UNIVERSAL SAFETY PRODUCTS, INC.

Previous wording

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-month periods ended September 30, 2025, and 2024.

Current wording

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 nine-month periods ended December 31, 2025, and 2024.

Previous wording

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 (30%) to fifty-five (55%) 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.

Current wording

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 twenty (20%) to forty-five (45%) 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.

Previous wording

Sales. Net sales for the three months ended September 30, 2025, were $759,999 compared to $7,203,269 for the comparable three months in the prior year, a decrease of $6,443,270 (89.4%). Sales decreased principally due to the sale of the smoke and carbon monoxide alarm portion of the Company’s business as previously discussed.

Current wording

Sales. Net sales for the three months ended December 31, 2025, were $22,549 compared to $5,535,148 for the comparable three months in the prior year, a decrease of $5,512,599 (99.6%). 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.

Previous wording

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 30, 2025, increased principally due to a refund of previously recorded tariffs during the three-month period ended September 30, 2025.

Current wording

Gross Profit Margin. Gross profit margin is calculated as net sales less cost of goods sold expressed as a percentage of net sales. Gross margins for the three-month period ended December 31, 2025, decreased principally due to sales returns and allowances.

Previous wording

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.

Current wording

Expenses. Selling, general and administrative expenses were $1,896,159 for the three months ended December 31, 2025, compared to $1,762,446 for the comparable three months in the prior year. These expenses did not decrease 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 including approximately $600,000 of professional fees, as previously discussed. In addition, a charge of $896,700 to salaries expense associated with the granting of incentive stock options, and charges associated with reductions in the work force were recorded in the three-month period ended December 31, 2025. These increases were partially offset by a reduction of $220,000 in the allowance for credit losses at December 31, 2025.

Previous wording

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.

Current wording

Engineering and product development expenses were $14,193 for the three-month period ended December 31, 2025, and $130,395 for the comparable quarter of the prior year, a $116,202 (89.1%) decrease. These expenses decreased primarily due the cessation of engineering and product development activities during the current fiscal year due to the sale of the smoke and carbon monoxide portion of the Company’s business as previously discussed.

Previous wording

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.

Current wording

Other expense. Other expense recorded during the three-month period ended December 31, 2025, included the change in the fair value of the derivative component of convertible debentures issued in the period of $135,000. Net interest expense was $78,824 for the quarter ended December 31, 2025, compared to interest expense of $77,409 for the quarter 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 for 2024.

Previous wording

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.

Current wording

*Net Loss.*We reported a net loss of $2,287,174 for the quarter ended December 31, 2025, compared to a net loss of $936,639 for the corresponding quarter of 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 smoke and carbon monoxide portion of the Company’s business, the recording of the charge for the issuance of incentive stock options, charges for reductions in work force, 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.

Previous wording

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.

Current wording

Sales*.* Net sales for the nine months ended December 31, 2025, were $4,606,795 compared to $17,336,933 for the comparable nine months in the prior fiscal year, a decrease of $12,730,138 (73.4%). Sales decreased principally due to the sale of the smoke and carbon monoxide alarm portion of the Company’s business as previously discussed.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

Operating activities provided cash of $3,940,773 for the six months ended September 30, 2025. This was primarily due to a decrease in accounts receivable and amount due from factor of $3,148,400, a decrease in inventories and prepaid expenses of $4,014,594, net income of $810,541 and partially offset by a decrease in accounts payable and accrued expenses of $2,006,764, and the non-cash change in the fair value of the derivative component of convertible debt of $47,000, the increase in the allowance for credit losses of $400,000, and $361,000 in deferred income taxes.

Current wording

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.

Previous wording

Operating activities used cash of $3,278,163 for the six months ended September 30, 2024. This was primarily due to an increase in accounts receivable and amount due from factor of $3,150,214, and an increase in inventories and prepaid expenses of $1,154,669, and partially offset by an increase in accounts payable and accrued expenses of $888,890 and net income of $134,772.

Current wording

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.

Previous wording

Investing activities for the three months ended June 30, 2025, provided cash from the sale of assets, net of the payment of related liabilities, of $2,820,668.

Current wording

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.

Previous wording

Financing activities used cash of $1,883,890 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.

Current wording

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.

Previous wording

Financing activities provided cash of $3,447,281 during the six months ended September 30, 2024, which is comprised of borrowings net of repayments to the factor.

Current wording

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.

Previous wording

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.

Current wording

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.