Item 9A. Controls and Procedures
ITEM 9A .
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of March 31, 2026, we have carried out an evaluation, under the supervision of, and with the participation of, our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, our principal executive officer and principal financial officer, with the assistance of other members of the Company’s management, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this annual report and has determined that our disclosure controls and procedures were not effective due to the material weaknesses as described herein.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2026. Our management has concluded that, as of March 31, 2026, our internal control over financial reporting was not effective.
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A material weakness is a control deficiency or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following material weaknesses:
A material weakness arose with respect to a lack of segregation of duties relating to substantially all accounting functions including review controls and account reconciliation over significant transaction classes inclusive of the income tax provision, lack of documentation to support journal entries, lack of proper IT general controls, incomplete footnote disclosures, and resulting in material audit adjustments.
A material weakness arose in managements controls surrounding complex financial instruments which include the evaluation of the fair value of the convertible debentures and the related derivative component of convertible debentures, in conjunction with the August 13, 2025 and September 25, 2025 note transactions upon inception and at March 31, 2026, and the calculation of stock option expense which required a material adjustment during the review of Form 10-K for the year ended March 31, 2026.
Planned Remediation
Management continues to work to improve its controls related to our material weaknesses, specifically relating to the proper disclosures in item 3 above, which arose during the fiscal year ended March 31, 2024 and persist. Management will continue to implement measures to remediate material weaknesses, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) engaging an independent expert to calculate the impact of complex instruments presented in our financial statements; (ii) adding additional personnel to the accounting function, which has not yet occurred; (iii) changing to the proper reporting of the classification of amounts, and inclusion of the required disclosures; (iv) engaging an independent expert to review our current and deferred tax provisions; and (v) implementing procedures to improve the review of, and documentation used to support, entries to our general ledger.
We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Despite the existence of these material weaknesses, we believe that the consolidated financial statements included in the periods covered by this Annual Report on Form 10-K fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
Trading Plans
During the fiscal year ended March 31, 2026, no director or Section 16 officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10 .
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following table sets forth the positions and offices presently held by each of our current directors and executive officers and their ages:
Served as a
Position and Offices
Director and/or
Name
Age
Held with the Company
Officer Since
Harvey B. Grossblatt (1)
79
President, Chief Executive Officer and Executive Chairman
1983
James B. Huff (1)
74
Chief Financial Officer
2004
Milton C. Ault, III (1)
56
Executive Vice Chairman
2025
Henry Nisser
57
Director
2025
Ronald A. Seff, M.D.
78
Director
2002
Ira F. Bormel
65
Director
2008
(1)
Executive Officer.
The Company’s directors are divided into three classes and are elected for terms of three years each and until his successor is elected and qualifies. Each of the directors named above will serve until the next annual meeting of our stockholders at which their class term ends or until his respective successor is elected and qualified. Subject to the terms of applicable employment agreements, our executive officers serve at the discretion of our Board.
Director Name
Director Class
Current Term Expires
at Annual Meeting in
Harvey B. Grossblatt
I
2027
Milton C. Ault, III
I
2027
Ira F. Bormel
II
2028
Henry Nisser
III
2029
Ronald A. Seff, M.D.
III
2029
Harvey B. Grossblatt has served as a director of our company since 1996 and as our Chief Executive Officer since August 2004. Mr. Grossblatt was Chief Financial Officer of our company from 1983 until August 2004, Secretary and Treasurer of our company from 1988 until August 2004 and Chief Operating Officer of our company from April 2003 through August 2004.
James B. Huff has been our Chief Financial Officer since August 2004 and Secretary and Treasurer since October 2004.
Milton C. Ault, III has served as a director of our company since May 2025 and as Executive Vice Chairman since September 2025. Mr. Ault has served as the Executive Chairman of Hyperscale Data, Inc, an issuer listed on the NYSE American (“Hyperscale Data”) since January 2021. Between December 2017 and January 2021, Mr. Ault was the Chief Executive Officer Hyperscale Data and between March 2017 and December 2017, Mr. Ault served as the Executive Chairman of Hyperscale Data. Mr. Ault has served as a director of Alzamend Neuro, Inc, an issuer listed on Nasdaq (“Alzamend”) since January 2024. Mr. Ault is Alzamend’s founder and served as Chairman of the Board and a director from inception in 2016 until its initial public offering in June 2021. Mr. Ault has served as Chairman and Chief Executive Officer of Ault & Company, Inc. (“Ault & Co.”) since December 2015, and as Chairman of Avalanche International Corp. (“AVLP”) from September 2014 until its liquidation in March 2025. Since January 2011, Mr. Ault has been the Vice President of Business Development for MCKEA Holdings, LLC, a family office. Since January 2024, Mr. Ault has served as the Chairman and Chief Executive Officer of RiskOn International, Inc., an issuer quoted on the OTCPK (“ROI”). Mr. Ault served as the Chairman of the Board of Ault Disruptive Technologies Corporation, an issuer previously listed on the NYSE American (“Ault Disruptive”) since its incorporation in February 2021 until October 2024. Between April 2023 and September 2024, Mr. Ault served as the Executive Chairman of the board of directors of Algorhythm Holdings, Inc., an issuer listed on Nasdaq (“RIME”). Mr. Ault is a seasoned business professional and entrepreneur who has spent more than twenty-seven years identifying value in various financial markets including equities, fixed income, commodities, and real estate. Throughout his career, Mr. Ault has consulted for publicly traded and privately held companies, providing each of them the benefit of his diversified experience, that range from development stage to seasoned businesses.
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Henry C.W. Nisser has served as a director of our company since May 2025. Since May 2019, Mr. Nisser has served as the Executive Vice President and General Counsel of Hyperscale Data and as one of its directors since September 2020; he became Hyperscale Data’s President on January 12, 2021. Mr. Nisser has served as Executive Vice President and General Counsel of Alzamend on a part-time basis since May 2019. Since March 2023, Mr. Nisser has served as the President, General Counsel and director of ROI. Between February 2021 and October 2024, Mr. Nisser served as the President, General Counsel and a director of Ault Disruptive. Between April 2023 and August 2024, Mr. Nisser served as a director of RIME. Mr. Nisser was the Executive Vice President and General Counsel of AVLP from March 2019 until its liquidation in March 2025. From December 15, 2021 through March 16, 2022, Mr. Nisser served as Chief Executive Officer and on the board of directors of TurnOnGreen, Inc., an OTCID quoted company. From October 2011 through April 2019, Mr. Nisser was an associate and subsequently a partner with Sichenzia Ross Ference LLP, a law firm in New York. While with this law firm, his practice was concentrated on national and international corporate law, with a particular focus on U.S. securities compliance, public as well as private M&A, equity and debt financings and corporate governance. Mr. Nisser received his B.A. degree from Connecticut College, where he majored in International Relations and Economics. He received his LL.B. from University of Buckingham School of Law in the United Kingdom.
Ronald A. Seff, M.D. has served as a director of our company since 2002. Dr. Seff has been in the private practice of ophthalmology since 1977. From 1977 until 1998, Dr. Seff practiced with, and was a senior executive of, a large medical practice with four offices in Maryland.
Ira F. Bormel, CPA has served as a director of our company since 2008. Mr. Bormel has served as chief financial officer of Berman Enterprises LLC and related companies, a Maryland based owner, developer and manager of office and retail commercial properties since 1999. Mr. Bormel is also a former chief financial officer of the Company.
CORPORATE GOVERNANCE
Board Meetings and Attendance
During the fiscal year ended March 31, 2026, the Board convened four times and the Board and various committees also took other actions by unanimous written consent. Each of the incumbent directors attended at least 75% of the meetings of the Board or committees of the Board on which he or she served during the fiscal year ended March 31, 2026 (in each case, which were held during the period for which he was a director and/or a member of the applicable committee). We encourage, but do not require, our Board members to attend the Annual Meeting.
In accordance with NYSE American requirements, we are required to hold meetings of the Board on at least a quarterly basis. In addition, the independent directors meet on a regular basis as often as necessary to fulfill their responsibilities, including at least annually in executive session without the presence of non-independent directors and management.
Board Committees
Our Board has established two (2) standing committees: the Audit Committee and the Compensation Committee, each of which is composed solely of independent directors and is described more fully below. Our Board may establish other committees from time to time.
The following table provides membership information for each committee:
Name
Audit Committee
Compensation Committee
Ira F. Bormel
** +
*
Ronald A. Seff
*
**
* Member of Committee
** Chairman of Committee
+ “Audit committee financial expert” as defined in SEC regulations
Below is a description of each committee of the Board.
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Audit Committee
The Audit Committee is appointed by the Board to assist the Board in its duty to oversee the Company’s accounting, financial reporting and internal control functions and the audit of the Company’s financial statements. The Committee’s responsibilities include, among others, direct responsibility for hiring, firing, overseeing the work of and determining the compensation for the Company’s independent auditors, who report directly to the Audit Committee. None of the Audit Committee members is an employee of the Company and each is independent under existing NYSE American and SEC requirements. The Board has examined the SEC’s definition of “audit committee financial expert” and determined that Mr. Bormel satisfies this definition. Accordingly, Mr. Bormel has been designated by the Board as the Company’s audit committee financial expert. During the fiscal year ended March 31, 2026, the Audit Committee met four times. The Board has adopted a written charter for the Audit Committee, which is available on the Company’s website, www.universalsecurity.com, under the “Investor Relations” tab.
Compensation Committee
Messrs. Seff and Bormel currently serve as members of the Compensation Committee, with Dr. Seff serving as chair of the committee. Our Board has determined that each current member of the Compensation Committee is “independent” as defined under the applicable listing standards of the NYSE American. The Compensation Committee is charged with reviewing and determining the compensation of the Chief Executive Officer and the other executive officers of the Company. The Board has not adopted a charter with respect to the Compensation Committee. The Compensation Committee did not meet during the fiscal year ended March 31, 2026.
Board Nominations
The independent members of the Board acts as a nominating committee for the annual selection of its nominees for election as directors, and the Board did not meet during the 2026. The Board has not adopted a charter with respect to the nominating committee function. The Board believes that the interests of the Company’s stockholders are served by relegating the nominations process to the Board members who are independent from management. While the Board will consider nominees recommended by stockholders, it has not actively solicited recommendations from the Company’s stockholders for nominees, nor established any procedures for this purpose. In considering prospective nominees, the Board will consider the prospect’s relevant financial and business experience, the integrity and dedication of the prospect, his independence and other factors the Board deems relevant. The Board of Directors will apply the same criteria to nominees recommended by stockholders as those recommended by the full Board. Nominations for director may be made by stockholders, provided such nominations comply with certain timing and informational requirements set forth in the Company’s Bylaws.
Family Relationships
There are no family relationships among our directors and executive officers.
Code of Ethics
The Company has adopted a Code of Ethics that is designed to promote the highest standards of ethical conduct by the Company’s directors, executive officers and employees. We have posted on our website a current copy of the Code of Ethics and all disclosures that are required by law in regard to any amendments to, or waivers from, any provision of the Code of Ethics.
Involvement in Certain Legal Proceedings
To our knowledge, and except as disclosed below, none of our current directors has, during the past ten years:
● been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
● had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he or she was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
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● been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his or her involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
● been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; *
● been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
● been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
* Hyperscale Data issued a press release on August 15, 2023 which summarized the terms of Hyperscale Data’s and Mr. Ault’s settlement with the SEC. The press release announced, in pertinent part, that, “Under terms of the settlement, [Hyperscale Data] and Mr. Ault neither admit nor deny the SEC’s findings, which do not entail intentional misconduct. [Hyperscale Data] will pay a civil penalty of $700,000 that was fully accrued in the fourth quarter of 2022; Mr. Ault will pay disgorgement of $85,504 and a civil penalty of $150,000. In addition, [Hyperscale Data] has undertaken to retain an independent consultant to conduct a comprehensive review of [Hyperscale Data]’s internal control over financial reporting and disclosure controls and procedures, and to issue a report providing recommendations for improvements.” All the foregoing payments were made in August 2023.
The action brought by the SEC alleged that (i) Hyperscale Data had violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”) and Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-11, 13a-13, 13a-15(a), 14a-3, and 14a-9 thereunder and (ii) Mr. Ault had violated, and caused Hyperscale Data to violate, Sections 17(a)(2) and 17 (a)(3) of the Securities Act and Exchange Act Section 14(a) and Exchange Act Rules 14a-3 and 14a-9, caused Hyperscale Data’s violations of Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Exchange Act Rules 13a-1, 13a-11, 13a-13, and 12b-20, and violated Exchange Act Rule 13b2-1. In summary, the foregoing sections and rules relate to alleged violations of U.S. federal securities laws consisting of, without limitation, material misstatements regarding certain businesses of Hyperscale Data, the failure to disclose interests in related person transactions, improper recording of purported consulting services, erroneous accounting of investments, and the failure to maintain accounting and disclosure controls.
Further, the SEC ordered each of Hyperscale Data and Mr. Ault to cease and desist from committing or causing any violations and future violations of the foregoing sections and rules of the Securities Act and Exchange Act that the SEC had alleged had been violated by each of them.
Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
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ITEM 11 .
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth summary compensation information for the following persons: (i) all persons serving as our principal executive officer during the years ended March 31, 2026 and 2025, and (ii) up to our two other most highly compensated executive officers who received compensation during the years ended March 31, 2026 and 2025, who were executive officers on the last day of our fiscal year. The following table includes all compensation earned by the named executive officers for the respective period, regardless of whether such amounts were actually paid during the period:
Stock
Option
All Other
Base
Awards
Awards
Compensation
Total
Name and Principal Position
Year
Salary ($)
Bonus ($)
($)
($)
($)
($)
Harvey B. Grossblatt,
2026
352,286
—
—
88,000
73,218
513,504
President and CEO
2025
352,286
—
—
—
80,994
(1)
433,280
James B. Huff,
2026
239,426
—
—
44,000
17,140
301,925
Secretary/Treasurer/CFO
2025
198,153
—
—
—
18,399
(2)
216,552
(1)
All other compensation for Mr. Grossblatt for 2026 and 2025, respectively, includes employer 401(k) contributions of $40,815 and $40,815, medical reimbursement and health insurance premiums of $26,820 and $33,029, group life and disability premiums of $4,731 and $6,298, and auto lease value of $852 and $852.
(2)
All other compensation for Mr. Huff for 2026 and 2025, respectively, includes employer match of 401(k) contributions of $4,741 and $6,000, group life and disability premiums of $4,599 and $4,599 and auto lease value or reimbursement allowance of $7,800 and $7,800.
Employment Agreements
On October 1, 2025, the Company entered into an employment agreement (the “Agreement”) with Harvey B. Grossblatt, the Company’s President and Chief Executive Officer, to continue to serve as the Company’s President and Chief Executive Officer through July 31, 2027.
Pursuant to the Agreement, Mr. Grossblatt will be paid a base salary of $352,286 per annum (the “Base Salary”). Additionally, Mr. Grossblatt is entitled to bonus compensation based upon milestone amounts of the Company’s receipt of gross proceeds from capital raises from the date of the Agreement through July 31, 2027, with the first bonus equal to $2.5 million upon receipt of gross proceeds of at least $100 million, with additional bonuses of $1.0 million for each $100 million of gross proceeds between $200 million and $900 million, with a final potential bonus of $500,000 upon gross proceeds of $1 billion, which would result in total bonus payments to Mr. Grossblatt of $10 million. Mr. Grossblatt is also entitled to life, health and disability insurance benefits, medical reimbursement, automobile allowance, and Company paid retirement plan contributions.
If the Agreement is terminated by Mr. Grossblatt for good reason, Mr. Grossblatt is entitled to receive his compensation through any balance of the employment term plus a lump sum payment equal to his last 12 months Base Salary, health benefits for three years, and an additional lump sum payment payable on each of the first three anniversaries of the termination equal to the 401(k) plan contribution the Company would have made on behalf of the Company had he remained employed by the Company.
If Mr. Grossblatt’s employment is terminated following or in anticipation of a “change of control” of the Company, Mr. Grossblatt will be entitled to receive a lump sum payment equal to his base salary for the balance of the Agreement’s term plus three times Mr. Grossblatt’s last 12 months Base Salary. In addition, Mr. Grossblatt is entitled to receive health benefits for three years, and an additional lump sum payment payable on the anniversary of the termination equal to the 401(k) plan contribution the Company would have made on behalf of the Company had he remained employed by the Company for three years. In the event of a change in control Mr. Grossblatt will receive an amount equal to three times his Base Salary for the last 12 months, limited to 2.99 times Mr. Grossblatt’s average annual taxable compensation from the Company which is included in his gross income for the five taxable years of the Company ending before the date on which the change of control occurs.
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If the Agreement is terminated by the Company due to Mr. Grossblatt’s death, Mr. Grossblatt’s estate is entitled to receive a lump sum payment equal to his base salary for the greater of the balance of the Agreement’s term or one year, reduced by any individual life insurance benefits the premiums for which are paid for by the Company, plus the amount of the Company’s last 401(k) plan contribution made on behalf of Mr. Grossblatt. In addition, Mr. Grossblatt’s estate is entitled to the health insurance and medical reimbursement benefits for the longer of the balance of the term or three years following the date of death, or the cash equivalent thereof.
If the Agreement is terminated by the Company due to Mr. Grossblatt’s disability, Mr. Grossblatt is entitled to the continuation of the payment of his base salary for the balance of the term, reduced by any group or individual disability income insurance benefits the premiums for which are paid for by the Company and Social Security disability benefits paid to Mr. Grossblatt. In addition, Mr. Grossblatt is entitled to the health insurance and medical reimbursement benefits and a payment equal to the 401(k) plan contribution the Company would have made on behalf of the Company had he remained employed by the Company, for the longer of the balance of the term or three years following the date of disability, or the cash equivalent thereof.
The Agreement generally prohibits Mr. Grossblatt from competing with the Company during the term and during any subsequent period during which he receives compensation from the Company.
The Employment Agreement includes a “clawback” provision in which Mr. Grossblatt agrees that the Company can recoup any compensation or benefits provided to him that are required by applicable law to be subject to recovery or recoupment.
Policies on Ownership, Insider Trading, 10b5-1 Plans and Hedging
We do not have formal stock ownership guidelines for our employees or directors, because the Board is satisfied that stock and option holdings among our employees or directors are sufficient at this time to provide motivation and to align this group’s interests with those of our stockholders.
We have not adopted a formal, distinct insider trading policy that provides guidelines to, and imposes restrictions on, officers, directors and employees with respect to transactions in the Company’s securities . Our Code of Ethics prohibits profiting from undisclosed information relating to the Company, and prohibits any director, officer or employee from purchasing or selling any of the Company’s securities while in possession of material nonpublic information relating to the Company. Given the small number of insiders and employees and the historically thin trading volume in the Company’s stock, management determined that a formal policy was not necessary.
We have not adopted any hedging policies.
Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information
We do not have any formal policy that requires us to grant, or avoid granting, equity-based compensation to our executive officers at certain times. The timing of any equity grants to executive officers in connection with new hires, promotions, or other non-routine grants is tied to the event giving rise to the award (such as an executive officer’s commencement of employment or promotion effective date). As a result, in all cases, the timing of grants of equity awards, including stock options, occurs independent of the release of any material nonpublic information, and we do not time the disclosure of material nonpublic information for the purpose of affecting the value of equity-based compensation.
During fiscal 2026, there were no equity grants made to our executive officers during any period beginning four business days before the filing of a periodic report or current report disclosing material non-public information and ending one business day after the filing or furnishing of such report with the SEC.
Advisory Vote on Executive Compensation
At the annual meeting of stockholders on March 27, 2026, the stockholders approved, on an advisory basis, the compensation paid to the Company’s named executive officers. An advisory vote on executive compensation is held every three years.
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Director Compensation
The Company pays each independent director an annual base amount of $10,000. Directors’ compensation is payable in cash or shares of Common Stock (computed at the closing price as reported by the NYSE American on the date of the payment).
The table below sets forth, for each non-employee director, the total amount of compensation related to his or her service during the year ended March 31, 2026:
All other
Fees earned or
Stock awards
Options
compensation
Name
paid in cash ($)
($)
awards ($)
($)
Total ($)
Cary Luskin (1)
2,500
—
—
—
2,500
Henry Nisser
—
—
—
—
—
Ronald A. Seff, M.D.
10,000
—
—
—
10,000
Ira F. Bormel, CPA
10,000
—
—
—
10,000
(1)
Mr. Luskin resigned from the Board, effective July 28, 2025.
Stock Incentive Plans
The Company maintains equity incentive plans to provide long-term incentives to directors, officers, employees and consultants and to align their interests with those of stockholders.
On August 27, 2025, the Company adopted the 2025 Stock Incentive Plan (the “2025 Plan”), which was subsequently approved by the Company’s stockholders. The 2025 Plan authorizes the issuance of up to 1.0 million shares of common stock pursuant to stock options, restricted stock, restricted stock units, stock appreciation rights and other stock-based awards. The 2025 Plan is the Company’s primary equity compensation plan.
The purpose of the Company’s equity incentive plan is to attract and retain qualified personnel, provide additional incentives to employees, directors and consultants, and promote the success of the Company’s business by aligning compensation with stockholder interests.
As of March 31, 2026, the Company had approximately 225,000 stock options outstanding and 775,000 shares available for future issuance under the 2025 Plan.
401(k) Plans
We have adopted a tax-qualified employee savings and retirement plan, or 401(k) plan, which generally cover all of our full-time employees who have completed 12 months of service are eligible to participate. Pursuant to the 401(k) plans, eligible employees may make voluntary contributions to the plan up to a maximum of pursuant to the current Internal Revenue Code limits. Our plan includes matching contributions at the rate of $1.00 for each $1.00 contributed, up to 4% of the base salary and permits discretionary contributions. The 401(k) plan is intended to qualify under Sections 401(k) and 401(a) of the Internal Revenue Code of 1986, as amended. Contributions to such a qualified plan are deductible by the Company when made, and neither the contributions nor the income earned on those contributions is taxable to plan participants until withdrawn. All 401(k) plan contributions are credited to separate accounts maintained in trust.
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%).
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ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Except as otherwise indicated below, the following table sets forth certain information regarding beneficial ownership of our common stock as of July 2, 2026 by (1) each of our current directors; (2) each of the executive officers; (3) each person known to us to be the beneficial owner of more than 5% of the outstanding shares of our common stock based upon Schedules 13G or 13D filed with the SEC; and (4) all of our directors and executive officers as a group. As of July 2, 2026, there were 3,028,463 shares of our common stock issued and outstanding.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Common stock subject to options or convertible securities that are currently exercisable or exercisable within 60 days of July 2, 2026 are deemed to be outstanding and to be beneficially owned by the person or group holding such options or convertible securities for the purpose of computing the percentage ownership of such person or group, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group. Unless otherwise indicated by footnote, to our knowledge, the persons named in the table have sole voting and sole investment power with respect to all common stock shown as beneficially owned by them, subject to applicable community property laws.
Number of
shares
Approximate
beneficially
percent
Name and address of beneficial owner (1)
owned
of class
Greater than 5% Beneficial Owners:
David E. Lazar (2)
281,400
9.29
%
Hyperscale Data, Inc. (3)
1,045,252
34.51
%
Directors and Officers:
Harvey B. Grossblatt (4)
160,320
5.21
%
James B. Huff (5)
25,510
*
Milton C. Ault, III (6)
1,103,452
35.84
%
Henry Nisser (7)
25,000
*
Ronald A. Seff, M.D. (8)
98,749
3.23
%
Ira F. Bormel, CPA (9)
25,000
*
All directors and executive officers as a group (six persons)
1,438,031
44.54
%
* Less than 1% of outstanding shares.
(1)
Unless otherwise indicated, the business address of each of the stockholders is c/o Universal Safety Products, Inc., 11407 Cronhill Drive, Suite A, Owings Mills, Maryland 21117.
(2)
Based solely on a Schedule 13G/A filed with the SEC on May 7, 2026 by David E. Lazar. The address for this stockholder is 44, Tower 100, The Towers, Winston Churchill, San Francisco, Paitilla, Panama City, Panama 07196.
(3)
Based solely on a Schedule 13D/A filed with the SEC on May 19, 2026 Hyperscale Data, Inc. Consists of (i) 1,025,252 shares of common stock held by Ault Lending, LLC (“Ault Lending”) and (ii) 20,000 shares of Common Stock held by Alpha Structured Finance LP (“Alpha Fund”). Ault Lending is a wholly owned subsidiary of Hyperscale Data. Mr. Ault, the Executive Chairman of Hyperscale Data, is deemed to have voting and investment power with respect to the securities held of record by Ault Lending. Mr. Ault is the Manager of Alpha Structured Finance GP LLC (“Alpha GP”) and ACG Alpha Management LLC (“Alpha Management”). Alpha GP and Alpha Management are the general partner and investment manager to Alpha Fund, respectively. As a result of these relationships, Mr. Ault may be deemed to beneficially own the securities beneficially owned by Ault & Co. and Alpha Fund. The address for this stockholder is 11411 Southern Highlands Parkway, Suite 190, Las Vegas, NV 89141.
(4)
Consists of (i) 109,820 shares of Common Stock owned directly, (ii) 500 shares of Common Stock owned by his spouse and (iii) 50,000 shares of Common Stock issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days.
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Table of Contents
(5)
Consists of (i) 510 shares of Common Stock and (ii) 25,000 shares of Common Stock issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days.
(6)
Consists of (i) 2,200 shares of Common Stock owned directly by Mr. Ault, (ii) 50,000 shares of Common Stock issuable upon the exercise of stock options owned directly by Mr. Ault that are currently exercisable or exercisable within 60 days, (iii) 1,025,252 shares of common stock held by Ault Lending, (iv) 6,000 shares of Common Stock held by Ault & Company, Inc. (“Ault & Co.”) and (v) 20,000 shares of Common Stock held by Alpha Fund. Ault Lending is a wholly owned subsidiary of Hyperscale Data. Mr. Ault, the Executive Chairman of Hyperscale Data, is deemed to have voting and investment power with respect to the securities held of record by Ault Lending. Mr. Ault is the Chief Executive Officer and Chairman of Ault & Co. Mr. Ault is the Manager of Alpha GP and Alpha Management. Alpha GP and Alpha Management are the general partner and investment manager to Alpha Fund, respectively. As a result of these relationships, Mr. Ault may be deemed to beneficially own the securities beneficially owned by Ault & Co. and Alpha Fund. The address for this stockholder is 11411 Southern Highlands Parkway, Suite 190, Las Vegas, NV 89141.
(7)
Represents shares of Common Stock issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days. The address for this stockholder is 122 E. 42 nd Street, 50 th Floor, Suite 5000, New York, NY 10168.
(8)
Consists of (i) 73,479 shares of Common Stock and (ii) 25,000 shares of Common Stock issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days.
(9)
Represents shares of Common Stock issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days.
Equity Compensation Information
The following table summarizes information about our equity compensation plans as of March 31, 2026.
Number of securities
Number of securities
Weighted-
remaining available for
to be issued
average
future issuance under
upon exercise
exercise price
equity compensation plans
of outstanding
of outstanding
(excluding securities
options, warrants and rights
options, warrants and rights
reflected in column (a))
Plan Category
(a)
(b)
(c)
Equity compensation plans approved by stockholders
225,000
$
3.40
775,000
Equity compensation plans not approved by stockholders
—
—
—
Total
225,000
$
3.40
775,000
ITEM 13 .
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Pursuant to its written charter, the Audit Committee of the Board of Directors of the Company reviews and approves all transactions with related persons that are required to be disclosed under applicable regulation. During the fiscal year ended March 31, 2026 and 2025, inventory purchases and other company expenses of approximately $162,000 and $1,097,000, 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, 2026 and 2025 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 $23,000 and $285,000, respectively, and the amount due to Mr. Grossblatt at each of March 31, 2026 and 2025 was $0.
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Table of Contents
ITEM 14 .
PRINCIPAL ACCOUNTANT FEES AND SERVICES
CBIZ CPAs P.C. has acted as the independent registered public accounting firm for Universal Safety since 2015 (such date takes into account the acquisition of the attest business of Marcum LLP by CBIZ CPAs P.C. effective November 1, 2024).
Fees and Services
The following table shows the aggregate fees billed to us for professional services by CBIZ CPAs P.C. for the years ended March 31, 2026 and 2025:
2026
2025
Audit Services
$
361,000
$
293,000
Audit-Related Services
—
—
Tax Services
—
—
All Other Services
—
—
Total
$
361,000
$
293,000
Audit Fees . Audit fees include fees billed for the fiscal years ended March 31, 2026 and 2025, in connection with the annual audits of the Company’s consolidated financial statements, and review of the Company’s interim financial statements. Audit fees also include fees for services performed by the Auditor that are closely related to the audit and in many cases could only be provided by the Auditor. Such services include consents related to Securities and Exchange Commission and other regulatory filings. The aggregate fees for audit services for the fiscal years ended March 31, 2026 and 2025 totaled approximately $361,000 and $293,000, respectively.
Audit Related Fees . Audit related services include due diligence services related to accounting consultations, internal control reviews and employee benefit plan audits. There were no fees billed for audit related services paid by the Company during the fiscal years ended March 31, 2026 and 2025.
Tax Fees . Tax fees include corporate tax compliance, advisory and planning services. There were no tax related services provided in fiscal years ended March 31, 2026 and 2025.
All Other Fees. There were no other fees for services provided in the fiscal years ended March 31, 2026 and 2025.
The Audit Committee’s policy is to pre-approve all services provided by our independent auditors. These services may include audit services, audit-related services, tax services and other services. The Audit Committee may also pre-approve particular services on a case-by-case basis. Our independent auditors are required to report periodically to the Audit Committee regarding the extent of services they provide in accordance with such pre-approval.
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Table of Contents
PART IV
ITEM 15 .
EXHIBITS
(a)1. Financial Statements .
Page
Report of Independent Registered Public Accounting Firm - PCAOB# 199
F-1
Consolidated Balance Sheets as of March 31, 2026, and 2025
F-2
Consolidated Statements of Operations for the Years Ended March 31, 2026, and 2025
F-3
Consolidated Statements of Shareholders’ Equity for the Years Ended March 31, 2026, and 2025
F-4
Consolidated Statements of Cash Flows for the Years Ended March 31, 2026, and 2025
F-5
Notes to Consolidated Financial Statements
F-6
(a)3. Exhibits required to be filed by Item 601 of Regulation S-K.
Exhibit
Number
Description
2.1
Asset Purchase Agreement by and between Feit Electric Company, Inc., Universal Security Instruments, Inc. and USI Electric, Inc. dated October 29, 2024 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 30, 2024)
2.2
Amendment Number One to Asset Purchase Agreement by and between Feit Electric Company, Inc., Universal Security Instruments, Inc. and USI Electric, Inc. dated May 22, 2025 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 29, 2025)
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)
3.2
Articles Supplementary, filed October 14, 2003 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed October 31, 2002)
3.3
Articles of Amendment, filed May 28, 2025 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8 K filed July 21, 2025)
3.4
Bylaws, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed April 17, 2025)
3.5
First Amendment to Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed August 29, 2025)
4.1
Form of Convertible Note, issued June 12, 2026 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed June 12, 2026)
4.2
Description of Capital Stock (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K filed July 29, 2025)
10.1
Lease between Universal Security Instruments, Inc. and St. John Properties, Inc. dated November 4, 2008 for its office and warehouse located at 11407 Cronhill Drive, Suites A-D, Owings Mills, Maryland 21117 (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2008) , as amended by Amendment to Lease dated June 23, 2009 (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2009) and Amendment to Lease between Universal Security Instruments, Inc. and St. John Properties, Inc. dated March 3, 2022 (Amendment to Lease dated June 23, 2009 (incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2022)
10.2
Memorandum of Understanding dated as of April 15, 2025, by and between Universal Security Instruments, Inc., Ault & Company, Inc., and solely for limited purposes, Harvey Grossblatt (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 17, 2025)
10.3*
2025 Stock Incentive Plan (incorporated by reference to Annex E to the Company’s Definitive Proxy Statement filed on September 17, 2025)
10.4*
Employment Agreement, dated October 1, 2025, by and between Universal Safety Products, Inc. and Harvey B. Grossblatt (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 2, 2025)
10.5
Securities Purchase Agreement, dated June 12, 2026, by and between Universal Safety Products, Inc. and SJC Lending LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 12, 2026)
10.6**
Node Revenue Sharing Agreement, dated June 30, 2026, by and between Universal DeFi, LLC and Ault Capital Group, Inc., in its capacity as authorized agent for Ault DAO LLC
46
Table of Contents
16.1
Letter of Marcum LLP (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K filed June 6, 2025)
21.1
List of subsidiaries (incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K filed July 29, 2025)
31.1**
Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2**
Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
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.
97.1
Policy Relating to Recovery of Erroneously Awarded Compensation (incorporated by reference to Exhibit 97 to the Company’s Annual Report on Form 10-K filed on July 29, 2025).
101.INS**
Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH**
Inline XBRL Taxonomy Extension Schema Document.
101.CAL**
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*
Indicates management contract or compensatory plan or arrangement.
**
Filed herewith.
***
Furnished herewith.
ITEM 16 .
FORM 10-K SUMMARY
None.
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
July 2, 2026
By:
/s/ Harvey B. Grossblatt
Harvey B. Grossblatt
President and Chief Executive Officer
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Harvey B. Grossblatt
President, Chief Executive Officer
July 2, 2026
Harvey B. Grossblatt
and Director
/s/ James B. Huff
Chief Financial Officer
July 2, 2026
James B. Huff
(principal financial officer and
principal accounting officer)
/s/ Milton C. (Todd) Ault, III
Director
July 2, 2026
Milton C. (Todd) Ault, III
/s/ Ira Bormel
Director
July 2, 2026
Ira Bormel
/s/ Henry Nisser
Director
July 2, 2026
Henry Nisser
/s/ Ronald A. Seff
Director
July 2, 2026
Ronald A. Seff
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Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
Universal Safety Products, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Universal Safety Products, Inc. and Subsidiaries (the “Company”) as of March 31, 2026 and 2025, the related consolidated statements of operations, shareholders’ equity and cash flows for the two years in the period ended March 31, 2026, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2026 and 2025, and the results of its operations and its cash flows for the two years in the period ended March 31, 2026, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note A, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note A. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-1
Table of Contents
Convertible Debt Obligations
As described in Note B of the consolidated financial statements, the Company entered into a Securities Purchase Agreement in which the Company agreed to sell convertible promissory notes in three separate closing of 8% convertible notes in various principal amounts up to $2,750,000 in the aggregate. The notes mature in one year, 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. The notes are recorded on the date of issuance including the fair value of the derivative component of the notes with changes in fair valuae of the derivative portion being recognized as gains or losses for each reporting period thereafter. The estimation of the fair value of the derivative component used the binomial valuation model which is subject to assumptions and variables requiring significant judgment. Auditing the Company’s estimate of the fair value of the derivative component is especially challenging due to the judgmental and subjective nature of the binomial valuation model.
We obtained an understanding of and evaluated the Company’s process for valuing its convertible debt obligations. To test the fair value estimate of the derivative component, our audit procedures included,
a. Evaluating the key assumptions utilized in the fair value calculation,
b. assessing the completeness of the obligations,
c. reviewing changes in the estimates from previous periods, and
d. inspecting evidence to support the assumptions made by management;
/s/ CBIZ CPAs P.C.
CBIZ CPAs P.C.
We have served as the Company’s auditor since 2015 (such date takes into account the acquisition of the attest business of Marcum LLP by CBIZ CPAs P.C. effective November 1, 2024).
Philadelphia, PA
J uly 2 , 2026
F-2
Table of Contents
UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31,
2026
2025
CURRENT ASSETS
Cash and cash equivalents
$
3,473,619
$
348,074
Accounts receivable:
Trade, less provision for credit losses of $ 767,000 in 2026 and $ 470,000 in 2025
309,588
580,574
Due from employees
8,166
8,500
317,754
589,074
Amount due from factor
—
3,666,790
Inventories – Finished goods
370,852
3,024,114
Assets – Held for Sale
—
1,681,937
Prepaid expenses
342,590
145,290
Deferred tax asset
—
361,000
TOTAL CURRENT ASSETS
4,504,815
9,816,279
TOTAL ASSETS
$
4,504,815
$
9,816,279
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Line of credit – factor
$
—
$
2,100,458
Convertible Debenture
600,908
—
Derivative Component of Convertible Debenture
309,000
—
Short-term portion of operating lease liability
—
13,330
Accounts payable – trade
261,648
1,094,546
Accounts payable – Eyston Company Ltd.
—
1,145,843
Accrued liabilities:
Accrued payroll and employee benefits
55,253
108,096
Accrued commissions and other
42,000
190,295
TOTAL CURRENT LIABILITIES
1,268,809
4,652,568
COMMITMENTS AND CONTINGENCIES
—
—
SHAREHOLDERS’ EQUITY
Common stock, $ .01 par value per share; 20,000,000 shares authorized, 2,842,887 and 2,312,887 shares issued and outstanding at March 31, 2026 and 2025, respectively
28,429
23,129
Additional paid-in capital
15,751,386
12,885,841
Accumulated Deficit
( 12,543,809 )
( 7,745,259 )
TOTAL SHAREHOLDERS’ EQUITY
3,236,006
5,163,711
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
4,504,815
$
9,816,279
The accompanying notes are an integral part of these consolidated financial statements.
F-2
Table of Contents
UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended March 31,
2026
2025
Net sales
$
4,847,163
$
23,563,554
Cost of goods sold
4,043,774
16,732,149
GROSS PROFIT
803,389
6,831,405
Selling, general and administrative expense
5,233,428
6,004,507
Engineering and product development expense
223,794
424,849
Operating (loss) income
( 4,653,833 )
402,049
Other income (expense):
Gain on sale of asset
2,820,668
—
Change in fair value of derivative component of convertible debt
( 75,000 )
—
Interest income
134,320
—
Interest expense
( 345,918 )
( 262,365 )
Net (loss) income before income taxes
( 2,119,763 )
139,684
Provision for income tax (expense) benefit
( 366,000 )
361,000
NET (LOSS) INCOME
$
( 2,485,763 )
$
500,684
(Loss) Income per share:
Basic and diluted
$
( 1.04 )
$
0.22
Shares used in computing net (loss) income per share:
Weighted average basic and diluted shares outstanding
2,397,736
2,312,887
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Table of Contents
UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Common Stock
Additional
Paid-In
Accumulated
Shares
Amount
Capital
Deficit
Total
Balance at March 31, 2024
2,312,887
$
23,129
$
12,885,841
$
( 8,245,943 )
$
4,663,027
Net income
—
—
—
500,684
500,684
Balance at March 31, 2025
2,312,887
23,129
12,885,841
( 7,745,259 )
5,163,711
Cash Dividend
—
—
—
( 2,312,787 )
( 2,312,787 )
Stock based compensation
—
—
896,700
—
896,700
Shares issued upon conversion of convertible debentures
530,000
5,300
1,968,845
—
1,974,145
Net loss
—
—
—
( 2,485,763 )
( 2,485,763 )
Balance at March 31, 2026
2,842,887
$
28,429
$
15,751,386
$
( 12,543,809 )
$
3,236,006
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended March 31,
2026
2025
OPERATING ACTIVITIES:
Net (Loss) Income
$
( 2,485,763 )
$
500,684
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Gain on sale of asset
( 2,820,668 )
—
Stock based compensation
896,700
—
Depreciation and amortization
—
4,470
Change in fair value of derivative component of convertible debt
75,000
—
Amortization of original issue discount and accrued intereston convertible debt
309,053
—
Amortization of right-of-use asset
—
159,656
Allowance for credit losses
297,000
( 65,000 )
Allowance for excess and obsolete inventory
110,000
300,000
Deferred income taxes
361,000
( 361,000 )
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable and amount due from factor
3,641,110
( 1,090,710 )
Decrease (Increase) in inventories and assets held for sale
2,543,262
( 227,396 )
(Increase) Decrease in prepaid expenses
( 197,300 )
81,442
Decrease in accounts payable and accrued expenses
( 2,179,879 )
( 192,016 )
Decrease in operating lease liability
( 13,330 )
( 158,742 )
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
536,185
( 1,048,612 )
INVESTING ACTIVITIES:
Proceeds from sale of assets
4,955,108
—
Decrease in trade accounts payable related to closing costs of sale
( 452,503 )
—
NET CASH PROVIDED BY INVESTING ACTIVITIES
4,502,605
—
FINANCING ACTIVITIES:
Cash dividend paid
( 2,312,787 )
—
Issuance of Convertible Debt
2,500,000
—
Net (repayment) borrowing on line of credit - factor
( 2,100,458 )
1,331,605
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
( 1,913,245 )
1,331,605
INCREASE IN CASH
3,125,545
282,993
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
348,074
65,081
CASH AND CASH EQUIVALENTS AT END OF YEAR
$
3,473,619
$
348,074
Supplemental information and Disclosure of Noncash Transactions:
Interest paid
$
27,988
$
262,365
Conversion of Convertible Debt to Common Stock
1,974,145
—
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 consolidated financial statements.
F-5
Table of Contents
UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business: The Company’s 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., (“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. In July 2025, we formed a wholly owned subsidiary called Universal DeFi LLC (“Universal DeFi”) as a new venture to diversify the business and explore new paths for revenue and stockholder value. Universal DeFi is pursuing two lines of business. First, Universal DeFi is developing and intends to own and operate a tokenization platform. Second, subsequent to March 31, 2026, Universal DeFi acquired and commenced limited operations running licensed nodes and a validator on the Ault Blockchain. As of the date of this report, Universal DeFi has no t generated any revenue.
Going Concern and Liquidity: Universal Safety Products, Inc. (the Company) prepares financial statements assuming it will continue operations, but reported a net loss of $ 2,485,763 for the fiscal year ended March 31, 2026, and has an accumulated deficit of $ 12,543,809 that create substantial doubt about its ability to continue as a going concern for at least one year and one day after the financial statements in this annual report are issued. Sales were lower during the March 31, 2026 fiscal year since we sold our smoke and carbon monoxide alarm segment during the first fiscal quarter. Sales were further negatively impacted by the increased import tariffs on all our products. Our plans are to continue operations in the wiring device and bath fan segments of our business, and to develop an additional line of business, as more fully described herein, financed through the issuance of convertible debentures, of which $ 10,000,000 has been contracted subject to the lenders discretion. However, these plans are not certain to succeed and the financial statements do not include adjustments that would be necessary if the Company cannot continue.
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 . On May 22, 2025, the Asset Purchase Agreement with Feit was completed and the Company recorded a gain from this transaction of $ 2,820,668 . 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.
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.
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Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. 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 and Cash Equivalents: 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. Cash equivalents include amounts invested in an institutional class treasury only portfolio.
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, 2026, and 2025 are as follows:
Fiscal Year ended
March 31, 2026
March 31, 2025
Sales of safety alarms
$
4,135,202
$
21,140,157
Sales of GFCI’s, ventilation fans, and other electrical devices
711,961
2,423,397
$
4,847,163
$
23,563,554
Accounts Receivable and Allowance for Credit Losses: The Company assigned the majority of its trade receivables on a pre-approved non-recourse basis to Merchant Factors Corporation (Merchant or Factor) under a factoring agreement that expired on February 26, 2026. Factoring charges recognized on assignment of receivables are deducted from revenue in the consolidated statements of operations and amounted to $ 47,370 and $ 209,841 for the years ended March 31, 2026, and 2025, respectively.
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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, 2026, and 2025, a provision for credit losses of $ 767,000 and $ 470,000 , respectively, has been provided for uncollectible trade accounts receivable. Management provided a provision for credit losses of $ 535,000 on March 31, 2024, and decreased this provision by $ 65,000 to $ 470,000 at March 31, 2025. The Company increased its provision for credit losses to cover potential credit losses during the fiscal year ended March 31, 2026 to $ 767,000 , however no amounts were written off during the fiscal years ended March 31, 2026, 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. 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. An allowance for excess and obsolete inventory of $ 510,000 and $ 400,000 is provided as of March 31, 2026, and 2025, respectively.
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, 2026, and 2025.
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.
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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 $ 0 , and $ 25,000 , respectively for the fiscal years ended March 31, 2026, and 2025 that is included in accrued commissions and other on the consolidated balance sheets.
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 $ 131,145 and $ 589,072 in fiscal years ended March 31, 2026 and 2025, respectively.
Net Income (Loss) per Share: Basic net income (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 were no other securities outstanding during 2026 or 2025 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.
Recent Accounting Pronouncements: 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 reporting periods beginning after December 15, 2024, was adopted prospectively and did not have a material impact to the income tax disclosures.
NOTE B – 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 and amounted to $ 105,763 for the fiscal year ended March 31, 2026. Of the original issue discount of $ 250,000 , interest expense of $ 168,630 has been recorded for the fiscal year ended March 31, 2026. In addition, further amortization of the original issue discount amounting to $ 44,013 was recorded as interest expense during the fiscal year ended March 31, 2026, for the portion of the convertible debt that remained outstanding. At March 31, 2026, unamortized original issue discount of $ 37,357 was presented as a reduction of the remaining convertible debentures.
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During the fiscal year ended March 31, 2026, convertible debt and accrued interest thereon in the amount of $ 1,974,145 was converted to 530,000 shares of common stock.
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 including 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 $ 309,000 at March 31, 2026. Other expense of $ 75,000 , has been recorded during the fiscal year ended March 31, 2026 reflecting an increase in the fair value of the derivative component of the liability, after redemptions, for the period from the original issuance of the notes payable to March 31, 2026.
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 March 31, 2026, the assumptions used to measure fair value of the liability embedded in our outstanding notes included an exercise price of $ 3.92 per share, a common share market price of $ 5.16 , a discount rate of 3.68 %, and a volatility of 105 %, for the remaining portion of the note issued in September 2025.
The following table sets forth, by level within the fair value hierarchy, our financial instrument liabilities as of March 31, 2026.
Description
Level 1
Level 2
Level 3
Total
Derivative Component of Convertible Debenture
—
—
$
309,000
$
309,000
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The following table sets forth a summary of changes in the fair value of our Level 3 financial instrument liability for the fiscal year ended March 31, 2026.
Balance March 31, 2025
$
—
Additions to derivative liabilities
767,000
Change in fair value of derivative component of convertible debt
75,000
Conversions to equity
( 533,000 )
Balance March 31, 2026
$
309,000
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, which was terminated on February 26, 2026, the Company could borrow eighty percent ( 80 %) of eligible accounts receivable. The Agreement, as supplemented, provided for additional financing at the sole discretion of Merchant to be secured by inventory. The amount available to borrow from Merchant was approximately $ 348,000 , at March 31, 2025. Advances on factored trade accounts receivable were secured by all assets, were repaid periodically as collections were made by Merchant and were otherwise due upon demand, and bore interest at the prime commercial rate of interest, as published, plus two percent (effective rate 9.5 % at March 31, 2025). Advances under the Agreement were 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, there was $ 2,100,458 borrowed and outstanding under the factoring agreement.
Under the Agreement, the Company assigned receivables of $ 3,691,347 and $ 23,513,973 during the years ended March 31, 2026, and 2025, respectively. The uncollected balance of receivables held by the factor amounted to $ 3,666,790 at March 31, 2025. Included in the uncollected balance of receivables held by the factor were amounts classified by the factor as amounts at client risk of approximately $ 545,000 at March 31, 2025. Collected cash maintained on deposit with the factor earned interest at the factor’s prime rate of interest less 2.5 percent (effective rate of 5.0 % at March 31, 2025). There was no cash on deposit with the Factor at March 31, 2025.
NOTE D – 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 approved 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 fiscal year ended March 31, 2026. 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 five-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 March 31, 2026 is $ 472,500 and the weighted average remaining life is approximately four years and five 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 .
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The following table summarizes the status of stock options at March 31, 2026, and option transactions for the year then ended:
Status as of March 31, 2026
Number of Options
Presently exercisable
225,000
Outstanding options as of March 31, 2025
—
Grant 1 – October 20, 2025 (Effective date)
225,000
Weighted average exercise price per option
$
3.40
Outstanding, vested, and exercisable options as of March 31, 2026
225,000
NOTE E – LEASES
The Company is a lessee in lease agreements for office space. The real estate lease for the office and warehouse located in Baltimore County, Maryland also includes 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.
Our operating lease for a 15,000 square foot office and warehouse located in Baltimore County, Maryland has been extended various times with the latest extension occurring subsequent to March 31, 2026, on May 14, 2026, extending the lease on a month-to-month basis until December, 2026. No option to continue the lease beyond December 2026 has been provided in the lease extension. Monthly rental expense, with common area maintenance, is approximately $ 15,000 .
The Company maintained an operating lease for office space in Naperville, Illinois. This lease consisting of 3,400 square feet, renewed on a month-to-month basis, and expired on June 30, 2025. The monthly rental, with common area maintenance, was approximately $ 4,900 per month during the lease term.
Rent expense, including common area maintenance, totaled approximately $ 211,000 and $ 296,000 for the years ended March 31, 2026, and 2025, respectively. None of the Company’s lease agreements contain any residual value guarantees or material restrictive covenants.
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, 2025, 2024, and 2023 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, 2026, the Company has total net federal operating loss carry-forwards of approximately $ 5,438,000 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.
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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:
Years ended March 31,
2026
2025
Federal (benefit) tax at statutory rate before loss carry-forward
$
( 497,000 )
$
100,137
Permanent and other differences
( 212,000 )
( 169,522 )
State income tax provision (benefit) – net of federal effect
( 18,000 )
( 19,764 )
Change in deferred tax asset valuation allowance
1,093,000
( 271,851 )
Current income tax provision (benefit)
$
366,000
$
( 361,000 )
The individual components of the Company’s deferred tax assets are as follows:
March 31,
2026
2025
Deferred tax assets:
Accruals and allowances
$
491,632
$
219,674
Non-deductible capitalized inventory
49,620
11,462
Net operating loss carry forward
1,158,317
736,679
Research and development tax credit carry forward
36,253
36,253
Allowance for unrealizable deferred tax assets
( 1,735,822 )
( 643,068 )
Net deferred tax asset
$
—
$
361,000
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”), dated October 1, 2025 and expiring on July 31, 2027, provides for certain milestone payments based on future capital investment in the Company and 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, or resignation under terms of the CEO Agreement.
NOTE H - CONCENTRATIONS
The Company is primarily a distributor of safety products for use in home and business. The Company had three customers during the fiscal year ended March 31, 2026, that represented 13.0 %, 12.5 %, and 10.8 % of the Company’s net sales, respectively. The Company had three customers in the fiscal year ended March 31, 2026, that represented 20.0 %, 19.0 %, and 10.0 % of the Company’s accounts receivable, respectively.
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The Company had two customers during the fiscal year ended March 31, 2025, that represented 21.7 %, and 14.9 % of the Company’s net sales, respectively. These two customers represented 17.3 % and 13.8 % of the Company’s accounts receivable at March 31, 2025, respectively.
The Company acquired one hundred percent ( 100 )% of the smoke alarm and carbon monoxide alarm safety products that it sold from Eyston Company, Ltd. Products manufactured for us by Eyston amounted to approximately 82.6 % and 96.3 % of our total purchases for the fiscal years ended March 31, 2026, and 2025, respectively. At March 31, 2026, and 2025, the Company had accounts receivable due from Eyston of $ 0 and $ 114,204 , respectively. At March 31, 2026, and 2025, the Company had trade accounts payable due to Eyston of approximately $ 0 and $ 1,146,000 , 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 $ 39,900 and $ 47,097 for the years ended March 31, 2026, and 2025, respectively.
NOTE J – RELATED PARTY TRANSACTIONS
During the fiscal year ended March 31, 2026, and 2025, inventory purchases and other company expenses of approximately $ 162,000 and $ 1,097,000 , 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, 2026, and 2025 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 $ 23,000 and $ 285,000 , respectively. There were no amounts due to Mr. Grossblatt at March 31, 2026, and 2025.
NOTE K – SUBSEQUENT EVENTS
On May 15, 2026, the remaining outstanding convertible debt with accrued interest thereon, amounting to $ 886,872 was converted to 185,576 shares of common stock.
On June 12, 2026, the Company entered into an agreement with SJC Lending LLC (SJC) in which the Company agreed to sell SJC convertible promissory notes in the aggregate principal amount of $ 10,000,000 . The agreement provides that the notes shall be issued through eleven separate tranche closings, provided however, that SJC has the ability, exercisable in its sole discretion, to purchase any principal face amount of Convertible Notes prior to the dates of the tranche closings provided for in the Agreement. Pursuant to the Agreement, the initial tranche occurred on June 12, 2026 consisting of a Convertible Note in the principal face amount of $ 1,060,000 for a purchase price of $ 1,000,000 .
On June 30, 2026, Universal DeFi entered into a node revenue sharing agreement (the “Revenue Sharing Agreement”) with Ault Capital Group, Inc. (“Ault Capital Group”), in its capacity as authorized agent for Ault DAO LLC. Ault Capital Group is a wholly owned subsidiary of Hyperscale Data. The Revenue Sharing Agreement acknowledges that on April 6, 2026, Ault Capital Group transferred, assigned, and activated, to Universal DeFi 125,000 Node Licenses and the right to operate one validator, together with the wallet holding all reward tokens earned by such Node Licenses and operating as a validator. In consideration of the transfer and delivery of the Node Licenses, Universal DeFi will pay Ault Capital Group a revenue share equal to 25 % of net proceeds (as defined in the Revenue Sharing Agreement as the net cash, cryptocurrency, stablecoin, and other proceeds actually received by Universal DeFi from the sale of tokens and rewards generated by the Node Licenses, less applicable transaction fees), and Universal DeFi will retain the remaining 75 % of net proceeds (the “Revenue Share”). The Revenue Share is payable solely from, and only to the extent of, net proceeds actually received by Universal DeFi, and in no event is Universal DeFi required to make any payments to Ault Capital Group other than from the net proceeds and pursuant to the revenue share. Ault Capital Group’s right to receive the Revenue Share, and Universal DeFi’s obligation to pay it, terminate once Ault Capital Group has received cumulative Revenue Share payments totaling $ 93,750,000 .
F-14
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