant is approximately $6729,000, and $348,000, at ~~September~~December 3031, 2025 and March 31, 2025, respectively. Advances on factored trade accounts receivable are secured by all assets, are repaid periodically as collections are made by Merchant but are otherwise due upon demand, and bear interest at the prime commercial rate of interest, as published, plus two percent (effective rate 98.2575% and 9.50% at ~~September~~December 3031, 2025, and March 31, 2025, respectively). Advances under the Agreement are made at the sole discretion of Merchant, based on their assessment of the receivables and inventory, and our financial condition at the time of each request for an advance. At ~~September~~December 3031, 2025, and March 31, 2025, there was $07,417 and $2,100,458 borrowed and outstanding under the factoring agreement, respectively. Collected cash maintained on deposit with the factor earns interest at the factor’s prime rate of interest less 2.5 percent (effective rate of 4.7525% and 5.00% at ~~September~~December 3031, 2025 and March 31, 2025, respectively). Cash on deposit with Merchant at ~~September~~December 3031, 2025 and March 31, 2025 amounted to $~~949~~142,~~693~~771 and 0, respectively.

Convertible Debentures

On August 13, 2025, the Company entered into a Securities Purchase Agreement with SJC Lending, LLC (SJC), in which the Company agreed to sell SJC convertible promissory notes in three separate closings of 8% convertible notes in various principal amounts up to $2,750,000 in the aggregate. The closing on the initial tranche, which occurred on August 13, 2025, consisted of the issuance of a convertible note to SJC in the principal amount of $1,100,000, for a purchase price of $1,000,000. An additional convertible note to SJC representing the planned second and third tranches was closed on September 25, 2025, in the principal amount of $1,650,000, for a purchase price of $1,500,000. The Company paid $20,000 out of the proceeds of the notes for legal fees and expenses related to the Agreement. The notes mature in one year on August 13, 2026, and September 25, 2026, respectively, if not previously converted, and are convertible into shares of common stock at a discounted price amounting to 80% of the lowest volume weighted average price occurring in the ten-business day period prior to the conversion date. SJC may convert any or all of the unpaid principal amount prior to the maturity date, however $500,000 of the unpaid principal must be converted to common stock on the date of maturity. The notes bear interest from the date of issuance at 8% of the face amount of the notes. In addition, straight-line amortization amounting to $15,479 of the original issue discount of $250,000, has been recorded as interest expense at September 30, 2025.

Under the provisions of ASC 815-40-15, “Derivatives and Hedging Contracts in Entity’s Own Equity – Scope and Scope Exceptions,” our outstanding convertible notes are indexed to our stock. The application of ASC 815-40-15 resulted in our accounting for these notes as derivative instruments, and they are recognized as liabilities in our condensed consolidated balance sheets.

The notes payable are accounted for as derivative liabilities at September 30, 2025, and are recorded net of the fair value of the derivative component on the date of issuance with changes in fair value recognized as a gain or loss for each reporting period thereafter. The notes were recorded at fair value on the date of issuance, using the Binomial valuation model, and accordingly, an original derivative liability of $309,000 and $458,000 was recorded on August 13, 2025, and September 25, 2025, respectively. The fair value of this liability is determined each reporting period and gains and losses are recognized in the statement of operations under “Other Income (Expense)”. The fair value of the derivative liability of the notes payable is $814,000 at September 30, 2025. Other expense of $47,000 was recorded during the accounting period ended September 30, 2025, reflecting an increase in the fair value of the derivative component of the liability for the period from the original issuance of the notes payable to September 30, 2025.

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Convertible Debentures

On August 13, 2025, the Company entered into a Securities Purchase Agreement with SJC Lending, LLC (SJC), in which the Company agreed to sell SJC convertible promissory notes in three separate closings of 8% convertible notes in various principal amounts up to $2,750,000 in the aggregate. The closing on the initial tranche, which occurred on August 13, 2025, consisted of the issuance of a convertible note to SJC in the principal amount of $1,100,000, for a purchase price of $1,000,000. An additional convertible note to SJC representing the planned second and third tranches was closed on September 25, 2025, in the principal amount of $1,650,000, for a purchase price of $1,500,000. The Company paid $20,000 out of the proceeds of the notes for legal fees and expenses related to the Agreement. The notes mature in one year on August 13, 2026, and September 25, 2026, respectively, if not previously converted, and are convertible into shares of common stock at a discounted price amounting to 80% of the lowest volume weighted average price occurring in the ten-business day period prior to the conversion date. SJC may convert any or all of the unpaid principal amount prior to the maturity date, however $500,000 of the unpaid principal must be converted to common stock on the date of maturity. The notes bear interest from the date of issuance at 8% of the face amount of the notes. In addition, straight-line amortization amounting to $63,014 and $78,493 respectively, of the original issue discount of $250,000, has been recorded as interest expense for the three and nine month periods ended December 31, 2025.

Our outstanding convertible notes are indexed to our stock. Accordingly, the convertible notes are accounted for using the amortized cost method with bifurcation of the derivative component being recognized in our condensed consolidated balance sheets as derivative instruments under the provisions of ASC 815-40-15, “Derivatives and Hedging Contracts in Entity’s Own Equity – Scope and Scope Exceptions,”

The notes payable are recorded net of the fair value of the derivative component on the date of issuance with changes in fair value of the derivative portion being recognized as a gain or loss for each reporting period thereafter, and the remainder of the convertible notes being accounted for using the amortized cost method with bifurcation of the derivative component, as discussed above. The derivative portion of the notes were recorded at fair value on the date of issuance, using the Binomial valuation model, and accordingly, an original derivative liability of $309,000 and $458,000 was recorded on August 13, 2025, and September 25, 2025, respectively. The fair value of this liability is determined each reporting period and gains and losses are recognized in the statement of operations under “Other Income (Expense)”. The fair value of the derivative liability of the notes payable is $949,000 at December 31, 2025. Other expense of $135,000 and $182,000 respectively, has been recorded during the three and nine month periods ended December 31, 2025 reflecting an increase in the fair value of the derivative component of the liability for the period from the original issuance of the notes payable to December 31, 2025.

Fair Value of Financial Instruments

The accounting standards regarding the fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash and other current assets and liabilities to approximate their fair values because of the short period of time between the origination of such instruments and their expected realization. The Company has also adopted ASC 820-10, “Fair Value Measurements” which defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

●

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

●

Level 3 – Inputs to valuation methodology are unobservable and significant to the fair value.

The carrying amounts of our financial instruments, including cash, cash investments, accounts payable, and accrued expenses approximate fair value because of their generally short maturities. The Company’s financial instruments are measured at amortized cost when the fair value option is not elected.

We measured the fair value of the derivative portion of the convertible notes by using the Binomial Valuation model. As of ~~September~~December 3031, 2025, the assumptions used to measure fair value of the liability embedded in our outstanding notes included an exercise price of $3.3292 per share, a common share market price of $35.9916, a discount rate of 203.53% and 3.51%, and a volatility of 5085% and 80% respectively, for the notes issued in August and September 2025.

~~The following table sets forth, by level within the fair value hierarchy, our financial instrument liabilities as of September 30, 2025.~~12


Description	Level 1	Level 2	Level 3	Total
Convertible Notes Payable	—	—	2,576,355	2,576,355

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The following table sets forth, by level within the fair value hierarchy, our financial instrument liabilities as of December 31, 2025.


Description	Level 1	Level 2	Level 3	Total
Derivative Component of Convertible Debenture	—	—	949,000	949,000

The following table sets forth a summary of changes in the fair value of our Level 3 financial instrument liability for the ~~three~~nine ~~and six~~ month ~~periods~~period ended ~~September~~December 3031, 2025.


Balance March 31, 2025	$	—
Additions to derivative liabilities		767,000
Other expense included in earnings		47,000
Change in fair value of derivative component of convertible debt		182,000
Conversions to equity		—
Balance September 30, 2025	$	814,000
Balance December 31, 2025	$	949,000

Stock-Based Compensation

In October 2025, the stockholders approved the Company’s 2025 Non-Qualified Stock Incentive Plan (the “Plan”). Under the terms of the Plan, 1,000,000 shares are reserved for the granting of stock options. Under the provisions of the Plan, a committee of the Board of Directors determines the option price and dates exercisable. During August 2025, the compensation committee granted two hundred-twenty-five thousand (225,000) stock options subject to shareholder approval of the Plan, which was granted in October 2025 as mentioned above, at an option price of $3.40 per share. These options became fully vested upon shareholder approval.

We account for share-based payments using the fair value method. We recognize all share-based payments to employees and non-employee directors in our financial statements based on their effective date fair values, calculated using the Black-Scholes option pricing model. Based on shareholder approval of the Plan on October 20, 2025, and due to the fully vested component of the stock option grants, compensation expense of $896,700 was recognized during the quarter ended December 31, 2025. The Company does not have current sufficient historical data on the estimated expected life of the options granted. Accordingly, the expected term of the stock options granted is estimated to be five years from the effective date of the grant based on the simplified safe harbor calculation provided under ASC 718-10-55-20 and 21. The expected volatility of the options granted was determined based on the Company’s stock price over a one-year look-back period and resulted in an expected volatility of 103.68%. The risk-free interest rate of 3.579% was determined using the yield available for zero-coupon U.S. government issues with a remaining term equal to the expected term of the options. The intrinsic value of the issued and outstanding options at December 31, 2025 is $396,000 and the weighted average remaining life is approximately four years and eight months. The company has not paid a dividend, other than a special one-time dividend paid as a result of the sale of a line of business, and as such, the dividend yield is considered to be zero.

The following table summarizes the status of stock options at December 31, 2025, and option transactions for the quarter then ended:


Status as of December 31, 2025	Number of Options
Presently exercisable		225,000

Outstanding options as of March 31, 2025		0
Grant 1 – October 20, 2025 (Effective date)		225,000
Weighted average exercise price per option	$	3.40
Outstanding, vested, and exercisable options as of December 31, 2025		225,000

Leases

The Company is a lessee in lease agreements for office space. ~~Certain of the Company’s leases contain provisions for one or more options to terminate or extend the lease at the Company’s sole discretion.~~ The Company’s leases are comprised of fixed lease payments, with its real estate leases including lease payments subject to a rate or index which may be variable. Certain real estate leases also include executory costs such as common area maintenance (non-lease component). As a practical expedient permitted under ASC 842, the Company has elected to account for the lease and non-lease components as a single lease component. The Company utilizes certain practical expedients for short-term leases including the election not to reassess its prior conclusions about lease identification, lease classification and initial direct costs, as well as the election not to separate lease and non-lease components for arrangements where the Company is a lessee. Lease payments, which may include lease components and non-lease components, are included in the measurement of the Company’s lease liabilities to the extent that such payments are either fixed amounts or variable lease amounts based on a rate or index (fixed in substance) as stipulated in the lease contract.

Effective October 2025, we extended our operating lease for a 15,000 square foot office and warehouse located in Baltimore County, Maryland to expire in January 2026. No option to continue the lease beyond January 2026 has been provided in the lease extension. Monthly rental expense, with common area maintenance, currently approximates $15,000.13

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of the Company’s lease liabilities to the extent that such payments are either fixed amounts or variable lease amounts based on a rate or index (fixed in substance) as stipulated in the lease contract.

The Company has negotiated several small lease extensions that have resulted in extending our operating lease for a 15,000 square foot office and warehouse located in Baltimore County, Maryland to expire in April 2026, with no option to continue the lease beyond April 2026. Monthly rental expense, with common area maintenance, currently approximates $15,000.

The Company maintained an operating lease for office space in Naperville, Illinois. This lease, consisting of 3,400 square feet, and renewed on a month-to-month basis and expired on June 30, 2025. The Company did not renew the lease upon expiration. The monthly rental, with common area maintenance, until expiration of the lease was approximately $4,900 per month.

Rent expense, including common area maintenance, totaled approximately $97135,000 and $80120,000 for the ~~six~~nine-month periods ended ~~September~~December 3031, 2025, and 2024, respectively. None of the Company’s lease agreements contain any residual value guarantees or material restrictive covenants.

Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments as specified in the lease. Right-of-use assets and lease liabilities related to the Company’s operating leases are recognized at the lease commencement date based on the present value of the remaining lease payments over the lease term. When the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available surrounding the Company’s borrowing rates at the lease commencement date in determining the present value of lease payments. The right-of-use asset also includes any lease payments made at or before lease commencement, less lease incentives. As of March 31, 2025, the Company had right-of-use assets of $0 and lease liabilities of $13,330 related to its operating leases. Lease liabilities related to the Company’s operating leases are included in short-term and long-term lease liability on the consolidated balance sheet. As of March 31, 2025, the Company’s weighted average remaining lease term and weighted-average discount rate related to its operating leases is one month and 5.5%, respectively.

Income Taxes

We calculate our interim tax provision in accordance with the guidance for accounting for income taxes in interim periods. We estimate the annual effective tax rate and apply that tax rate to our ordinary quarterly pre-tax income. The tax expense or benefit related to discrete events during the interim period is recognized in the interim period in which those events occurred.

The Company recognizes a liability or asset for the deferred tax consequences of temporary differences between the tax basis of assets or liabilities and their reported amounts in the condensed consolidated financial statements. These temporary differences may result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled.

Management reviews net operating loss carry-forwards and income tax credit carry forwards to evaluate if those amounts are recoverable. ~~The~~After ~~Company expects to use approximately $1,950,000 of its net operating loss carry-forwards in connection with the filing of its tax return for the fiscal year ending March 31, 2026. However, after~~ a review of projected taxable income, the components of the deferred tax asset, and the current global economic conditions, it was determined that it is more likely than not that the tax benefits associated with the remaining components of the deferred tax assets will not be realized. This determination was made based on the Company’s prior history of losses from operations and the uncertainty as to whether the Company will generate sufficient taxable income to use the deferred tax assets prior to their expiration. Accordingly, a valuation allowance was established to fully offset the value of the remaining deferred tax assets. Our ability to realize the tax benefits associated with the deferred tax assets depends primarily upon the timing of future taxable income and the expiration dates of the components of the deferred tax assets. If sufficient future taxable income is generated, we may be able to offset a portion of future tax expenses.

The Company follows ASC 740-10 which provides guidance for tax positions related to the recognition and measurement of a tax position taken or expected to be taken in a tax return and requires that we recognize in our condensed consolidated financial statements the impact of a tax position, if that position is more likely than not to be sustained upon an examination, based on the technical merits of the position. Interest and penalties, if any, related to income tax matters are recorded as income tax expenses.

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Earnings 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 using the treasury stock method based on the Company’s average stock price.

13Potentially dilutive common stock equivalents in the form of convertible debentures were issued during the three-month period ended September 30, 2025. Additional potentially dilutive common stock equivalents in the form of stock options were granted during the three-month period ended December 31, 2025. Basic and diluted weighted average per share amounts are identical for the three and nine-month periods ended December 31, 2025 since the net loss for the periods would result in an antidilutive loss per share.

~~Table~~Basic ofand ~~Contents~~diluted weighted average common shares outstanding are identical for the three and nine-month periods ended December 31, 2024.

Potentially dilutive common stock equivalents in the form of convertible debentures were issued during the three-month period ended September 30, 2025. The following table presents the reconciliation of basic to diluted weighted average shares used in computing net income per share of common stock attributable to common stockholders, as adjusted to give effect to the potentially dilutive effect of convertible debentures issued during the three-month period ended September 30, 2025. Basic and diluted weighted average common shares outstanding are identical for the three and six-month periods ended September 30, 2024.


	Three months ended				Six months ended
	Sept. 30, 2025		Sept. 30, 2024		Sept. 30, 2025		Sept. 30, 2024
Basic weighted average common shares	$	2,312,887	$	2,312,887	$	2,312,887	$	2,312,887
Potential dilutive effect of convertible debentures		—		—		174,544		—
Fully diluted weighted average common shares	$	2,312,887	$	2,312,887	$	2,487,431	$	2,312,887

Cash Dividend

On September 2, 2025, the Company declared a one-time special cash dividend of $1.00 per share of the Company’s outstanding common stock. The special dividend represents a portion of the purchase price the Company received for the sale of assets held for sale as previously discussed. The dividend to shareholders of record on September 18, 2025, was paid on September 25, 2025, in the aggregate amount of $2,312,787.

Contingencies

From time to time, the Company is involved in various claims and routine litigation matters. In the opinion of management, after consultation with legal counsel, the outcomes of such matters are not anticipated to have a material adverse effect on the Company’s condensed consolidated financial position, results of operations, or cash flows in future years.

Related Party Transactions

During the three and ~~six~~nine-month periods ended ~~September~~December 3031, 2025, inventory purchases and other company expenses of approximately $3912,000 and $~~123~~134,000 respectively, were charged to credit card accounts of Harvey B. Grossblatt, the Company’s Chief Executive Officer and certain of his immediate family members. During the three and ~~six~~nine-month periods ended ~~September~~December 3031, 2024, inventory purchases and other company expenses of approximately $~~386~~67,000 and $~~946~~1,013,000 respectively, were charged to credit card accounts of Harvey B. Grossblatt, the Company’s Chief Executive Officer and certain of his immediate family members. The Company subsequently reimbursed these charges in full. Mr. Grossblatt receives mileage benefits from these charges. The maximum amount outstanding and due to Mr. Grossblatt at any point during the ~~six~~nine-month period ended ~~September~~December 3031, 2025, and 2024 amounted to $22,680 and $285,333, respectively. The amount due to Mr. Grossblatt at ~~September~~December 3031, 2025, and 2024 amounted to approximately $32,000 and $72,000, respectively and is included in accounts payable on the condensed consolidated balance sheets.

Recently Adopted Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve income tax disclosure requirements by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements. The guidance in this ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and footnote disclosures.

On August 28, 2017, the FASB issued Accounting Standards Update No. 2017- 12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in that Update made targeted improvements to the optional hedge accounting model with the objective of improving hedge accounting to better portray the economic results of an entity’s risk management activities in its financial statements. In August 2025, the Company adopted the accounting standard as the Company entered into certain contracts that may contain embedded derivatives requiring separate accounting if specific criteria were met.

Subsequent Events

On January 26, and 27, and on February 3, 2026 portions of the outstanding convertible debt with accrued interest, amounting to $1,545,458 were retired in exchange for 405,000 shares of common stock.

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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 Safety Products, 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 include, but are not limited to, those risks identified in our periodic reports filed with the Securities and Exchange Commission.

OVERVIEW

We are in the business of marketing and distributing safety and security products. Our financial statements detail our sales and other operational results for the three and ~~six~~nine-month periods ended ~~September~~December 3031, 2025, and 2024.

Management had been seeking access to additional funding or other resources, or the right strategic business combination, which would allow the Company to drive long-term value for its shareholders while taking advantage of growth opportunities that the Company seeks to execute. In furtherance thereof, as previously announced on October 31, 2024, the Company entered into an Asset Purchase Agreement with Feit Electric Company, Inc. (“Feit”) pursuant to which Feit agreed to acquire the smoke and carbon monoxide alarm portion of the Company’s business and the non-tangible assets of the Company, including but not limited to the trade name of Universal Security Instruments, Inc. and Universal Electric, Inc. The Closing was subject to the approval of the transaction by the requisite vote of the shareholders of the Company. A special meeting of the shareholders to approve the sale and related actions was held on April 15, 2025, and the asset sale was approved. Accordingly on May 22, 2025, the Company closed on the asset sale to Feit pursuant to the terms of the Asset Purchase Agreement. The Company currently intends to continue importing and marketing its product lines other than smoke alarms and carbon monoxide alarms and is exploring other business opportunities to drive long-term value for our shareholders.

Changes in international trade duties and other aspects of international trade policy, both in the U.S. and abroad, could materially impact the cost of our products. We import all our products. As an importer, we are subject to numerous tariffs which vary depending on types of products and country of origin, changes in economic and political conditions in the country of manufacture, potential trade restrictions, and currency fluctuations. Substantially all our safety products are imported from the People’s Republic of China. Certain of these products are currently subject to tariffs of from ~~thirty~~twenty (3020%) to ~~fifty~~forty-five (5545%) percent. The imposition of and modification of tariffs during the latter half of the fiscal year ended March 31, 2025, and subsequent thereto, has increased uncertainty as to the short-term sustainability of importing products from our principal suppliers. If the Company is unable to import products at a competitive price point our sales could be adversely affected.

RESULTS OF OPERATIONS

Three Months Ended ~~September~~December 3031, 2025 and 2024

Sales. Net sales for the three months ended ~~September~~December 3031, 2025, were $~~759~~22,~~999~~549 compared to $75,~~203~~535,~~269~~148 for the comparable three months in the prior year, a decrease of $65,~~443~~512,~~270~~599 (8999.46%). Sales decreased principally due to the sale of the smoke and carbon monoxide alarm portion of the Company’s business as previously discussed. In addition, a one-time return of goods was approved for a large customer.

Gross Profit Margin. 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 60.4% and 27.7% of sales for the quarters ended September 30, 2025, and 2024, respectively.~~ Gross margins for the three-month period ended ~~September~~December 3031, 2025, ~~increased~~decreased principally due to asales ~~refund~~returns ofand ~~previously recorded tariffs during the three-month period ended September 30, 2025~~allowances.

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Expenses. Selling, general and administrative expenses were $1,311,187 for the three months ended September 30, 2025, compared to $1,209,352 for the comparable three months in the prior year. As a percentage of net sales, these expenses increased to 172.5% for the three-month period ended September 30, 2025, from 16.8% for the 2024 period. These expenses increased as a percentage of net sales principally due to the increase in the allowance for credit losses of $400,000, and since selling, general, and administrative expenses do not decrease in direct proportion to changes in sales. These expenses increased as a dollar amount principally due to increase in the allowance for credit losses and due to the timing of expenditures related to efforts in the current quarter and the comparable quarter of the prior year to pursue strategic alternatives and merger activities.

Engineering and product development expenses were $76,682 for the three-month period ended September 30, 2025, and $110,371 for the comparable quarter of the prior year, a $33,689 (30.5%) decrease. These expenses decreased primarily due the cessation of engineering and product development activities during the current quarter due to the sale of the smoke and carbon monoxide portion of the Company’s business as previously discussed.

Other expense. Other expense recorded during the three-month period ended September 30, 2025, included the change in the fair value of the derivative component of convertible debentures issued in the period of $47,000. Net interest expense was $11,053 for the quarter ended September 30, 2025, compared to interest expense of $89,642 for the quarter ended September 30, 2024. Interest expense is dependent upon the total amounts borrowed from the Factor and changes in interest rates during the period as compared to the corresponding period for 2024.

Net (Loss) Income. We reported a net loss of $999,780 for the quarter ended September 30, 2025, compared to net income of $576,978 for the corresponding quarter of the prior fiscal year, a $1,576,758 (273.3%) decrease in net income. Net income decreased principally due to the sale of the smoke and carbon monoxide portion of the Company’s business as discussed above and the increase in the allowance for credit losses.

Six Months Ended September 30, 2025 and 2024

Sales. Net sales for the six months ended September 30, 2025, were $4,584,246 compared to $11,801,785 for the comparable six months in the prior fiscal year, a decrease of $7,217,539 (61.2%). Sales decreased principally due to the sale of the smoke and carbon monoxide alarm portion of the Company’s business as previously discussed.

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 was 25.2% for the six months ended September 30, 2025, and 26.1% for the six months ended September 30, 2024. Gross margins for the six-month period ended September 30, 2025, decreased principally due to the sale of the smoke and carbon monoxide alarm portion of the Company’s business as previously discussed.

Expenses. Selling, general and administrative expenses were $2,424,490 for the six months ended September 30, 2025, compared to $2,606,773 for the comparable six months in the prior year. As a percentage of sales, these expenses were 52.9% for the six-month period ended September 30, 2025, and 22.1% for the comparable 2024 period. These expenses increased as a percentage of net sales principally due to the increase in the allowance for credit losses of $400,000, and since selling, general, and administrative expenses do not decrease in direct proportion to changes in sales. These expenses decreased as a dollar amount principally due to the increase in the allowance for credit losses and the timing of expenditures related to efforts in the current six-month period and the comparable period of the prior year to pursue strategic alternatives and merger activities.

Engineering and product development expenses were comparable at $188,689 for the six months ended September 30, 2025, to $197,972 for the comparable period of the prior year. These expenses decreased primarily due the cessation of engineering and product development activities during the period due to the sale of the smoke and carbon monoxide portion of the Company’s business as previously discussed.

Other income (expense). Other expense for the six-month period ended September 30, 2025, included the change in the fair value of the derivative component of convertible debentures issued of $47,000. Other income included the gain of the sale of inventory and intangible assets of $2,820,668. Our interest expense was $7,225 for the six months ended September 30, 2025, compared to interest expense of $134,530 for the six months ended September 30, 2024. Interest expense is dependent upon the total amounts borrowed from the Factor and changes in interest rates during the period as compared to the corresponding period of the prior year.

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~~Net Income~~Expenses. WeSelling, ~~reported~~general ~~net~~and ~~income~~administrative ofexpenses were $~~810~~1,~~541~~896,159 for the ~~six~~three months ended ~~September~~December 3031, 2025, compared to ~~net income of~~ $~~134~~1,~~772~~762,446 for the ~~corresponding~~comparable ~~period~~three ofmonths in the prior ~~fiscal~~ year,. anThese ~~increase~~expenses did not decrease in ~~net~~proportion ~~income~~to ofthe ~~$675,769~~decrease ~~(501.4%).~~in ~~Net~~sales ~~income~~or ~~increased~~as a dollar amount principally due to the ~~gain~~timing onof ~~the~~expenditures ~~sale~~related ofto efforts in the ~~smoke~~current quarter to pursue strategic alternatives and ~~carbon~~merger ~~monoxide~~activities ~~portion~~including approximately $600,000 of professional fees, as previously discussed. In addition, a charge of $896,700 to salaries expense associated with the ~~Company’s~~granting ~~business~~of incentive stock options, and ~~was~~charges ~~offset~~associated bywith ~~lower~~reductions ~~sales~~in the work force were recorded in the ~~quarter~~three-month period ended ~~September~~December 3031, 2025,. ~~and~~These ~~the~~increases ~~increase~~were partially offset by a reduction of $220,000 in the allowance for credit losses at December 31, 2025.

~~Operating~~Engineering ~~activities~~and ~~provided~~product ~~cash~~development ofexpenses were $314,~~940,773~~193 for the ~~six~~three-month ~~months~~period ended ~~September~~December 3031, 2025., ~~This was primarily due to a decrease in accounts receivable~~ and ~~amount due from factor of~~ $3130,~~148,400,~~395 afor ~~decrease~~the incomparable ~~inventories~~quarter ~~and~~of ~~prepaid~~the ~~expenses~~prior ~~of $4~~year,~~014,594,~~ ~~net~~a ~~income of~~ $~~810~~116,~~541~~202 ~~and~~(89.1%) ~~partially offset by a~~ decrease. inThese ~~accounts~~expenses ~~payable~~decreased ~~and~~primarily ~~accrued~~due ~~expenses~~the cessation of ~~$2,006,764,~~engineering and ~~the~~product ~~non-cash~~development ~~change~~activities induring the ~~fair~~current ~~value~~fiscal ofyear ~~the~~due ~~derivative~~to ~~component~~the ofsale ~~convertible debt~~ of ~~$47,000,~~ the ~~increase~~smoke inand ~~the~~carbon ~~allowance~~monoxide ~~for~~portion ~~credit losses~~ of ~~$400,000,~~the ~~and~~Company’s ~~$361,000~~business inas ~~deferred~~previously ~~income taxes~~discussed.

~~Operating~~Other ~~activities~~expense. ~~used~~Other ~~cash~~expense ofrecorded $3during the three-month period ended December 31,~~278~~ 2025,~~163~~ ~~for~~included the ~~six~~change ~~months~~in ~~ended~~the ~~September~~fair ~~30,~~value ~~2024.~~of ~~This~~the ~~was~~derivative ~~primarily~~component ~~due~~of toconvertible andebentures ~~increase~~issued in ~~accounts~~the ~~receivable~~period ~~and~~of ~~amount~~$135,000. ~~due~~Net ~~from~~interest ~~factor~~expense ofwas $378,~~150,214,~~824 ~~and~~for anthe ~~increase~~quarter inended ~~inventories~~December ~~and~~31, ~~prepaid~~2025, ~~expenses~~compared to interest expense of $177,~~154~~409 for the quarter ended December 31,~~669,~~ ~~and~~2024. ~~partially~~Interest ~~offset~~expense byis andependent ~~increase~~upon inthe ~~accounts~~total ~~payable~~amounts borrowed from the Factor and ~~accrued~~changes ~~expenses~~in ofinterest ~~$888,890~~rates ~~and~~during ~~net~~the ~~income~~period ofas ~~$134,772~~compared to the corresponding period for 2024.

~~Investing~~Net ~~activities~~Loss. We reported a net loss of $2,287,174 for the ~~three~~quarter ~~months~~ ended ~~June~~December 3031, 2025, ~~provided~~compared ~~cash~~to ~~from~~a net loss of $936,639 for the ~~sale~~corresponding quarter of ~~assets~~the prior fiscal year, a $1,350,535 (144.2%) increase in net loss. The net loss increased principally due to the sale of the ~~payment~~smoke and carbon monoxide portion of ~~related~~the ~~liabilities~~Company’s business, the recording of $2the charge for the issuance of incentive stock options,~~820~~ charges for reductions in work force,~~668~~ and the efforts in the current quarter to pursue strategic alternatives, and partially offset by the reduction in the allowance for credit losses, as previously discussed.

~~Financing~~Nine ~~activities~~Months ~~used~~Ended ~~cash~~December ~~of $1~~31,~~883,890~~ ~~during the six months ended September 30,~~ 2025, ~~which is comprised of net repayments to the factor of $2,100,458, a one-time special dividend to shareholders in the amount of $2,312,787~~ and ~~partially offset by net borrowing of convertible debt of $2,529,355.~~2024

~~Financing~~Sales. ~~activities~~Net ~~provided~~sales ~~cash~~for ofthe nine months ended December 31, 2025, were $34,~~447~~606,~~281~~795 ~~during~~compared to $17,336,933 for the ~~six~~comparable nine months ~~ended~~in ~~September~~the 30prior fiscal year, ~~2024~~a decrease of $12,730,138 ~~which~~(73.4%). isSales ~~comprised~~decreased ofprincipally ~~borrowings~~due ~~net~~to the sale of ~~repayments~~the tosmoke and carbon monoxide alarm portion of the ~~factor~~Company’s business as previously discussed.

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 was 19.0% for the nine months ended December 31, 2025, and 23.7% for the nine months ended December 31, 2024. Gross margins for the nine-month period ended December 31, 2025, decreased principally due to the sale of the smoke and carbon monoxide alarm portion of the Company’s business as previously discussed.

Expenses. Selling, general and administrative expenses were $4,320,649 for the nine months ended December 31, 2025, compared to $4,369,219 for the comparable nine months in the prior year. These expenses did not change materially in proportion to the decrease in sales or as a dollar amount principally due to the timing of expenditures related to efforts in the current quarter to pursue strategic alternatives and merger activities, as previously discussed. These expenses included an increase in the allowance for credit losses of $180,000, a charge to salaries expense for $896,700 related to the issuance of incentive stock options, charges associated with reductions in work force, and the timing of expenditures related to efforts in the current nine-month period to pursue strategic alternatives as previously discussed.

Engineering and product development expenses were $202,882 for the nine months ended December 31, 2025, compared to $328,367 for the comparable period of the prior year. These expenses decreased primarily due the cessation of engineering and product development activities during the period due to the sale of the smoke and carbon monoxide portion of the Company’s business as previously discussed.

Other income (expense). Other expense for the nine-month period ended December 31, 2025, included the change in the fair value of the derivative component of convertible debentures issued of $182,000. Other income included the gain of the sale of inventory and intangible assets of $2,820,668. Our net interest expense was $86,049 for the nine months ended December 31, 2025, compared to interest expense of $211,939 for the nine months ended December 31, 2024. Interest expense is dependent upon the total amounts borrowed from the Factor and changes in interest rates during the period as compared to the corresponding period of the prior year.

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Net Income. We reported a net loss of $1,476,633 for the nine months ended December 31, 2025, compared to a net loss of $801,867 for the corresponding period of the prior fiscal year, an increase in the net loss of $674,766 (84.1%). The net loss increased due principally to the sale of the smoke and carbon monoxide portion of the Company’s business, the recording of the charge for the issuance of incentive stock options, and the efforts in the current year to pursue strategic alternatives, as previously discussed.

Operating activities provided cash of $1,347,625 for the nine months ended December 31, 2025. This was primarily due to a decrease in accounts receivable and amount due from factor of $3,743,519, a decrease in inventories and prepaid expenses of $2,294,183, and partially offset by a component of the gain on the sale of assets of $2,820,668, a decrease in accounts payable and accrued expenses of $2,148,596, the non-cash changes in the fair value of the derivative component of convertible debt of $182,000, the non-cash amortization of accrued interest of $70,957, the increase in the allowance for credit losses of $180,000, the issuance of incentive stock options of $896,700, and $361,000 in deferred income taxes.

Operating activities used cash of $736,999 for the nine months ended December 31, 2024. This was primarily due to a decrease in accounts receivable and amount due from factor of $32,581, and an increase in accounts payable and accrued expenses of $1,233,487, offset by an increase in inventories and prepaid expenses of $1,505,513, and a net loss of $801,867.

Investing activities for the nine months ended December 31, 2025, provided cash from the sale of assets, net of the payment of related liabilities, of $4,502,605. There were no investing activities for the nine months ended December 31, 2024.

Financing activities used cash of $1,905,828 during the nine months ended December 31, 2025, which is comprised of net repayments to the factor of $2,093,041, a one-time special dividend to shareholders in the amount of $2,312,787 and partially offset by net borrowing of convertible debt of $2,500,000.

Financing activities provided cash of $730,800 during the nine months ended December 31, 2024, which is comprised of net borrowings from the factor net of repayments.

Liquidity and Capital Resources

The Company believes its balances of cash received from the sales of convertible debentures, funds available to borrow under the terms of its factoring agreement, and cash generated by ongoing operations will be sufficient to satisfy its cash requirements over the next twelve months and beyond. The Company’s contractual cash requirements have not changed materially since it filed its Form 10-K for the fiscal year ended March 31, 2025. Subsequent to December 31, 2025, $1,545,458 of convertible debt was converted to 405,000 shares of common stock.

CRITICAL ACCOUNTING POLICIES

In the notes to the consolidated financial statements, and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K, we have disclosed those accounting policies that we consider to be significant in determining our results of Operations and financial condition. With the exception of the adoption of accounting principles relating to convertible debt and the fair value of the derivative component thereof, there have been no material changes to those policies that we consider to be significant since the filing of our Form 10-K. The accounting principles used in preparing our unaudited condensed consolidated financial statements conform in all material respects to accounting principles generally accepted in the United States of America.

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ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures (as such item is defined in Rules 13a – 15(e) and 15d – 15(e) of the Exchange Act) 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 in accordance with applicable Securities and Exchange Commission guidance as of the end of the period covered by this quarterly report and have concluded that disclosure controls and procedures were not effective because the Company has not yet completed its remediation of the material weaknesses previously identified and disclosed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2025, the end of its most recent fiscal year.

Material weaknesses arose during the fiscal quarter ended September 30, 2025, related to the accounting for complex instruments that continued to exist in the fiscal quarter ended December 31, 2025. The Company plans to remediate the material weakness by engaging an independent expert to calculate the impact of complex instruments presented in the Company’s financial statements.

Material weaknesses arose during the fiscal year ended March 31, 2025, that continued to exist in the fiscal quarter ended ~~September~~December 3031, 2025, related to the inherent risk associated with the lack of segregation of duties due to limited staffing in the accounting function. The Company plans to remediate the material weakness by adding additional personnel to the accounting function, which has not yet occurred.

Material weaknesses arose during the fiscal year ended March 31, 2024, that continued to exist in the fiscal quarter ended ~~September~~December 3031, 2025, in the management review controls over classification of and disclosure of amounts within the financial statements resulting in revisions of amounts previously published in the March 31, 2024, financial statements. The Company plans to remediate the material weakness by changing to the proper reporting of the classification of amounts, and inclusion of the required disclosures.

Material weaknesses arose during the fiscal year ended March 31, 2024, that continued to exist in the fiscal quarter ended ~~September~~December 3031, 2025, in the management review controls over the classification of and accounting for income taxes. The Company plans to remediate the material weakness by engaging an independent expert to review the Company’s current and deferred tax provisions.

Material weaknesses arose during the fiscal year ended March 31, 2024, that continued to exist in the fiscal quarter ended ~~September~~December 3031, 2025 in management’s review and control over documentation supporting entries posted to the Company’s general ledger. The Company plans to remediate the material weakness by implementing procedures to improve the review of, and documentation used to support, entries to the Company’s general ledger.

Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended ~~September~~December 3031, 2025.

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PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

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 5.

OTHER INFORMATION

None of the Company’s directors and officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended ~~September~~December 3031, 2025 (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).

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. 1-31747)
3.2		Articles Supplementary, (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed October 31, 2002, file No. 0-07885)
3.3		Bylaws, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed July 13, 2011, 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		Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.**
99.1		Press Release dated November 19, 2025*
101		Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2025 in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of December 31, 2025 and March 31, 2025, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2025 and 2024, (iii) Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2025 and 2024, (v) Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended December 31, 2025 and 2024, and (vi) Notes to Condensed Consolidated Financial Statements*
101		Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of September 30, 2025 and March 31, 2025, (ii) Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2025 and 2024, (iii) Condensed Consolidated Statements of Cash Flows for the three and six months ended September 30, 2025 and 2024, (v) Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended September 30, 2025 and 2024, and (vi) Notes to Condensed Consolidated Financial Statements*
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Filed herewith

**	Furnished herewith

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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 SAFETY PRODUCTS, INC.
	(Registrant)

Date: November 19, 2025	By:	/s/ Harvey B. Grossblatt
Date: February 19, 2026	By:	/s/ Harvey B. Grossblatt
		Harvey B. Grossblatt
		President, Chief Executive Officer

	By:	/s/ James B. Huff
		James B. Huff
		Vice President, Chief Financial Officer

2021

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