What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-31 compared with 2025-02-28 · 415 added, 342 removed, 860 unchanged (47% of the section changed)

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Notes to the Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and Board of Directors

Focus Universal Inc.

Ontario, California

West Covina, California

Opinion on the Financial Statements

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critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sale of Warehouse

As described in Note

5 to the consolidated financial statements, the Company sold its warehouse and land during the year ended December 31, 2024 resulting

in a gain of $3,181,706, and subsequently entered into a short term lease agreement to rent the facility back from the buyer.

We identified

the recognition of the gain on sale of these assets as a critical audit matter due to the significance of this transaction to the Company’s

operations, and to the complex accounting relating to sale/leaseback transactions.

This in turn led to significant effort in performing

our audit procedures which were designed to evaluate the proper accounting and presentation of the sale/lease back transaction.

The primary audit procedures

we performed to address this critical audit matter included;

· Obtaining, examining and testing the underlying contractual documentation related to the sale transaction

· Obtaining and understanding the lease agreement

· Recalculating the gain recorded by the Company

· Ensuring the Company properly accounted for the recognition of the gain in accordance with current accounting

Issuance of Series B Redeemable Preferred Stock

Description of the Matter

As described in Note 6 – Series B Redeemable

Preferred Stock (“Series B Preferred Stock”) to the financial statements, during the year ended December 31, 2025, the Company

entered into a Series B Preferred Stock Purchase Agreement pursuant to which the Company agreed to issue up to 8,236 shares of Series

B Preferred Stock, par value $0.001 per share, at a price of $850 per share (pre-reverse split), for an aggregate purchase price of $7,000,000,

subject to $680,000 direct financing costs, receiving net proceeds of $6,320,000.

The Certificate of Designation of the Series B Preferred

Stock, as amended, also contained provisions that would allow the holder certain redemption rights.

The Company accounted for this transaction as

mezzanine (temporary) equity under ASC 480 due to redemption features exercisable at the option of the holder or upon events not solely

within the Company’s control.

Furthermore, the Company recorded the closing costs as a reduction of the initial carrying amount of

the instrument that will be accreted over the redemption period.

We determined this to be a Critical Audit Matter

as it is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to

be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial

statements and (2) involved especially challenging, subjective, or complex judgments.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address

this critical audit matter included:

We obtained and examined the supporting Series B Preferred Stock purchase

agreements including the certificates of designation, to understand the specific terms and conditions, including conversion and redemption features.

We obtained and tested the Company’s analysis of the transaction in accordance with the current accounting guidance, vouched

the receipt of the proceeds and issuance of the shares, and tested the mathematical recalculation of then accretion during the period.

We evaluated the adequacy of the Company’s disclosures related to the Convertible Preferred Stock and related accounting

We have served as the Company’s auditor

/s/ Weinberg & Company, P.A.

& Company, P.A .

February 28, 2025

March 31, 2026

Los Angeles, CA

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Marketable securities

Current assets of discontinued operations

Deposit – current portion

Total Current Assets

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Operating lease right-of-use asset

LIABILITIES AND STOCKHOLDERS’ EQUITY

Capitalized software costs

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable and accrued liabilities

Related party loan

Other current liabilities

Lease liability, current portion

Current liabilities of discontinued operations

Total Current Liabilities

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Lease liability, less current portion

Other liability

Total Non-Current Liabilities

Total Liabilities

Redeemable Preferred Stock:

Series B convertible redeemable preferred

stock, par value $ 0.001

per share, 15,000

shares authorized;

shares issued and outstanding as of December 31, 2025 and 2024, respectively (Net of discount of $ 226,666 )

Contingencies (Note 11)

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Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Total Liabilities, Redeemable Preferred Stock and Stockholders’

The accompanying notes are an integral part

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FOCUS UNIVERSAL INC.

CONSOLIDATED STATEMENTS

OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended December 31,

Cost of revenue

Gross (Loss) Profit

Operating Expenses

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Gain on disposal of property

Unrealized gain (loss) on marketable equity securities

Realized loss on marketable equity securities

Unrealized loss on marketable equity securities

Rental income

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$ ( 3,200,138 )

Accretion of redeemable preferred stock

Net loss available to common stockholders

$ ( 5,241,103 )

$ ( 3,200,138 )

Other comprehensive items

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FOR THE YEARS ENDED DECEMBER 31, 2025 and 2024

Other Comprehensive

Stockholders’

Redeemable Preferred Stock

Treasury stock

Additional Paid-In

Shares to be issued

Accumulated Other Comprehensive

Total Stockholders’

Balance – December 31, 2023

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Stock based compensation - options

Stock based compensation - cashless exercise option

Stock based compensation - shares

Purchase of treasury stock

Retirement of treasury stock

( 1,999,940 )

Amendment stock purchase agreement – treasury stock

Issued stock dividend

Purchase of treasury stock

Stock issued for placement agent

Stock issued for private placement

Fair value of stock issued to placement agent as commitment fee

Stock based compensation related to discount on shares sold to related parties

Other comprehensive loss

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Stock based compensation - shares

Retirement of treasury stock

Purchase of treasury stock

Stock issued for placement agent

Stock issued for private placement

Fair value of stock issued to placement agent as commitment fee

Stock based compensation related to discount on shares sold to related

Stock split rounding up

Retirement of treasury stock

( 1,055,557 )

Stock issued for cash

Issuance of series A preferred stock to related party, and subsequent

conversion to common

Issuance of convertible preferred stock – Series B

Conversion of Series B preferred stock to common stock

Preferred stock accretion

Other comprehensive loss

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Unrealized (gain) or loss on marketable equity securities

Realized loss on marketable equity securities

Stock-based compensation - shares

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Accounts receivable

Accounts receivable - related party

Other receivable

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Purchase of property and equipment

Purchase of marketable securities

Proceeds from sales of marketable securities

Proceeds from sales of property

Net cash flows provided by investing activities

Capitalized software costs

Net cash flows provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from sale of series B preferred stock, net

Series A preferred stock issued for cash

Proceeds from third party loan

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Repayment on third party loan

Stock issued for placement agent

Stock issued for private placement

Common stock issued for placement agent

Common stock issued for private placement

Purchase of treasury stock

( 1,434,048 )

Net cash flows provided by (used in) financing activities

Net cash flows provided by financing activities

Effect of exchange rate

Net change in cash

( 3,915,172 )

Cash beginning of year

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Supplemental disclosure of non-cash investing and financing activities:

Right-of-use assets obtained in exchange for operating lease liabilities

Cashless exercise of options

Receiving discount upon issuance of redeemable series B preferred stock

Accretion of redeemable series B preferred stock discount

Conversion of series B preferred stock into common stock

The accompanying notes are an integral part

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Perfecular Inc.

(“Perfecular”), AVX Design and Integration Inc.

(“Perfecular”), AVX Design & Integration, Inc.

(“AVX,” also doing business as Smart AVX (“Smart

AVX”)), Focus Universal (Shenzhen) Technology Company LTD (“Focus Shenzhen”), Lusher Bioscientific, Inc.

and until August, 2024, AT Tech Systems LLC (“AT Tech LLC”), which activities’ have since been discontinued.

a wholly owned subsidiary of Focus, was founded in September 2009 and is headquartered in Ontario, California, and is engaged in

designing certain digital sensor products and sells a broad selection of horticultural sensors and filters in North America and Europe.

(together “Lusher”), and until August, 2024, AT Tech Systems LLC (“AT Tech LLC”), which activities’

have since been discontinued.

AT Tech Systems was a subsidiary of Focus and

specialized in commercial and industrial smart IoT installation projects in areas throughout Southern California.

On August 5, 2024, the

Company and the segment manager of AT Tech Systems LLC reached a tentative oral agreement to terminate his employment, and the employment

On August 5, 2024,

the Company and the segment manager of AT Tech Systems LLC reached a tentative oral agreement to terminate his employment, and the employment

of his two team members.

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and is now presenting these operations as discontinued.

(See Note 10)

Note 2 – Summary of Significant Accounting Policies

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(FDIC) insurance limit.

As of December 31, 2024, and 2023, approximately $ 2,781,560 and $ 0 of the Company’s cash was not insured

As of December 31, 2025, and 2024, approximately $ 7,441,498 and $ 2,781,560 of the Company’s cash was not

insured by the FDIC.

There were no cash equivalents held by the Company at December 31, 2025 and 2024.

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For the years ended December 31,

Purchase for the year ended had not exceeded 10% or more of the consolidated purchase.

Inventory consists primarily of parts and finished

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The resulting stock-based compensation expense

for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service period of the award.

Stock Dividends

The Company follows paragraph ASC 505-20-25 in

treating stock dividends as a stock split when the stock dividend is greater than 25% of the shares then outstanding.

On March 23, 2023,

and April 3, 2023, the Company issued 2,159,216 shares of common stock as dividends to its shareholders for a stock dividend of one share

of common stock for every two shares of common stock issued and outstanding.

The Company followed paragraph ASC 260-10-55-12, wherein

it retroactively adjusted all share amounts and its statement of stockholders’ equity for all presented periods to incorporate the

alteration in capital structure.

for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service period of the

Fair Value of Financial Instruments

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on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

the related party loan approximates its fair value based on interest rate of the loan.

Comprehensive Income (Loss)

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net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity.

Other comprehensive

loss for the years ended December 31, 2024 and 2023 was comprised of foreign currency translation adjustments.

Other comprehensive loss for

the years ended December 31, 2025 and 2024 was comprised of foreign currency translation adjustments.

Revenue Recognition

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Currently, the software segment is not generating any revenue.

A summary of our revenue by product type for

the fiscal years ended December 31, 2024 and 2023 is as follows:

Schedule of revenue by product type

December 31, 2024

December 31, 2023

IoT Project Construction and Installation Services

Cost of Revenue, excluding depreciation & amortization

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labor and product incurred to provide product sales, service sales and project sales.

Advertising Expenses

During the years ended December 31, 2024 and 2023, the Company incurred

advertising costs of $ 15,125 and $ 0 , respectively.

Software Development Costs

In accordance with ASC 985-20, Costs of Software

to Be Sold, Leased, or Marketed, the Company expenses software development costs as research and development until technological feasibility

is established.

Technological feasibility is established when the Company has completed all planning, designing, coding, and testing activities

that are necessary to establish that the product can be produced to meet its design specifications, including functions, features, and

performance requirements.

Costs incurred prior to the establishment of technological feasibility are expensed as research and development.

Subsequent to achieving technological feasibility,

and until the product is available for general release, the Company will capitalize qualifying development costs, which primarily include

payroll and related costs for employees directly involved in coding and testing, fees paid to third-party developers, and other direct

costs incurred to complete the software product.

Capitalization ceases when the product is ready for release.

Capitalized software development costs will be

amortized on a product-by-product basis using the greater of (i) the ratio of current gross revenues to total anticipated gross revenues

or (ii) the straight-line method over the estimated economic life of the product, generally three to five years.

Amortization expense

will be included in cost of revenues.

Capitalized software will be reviewed for impairment when indicators of loss are present.

Redeemable Convertible Preferred Stock

The Company accounts for its Series B Convertible

Preferred Stock in accordance with the guidance in ASC Topic 480, Distinguishing Liabilities from Equity, and related SEC guidance for

redeemable equity instruments.

The Series B Convertible Preferred Stock contains

redemption features that are exercisable at the option of the holders and upon the occurrence of certain events that are not solely within

the Company’s control.

Accordingly, the Series B Convertible Preferred Stock is classified as temporary equity and presented outside

of permanent equity in the consolidated balance sheets.

The preferred stock is initially recorded at its

issuance date carrying amount, net of directly attributable issuance costs.

The Company subsequently adjusts the carrying amount of the

redeemable preferred stock to equal the redemption value at the end of each reporting period.

Changes in redemption value are recognized

immediately as they occur through charges or credits to additional paid-in capital (or accumulated deficit if additional paid-in capital

is not available).

Upon conversion of the preferred stock into common

stock, the related carrying amount is reclassified to stockholders’ equity.

Research and development

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As of December 31, 2025 and 2024, the Company

did no t identify any material uncertain tax positions.

did no t identify any material uncertain

tax positions.

Basic and Diluted Net Income (Loss) Per Share

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Foreign Currency Translation and Transactions

The reporting

and functional currency of Focus is the USD.

The reporting and functional currency of Focus

The functional currency of Focus Universal (Shenzhen) Technology Co.

LTD, a wholly owned

subsidiary of Focus located in China, is the Renminbi (“RMB”).

For financial

reporting purposes, the financial statements of the Company’s Chinese subsidiary, which are prepared using the RMB, are translated

into the Company’s reporting currency, USD.

Assets and liabilities are translated using the exchange rate on the balance sheet

Revenue and expenses are translated using average exchange rates prevailing during each reporting period.

Stockholders’ equity

is translated at historical exchange rates.

Adjustments resulting from the translation are recorded as a separate component of accumulated

other comprehensive loss in stockholders’ equity.

Transactions denominated in currencies other

than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions.

LTD, a wholly owned subsidiary of Focus located in China,

is the Renminbi (“RMB”).

For financial reporting purposes, the financial

statements of the Company’s Chinese subsidiary, which are prepared using the RMB, are translated into the Company’s reporting

currency, USD.

Assets and liabilities are translated using the exchange rate on the balance sheet date.

Revenue and expenses are

translated using average exchange rates prevailing during each reporting period.

Stockholders’ equity is translated at historical

exchange rates.

Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive loss

in stockholders’ equity.

Transactions denominated in currencies other than

the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions.

The resulting exchange difference, presented as foreign currency transaction loss, is included in the accompanying consolidated statements

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The Company has assessed its ability to continue

as a going concern for a period of one year from the date of the issuance of these financial statements.

The Company has a net loss of

$ 3,200,138 and $ 4,718,142 for the years ended December 31, 2024 and 2023, respectively.

In addition, the Company had an accumulated deficit

of $ 25,782,308 and $ 22,582,170 as of December 31, 2024 and 2023, respectively, and negative cash flow from operating activities of $ 4,656,754

and $ 3,528,762 for the years ended December 31, 2024 and 2023, respectively.

Substantial doubt about the Company’s ability to continue

as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the Company

will be unable to meet its obligations as they become due within one year from the financial statement issuance date.

The accompanying

consolidated financial statements have been prepared in conformity with U.S.

GAAP, which contemplate continuation of the Company as a

going concern.

The Company currently suffered recurring loss from operations, generated negative cash flow from operating activities,

has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating

costs over an extended period of time.

as a going concern for a period of one year from the date of the issuance of these consolidated financial statements.

The Company has

a net loss of $ 4,787,769 and $ 3,200,138 for the years ended December 31, 2025 and 2024, respectively.

In addition, the Company had an

accumulated deficit of $ 31,023,411 and $ 25,782,308 as of December 31, 2025 and 2024, respectively, and negative cash flow from operating

activities of $ 5,102,771 and $ 4,656,754 for the years ended December 31, 2025 and 2024, respectively.

Substantial doubt about the Company’s

ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable

that the Company will be unable to meet its obligations as they become due within one year from the financial statement issuance date.

The accompanying consolidated financial statements have been prepared in conformity with U.S.

GAAP, which contemplate continuation of

the Company as a going concern.

The Company currently suffered recurring losses from operations, generated negative cash flow from operating

activities, has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover

operating costs over an extended period of time.

These conditions raise substantial doubt as to its ability to continue as a going concern.

consolidated financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts

or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

These consolidated financial statements do not include adjustments relating to the recoverability and classification of reported asset

amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

At December 31, 2025, the Company had cash and

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or cause substantial dilution for our stockholders, in case of equity financing, or grant unfavorable terms in future licensing agreements.

Reverse Stock Splits

On January 31, 2025, we effected a 10 for 1 reverse

stock split of the Company’s authorized stock and issued and outstanding shares of Common Stock by filing a Certificate of Change

pursuant to pursuant to Nevada Revised Statutes (“NRS”) Section 78.209.

On February 9, 2026, we effected a 10

for 1 reverse stock split of the Company’s issued and outstanding shares of Common Stock by filing an Amendment to the

Articles of Incorporation.

All share and per share amounts were retroactively adjusted to reflect this split as if it occurred at the earliest

period presented.

Note 3 – Recent Accounting Pronouncement

In November 2023, the FASB issued ASU 2023-07,

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure

requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief

operating decision maker and included in each reported measure of a segment’s profit or loss.

The update also requires all annual

disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single

reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures.

This standard became effective for the Company on January 1, 2024.

The adoption of this standard did not have a material impact on its

results of operations, financial position or cash flows.

In November 2024, FASB issued ASU 2024-03 Income

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with the buyer for an approximately 14,004 square foot office and warehouse space.

The lease commenced on July 4, 2024 and will end on

The lease commenced on July 4, 2024 and expired on

July 31, 2025.

The monthly rent is $16,804 (See Note 8).

Note 6– Related Party Loans

On September 7, 2023, the Company entered into

a loan agreement with Golden Sunrise Investment LLC in the amount of $ 1,000,000 .

This loan is secured against the Company’s property,

which serves as collateral, with a cost of $4.5 million pledged.

At the time of entering the loan agreement, Golden Sunrise Investment

LLC was owned by two of the Company’s shareholders who collectively owned approximately 19% of the Company’s outstanding shares.

The loan has an annual interest rate of 12 % and the principal amount has a due date of September 7, 2024 .

On March 5, 2024, the Company

entered into an addendum to the loan agreement with Golden Sunrise Investment LLC, a related party obtaining an additional secured loan

amount of $ 300,000 at an annual interest rate of 12 % which is due September 7, 2024 .

The principal of $ 1,300,000 and interest of $ 28,208

were paid off on July 3, 2024 from the proceeds of the sale of the building.

As of December 31, 2024, principal and interest under this

loan was $ 0 .

The interest expense amount was $ 77,208 for the year ended December 31, 2024.

On April 2, 2024, the Company entered into a two-year

loan agreement with the Company’s CEO Desheng Wang for the amount of $ 300,000 .

The loan has an annual interest rate of 12 % and the

principal and interest amount have a due date of April 1, 2026 , as consistent with the previous and separate loan agreement with Golden

Sunrise Investment LLC.

During the year, the principal loan amount has been increased from $ 300,000 to $ 801,000 .

The interest expense

amount was $ 19,501 for the year ended December 31, 2024.

The principal and interest were paid off on July 9, 2024.

As of December 31,

2024, principal and interest under this loan was $ 0 .

Note 7 – Short-Term Loans

On January 2, 2024, the board of directors of

the Company authorized the Company to enter into a revolving credit facility or series of promissory notes for up to $ 5 million with one

or more lenders.

The Company accepted the first $ 300,000 tranche on January 9, 2024 (the “Loan”) with a third-party private

lender (the “Lender”) whereby the Lender loaned $ 300,000 to the Company (the “Principal Amount”).

an annual 3 % compound interest rate and note payments begins on February 4, 2024 (“Due Date”).

On the Due Date, the Company

will begin to pay Lender in 12 equal monthly installment payments of $ 25,408 .11 each.

The interest amount for the year ended December

31, 2024 was $ 4,897 , and the total principal of $ 300,000 and interest were paid off on December 31, 2024.

On June 18, 2024, the Company entered into a one-month

loan agreement with a third party for the amount of $ 50,000 .

The loan has an annual interest rate of 12 % and the principal and interest

amount have a due date of July 19, 2024 .

The interest expense amount was $ 500 for the year ended December 31, 2024.

The principal and

interest were paid off on July 19, 2024.

As of December 31, 2024, principal of $ 50,000 and interest under this loan was $ 0 .

The monthly rent is $16,804 on a month-to-month basis (See Note 7).

6 – Series B Redeemable Preferred Stock (Temporary Equity)

On October 21, 2025, the Company entered into

a Series B Preferred Stock Purchase Agreement with Spartan Capital Securities, LLC (“Spartan”), pursuant to the terms and

conditions of the Series B Preferred Stock Purchase Agreement, the Investors committed to purchase up to $7,000,000 or 8,236 shares (the

“Commitment Amount”) of the Company’s Series B Convertible Preferred Stock, par value $0.001 per share (the “Series

B Preferred Stock”) at a price per share of $850.00 (the “Series B Private Placement”), which represents a 15% original

issuance discount.

There were three Closings:

(i) $3,000,000 for the purchase of the Series B Preferred Stock funded at the Initial Closing;

(ii) $1,000,000 for the purchase of the Series B Preferred Stock funded on the date the Company files:

(a) the Registration Statement

on Form S-1 required by and pursuant to the Registration Rights Agreement, and (b) the Information Statement with the SEC;

$3,000,000 for the purchase of the Series B Preferred Stock funded within two (2) Business Days after:

(a) such Registration Statement

is declared effective by the SEC, and (b) the Information Statement has become effective under Rule 14c-2.

The Company received net proceeds

of $ 6,320,000

on December 19, 2025.

The proceeds were net of closing costs of $ 680,000

which was recorded as a discount and will be amortized over the earliest date of the redemption period.

On December 5, 2025, the Company

filed the Amended and Restated Certificate of Designations, Preferences, and Rights of the Series B Convertible Preferred Stock that

had the effect of altering the conversion price and floor price calculations of the Series B Preferred Stock in the event that the Company

approves a subdivision, reverse stock split, or similar transaction.

The amendment to Series B Designation also provided for voluntary

redemption rights at the option of the holder of Series B Preferred Stock and upon the occurrence of events outside the Company’s

On or after January 19, 2026, and for a period of two years thereafter, each holder of Series B Preferred Stock shall have the

right, but not the obligation, to require the Company to redeem all or a portion of the outstanding Series B shares held by them during

specified periods within the redemption window.

The initial redemption period will last ninety days, beginning on January 19, 2026.

redemption periods will each last thirty days and commence on the following dates:

(i) July 1, 2026;

(ii) October 1, 2026;

(iii) December

(iv) July 1, 2027;

(v) October 1, 2027;

and (vi) December 1, 2027.

The holders of the Series B Preferred Stock

may, at any time and from time to time, require the Company to convert their Series B Preferred Stock shares into common stock.

conversion price shall be equal to 85% of the lowest daily volume-weighted average price (VWAP) of the Company’s common stock

during the ten trading days immediately preceding the applicable conversion date or other determination date, subject to the

adjustments set forth herein.

In no event, however, shall the conversion price be less than the floor price of $7.84.

classifies the Series B Preferred Stock outside of permanent equity (as temporary equity within the mezzanine section between

liabilities and equity on the consolidated balance sheets) since the redemption of such shares is not solely within the

Company’s control.

During the year ended December 31, 2025, 973

shares of Series B Preferred Stock were converted into 93,926

shares of common stock, and there was an accretion of the discount of $ 453,334

which has been reflected as an addition to the net loss allocated to common stockholders.

At December 31, 2025, 7,263 shares of the

Series B Preferred Stock remain outstanding and the Series B Preferred Stock has been recorded at its redemption value of

$ 5,946,284 .

See note 13 for subsequent redemption demand.

As of December 31, 2025, Series B Preferred Stock

shares reflected on the balance sheet is reconciled on the following table:

Schedule of balance sheet reconciled

Series B Preferred Stock

Gross proceeds

Preferred stock issuance costs

Value converted into common stock

Accretion of carrying value to redemption value

Preferred stock subject to possible redemption

Note 7 – Leases

Operating Leases

The Company recorded its operating lease cost

of $ 143,097 and $ 143,097 for the years ended December 31, 2024 and 2023, respectively.

This is included in general and administrative

On January 16, 2023, Focus Universal (Shenzhen)

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Technology Co.

LTD entered into a thirty-six month commercial lease with a third party for an approximately 3,449 square foot office

LTD entered into a thirty-six month commercial lease with a third party for an approximately 3,449 square foot office space.

The lease commenced on March 31, 2023 and will end on February 28, 2026.

The monthly rent is RMB35,246 (approximately $4,906)

with approximately an 11.1% to 12.5% increase rate in each additional year.

The incremental borrowing rate for a lease is the rate of

interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under

similar term, which is 10%.

The monthly rent is RMB 35,246 (approximately $4,904) with approximately

an 11.1% to 12.5% increase rate in each additional year.

The incremental borrowing rate for a lease is the rate of interest the Company

would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar terms, which is

Lease expense for the lease is recognized on a straight-line basis over the lease term.

Operating lease right-of-use assets represent the Company’s right

to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising

from the lease.

As of December 31, 2024 and 2023, operating lease right-of use assets and lease liabilities were as follows:

Operating lease right-of-use assets represent

the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation

to make lease payments arising from the lease.

As of December 31, 2025 and 2024, operating lease right-of use assets and lease liabilities

were as follows:

Schedule of operating lease right of use assets and lease liabilities

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Year ending December 31, 2026

Total minimum lease payment

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Short-term leases

On June 1, 2024, Focus Universal (Shenzhen) Technology

LTD entered into a twelve-month commercial lease with a third party for an approximately 1,701 square foot office space as a sales-focused

The lease commenced on June 1, 2024 and will end on May 31, 2025.

The monthly rent is RMB8,000 (approximately $1,141).

On July 8, 2024, the Company entered into a Standard

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due upon execution of the lease.

The Company is currently leasing this facility on a month-to-month basis.

The Company recorded its operating lease

cost of $ 324,391 and $ 143,097 for the years ended December 31, 2025 and 2024, respectively.

This is included in general and administrative

Note 8 – Stockholders’ Equity

Stock Dividend

On March 23, 2023, the Company issued 2,159,216

shares of common stock as a dividend to its shareholders for a stock dividend of one share of common stock for every two shares of common

stock issued and outstanding .

The Company followed paragraph ASC 505-20-25 in

treating its stock dividend as a stock split due to the stock dividend being greater than 25% of the shares then outstanding.

adhered to paragraph ASC 260-10-55-12, and retroactively adjusted the common shares outstanding and its statement of stockholders’

equity for all presented periods to incorporate the alteration in capital structure.

Series A Preferred Stock

On October 27, 2025, the Company completed

the sale of 75,000

shares of Series A Preferred Stock in a private placement to Edward Lee, the Chairman of the Company’s Board of Directors at

the time, as the lead investor and other accredited investors for an aggregate purchase price of $ 3,000,000 ,

or $40.00 per share (the “Series A Private Placement”).

On or about November 17, 2025, the Company received

notice from the holders of Series A Preferred Stock, including Edward Lee, of their election to convert their shares of Series

A Preferred Stock to Common Stock.

As a result of the conversion of Series A Preferred Stock, the Company issued an aggregate 82,500 shares

of restricted Common Stock to the Series A Private Placement investors, including 55,000 shares of restricted Common Stock to

All of the Series A Preferred Stock has been converted, and there are currently no issued and outstanding shares of Series

A Preferred Stock.

Amendments to Articles of Incorporation

On January 28, 2025, the Company filed a Certificate

Change pursuant to Nevada Revised Statutes (“NRS”) 78.209 with the Secretary of State of the State of Nevada to effect a 1-for-10

reverse stock split of the Company’s (i) authorized common stock shares and (ii) issued and outstanding common stock shares.

reverse stock split became effective on January 31, 2025.

All common stock shares, options, warrants and securities convertible or exercisable

into common stock shares have been adjusted to give retroactive effect to this reverse stock split for all periods presented.

of the reverse split, the Company was authorized to issue 15,000,000 shares of common stock.

On September 8, 2025, the Company filed its Second Amendment and Restatement

to its Articles of Incorporation to increase the total number of its authorized capital stock to 30,000,000 shares with 25,000,000 shares

designated as common stock and 5,000,000 shares designated as blank check preferred stock.

On October 20, 2025, the Company filed a Certificate of Designation

of Series B Preferred Stock (“Series B Designation”) that had the effect of designating 15,000 shares of its 5,000,000 authorized

shares of preferred stock as Series B Convertible Preferred Stock.

On October 21, 2025, the Company filed a Certificate of Designation

of Series A Preferred Stock (“Series A Designation”) that had the effect of designating 1,000,000 shares of its 5,000,000

authorized shares of preferred stock as Series A Preferred Stock.

On November 17, 2025, the Company increased the total number of authorized

capital stock from 30,000,000 shares to 1,100,000,000 shares and designated 1,000,000,000 shares as common stock and designated 100,000,000

shares as blank check preferred stock by filing a Third Amendment and Restatement to the Articles of Incorporation.

On December 5, 2025, the Company filed an Amended

and Restated Certificate of Designation (the “Amended Series B Designation”) that provided for (i) a fixed floor price, adjusted

in the event if reverse splits and/or subdivisions, (ii) the method of calculating the conversion price in the event of a reverse splits

and/or subdivisions and (iii) grant of redemption rights to the holders of Series B Preferred Stock.

On February 9, 2026, the Company effected a reverse stock split of

its outstanding common stock on a 1-for-10 basis.

No adjustment was made to the Company’s authorized shares of capital stock.

On September 15, 2024, the Company entered into

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the trading day immediately prior to the shares being issued.

The Company issued 105,175 shares of common stock valued at $ 250,000 to

Alumni Capital which was recorded as a finance cost during the year ended December 31, 2024.

On January 31, 2025, we effected a 10 for 1 reverse

stock split of the Company’s authorized stock, and issued and outstanding shares of Common Stock by filing a Certificate of Change

pursuant to pursuant to Nevada Revised Statutes (“NRS”) Section 78.209.

As a result of the reverse split, the Company is authorized

to issue 15,000,000 common shares (the Company’s authorized common shares were reduced in the same ratio (10-for-1) as its outstanding

Common Stock shares were reduced).

All share and per share amounts were retroactively adjusted to reflect this split as if it occurred

at the earliest period presented.

The Company issued 10,518 shares of common stock valued at $ 250,000 to Alumni

Capital which was recorded as a finance cost during the year ended December 31, 2024.

An additional 30,928 common stock shares were

included in the Company’s issued and outstanding shares as a result of rounding-up fractional shares into whole shares as a result

of the reverse stock split.

Treasury stock

On August 10, 2022, the Company entered a stock

purchase agreement (the “Stock Purchase Agreement”) with a private shareholder to repurchase 60,000 shares of its common stock

for $2,000,000.

The private shareholder transferred the shares on October 4, 2022, which the Company placed in treasury;

and on October

6, 2022, the Company wired the first $1,000,000 of the purchase price.

Subsequently, on July 14, 2023, the Company entered into an amendment

to the Stock Purchase Agreement that increased the number of shares of its common stock the Company would purchase to 130,000 shares and

revised the total purchase price of the shares to $ 1,965,000 resulting in a $35,000 change in our obligation to purchase Treasury stock.

The remaining $ 965,000 was paid on July 14, 2023.

Upon receipt of the additional 90,000 shares, the Company also placed them in treasury.

As of January 17, 2023, the Company retired the initial 60,000 shares and restored them to the status of authorized and unissued shares.

On June 11, 2024, the Company retired 300 shares

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During the year ended December

31, 2023, an aggregate of 4,146 shares with a fair value of $ 74,473 vested during the period and were recognized as compensation costs.

During the year ended December 31, 2024, an aggregate of 9,011 shares with a fair value of $ 59,953 vested during the period and were recognized

as compensation costs.

During the year ending December 31, 2024, 7,494 shares with a fair value of $ 108,856 that previously vested were

As of December 31, 2024, 5,681 shares of common stock with a fair value of $ 25,573 remain vested but not issued.

31, 2024, an aggregate of 901

shares with a fair value of $ 59,953

vested during the period and were recognized as compensation costs.

As of December 31, 2024, 568

shares of common stock with a fair value of $ 25,573

remain vested but not issued.

During the year ended December 31, 2025, an aggregate of 5,770

shares with a fair value of $ 78,716

vested during the period and were recognized as compensation costs.

During the year ending December 31, 2025, 4,953

shares with a fair value of $ 13,905

that previously vested were issued.

As of December 31, 2025, 5,794

shares of common stock with a fair value of $ 82,884

remain vested but not issued.

On February 11, 2022 (the “Vesting Date”),

the Company entered into a restricted stock award agreements (the “Award Agreement”) with eight employees for 28,000 shares

of the Company’s common stock subject to the terms and to the fulfillment of the conditions set forth in the Company’s equity

incentive plan.

the Company entered into a restricted stock award agreements (the “Award Agreement”) with eight employees for 2,800

shares of the Company’s common stock subject to the terms and to the fulfillment of the conditions set forth in the Company’s

equity incentive plan.

The first 20% of the restricted shares were granted and vested on February 11, 2022.

An additional 20% of the restricted

shares will vest on each anniversary of the Vesting Date until the fourth anniversary of the Vesting Date.

The initial fair value of the

awards on the date of grant was determined to be $ 2,942,800 which is being amortized over the 5 year vesting period.

During the year ended

December 31, 2023, the Company amortized $ 357,340 leaving an unamortized balance of $ 1,072,020 at December 31, 2023.

During the year ended

December 31, 2024 the Company amortized $ 357,340 of this amount leaving an unamortized balance of $ 714,680 at December 31, 2024.

December 31, 2024, 20,400 of the shares had been vested.

An additional 20% of the

restricted shares will vest on each anniversary of the Vesting Date until the fourth anniversary of the Vesting Date.

The initial fair

value of the awards on the date of grant was determined to be $ 2,942,800

which is being amortized over the 5 year vesting period.

During the years ended December 31, 2025 and 2024, the Company amortized $ 357,340

and $ 357,340

of this amount leaving an unamortized balance of $ 357,340

at December 31, 2025.

As of December 31, 2025, 510

of the shares had been vested.

Stock options

On December 30, 2022, each member of the Board

was granted 22,500 options to purchase shares at $ 4.27 per share with a fair value of $ 533,611 at the date of grant.

shares fully vested during 2023.

On January 2, 2024, each member of the Board was

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December 31, 2024, the Company recognized $ 147,975 of compensation cost relating to the vesting of these options.

On January 2, 2025, each member of the Board

was granted 225

options to purchase shares at $ 34.50

per share with a fair value of $ 6,854 .

The options vest monthly over one (1) year, and may be exercised during a 10 -year

In the aggregate during the year ended December 31, 2025, 1,350

options with a fair value of $ 41,136

were granted and vested.

For the years ended December 31, 2025 and 2024,

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The Company discontinued operations of AT Tech Systems on August 21, 2024, with a termination cost of $ 22,000 .

The carrying amount of assets and liabilities

of discontinued operations as of December 31, 2024 and 2023 consist of the following:

Schedule of discontinued operations

Current assets of discontinued operations:

Accounts receivable, net

Prepaid expenses

Total current assets of discontinued operations

Current liabilities of discontinued operations:

Accounts payable and accrued liabilities

Other current liabilities

Total current liabilities of discontinued operations

The loss from discontinued operations presented

in the statement of operations for the years ended December 31, 2024 and 2023 as follows:

in the statement of operations for the years ended December 31, 2024 as follows:

Schedule of discontinued operations

For the Years Ended December 31, 2024

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Total operating cash flows from discontinued operations

were $ 52,700 and $ ( 52,700 ) , respectively, for the years ended December 31, 2024 and 2023, respectively.

were $ 52,700 for the years ended December 31, 2024.

Note 10 – Segment reporting

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Asset information by operating segment is not

presented as the chief operating decision maker does not review this information by segment.

presented as the Chief Executive Officer does not review this information by segment.

The reporting segments follow the same accounting

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$ ( 4,787,769 )

$ ( 3,200,138 )

The following tables summarize the financial information

of each operating segment of the Company for the year ended December 31, 2023:

The following tables summarize the financial

information of each operating segment of the Company for the year ended December 31, 2024:

For the Year ended December 31, 2024

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Note 11 – Contingencies

Pending Litigation

On or about April 13, 2020, Ian Patterson, the

Chief Operations Officer of AVX resigned from his position.

On May 5, 2020, Mr.

Patterson filed an action in the Superior Court for the

County of Los Angeles, State of California, against the company, et al.

The complaint alleges claims including discrimination, wrongful

termination, retaliation and various other provisions of the California Labor Code, and various other claims under California state law.

The complaint seeks unspecified economic and non-economic losses, as well as attorneys’ fees.

We have conducted written discovery,

depositions, and expert discovery.

We have a motion for summary judgment set to be heard on June 17, 2025.

Trial for this matter is set

for August 6, 2025.

AVX intends to vigorously contest this matter.

Further, AVX disputes that the other defendants are proper parties

to the litigation.

However, litigation and investigations are inherently uncertain, but the outcome could have a material impact on the

Similarly, on or about April 14, 2020, Devesa

Sarria, the Sales and Marketing Director, was terminated.

On May 13, 2020, she filed an action in the Superior Court for the County of

Los Angeles, State of California.

The Complaint alleges claims including discrimination, wrongful termination, retaliation and various

other provisions of the California Labor Code, and various other claims under California state law.

The complaint seeks unspecified economic

and non-economic losses, as well as attorneys’ fees.

We have conducted written discovery, depositions, and expert discovery.

for this matter is set for August 13, 2025.

AVX intends to vigorously contest this matter.

Further, AVX disputes that the other defendants

are proper parties to the litigation.

However, litigation and investigations are inherently uncertain, but the outcome could have a material

impact on the Company.

On August 26, 2024, a former software engineer

filed an action against Perfecular Inc., a wholly owned subsidiary of the Company, in the Superior Court for the County of San Bernardino,

State of California alleging wrongful termination and other violations of the California Labor Code.

The complaint seeks unspecified economic

and non-economic losses, as well as attorneys’ fees.

The Company is investigating and intends to vigorously defend itself in the

foregoing matters.

The case has currently been stayed until a status conference on September 17, 2025, which is when the expected trial

date will be set.

On July 16, 2025, a former engineer filed a claim

against Focus Shenzhen, a wholly owned subsidiary of the Company, in the Shenzhen Qianhai Cooperation Zone People’s Court, alleging

wrongful termination and other violations of the China Labor Code.

The Company is currently investigating the matter and intends to vigorously

defend itself.

The case has been stayed pending a status conference.

However, litigation and investigations are inherently uncertain.

The Company does possess EPLI insurance, and the legal

team as selected by the insurance company is currently handling the matter.

The Company vigorously disputes these allegations.

On October 28, 2024, MGR Real Estate, Inc.

California corporation, filed an action in the Superior Court of the State of California, County of San Bernardino, against the

The complaint alleges a variety of things including breach of contract and declaratory relief.

The complaint is in

connection with a listing agreement executed between the Company and the plaintiff, which plaintiff alleges gave it exclusive rights

to list and sale the property located at 2311 E.

Locust St., Ontario, CA 91761 (the “Premises”).

The complaint seeks

damages in a minimum amount of $ 373,025 ,

plus interest at a rate of 10% per annum.

The Company is negotiating a resolution and if such resolution falls through then the

Company intends to contest this matter.

Management believes it has made a provision for the probable settlement of the outcome in

these financial statements.

However, since litigation and investigations are inherently uncertain, the outcome may have a material

impact on the Company.

At present, the Shenzhen Qianhai Cooperation Zone People’s Court has frozen approximately $ 23,703 (RMB 165,802) in Focus Shenzhen’s

bank account.

While the outcome remains uncertain, it could have a material impact on the Company.

Note 12 – Income taxes

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tax to our effective income tax is as follows:

Schedule of effective tax rate

Reconciliation of income tax

Federal statutory rates

$ ( 1,004,000 )

$ ( 991,000 )

State income taxes

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Note 13 – Subsequent Events

On January 28, 2025, the Company filed a Certificate

Change pursuant to Nevada Revised Statutes (“NRS”) 78.209 with the Secretary of State of the State of Nevada to effect a 1-for-10

reverse stock split of the Company’s (i) authorized common stock shares and (ii) issued and outstanding common stock shares.

reverse stock split became effective on January 31, 2025.

All common stock shares, options, warrants and securities convertible or exercisable

into common stock shares have been adjusted to give retroactive effect to this reverse stock split for all periods presented.

An additional 65,947 common stock shares were

included in the Company’s issued and outstanding shares as a result of rounding-up fractional shares into whole shares as a result

of the reverse stock split.

On February 20, 2025, the Company received formal

written confirmation from The Nasdaq Stock Market, LLC ("Nasdaq"), confirming that Nasdaq has determined that for the last 13

consecutive business days, from January 31, 2025, to February 19, 2025, the closing bid price of the Company's shares has been at $1.00

per share or greater.

Accordingly, the Company has regained compliance with Listing Rule 5550(a)(2).

The Company has regained compliance

with Nasdaq's minimum bid price requirement, noting that this matter is now closed.

In January 2026, Focus Universal (Shenzhen) Technology

entered into two thirty-six-month commercial leases with a third party for office spaces of approximately 3,700 and 4,230 square

The first lease commenced on January 31, 2026 and will expire on January 30, 2029, with a monthly rent of RMB 14,612 (approximately

The second lease commenced on February 1, 2026 and will expire on January 31, 2029, with a monthly rent of RMB 24,771 (approximately

The Company’s incremental borrowing rate for these leases is 10%, representing the rate it would incur on a collateralized

basis to borrow an amount equal to the lease payments over a similar term.

Lease expense is recognized on a straight-line basis over the

On January 19, 2026, the Company received

requests for redemption (the “Redemption Notice”) from the holders of the outstanding shares of Series B Convertible

Preferred Stock (“Series B Preferred Stock”).

Pursuant to the Certificate of Designation of Series B Preferred Stock, as

amended, the holders of the outstanding shares of Series B Preferred Stock have the option to require the Company, to redeem all or

less than all of the outstanding shares of Series B Preferred Stock.

From the date the Company receives the Redemption Notice, the

Company had 20 trading days (the “Time Period”) to redeem the shares of Series B Preferred Stock set forth in the notice

for a price equal to the Purchase Price multiplied by the number of shares of Series B Preferred Stock subject to such redemption.

Since the Company has received the Redemption Notice, the Time Period the Company had to redeem the shares of Series B Preferred

Stock has since lapsed.

As provided in the Certificate of Designation, with respect to redemption, the Company must comply with

Nevada state law, which prohibits certain distributions or redemptions.

Therefore, management of the Company took the position that

under Nevada law, the Series B Transaction documents do not require them to redeem the Series B holders under the specific

conditions demanded by the investors.

As of March 16, 2026, a total of 6,447 shares of Series B Preferred Stock or an aggregate of

$5,479,950 remain subject to redemption.

On February 19, 2026, the Series B investors sent a redemption demand letter for 3,716

outstanding Series B Preferred shares, totaling $3,158,600.

This demand letter was subsequently rescinded while the investors and

management attempted to negotiate a settlement.

On March 17, 2026, after the parties could not successfully negotiate a settlement,

the Series B holders renewed their redemption requests by emailing Company management a notice of default.

The Company has engaged external advisors to assist in discussions

with the holders of the Series B Preferred Stock and is currently engaged in ongoing negotiations to determine the most appropriate resolution

that maximizes value for all stockholders.

In addition, management is actively working to identify potential buyers to purchase the Series

B Preferred Stock from holders seeking redemption on mutually acceptable terms.

On January 21, 2026, the Company entered into

a purchase, sale, and escrow agreement with 901 Corporate Center, LP to acquire a 100,743 sq.

office and commercial building, along

with a four-level parking structure, located in Monterey Park, California.

The purchase price is $17,700,000, with an escrow deposit of

The escrow was initially scheduled to close within sixty days of opening escrow.

The $525,000 deposit was placed into the escrow

account on January 26, 2026.

Both parties have executed several amendments to extend the closing date from February to March 2026.

Subsequently,

on March 20, 2026, the parties entered into a fifth amendment extending the contingency period to April 10, 2026.

At this point in time,

the Company has made significant progress towards financing, however there is no assurance that the financing will be completed or that

it will be on terms acceptable to the Company.

On January 22, 2026, the Company entered into

a Standard Industrial/Commercial Single-Tenant Lease (the “Lease”) with the Cameron Court, L.P.

to lease the Company premises

located at 1515 W Cameron Ave., Ste 210, West Covina, CA 91790 on a month-to-month basis.

The commercial property consists of a total

office space of 3,546 square feet.

In January 2026, the Company repurchased 16,890

shares of its common stock for $154,618 in the public market at average price of $9.15 and placed them in treasury.

On February 2, 2026, the Company founded a wholly

owned subsidiary named Lusher Holding LLC.

Lusher Holding LLC was established to provide commercial real estate property management services.

As of the filing date, its activities are still in the introductory phase.

On February 27, 2026, the Company was informed

of the unexpected death of Chairman Edward Lee, who passed away on February 26, 2026.

Lee served as a director since 2015 and was,

at the time of his passing, Chairman of our Board.

The Company is grateful for Dr.

Lee’s service and leadership over the years.

On March 27, 2026, our Board unanimously approved

to appoint Michael Pope as the Chairman of the Board of Directors and appoint the Company’s CFO, Irving Kau, as director until the

next annual meeting of shareholders.

The Company has evaluated all other subsequent

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data