UNIVERSAL SAFETY PRODUCTS, INC. Income Taxes Disclosure

NOTE F – INCOME TAXES

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

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

In addition, after a review of projected taxable income, remaining components of the deferred tax asset, and current global economic conditions, it was determined that it is more likely than not, that the tax benefits associated with the remaining components of deferred tax assets after the sale of a portion of the business, will not be realized. This determination was made based on the Company’s prior history of losses from operations and the uncertainty as to whether the Company will generate sufficient taxable income to use the remaining deferred tax assets prior to their expiration. Accordingly, a valuation allowance was established to fully offset the value of the remaining deferred tax assets. Our ability to realize the tax benefits associated with the remaining deferred tax assets depends primarily upon the timing of future taxable income and the expiration dates of the components of the deferred tax assets. If sufficient future taxable income is generated, we may be able to offset a portion of future tax expenses.

The reconciliation between the statutory federal income tax provision and the actual effective tax provision is as follows:

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

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