Financial Analysis

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 Companys 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. …

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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 ori …

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Fiscal Year ended March 31, 2026 March 31, 2025 Sales of safety alarms $ 4,135,202 $ 21,140,157 Sales of GFCIs, ventilation fans, and other electrical devices 711,961 2,423,397 $ 4,847,163 $ 23,563,554 …

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NOTE D STOCK BASED COMPENSATION In October 2025, the stockholders approved the Companys 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 Companys stock price over a five-year look-back period and re …

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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. 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 wit …

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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 Companys 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 …

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Recently Issued Accounting Standards: Changes to US-GAAP are established by the Financial Accounting Standards Board (FASB) in the form of Accounting Standards Updates (ASUs) to the FASBs Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. 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. …

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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 Companys 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. …

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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 …

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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 Companys condensed consolidated financial position, results of operations, or cash flows in future years. …

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

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Three months ended Nine months ended December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024 Sales of products acquired from Eyston $ $ 4,929,918 $ 4,170,877 $ 15,420,952 Sales of GFCIs and ventilation fans 22,549 605,230 435,918 1,915,981 $ 22,549 $ 5,535,148 $ 4,606,795 $ 17,336,933 …

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Stock-Based Compensation In October 2025, the stockholders approved the Companys 2025 Non-Qualified Stock Incentive Plan (the Plan). Under the terms of the Plan, 1,000,000 shares are reserved for the granting of stock options. Under the provisions of the Plan, a committee of the Board of Directors determines the option price and dates exercisable. During August 2025, the compensation committee granted two hundred-twenty-five thousand ( 225,000 ) stock options subject to shareholder approval of the Plan, which was granted in October 2025 as mentioned above, at an option price of $3.40 per share. These options became fully vested upon shareholder approval. We account for share-based payments using the fair value method. We recognize all share-based payments to employees and non-employee directors in our financial statements based on their effective date fair values, calculated using the Black-Scholes option pricing model. Based on shareholder approval of the Plan on October 20, 2025, and due to the fully vested component of the stock option grants, compensation expense of $896,700 was recognized during the quarter ended December 31, 2025. The Company does not have current sufficient historical data on the estimated expected life of the options granted. Accordingly, the expected term of the stock options granted is estimated to be five years from the effective date of the grant based on the simplified safe harbor calculation provided under ASC 718-10-55-20 and 21. The expected v …

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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. The Companys financial instrum …

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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. After a review of projected taxable income, the components of the deferred tax asset, and the current global economic conditions, it was determined that it is more likely than not that the tax benefits associated with the remaining components of the deferred tax assets will not be realized. This determination was made based on the Companys prior history of losses from operations and the uncertainty as to whether the Company will generate sufficient taxable income to use the deferred tax assets prior to their expiration. Accordingly, a valuation allowance was establish …

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Leases The Company is a lessee in lease agreements for office space. The Companys 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 Companys lease liabilities to the extent that such payments are either fixed amounts or variable lease amounts based on a rate or index (fixed in substance) as stipulated in the lease contract. The Company has negotiated several small lease extensions that have resulted in extending our operating lease for a 15,000 square foot office and warehouse located in Baltimore County, Maryland to expire in April 2026, with no option to continue the lease beyond April 2026. Monthly rental expense, with common area maintenance, currently approximates $15,000. The Com …

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Related Party Transactions During the three and nine-month periods ended December 31, 2025, inventory purchases and other company expenses of approximately $12,000 and $134,000 respectively, were charged to credit card accounts of Harvey B. Grossblatt, the Companys Chief Executive Officer and certain of his immediate family members. During the three and nine-month periods ended December 31, 2024 , inventory purchases and other company expenses of approximately $67,000 and $1,013,000 respectively, were charged to credit card accounts of Harvey B. Grossblatt, the Companys Chief Executive Officer and certain of his immediate family members. The Company subsequently reimbursed these charges in full. Mr. Grossblatt receives mileage benefits from these charges. The maximum amount outstanding and due to Mr. Grossblatt at any point during the nine-month period ended December 31, 2025, and 2024 amounted to $22,680 and $285,333, respectively. The amount due to Mr. Grossblatt at December 31, 2025, and 2024 amounted to approximately $2,000 and $2,000, respectively and is included in accounts payable on the condensed consolidated balance sheets. …

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

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