UUU 10-Q
Universal Safety Products, Inc. (UUU)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended
OR
SECURITIES EXCHANGE ACT OF 1934
Commission file number
(Exact name of registrant as specified in its charter)
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incorporation or organization) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
| Accelerated filer ☐ |
Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
At November 19, 2025, the number of shares outstanding of the registrant’s common stock was
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS | (unaudited) | (audited) | ||||
| September 30, 2025 |
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CURRENT ASSETS |
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Cash and cash equivalents | $ | | $ | | ||
Accounts receivable: |
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Trade, net of provision for credit losses of $ |
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Other receivables | | | ||||
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Amount due from factor |
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Inventories – finished goods |
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Assets – Held for Sale | — | |||||
Deferred tax asset | — | |||||
Prepaid expenses |
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TOTAL CURRENT ASSETS |
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TOTAL ASSETS | $ | | $ | | ||
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Line of credit - factor | $ | — | $ | | ||
Short-term portion of operating lease liability | — | | ||||
Convertible Debenture | | — | ||||
Derivative Component of Convertible Debenture | | — | ||||
Accounts payable - trade |
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Accounts payable – Eyston Company, Ltd. |
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Accrued liabilities: |
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Accrued payroll and employee benefits |
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Accrued commissions and other |
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TOTAL CURRENT LIABILITIES |
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COMMITMENTS AND CONTINGENCIES |
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SHAREHOLDERS’ EQUITY |
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Common stock, $ | |
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Additional paid-in capital | |
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Accumulated Deficit | ( |
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TOTAL SHAREHOLDERS’ EQUITY | |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30, | ||||||
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Net sales | $ | | $ | | ||
Cost of goods sold |
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GROSS PROFIT |
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Selling, general and administrative expense |
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Engineering and product development expense |
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Operating (loss) income |
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Other income (expense): |
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Gain on sale of assets | — | — | ||||
Change in fair value of derivative component of convertible debt | ( | — | ||||
Interest expense - net |
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Net (loss) income before taxes | ( | | ||||
Provision for income tax expense | ( | ( | ||||
NET (LOSS) INCOME | $ | ( | $ | | ||
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(Loss) earnings per share: |
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Basic | $ | ( | $ | | ||
Diluted | ( | | ||||
Shares used in computing loss (earnings) per share: |
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Weighted average basic shares outstanding |
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Weighted average diluted shares outstanding | | | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended September 30, | ||||||
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Net sales | $ | | $ | | ||
Cost of goods sold |
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GROSS PROFIT |
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Selling, general and administrative expense |
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Engineering and product development expense |
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Operating (loss) income |
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Other income (expense): |
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Gain on sale of asset | | — | ||||
Change in fair value of derivative component of convertible debt | ( | — | ||||
Interest expense - net |
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Net Income before income taxes | |
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Provision for income tax expense | |
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NET INCOME | $ | | $ | | ||
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Earnings per share: |
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Basic | $ | | $ | | ||
Diluted | | | ||||
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Shares used in computing earnings per share: |
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Weighted average basic shares outstanding |
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Weighted average diluted shares outstanding | | | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
SIX MONTHS ENDED SEPTEMBER 30, 2025
(Unaudited)
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Common | Stock | Paid-In | Accumulated | |||||||||||
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| Deficit |
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Balance at April 1, 2025 |
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Net income |
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Balance at June 30, 2025 |
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Cash Dividend | ( |
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Net loss |
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Balance at September 30, 2025 | | $ | | $ | | $ | ( | $ | | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
SIX MONTHS ENDED SEPTEMBER 30, 2024
(Unaudited)
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Common | Stock | Paid-In | Accumulated | |||||||||||
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| Deficit |
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Balance at April 1, 2024 |
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Net loss |
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Balance at June 30, 2024 |
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Net income |
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Balance at September 30, 2024 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended September 30, | ||||||
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OPERATING ACTIVITIES: |
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Net Income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Gain on sale of asset | ( | — | ||||
Depreciation and amortization |
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Allowance for excess and obsolete inventory | — | | ||||
Increase in allowance for credit losses | | — | ||||
Deferred income taxes |
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Change in fair value of derivative component of convertible debt | | — | ||||
Decrease in lease obligation | ( | — | ||||
Changes in operating assets and liabilities: |
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Decrease (Increase) in accounts receivable and amount due from factor |
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Decrease (Increase) in inventories and assets held for sale |
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(Increase) Decrease in prepaid expenses | ( | | ||||
(Increase) Decrease in accounts payable and accrued liabilities |
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
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INVESTING ACTIVITIES: | ||||||
Proceeds from sale of assets | | — | ||||
Decrease in trade accounts payable related to closing costs on sale | ( | — | ||||
Decrease in inventories and intangible assets - held for sale | ( | — | ||||
NET CASH PROVIDED BY INVESTING ACTIVITIES | | — | ||||
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FINANCING ACTIVITIES: |
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Cash dividend paid | ( | — | ||||
Issuance of Convertible Debt | | — | ||||
Net (repayment) borrowing - Line of Credit – Factor |
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NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES |
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NET INCREASE IN CASH |
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Cash at beginning of period |
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CASH AT END OF PERIOD | $ | | $ | | ||
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SUPPLEMENTAL INFORMATION: | ||||||
Interest paid | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNIVERSAL SAFETY PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Statement of Management
Universal Safety Products, Inc., formerly “Universal Security Instruments, Inc.” (“we” or “the Company”) designs and markets a variety of popularly priced safety products which, during the period covered by this Quarterly Report, consisted primarily of smoke alarms, carbon monoxide alarms and related products. Most of our products require minimal installation and are designed for easy installation by the consumer without professional assistance and are sold through retail stores. We also market products to the electrical distribution trade through our wholly owned subsidiary, Universal Safety Electric, Inc., formerly, USI Electric, Inc. (“Universal Electric”). The electrical distribution trade includes electrical and lighting distributors as well as manufactured housing companies. Products sold by Universal Electric usually require professional installation. On July 7, 2025, we established a wholly owned subsidiary, Universal DEFI, LLC, to facilitate future growth opportunities. As of September 30, 2025, Universal DEFI, LLC has conducted no operations.
Management had been seeking access to additional funding or other resources, or the right strategic business combination, which would allow the Company to drive long-term value for its shareholders while taking advantage of growth opportunities that the Company seeks to execute. In furtherance thereof, as previously announced on October 31, 2024, the Company entered into an Asset Purchase Agreement with Feit Electric Company, Inc. (“Feit”) pursuant to which Feit agreed to acquire the smoke and carbon monoxide alarm portion of the Company’s business and the non-tangible assets of the Company, including but not limited to the trade name of Universal Security Instruments, Inc. and Universal Electric, Inc. The Closing was subject to the approval of the transaction by the requisite vote of the shareholders of the Company. A special meeting of the shareholders to approve the sale and related actions was held on April 15, 2025, and the asset sale was approved. Accordingly on May 22, 2025, the Company closed on the asset sale to Feit pursuant to the terms of the Asset Purchase Agreement. The assets held for sale in accordance with the Asset Purchase Agreement at March 31, 2025, are shown separately in the financial statements accompanying this Quarterly Report and are valued at the lower of the assets carrying value or fair value less selling cost. The Company currently intends to continue importing and marketing its product lines other than smoke alarms and carbon monoxide alarms and is exploring other business opportunities to drive long-term value for our shareholders.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Universal Electric. and Universal DEFI, LLC. Except for the condensed consolidated balance sheet as of March 31, 2025, which was derived from audited financial statements, the accompanying condensed consolidated financial statements are unaudited. Significant inter-company accounts and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the interim condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (US-GAAP) have been condensed or omitted. The interim condensed consolidated financial statements should be read in conjunction with the Company’s March 31, 2025, audited financial statements filed with the Securities and Exchange Commission on Form 10-K as filed on July 29, 2025. The interim operating results are not necessarily indicative of the operating results for the full fiscal year.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with US-GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.
Revenue Recognition
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
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contracts with an original expected duration of one year or more. The Company’s contracts are predominantly short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in ASC Topic 606 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for products sold. Purchase orders may contain stand-alone pricing applied to each of the multiple products ordered. Revenue is recorded at the transaction price net of estimates of variable consideration. The Company uses the expected value method based on historical data in considering the impact of estimates of variable consideration, which may include trade discounts, allowances, product returns (including rights of return) or warranty replacements. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.
Disaggregation of Revenue
The Company presents below revenue associated with sales of products acquired from Eyston Company Ltd. (Eyston) separately from revenue associated with sales of ground fault circuit interrupters (GFCI’s) and ventilation fans. The Company believes this disaggregation best depicts how our various product lines perform and are affected by economic factors. Revenue recognized by these categories for the three and six months ended September 30, 2025, and 2024 are as follows:
Three months ended | Six months ended | |||||||||||
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Sales of products acquired from Eyston | $ | | $ | | $ | | $ | | ||||
Sales of GFCI’s and ventilation fans |
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$ | | $ | | $ | | $ | | |||||
Accounts Receivable, Amount Due From Factor, and Allowance for Credit Losses
Receivables are recorded when the Company has an unconditional right to consideration. We have established a provision for credit losses based upon historical experience and the consideration of current and future economic conditions.
The Company assigns the majority of its trade receivables on a pre-approved non-recourse basis to Merchant Factors Corporation (Merchant or Factor) under a factoring agreement on an ongoing basis. At the time a receivable is assigned to our factor 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 sales to customers that are denied credit by the factor, dispute delivery, and/or have warranty issues related to the products sold.
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.
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,
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Concentrations
The Company is primarily a distributor of safety products for use in home and business under both its trade names and private labels for other companies. The Company had
The Company had
Line of Credit – Factor
The Company entered into an Agreement with Merchant Financial Group (Merchant) for the purpose of factoring the Company’s trade accounts receivable. Under the Agreement the Company may borrow eighty percent (
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
Under the provisions of ASC 815-40-15, “Derivatives and Hedging Contracts in Entity’s Own Equity – Scope and Scope Exceptions,” our outstanding convertible notes are indexed to our stock. The application of ASC 815-40-15 resulted in our accounting for these notes as derivative instruments, and they are recognized as liabilities in our condensed consolidated balance sheets.
The notes payable are accounted for as derivative liabilities at September 30, 2025, and are recorded net of the fair value of the derivative component on the date of issuance with changes in fair value recognized as a gain or loss for each reporting period thereafter. The notes were recorded at fair value on the date of issuance, using the Binomial valuation model, and accordingly, an original derivative liability of $
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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.
We measured the fair value of the convertible notes by using the Binomial Valuation model. As of September 30, 2025, the assumptions used to measure fair value of the liability embedded in our outstanding notes included an exercise price of $
The following table sets forth, by level within the fair value hierarchy, our financial instrument liabilities as of September 30, 2025.
Description |
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| Level 3 |
| Total |
Convertible Notes Payable |
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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 three and six month periods ended September 30, 2025.
Balance March 31, 2025 |
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Additions to derivative liabilities |
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Other expense included in earnings |
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Conversions to equity |
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Balance September 30, 2025 |
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Leases
The Company is a lessee in lease agreements for office space. Certain of the Company’s leases contain provisions for one or more options to terminate or extend the lease at the Company’s sole discretion. The Company’s leases are comprised of fixed lease payments, with its real estate leases including lease payments subject to a rate or index which may be variable. Certain real estate leases also include executory costs such as common area maintenance (non-lease component). As a practical expedient permitted under ASC 842, the Company has elected to account for the lease and non-lease components as a single lease component. The Company utilizes certain practical expedients for short-term leases including the election not to reassess its prior conclusions about lease identification, lease classification and initial direct costs, as well as the election not to separate lease and non-lease components for arrangements where the Company is a lessee. Lease payments, which may include lease components and non-lease components, are included in the measurement of the Company’s lease liabilities to the extent that such payments are either fixed amounts or variable lease amounts based on a rate or index (fixed in substance) as stipulated in the lease contract.
Effective October 2025, we extended our operating lease for a
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The Company maintained an operating lease for office space in Naperville, Illinois. This lease, consisting of
Rent expense, including common area maintenance, totaled approximately $
Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments as specified in the lease. Right-of-use assets and lease liabilities related to the Company’s operating leases are recognized at the lease commencement date based on the present value of the remaining lease payments over the lease term. When the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available surrounding the Company’s borrowing rates at the lease commencement date in determining the present value of lease payments. The right-of-use asset also includes any lease payments made at or before lease commencement, less lease incentives. As of March 31, 2025, the Company had right-of-use assets of $
Income Taxes
We calculate our interim tax provision in accordance with the guidance for accounting for income taxes in interim periods. We estimate the annual effective tax rate and apply that tax rate to our ordinary quarterly pre-tax income. The tax expense or benefit related to discrete events during the interim period is recognized in the interim period in which those events occurred.
The Company recognizes a liability or asset for the deferred tax consequences of temporary differences between the tax basis of assets or liabilities and their reported amounts in the condensed consolidated financial statements. These temporary differences may result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled.
Management reviews net operating loss carry-forwards and income tax credit carry forwards to evaluate if those amounts are recoverable. The Company expects to use approximately $
The Company follows ASC 740-10 which provides guidance for tax positions related to the recognition and measurement of a tax position taken or expected to be taken in a tax return and requires that we recognize in our condensed consolidated financial statements the impact of a tax position, if that position is more likely than not to be sustained upon an examination, based on the technical merits of the position. Interest and penalties, if any, related to income tax matters are recorded as income tax expenses.
We calculate our interim tax provision in accordance with the guidance for accounting for income taxes in interim periods. We estimate the annual effective tax rate and apply that tax rate to our ordinary quarterly pre-tax income. The tax expense or benefit related to discrete events during the interim period is recognized in the interim period in which those events occurred.
Earnings per Common Share
Basic earnings per common share is computed based on the weighted average number of common shares outstanding during the periods presented. Diluted earnings per common share is computed based on the weighted average number of common shares outstanding plus the effect of stock options and other potentially dilutive common stock equivalents using the treasury stock method based on the Company’s average stock price.
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Potentially dilutive common stock equivalents in the form of convertible debentures were issued during the three-month period ended September 30, 2025. The following table presents the reconciliation of basic to diluted weighted average shares used in computing net income per share of common stock attributable to common stockholders, as adjusted to give effect to the potentially dilutive effect of convertible debentures issued during the three-month period ended September 30, 2025. Basic and diluted weighted average common shares outstanding are identical for the three and six-month periods ended September 30, 2024.
| Three months ended |
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Basic weighted average common shares | $ | | $ | | $ | | $ | | ||||
Potential dilutive effect of convertible debentures |
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Fully diluted weighted average common shares | $ | | $ | | $ | | $ | | ||||
Cash Dividend
On
Contingencies
From time to time, the Company is involved in various claims and routine litigation matters. In the opinion of management, after consultation with legal counsel, the outcomes of such matters are not anticipated to have a material adverse effect on the Company’s condensed consolidated financial position, results of operations, or cash flows in future years.
Related Party Transactions
During the three and six-month periods ended September 30, 2025, inventory purchases and other company expenses of approximately $
Recently Adopted Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve income tax disclosure requirements by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements. The guidance in this ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and footnote disclosures.
On August 28, 2017, the FASB issued Accounting Standards Update No. 2017- 12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in that Update made targeted improvements to the optional hedge accounting model with the objective of improving hedge accounting to better portray the economic results of an entity’s risk management activities in its financial statements. In August 2025, the Company adopted the accounting standard as the Company entered into certain contracts that may contain embedded derivatives requiring separate accounting if specific criteria were met.
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ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
As used throughout this Report, “we,” “our,” “the Company” and similar words refers to Universal Safety Products, Inc.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain forward-looking statements reflecting our current expectations with respect to our operations, performance, financial condition, and other developments. These forward-looking statements may generally be identified by the use of the words “may”, “will”, “believes”, “should”, “expects”, “anticipates”, “estimates”, and similar expressions. These statements are necessarily estimates reflecting management’s best judgment based upon current information and involve a number of risks and uncertainties. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and readers are advised that various factors could affect our financial performance and could cause our actual results for future periods to differ materially from those anticipated or projected. While it is impossible to identify all such factors, such factors include, but are not limited to, those risks identified in our periodic reports filed with the Securities and Exchange Commission.
OVERVIEW
We are in the business of marketing and distributing safety and security products. Our financial statements detail our sales and other operational results for the three and six-month periods ended September 30, 2025, and 2024.
Management had been seeking access to additional funding or other resources, or the right strategic business combination, which would allow the Company to drive long-term value for its shareholders while taking advantage of growth opportunities that the Company seeks to execute. In furtherance thereof, as previously announced on October 31, 2024, the Company entered into an Asset Purchase Agreement with Feit Electric Company, Inc. (“Feit”) pursuant to which Feit agreed to acquire the smoke and carbon monoxide alarm portion of the Company’s business and the non-tangible assets of the Company, including but not limited to the trade name of Universal Security Instruments, Inc. and Universal Electric, Inc. The Closing was subject to the approval of the transaction by the requisite vote of the shareholders of the Company. A special meeting of the shareholders to approve the sale and related actions was held on April 15, 2025, and the asset sale was approved. Accordingly on May 22, 2025, the Company closed on the asset sale to Feit pursuant to the terms of the Asset Purchase Agreement. The Company currently intends to continue importing and marketing its product lines other than smoke alarms and carbon monoxide alarms and is exploring other business opportunities to drive long-term value for our shareholders.
Changes in international trade duties and other aspects of international trade policy, both in the U.S. and abroad, could materially impact the cost of our products. We import all our products. As an importer, we are subject to numerous tariffs which vary depending on types of products and country of origin, changes in economic and political conditions in the country of manufacture, potential trade restrictions, and currency fluctuations. Substantially all our safety products are imported from the People’s Republic of China. Certain of these products are currently subject to tariffs of from thirty (30%) to fifty-five (55%) percent. The imposition of and modification of tariffs during the latter half of the fiscal year ended March 31, 2025, and subsequent thereto, has increased uncertainty as to the short-term sustainability of importing products from our principal suppliers. If the Company is unable to import products at a competitive price point our sales could be adversely affected.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2025 and 2024
Sales. Net sales for the three months ended September 30, 2025, were $759,999 compared to $7,203,269 for the comparable three months in the prior year, a decrease of $6,443,270 (89.4%). Sales decreased principally due to the sale of the smoke and carbon monoxide alarm portion of the Company’s business as previously discussed.
Gross Profit Margin. Gross profit margin is calculated as net sales less cost of goods sold expressed as a percentage of net sales. Our gross profit margin was 60.4% and 27.7% of sales for the quarters ended September 30, 2025, and 2024, respectively. Gross margins for the three-month period ended September 30, 2025, increased principally due to a refund of previously recorded tariffs during the three-month period ended September 30, 2025.
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Expenses. Selling, general and administrative expenses were $1,311,187 for the three months ended September 30, 2025, compared to $1,209,352 for the comparable three months in the prior year. As a percentage of net sales, these expenses increased to 172.5% for the three-month period ended September 30, 2025, from 16.8% for the 2024 period. These expenses increased as a percentage of net sales principally due to the increase in the allowance for credit losses of $400,000, and since selling, general, and administrative expenses do not decrease in direct proportion to changes in sales. These expenses increased as a dollar amount principally due to increase in the allowance for credit losses and due to the timing of expenditures related to efforts in the current quarter and the comparable quarter of the prior year to pursue strategic alternatives and merger activities.
Engineering and product development expenses were $76,682 for the three-month period ended September 30, 2025, and $110,371 for the comparable quarter of the prior year, a $33,689 (30.5%) decrease. These expenses decreased primarily due the cessation of engineering and product development activities during the current quarter due to the sale of the smoke and carbon monoxide portion of the Company’s business as previously discussed.
Other expense. Other expense recorded during the three-month period ended September 30, 2025, included the change in the fair value of the derivative component of convertible debentures issued in the period of $47,000. Net interest expense was $11,053 for the quarter ended September 30, 2025, compared to interest expense of $89,642 for the quarter ended September 30, 2024. Interest expense is dependent upon the total amounts borrowed from the Factor and changes in interest rates during the period as compared to the corresponding period for 2024.
Net (Loss) Income. We reported a net loss of $999,780 for the quarter ended September 30, 2025, compared to net income of $576,978 for the corresponding quarter of the prior fiscal year, a $1,576,758 (273.3%) decrease in net income. Net income decreased principally due to the sale of the smoke and carbon monoxide portion of the Company’s business as discussed above and the increase in the allowance for credit losses.
Six Months Ended September 30, 2025 and 2024
Sales. Net sales for the six months ended September 30, 2025, were $4,584,246 compared to $11,801,785 for the comparable six months in the prior fiscal year, a decrease of $7,217,539 (61.2%). Sales decreased principally due to the sale of the smoke and carbon monoxide alarm portion of the Company’s business as previously discussed.
Gross Profit Margin. The gross profit margin is calculated as net sales less cost of goods sold expressed as a percentage of net sales. The Company’s gross profit margin was 25.2% for the six months ended September 30, 2025, and 26.1% for the six months ended September 30, 2024. Gross margins for the six-month period ended September 30, 2025, decreased principally due to the sale of the smoke and carbon monoxide alarm portion of the Company’s business as previously discussed.
Expenses. Selling, general and administrative expenses were $2,424,490 for the six months ended September 30, 2025, compared to $2,606,773 for the comparable six months in the prior year. As a percentage of sales, these expenses were 52.9% for the six-month period ended September 30, 2025, and 22.1% for the comparable 2024 period. These expenses increased as a percentage of net sales principally due to the increase in the allowance for credit losses of $400,000, and since selling, general, and administrative expenses do not decrease in direct proportion to changes in sales. These expenses decreased as a dollar amount principally due to the increase in the allowance for credit losses and the timing of expenditures related to efforts in the current six-month period and the comparable period of the prior year to pursue strategic alternatives and merger activities.
Engineering and product development expenses were comparable at $188,689 for the six months ended September 30, 2025, to $197,972 for the comparable period of the prior year. These expenses decreased primarily due the cessation of engineering and product development activities during the period due to the sale of the smoke and carbon monoxide portion of the Company’s business as previously discussed.
Other income (expense). Other expense for the six-month period ended September 30, 2025, included the change in the fair value of the derivative component of convertible debentures issued of $47,000. Other income included the gain of the sale of inventory and intangible assets of $2,820,668. Our interest expense was $7,225 for the six months ended September 30, 2025, compared to interest expense of $134,530 for the six months ended September 30, 2024. Interest expense is dependent upon the total amounts borrowed from the Factor and changes in interest rates during the period as compared to the corresponding period of the prior year.
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Net Income. We reported net income of $810,541 for the six months ended September 30, 2025, compared to net income of $134,772 for the corresponding period of the prior fiscal year, an increase in net income of $675,769 (501.4%). Net income increased due to the gain on the sale of the smoke and carbon monoxide portion of the Company’s business, and was offset by lower sales in the quarter ended September 30, 2025, and the increase in the allowance for credit losses.
Operating activities provided cash of $3,940,773 for the six months ended September 30, 2025. This was primarily due to a decrease in accounts receivable and amount due from factor of $3,148,400, a decrease in inventories and prepaid expenses of $4,014,594, net income of $810,541 and partially offset by a decrease in accounts payable and accrued expenses of $2,006,764, and the non-cash change in the fair value of the derivative component of convertible debt of $47,000, the increase in the allowance for credit losses of $400,000, and $361,000 in deferred income taxes.
Operating activities used cash of $3,278,163 for the six months ended September 30, 2024. This was primarily due to an increase in accounts receivable and amount due from factor of $3,150,214, and an increase in inventories and prepaid expenses of $1,154,669, and partially offset by an increase in accounts payable and accrued expenses of $888,890 and net income of $134,772.
Investing activities for the three months ended June 30, 2025, provided cash from the sale of assets, net of the payment of related liabilities, of $2,820,668.
Financing activities used cash of $1,883,890 during the six months ended September 30, 2025, which is comprised of net repayments to the factor of $2,100,458, a one-time special dividend to shareholders in the amount of $2,312,787 and partially offset by net borrowing of convertible debt of $2,529,355.
Financing activities provided cash of $3,447,281 during the six months ended September 30, 2024, which is comprised of borrowings net of repayments to the factor.
Liquidity and Capital Resources
The Company believes its balances of cash received from the sales of convertible debentures, funds available to borrow under the terms of its factoring agreement, and cash generated by ongoing operations will be sufficient to satisfy its cash requirements over the next twelve months and beyond. The Company’s contractual cash requirements have not changed materially since it filed its Form 10-K for the fiscal year ended March 31, 2025.
CRITICAL ACCOUNTING POLICIES
In the notes to the consolidated financial statements, and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K, we have disclosed those accounting policies that we consider to be significant in determining our results of Operations and financial condition. With the exception of the adoption of accounting principles relating to convertible debt and the fair value of the derivative component thereof, there have been no material changes to those policies that we consider to be significant since the filing of our Form 10-K. The accounting principles used in preparing our unaudited condensed consolidated financial statements conform in all material respects to accounting principles generally accepted in the United States of America.
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ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures (as such item is defined in Rules 13a – 15(e) and 15d – 15(e) of the Exchange Act) that is designed to provide reasonable assurance that information, which is required to be disclosed by us in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated and communicated to management in a timely manner. Our Chief Executive Officer and Chief Financial Officer have evaluated this system of disclosure controls and procedures in accordance with applicable Securities and Exchange Commission guidance as of the end of the period covered by this quarterly report and have concluded that disclosure controls and procedures were not effective because the Company has not yet completed its remediation of the material weaknesses previously identified and disclosed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2025, the end of its most recent fiscal year.
Material weaknesses arose during the fiscal quarter ended September 30, 2025 related to the accounting for complex instruments. The Company plans to remediate the material weakness by engaging an independent expert to calculate the impact of complex instruments presented in the Company’s financial statements.
Material weaknesses arose during the fiscal year ended March 31, 2025, that continued to exist in the fiscal quarter ended September 30, 2025, related to the inherent risk associated with the lack of segregation of duties due to limited staffing in the accounting function. The Company plans to remediate the material weakness by adding additional personnel to the accounting function, which has not yet occurred.
Material weaknesses arose during the fiscal year ended March 31, 2024, that continued to exist in the fiscal quarter ended September 30, 2025, in the management review controls over classification of and disclosure of amounts within the financial statements resulting in revisions of amounts previously published in the March 31, 2024, financial statements. The Company plans to remediate the material weakness by changing to the proper reporting of the classification of amounts, and inclusion of the required disclosures.
Material weaknesses arose during the fiscal year ended March 31, 2024, that continued to exist in the fiscal quarter ended September 30, 2025, in the management review controls over the classification of and accounting for income taxes. The Company plans to remediate the material weakness by engaging an independent expert to review the Company’s current and deferred tax provisions.
Material weaknesses arose during the fiscal year ended March 31, 2024, that continued to exist in the fiscal quarter ended September 30, 2025 in management’s review and control over documentation supporting entries posted to the Company’s general ledger. The Company plans to remediate the material weakness by implementing procedures to improve the review of, and documentation used to support, entries to the Company’s general ledger.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended September 30, 2025.
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PART II - OTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS |
From time to time, the Company is involved in various lawsuits and legal matters. It is the opinion of management, based on the advice of legal counsel, that these matters will not have a material adverse effect on the Company’s financial statements.
ITEM 5. | OTHER INFORMATION |
None of the Company’s directors and officers
ITEM 6. | EXHIBITS |
Exhibit No. |
| |
3.1 | ||
3.2 | ||
3.3 | ||
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer* | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer* | |
32.1 | ||
99.1 | ||
101 | Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of September 30, 2025 and March 31, 2025, (ii) Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2025 and 2024, (iii) Condensed Consolidated Statements of Cash Flows for the three and six months ended September 30, 2025 and 2024, (v) Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended September 30, 2025 and 2024, and (vi) Notes to Condensed Consolidated Financial Statements* | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* | Filed herewith |
** | Furnished herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
UNIVERSAL SAFETY PRODUCTS, INC. | ||
(Registrant) | ||
| ||
Date: November 19, 2025 | By: | /s/ Harvey B. Grossblatt |
Harvey B. Grossblatt | ||
President, Chief Executive Officer | ||
By: | /s/ James B. Huff | |
James B. Huff | ||
Vice President, Chief Financial Officer | ||
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