UNIVERSAL SAFETY PRODUCTS, INC.

NOTE A – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business: Universal Safety Products, Inc.’s (the “Company”) formerly “Universal Security Instruments, Inc.” primary business during the period covered by this Annual Report, consisted primarily in the sale of smoke alarms and other safety products to retailers, wholesale distributors and to the electrical distribution trade which includes electrical and lighting distributors as well as manufactured housing companies. 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 Company imports all of its safety and other products from foreign manufacturers. The Company, as an importer, is subject to 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.

Assets Held for Sale: 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 a portion of the Company’s business and the intangible assets of the Company for approximately $4,955,000. The Company anticipates that it will record a gain from this transaction of between $2,000,000 and $2,750,000. As more fully described in footnote B - Subsequent Events, on May 22, 2025, the Asset Purchase Agreement with Feit was completed. Accordingly, the assets held for sale in accordance with the Asset Purchase Agreement at March 31, 2025, are shown separately in these financial statements and valued at the lower of the assets carrying value or its fair value less selling cost.

Revisions to Previously Issued Consolidated Financial Statements and Financial Information

In connection with the preparation of its fiscal year 2025 financial statements, the Company identified errors in its Consolidated Balance Sheet and Consolidated Statements of Operations for the year ended March 31, 2024*.*Specifically, the Company underestimated insurance expense for the fiscal year ended March 31, 2024, resulting from an insurance audit of contingently billed premiums. The Company also reclassified an amount between sales and cost of goods sold. Additionally, the Company underestimated the allowance for credit losses for the fiscal year ended March 31, 2024. The Company’s Consolidated Balance Sheet, and Consolidated Statements of Operations, and Consolidated Statements of Cash Flows for the fiscal year ended March 31, 2024, have been revised.

The Company assessed the effect of the errors on prior periods under the guidance of Securities and Exchange Commission (“SEC”) Staff Accounting BulletinNo. 99, “Materiality,” codified in ASC250, Accounting Changes and Error Corrections (“ASC250”). Based on its assessment, the Company determined that the error correction is not material to its previously issued financial statements. The correction does not have a material impact on the Company’s previously reported consolidated net income and financial position.

Revisions of Previously Issued Audited Consolidated Financial Statements

As discussed above, the identified errors did not have a material impact on the previously issued financial statements for the year ended March 31, 2024. The Company has determined it appropriate to revise the following financial statement line items in the Consolidated Balance Sheet, Consolidated Statement of Operations, and Consolidated Statement of Cash Flows for the year ended March 31, 2024.

Fair Value Measurements - We account for fair value of financial instruments in accordance with ASC 820,Fair Value Measurement, which defines fair value and establishes a framework to measure fair value and the related disclosures about fair value measurements. The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The Financial Accounting Standards Board, or FASB, establishes a fair value hierarchy used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories: Level 1: Inputs based upon quoted market prices for identical assets or liabilities in active markets at the measurement date; Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and Level 3: Inputs that are management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instruments’ valuation. In addition, we will measure fair value in an inactive or dislocated market based on facts and circumstances and significant management judgment. We will use inputs based on management estimates or assumptions or adjust observable inputs to determine fair value when markets are not active and relevant observable inputs are not available.

ASC 825,* *Financial Instruments, requires disclosures about the fair value of financial instruments. The carrying amount of cash, accounts receivable and amounts due from factor, accounts payable, and accrued expenses, as presented in the balance sheet, approximates fair value due to the short-term nature of these instruments.

Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates: In preparing financial statements in conformity with accounting principles generally accepted in the United States of America (US-GAAP), management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate these estimates, including those related to credit losses, inventories, income taxes, and contingencies and litigation. We base these estimates on historical experiences and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates.

Cash: The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts, and believes it is not exposed to any significant credit risk with cash.

Revenue 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 safety alarm products 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 fiscal years ended March 31, 2025, and 2024 are as follows:

Accounts Receivable and Allowance for Credit Losses: 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. Factoring charges recognized on assignment of receivables are deducted from revenue in the consolidated statements of operations and amounted to $209,841 and $174,074 for the years ended March 31, 2025, and 2024, respectively.

Management considers amounts due from the Company’s factor to be “financing receivables”. Trade accounts receivable, foreign receivables, and receivables from our suppliers are not considered to be financing receivables At the time a receivable is assigned to our factor the credit risk associated with the credit worthiness of the debtor is assumed by the factor. The Company continues to bear any credit risk associated with delivery or warranty issues related to the products sold.

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 March 31, 2025, and 2024, a provision for credit losses of $470,000 and $535,000, respectively, has been provided for uncollectible trade accounts receivable. Management provided a provision for credit losses of $157,012 on March 31, 2023, and increased this provision by $377,988 to $535,000 on March 31, 2024, and decreased this provision by $65,000 to $470,000 on March 31, 2025. The Company increased its provision for credit losses to cover potential credit losses, howeverno amounts were ultimately written off during the fiscal years ended March 31, 2024, and 2025.

Inventories: Inventories are stated at the lower-of-cost (first in/first out method) or net realizable value. Included as a component of finished goods inventory are additional non-material costs. These costs include freight, import duty, tariffs, and inspection fees. Expenses incurred for inventory quality control in the amount of approximately $45,000 and $45,000, were absorbed in inventory for the fiscal years ended March 31, 2025, and 2024, respectively. We evaluate inventories on a quarterly basis and write down inventory that is considered obsolete or unmarketable in an amount equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions.

Impairment of long-lived assets: Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset group may not be recoverable. The factors considered in performing this assessment include current operating results, anticipated future results, the manner in which the asset group is used and the effects of obsolescence, demand, competition and other economic factors. Accordingly, when indicators of impairment are present, the Company evaluates the carrying value of these asset groups in relation to the operating performance of the business and future undiscounted cash flows expected to result from the use of these asset groups. Impairment losses are recognized when the sum of expected future cash flows is less than the asset groups carrying value, and losses are determined based upon the excess carrying value of the asset group over its fair value. Based on this assessment, no impairment to long-lived assets resulted for fiscal years ended March 31, 2025, and 2024.

Leases: The Company determines if an arrangement is a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company estimates the incremental borrowing rate to discount the lease payments based on information available at lease commencement. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. 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. See Note E, Leases.

Income Taxes: 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 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. The deferred tax assets are reviewed periodically for recoverability and a valuation allowance is provided whenever it is more likely than not that a deferred tax asset will not be realized.

The Company follows Accounting Standards Codification (ASC) 740-10 that gives guidance to 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 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. See Note F, Income Taxes.

Warranties: We generally provide warranties on safety products to the non-commercial end user on all products sold. The manufacturers of our safety products offer the company a discount on products purchased to cover the cost of providing warranty replacements. Claims for warranty replacement of products covered by the manufacturers have not been historically material. The Company has provided an allowance for warranty replacement of products of $25,000 for the fiscal years ended March 31, 2025, and 2024 that is included in accrued commissions and other on the consolidated balance sheet.

Engineering and Product Development: Engineering and product development costs are charged to operations as incurred.

Shipping and Handling Fees and Costs: The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound freight are included in cost of goods sold. Shipping and handling costs associated with outbound freight are included in selling, general and administrative expenses and totaled $589,072 and $561,075 in fiscal years 2025 and 2024, respectively.

Net Loss per Share: Basic net earnings (loss) per share is computed by dividing net earnings (loss) for the year by the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per share is computed by dividing net income (loss) for the year by the weighted average number of common shares and common share equivalents outstanding (unless their effect is anti-dilutive) for the year. In addition, there wereno other securities outstanding during 2025 or 2024 other than common stock. As a result, the weighted average number of common shares outstanding is identical for both basic and diluted shares.

Recently Issued Accounting Standards: Changes to US-GAAP are established by the Financial Accounting Standards Board (FASB) in the form of Accounting Standards Updates (ASU’s) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASU’s. Management adopted ASU 2016-02 related to credit losses effective April 1, 2023. Management determined that adoption of the guidance of the ASU did not have a material impact on the consolidated financial statements on the date of adoption or for the fiscal year ended March 31, 2024. Management has reviewed ASU 2023 - 07 related to segment reporting effective November 27, 2023. Management determined that adoption of the guidance of the ASU did not have a material impact on the consolidated financial statements for the fiscal year ended March 31, 2025.

Recent Accounting Pronouncements Not Yet Adopted: 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.

NOTE B – SUBSEQUENT EVENTS

On October 31, 2024, the Company entered into an Asset Purchase Agreement (Agreement) with Feit Electric Company, Inc. (Feit) pursuant to which Feit agreed to acquire a portion of the Company’s business and the intangible assets of the Company for approximately $4,955,000. Under the terms of the Asset Purchase Agreement, the Company sold finished good inventories of $1,655,000, and all of the Company’s fully amortized intangible assets including, but not limited to, all of the Company’s patents, trademarks, copyrights, and the trade name Universal Security Instruments, Inc. and USI Electric, Inc. The sale and charter amendment is subject to approval by the Company’s shareholders and was approved by the requisite vote at a special meeting of the Shareholders held on April 15, 2025. Accordingly, on May 22, 2025, the Company closed on the sale of the assets subject to the Asset Purchase Agreement and changed the name of the Company to Universal Safety Products, Inc. Further, the plan for a subsequent complete liquidation of the Company was not approved by the requisite vote of the stockholders of the Company, and accordingly, the Company is continuing in operation engaged in the sale of products other than smoke and carbon monoxide alarms, and continues to seek a strategic business combination to drive long-term value for our shareholders.

The importation of certain wiring devices, carbon-monoxide alarms, and photo-electric alarms are currently subject to tariffs of 25%, and subsequent to March 31, 2025 tariffs on these products increased to 55%. The imposition of and modification of tariffs during the latter half of the current 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.

The impact to the Company’s current and deferred income tax position that may be effected by changes to the Internal Revenue Code resulting from passage of the One Big Beautiful Bill Act, subsequent to the Company’s fiscal year ended March 31, 2025, has not been evaluated.

NOTE C – SHORT-TERM BORROWINGS AND CREDIT ARRANGEMENTS

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 was extended and expires on January 6, 2026, provides for continuation of the program for successivetwo-year periods until terminated by one of the parties to the Agreement. The amount available to borrow from Merchant is approximately $348,000, and $610,000, at March 31, 2025 and 2024, 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, plustwo percent (effective rate 9.5% and 10.5% at March 31, 2025, and 2024, 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 March 31, 2025, and 2024 there was $2,100,458 and $768,853 borrowed and outstanding under the factoring agreement, respectively.

During the fiscal year ending March 31, 2024, a temporary provision by Merchant to provide additional funding of up to $500,000, characterized by Merchant as an over advance, and that provided funding up to one hundred percent (100%) of eligible accounts receivable, expired. In June 2024, Merchant approved additional funding via an overadvance of up to $1,600,000 secured by inventory.

Under the Agreement, the Company assigned receivables of $23,513,973 and $18,668,543 during the years ended March 31, 2025, and 2024, respectively. The uncollected balance of receivables held by the factor amounted to $3,666,790 and $2,202,663 at March 31, 2025, and 2024. Included in the uncollected balance of receivables held by the factor are amounts classified by the factor as amounts at client risk of approximately $545,000 and $372,000 at March 31, 2025, and 2024, 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 5.0% and 6.0% at March 31, 2025, and 2024, respectively.) There was no cash on deposit with the Factor at March 31, 2025, or 2024.

NOTE D – PROPERTY AND EQUIPMENT AND RIGHT OF USE ASSET - NET

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided by using the straight-line method based on estimated useful lives. Expenditures for major betterments that extend the useful life of property and equipment are capitalized. Repair and maintenance costs are expensed as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in the results of operations. Right-of-use lease assets of $0 and $155,763, net, are included in leasehold improvements in Property and Equipment on the Consolidated Balance Sheets as of March 31, 2025, and 2024, respectively.

The estimated useful lives for financial reporting purposes are as follows:

Property and equipment consist of the following:

Depreciation and the amortization of intangibles totaled $159,656 which includes $155,763 of amortization of right-of-use lease asset for fiscal year ended March 31, 2025. For the fiscal year ended March 31, 2024, depreciation expense totaled $163,457 which included $155,764 of amortization of right-of-use lease asset.

NOTE E – LEASES

The Company is a lessee in lease agreements for office space. Certain of the Company’s leases contain provisions that provide 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 April 2025, we extended our operating lease for a 15,000 square foot office and warehouse located in Baltimore County, Maryland to expire in October 2025. No option to continue the lease beyond October 2025 has been provided in the lease extension. Monthly rental expense, with common area maintenance, currently approximates $15,000.

The Company maintains an operating lease for office space in Naperville, Illinois. This lease, consisting of 3,400 square feet, and renews on a month-to-month basis and expired on June 30, 2025. The Company didnot renew the lease upon expiration. The monthly rental, with common area maintenance, was approximately $4,900 per month during the current fiscal year.

Rent expense, including common area maintenance, totaled approximately $296,000 and $293,000 for the years ended March 31, 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 any 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. Right-of-use assets are included in property and equipment, net, on the consolidated balance sheet and 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 isone month and 5.5%, respectively. During the fiscal year ended March 31, 2025, and 2024 the operating lease costs related to the Company’s operating leases amounted to $159,656, and $184,056 respectively, which is included in selling, general and administrative expense in the consolidated statements of operations.

As of March 31, 2024, the Company had right-of-use assets of $159,656 and lease liabilities of $172,072 related to its operating leases. Right-of-use assets are included in property and equipment, net, on the consolidated balance sheet and 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, 2024, the Company’s weighted-average remaining lease term and weighted-average discount rate related to its operating leases isone year and one month, and 5.5%, respectively.

The future minimum payments under operating leases were as follows at March 31, 2025:

NOTE F – INCOME TAXES

The Company files its income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. Federal income tax returns filed for the fiscal years ended March 31, 2024, 2023, and 2022 are considered open and subject to examination by tax authorities. Deferred income tax assets and liabilities are computed and recognized for those differences that have future tax consequences and will result in net taxable or deductible amounts in future periods. Deferred tax expense or benefit is the result of changes in the net asset or liability for deferred taxes. The deferred tax liabilities and assets for the Company result primarily from net operating loss and tax credit carry forwards, reserves, and accrued liabilities.

At March 31, 2025, the Company has total net federal operating loss carry-forwards of approximately $3,683,000 that has no fixed expiration date. In addition, the Company has research and development tax credit carry-forwards of approximately $35,000 that begin to expire in the fiscal year ending 2030. There are certain limitations to the use and application of these items. Management reviews net operating loss carry-forwards and income tax credit carry-forwards to evaluate if those amounts are recoverable. The Company expects to utilize $1,765,000 of the operating loss carry-forwards to offset the expected taxable income on the sale of a portion of the Company’s business with the filing of its tax returns for the fiscal year ending March 31, 2026. Accordingly, $361,000 of the allowance for deferred tax assets was reversed for the fiscal year ended March 31, 2025.

In addition, after a review of projected taxable income, remaining components of the deferred tax asset, and current global economic conditions, it was determined that it is more likely than not, that the tax benefits associated with the remaining components of deferred tax assets after the sale of a portion of the business, 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 remaining 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 remaining 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 reconciliation between the statutory federal income tax provision and the actual effective tax provision is as follows:

The individual components of the Company’s deferred tax assets are as follows:

NOTE G – COMMITMENTS AND CONTINGENCIES

From time to time, the Company is involved in various lawsuits and legal matters. It is the opinion of management, based on consultation with legal counsel, that there are no outstanding material claims outside of the normal course of business.

The Company’s employment agreement with its CEO (the “CEO Agreement”) requires the Company to make certain post-employment payments to the CEO in the event of his termination following a change in control, death, disability, non-renewal, or resignation under terms of the CEO Agreement. Additionally, the CEO Agreement requires the Company to make post-employment payments, which can range from approximately $74,000 to $1,640,000, dependent upon the controlling event, as discussed above. In July 2024, the Company renewed the CEO Agreement through July 31, 2025.

NOTE H - 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 hadtwo customers during the fiscal year ended March 31, 2025, that represented 21.7%, and 14.9% of the Company’s net sales. Thesetwo customers represented 17.3% and 13.5% respectively, of the Company’s accounts receivable at March 31, 2025.

The Company hadthree customers during the fiscal year ended March 31, 2024, that represented 13.7%,13.7%, and 10.6% of the Company’s net sales. The Company hadno customers in the fiscal year ended March 31, 2024, that represented greater than 10% of the Company’s accounts receivable.

The Company acquires all the smoke alarm and carbon monoxide alarm safety products that it sells from Eyston Company, Ltd. Products manufactured for us by Eyston amounted to approximately 96.3% and 84.3% of our purchases for the fiscal years ended March 31, 2025, and 2024, respectively. At March 31, 2025, and 2024, the Company had accounts receivable due from Eyston of $114,204 and $133,401, respectively. At March 31, 2025, and 2024, the Company had trade accounts payable due to Eyston of approximately $1,146,000 and $1,501,000, respectively. Subsequent to March 31, 2025, and in connection with the previously discussed asset sale to Feit, amounts due from, or due to Eyston were settled in full.

NOTE I – RETIREMENT PLAN

The Company has a retirement savings plan under Section 401(k) of the Internal Revenue Code. All full-time employees who have completed 12 months of service are eligible to participate. Employees are permitted to contribute up to the amounts prescribed by law. The Company may provide contributions to the plan consisting of a matching amount equal to a percentage of the employee’s contribution, not to exceed four percent (4%). Employer contributions were $47,097 and $47,262 for the years ended March 31, 2025, and 2024, respectively.

NOTE J – RELATED PARTY TRANSACTIONS

During the fiscal year ended March 31, 2025, and 2024, inventory purchases and other company expenses of approximately $1,097,000 and $1,699,000, 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 travel mileage and other credit card benefits from these charges. The maximum amount outstanding and due to Mr. Grossblatt at any point during the fiscal year ended March 31, 2025, and 2024 may include amounts submitted for personal expense reimbursement and amounts paid by Mr. Grossblatt for inventory purchases or other company expenses and amounted to approximately $285,000 and $276,000, respectively, and the amount outstanding at March 31, 2025, and 2024 is approximately $0 and $0, respectively.

NOTE K – INTANGIBLE ASSET - NET

Intangible assets consist of legal expenses of $89,434 incurred in obtaining and perfecting patents used by the Company in newly developed detector technology and are capitalized for financial statement purposes. Upon issuance, patents are amortized on a straight-line basis over twenty years. Amortization expense for the fiscal year ended March 31, 2025, and 2024 was $4,470 and $4,474, respectively. Accumulated amortization at March 31, 2025, and 2024 was $62,605 and $58,133, respectively. Amortization expense for the next five years is expected to be $4,472 per fiscal year through 2030.