FOCUS UNIVERSAL INC. 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FOCUS UNIVERSAL INC. AND SUBSIDIARY FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024 Index to the Financial Statements Contents Page Report of Independent Registered Public Accounting Firm (PCAOB No. 572 ) F-2 Consolidated Balance Sheets as of December 31, 2025 and 2024 F-4 Consolidated Statements of Operations for the Years Ended December 31, 2025 and 2024 F-5 Consolidated Statements of Changes in Stockholders’ Equity for the Years ended December 31, 2025 and 2024 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 F-7 Notes to the Consolidated Financial Statements F-8 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Focus Universal Inc. West Covina, California Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Focus Universal Inc. and Subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has experienced negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. F- 2 Critical Audit Matter The critical audit matter communicated below 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. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 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 conclusions. We have served as the Company’s auditor since 2024. /s/ Weinberg & Company, P.A. Weinberg & Company, P.A . March 31, 2026 Los Angeles, CA F- 3 FOCUS UNIVERSAL INC. CONSOLIDATED BALANCE SHEETS December 31, December 31, 2025 2024 ASSETS Current Assets: Cash $ 7,934,958 $ 3,589,318 Accounts receivable, net 7,125 5,584 Inventories, net 99,813 126,071 Other receivables 20,000 – Prepaid expenses 492,953 100,730 Marketable securities 22,887 24,660 Deposit – current portion 69,393 – Total Current Assets 8,647,129 3,846,363 Property and equipment, net 66,705 60,485 Operating lease right-of-use asset 12,501 108,270 Capitalized software costs 159,179 – Deposits – 65,195 Total Assets $ 8,885,514 $ 4,080,313 LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable and accrued liabilities $ 358,007 $ 702,065 Other current liabilities – 68,204 Lease liability, current portion 8,464 106,706 Total Current Liabilities 366,471 876,975 Non-Current Liabilities: Lease liability, less current portion – 8,114 Total Liabilities 366,471 885,089 Redeemable Preferred Stock: Series B convertible redeemable preferred stock, par value $ 0.001 per share, 15,000 shares authorized; 7,263 and 0 shares issued and outstanding as of December 31, 2025 and 2024, respectively (Net of discount of $ 226,666 ) 5,946,284 – Contingencies (Note 11) – – Stockholders’ Equity: Common stock, par value $ 0.001 per share, 1,000,000,000 shares authorized; 915,097 and 715,366 shares issued and outstanding as of December 31, 2025 and 2024, respectively 915 715 Treasury stock ( 17,085 and 34,897 shares held at December 31, 2025 and 2024, respectively) ( 494,390 ) ( 1,055,592 ) Additional paid-in capital 34,038,158 30,032,026 Shares to be issued, common shares ( 5,794 and 568 shares at December 31, 2025 and 2024, respectively) 82,884 25,573 Accumulated deficit ( 31,023,411 ) ( 25,782,308 ) Accumulated other comprehensive loss ( 31,397 ) ( 25,190 ) Total Stockholders’ Equity 2,572,759 3,195,224 Total Liabilities, Redeemable Preferred Stock and Stockholders’ Equity $ 8,885,514 $ 4,080,313 The accompanying notes are an integral part of these consolidated financial statements. F- 4 FOCUS UNIVERSAL INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2025 2024 Revenue $ 255,023 $ 398,137 Cost of revenue 290,275 387,936 Gross (Loss) Profit ( 35,252 ) 10,201 Operating Expenses Selling expense 60,289 100,189 Compensation - officers and directors 499,852 951,845 Research and development 919,965 1,381,937 Professional fees 1,302,800 1,660,590 General and administrative 2,075,107 2,115,891 Total Operating Expense 4,858,013 6,210,452 Loss from Operations ( 4,893,265 ) ( 6,200,251 ) Other Income (Expense): Interest income, net 70,024 40,853 Interest expense - related party – ( 89,098 ) Gain on disposal of property – 3,181,706 Unrealized loss on marketable equity securities ( 1,773 ) ( 12,075 ) Rental income – 96,541 Other income 37,245 60,449 Total other income 105,496 3,278,376 Loss from continuing operations before income taxes ( 4,787,769 ) ( 2,921,875 ) Loss from discontinued operations, net of tax – ( 278,263 ) Net loss $ ( 4,787,769 ) $ ( 3,200,138 ) Accretion of redeemable preferred stock ( 453,334 ) – Net loss available to common stockholders $ ( 5,241,103 ) $ ( 3,200,138 ) Other comprehensive items Foreign currency translation loss ( 6,207 ) ( 11,626 ) Total comprehensive loss $ ( 5,247,310 ) $ ( 3,211,764 ) Basic and fully diluted net loss per shares: Continuing operations: $ ( 7.07 ) $ ( 4.35 ) Discontinued operations: $ – $ ( 0.42 ) Net Loss $ ( 7.07 ) $ ( 4.77 ) Weight Average Number of Common Shares Outstanding: Basic and Diluted 742,201 671,513 The accompanying notes are an integral part of these consolidated financial statements. F- 5 FOCUS UNIVERSAL INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2025 and 2024 Series B Redeemable Preferred Stock Common stock Treasury stock Additional Paid-In Shares to be issued Common Accumulated Accumulated Other Comprehensive Total Stockholders’ Description Shares Amount Shares Amount Amount Capital Shares Deficit Loss Equity Balance – December 31, 2023 – $ – 647,718 $ 648 $ ( 434,048 ) $ 26,500,284 $ 74,476 $ ( 22,582,170 ) $ ( 13,564 ) $ 3,545,626 Stock based compensation - options – – – – – 147,975 – – – 147,975 Stock based compensation - shares – – 1,260 1 – 466,195 ( 48,903 ) – – 417,293 Retirement of treasury stock – – ( 300 ) – 48,362 ( 48,362 ) – – – – Purchase of treasury stock – – ( 24,330 ) ( 24 ) ( 669,906 ) 24 – – – ( 669,906 ) Stock issued for placement agent – – 37,500 37 – 1,085,963 – – – 1,086,000 Stock issued for private placement – – 43,000 43 – 1,289,957 – – – 1,290,000 Fair value of stock issued to placement agent as commitment fee – – 10,518 10 – 249,990 – – – 250,000 Stock based compensation related to discount on shares sold to related parties – – – – – 340,000 – – – 340,000 Other comprehensive loss – – – – – – – – ( 11,626 ) ( 11,626 ) Net loss – – – – – – – ( 3,200,138 ) – ( 3,200,138 ) Balance – December 31, 2024 – $ – 715,366 $ 715 $ ( 1,055,592 ) $ 30,032,026 $ 25,573 $ ( 25,782,308 ) $ ( 25,190 ) $ 3,195,224 Stock based compensation - options – – – – – 41,136 – – – 41,136 Stock based compensation - shares – – 1,005 1 – 371,234 57,311 – – 428,546 Purchase of treasury stock – – – – ( 494,389 ) – – – – ( 494,389 ) Stock split rounding up – – 30,928 31 – ( 31 ) – – – – Retirement of treasury stock – – ( 34,897 ) ( 34 ) 1,055,591 ( 1,055,557 ) – – – – Stock issued for cash – – 26,269 26 – 822,476 – – – 822,502 Issuance of series A preferred stock to related party, and subsequent conversion to common – – 82,500 82 – 2,999,918 – – – 3,000,000 Issuance of convertible preferred stock – Series B 8,236 6,320,000 – – – – – – – – Conversion of Series B preferred stock to common stock ( 973 ) ( 827,050 ) 93,926 94 – 826,956 – – – 827,050 Preferred stock accretion – 453,334 – – – – – ( 453,334 ) – ( 453,334 ) Other comprehensive loss – – – – – – – – ( 6,207 ) ( 6,207 ) Net loss – – – – – – – ( 4,787,769 ) – ( 4,787,769 ) Balance – December 31, 2025 7,263 $ 5,946,284 915,097 $ 915 $ ( 494,390 ) $ 34,038,158 $ 82,884 $ ( 31,023,411 ) $ ( 31,397 ) $ 2,572,759 The accompanying notes are an integral part of these consolidated financial statements. F- 6 FOCUS UNIVERSAL INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2025 2024 Cash flows from operating activities: Net Loss $ ( 4,787,769 ) $ ( 3,200,138 ) Adjustments to reconcile net loss to net cash from operating activities: Gain on sale of warehouse – ( 3,181,706 ) Bad debt expense – 4,852 Inventory reserve – 211,014 Depreciation expense 23,801 73,611 Unrealized (gain) or loss on marketable equity securities 1,773 12,075 Stock-based compensation - shares 428,546 417,293 Stock based compensation - options 41,136 147,975 Compensation cost related to sale of common shares to related parties – 340,000 Fair value of shares issued as commitment fee – 250,000 Changes in operating assets and liabilities: Accounts receivable ( 1,541 ) 3,092 Inventories 26,258 ( 55,014 ) Other receivable ( 20,000 ) 20,407 Prepaid expenses ( 390,859 ) ( 13,075 ) Deposit ( 3,029 ) ( 41,825 ) Operating lease right-of-use asset 97,765 87,869 Accounts payable and accrued liabilities ( 342,304 ) 272,841 Other current liabilities ( 68,204 ) 42,345 Lease liabilities ( 108,344 ) ( 88,735 ) Other liabilities – ( 12,335 ) Net cash flows used in operating activities from continuing operations ( 5,102,771 ) ( 4,709,454 ) Net cash flows provided by (used in) operating activities from discontinuing operations – 52,700 Net cash used in operating activities ( 5,102,771 ) ( 4,656,754 ) Cash flows from investing activities: Purchase of property and equipment ( 28,106 ) ( 18,687 ) Proceeds from sales of property – 7,145,808 Capitalized software costs ( 157,654 ) – Net cash flows provided by (used in) investing activities ( 185,760 ) 7,127,121 Cash flows from financing activities: Proceeds from sale of series B preferred stock, net 6,320,000 – Series A preferred stock issued for cash 3,000,000 – Proceeds from third party loan – 350,000 Proceeds from related party loan – 1,101,000 Repayment on related party loan – ( 2,101,000 ) Repayment on third party loan – ( 350,000 ) Common stock issued for placement agent – 1,086,000 Common stock issued for private placement 822,502 1,290,000 Purchase of treasury stock ( 494,389 ) ( 669,906 ) Net cash flows provided by financing activities 9,648,113 706,094 Effect of exchange rate ( 13,942 ) ( 15,397 ) Net change in cash 4,345,640 3,161,064 Cash beginning of year 3,589,318 428,254 Cash end of year $ 7,934,958 $ 3,589,318 Supplemental cash flow disclosure: Cash paid for income taxes $ 3,807 $ – Cash paid for interest $ – $ 4,209 Supplemental disclosure of non-cash investing and financing activities: Receiving discount upon issuance of redeemable series B preferred stock $ 680,000 $ – Accretion of redeemable series B preferred stock discount $ 453,334 $ – Conversion of series B preferred stock into common stock $ 827,050 $ – The accompanying notes are an integral part of these consolidated financial statements. F- 7 FOCUS UNIVERSAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2025 AND 2024 Note 1 – Organization and Operations Focus Universal Inc. (“Focus”) was incorporated under the laws of the State of Nevada on December 4, 2012 (“Inception”). The Company is a universal smart instrument developer and manufacturer, headquartered in Ontario, California, specializing in the development and commercialization of novel and proprietary universal smart technologies and instruments. Focus Universal Inc. is also a provider of patented hardware and software design technologies for Internet of Things (“IoT”) and 5G. The Company has developed five disruptive patented technology platforms with 28 patents and patents pending in various phases and 8 trademarks pending in various phases to solve the major problems facing hardware and software design and production within the industry today. These technologies combined have the potential to reduce costs, product development timelines and energy usage while increasing range, speed, efficiency, and security. The smartphone or other mobile device, foundation, and sensor readouts together perform the functions of many traditional scientific and engineering instruments and are intended to replace the traditional, wired stand-alone instruments at a fraction of their cost. The Company has multiple subsidiaries, including Perfecular 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 Lusher, Inc. (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 of his two team members. The Company discontinued operations of AT Tech Systems on August 21, 2024, with a termination cost of $ 22,000 and is now presenting these operations as discontinued. (See Note 9) Note 2 – Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Perfecular, AVX, Focus Shenzhen, Lusher, Lusher Inc. and AT Tech Systems (collectively, the “Company,” “we,” “our,” or “us”). All significant intercompany transactions and balances have been eliminated. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the accompanying consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying financial statements include the useful lives of property and equipment, allowance for doubtful accounts, inventory reserves, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and the valuation allowance on deferred tax assets. The Company regularly evaluates its estimates and assumptions. F- 8 Segment Reporting The Company’s management team is provided financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. In addition, substantially all of the Company’s revenue and long-lived assets are attributable to operations in the United States for all periods presented. The Company currently has two operating segments. In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company considers operating segments to be components of the Company’s business for which separate financial information is available and evaluated regularly by Management in deciding how to allocate resources and to assess performance. Management reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it has two operating and reportable segments. The Company consists of two types of operations. (1) AVX and Smart AVX (inclusive of the smart IoT Products sales under Smart AVX) cooperatively run our “LED and IoT Installation Services” segment, which handles our LED and IoT installation and management business specializing in high performance and easy to use LED and display systems, audio/video systems, home theaters, lighting control, automation, and integration. This includes the Focus and Focus Shenzhen collectively operate our “Corporate and R&D” segment focused on R&D development for the IoT, which involves the non-specific financing, executive expense, operations and investor relations of our public entity, and the general shared management and costs across the Company’s subsidiaries that spread across all functional categories and research and development of these IoT technology products and of our smart products into the commercial and home automation sectors. (2) Perfecular and Lusher jointly operate the SEC Financial Software segment, which involves the development, marketing, and production of our SEC Financial Reporting AI-Driven Automation Software package and also includes our universal smart instruments and devices in the hydroponic and controlled agriculture segments. Asset information by operating segment is not presented as the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s consolidated financial statements. Cash The Company considers all highly liquid investments with a maturity of three months or less to be cash. At times, such investments may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limit. 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. Accounts Receivable The Company grants credit to clients that sell the Company’s products or engage in construction service under credit terms that it believes are customary in the industry and do not require collateral to support customer receivables. The accounts receivable balances are generally collected within 30 to 90 days of the product sale. Allowance for doubtful accounts The Company estimates an allowance for doubtful accounts based on historical collection trends and review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. As of December 31, 2025 and 2024, allowance for doubtful accounts amounted to $ 278,201 and $ 278,201 , respectively. F- 9 Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company limits its exposure to credit loss by investing its cash with high credit quality financial institutions. Major customers For the years ended of December 31, 2025 and 2024, the Company’s revenue received from the following customers and were set out as below: Schedule of concentrations of credit risk For the years ended December 31, 2025 2024 Amount % of Total Revenue Amount % of Total Revenue Customer A $ 132,531 52 % $ – – Customer B 81,242 32 % 83,548 21 % Customer C 26,019 10 % (*) (*) Customer D – – 69,325 17 % Customer E – – 54,479 14 % Customer F – – 50,053 13 % _________________ (*) Revenue for the year ended had not exceeded 10% or more of the consolidated revenue. Major vendors For the years ended of December 31, 2025 and 2024, the Company’s purchase from the following vendors and were set out as below: For the years ended December 31, 2025 2024 Amount % of Total Purchase Amount % of Total Purchase Vendor A $ 69,912 70 % $ 147,591 83 % Vendor B 21,870 22 % 21,822 12 % Inventory Inventory consists primarily of parts and finished goods and is valued at the lower of the inventory’s cost or net realizable value under the first-in-first-out method. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower. Inventory allowances are recorded for obsolete or slow-moving inventory based on assumptions about future demand and marketability of products, the impact of new product introductions and specific identification of items, such as discontinued products. These estimates could vary significantly from actual requirements, for example, if future economic conditions, customer inventory levels or competitive conditions differ from expectations. The Company regularly reviews the value of inventory based on historical usage and estimated future usage. If estimated realized value of our inventory is less than cost, we make provisions in order to reduce the carrying value to its estimated market value. F- 10 Marketable Equity Securities The Company invests part of its excess treasury cash in equity securities and money market funds according to company treasury and investment policies. Marketable securities represent trading securities bought and held primarily for sale in the near-term to generate income on short-term price differences and are stated at fair value. Realized and unrealized gains and losses are recorded in other income (expense), net. Property and Equipment Property and equipment are stated at cost. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts and any gain or loss is included in earnings. Maintenance and repairs are expensed currently. Major renewals and betterments are capitalized. Depreciation is computed using the straight-line method. Estimated useful lives are as follows: Schedule of estimated useful lives, property and equipment Fixed assets Useful life Furniture 5 years Equipment 5 years Warehouse 39 years Improvement 5 years Land N/A Long-Lived Assets The Company applies the provisions of FASB ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Long-term assets of the Company are reviewed when circumstances warrant as to whether their carrying value has become impaired. The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. Based on its review at December 31, 2025 and 2024, the Company believes there was no impairment of its long-lived assets. Treasury stock Purchases and sales of treasury stock are accounted for using the cost method. Under this method, shares acquired are recorded at the acquisition price directly to the treasury stock account. Upon sale, the treasury stock account is reduced by the original acquisition price of the shares and any difference is recorded in additional paid in capital, on a first-in first-out basis. Share-based Compensation The Company accounts for stock-based compensation to employees in conformity with the provisions of ASC Topic 718, Stock-Based Compensation. Stock-based compensation to employees consist of stock options, grants, and restricted shares that are recognized in the statement of operations based on their fair values at the date of grant. The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period during which services are received. F- 11 The Company calculates the fair value of option grants utilizing the Black-Scholes pricing model and estimates the fair value of the stock based upon the estimated fair value of the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. 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. Fair Value of Financial Instruments The Company follows paragraph ASC 825-10-50-10 for disclosures about fair value of its financial instruments and paragraph ASC 820-10-35-37 (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP) and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below: · Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. · Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. · Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data. The following table summarize financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024: Schedule of fair value of assets and liabilities measured on recurring basis December 31, 2025 Fair Value Carrying Level 1 Level 2 Level 3 Value Assets Marketable securities: Stock $ 22,887 $ – $ – $ 22,887 Total assets measured at fair value $ 22,887 $ – $ – $ 22,887 December 31, 2024 Fair Value Carrying Level 1 Level 2 Level 3 Value Assets Marketable securities: Stock $ 24,660 $ – $ – $ 24,660 Total assets measured at fair value $ 24,660 $ – $ – $ 24,660 The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts receivable, inventories, other receivable, prepaid expenses, deposit, accounts and accrued expenses, payable, treasury stock payable, other current liabilities, customer deposit, approximate their fair value because of the short maturity of those instruments. F- 12 Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. Comprehensive Income (Loss) Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. Other comprehensive loss for the years ended December 31, 2025 and 2024 was comprised of foreign currency translation adjustments. Revenue Recognition Revenue from the Company is recognized under Topic 606 in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements: · executed contracts with the Company’s customers that it believes are legally enforceable; · identification of performance obligations in the respective contract; · determination of the transaction price for each performance obligation in the respective contract; · Allocation of the transaction price to each performance obligation; and · recognition of revenue only when the Company satisfies each performance obligation. These five elements, as applied to each of the Company’s revenue category, is summarized below: · Product sales – revenue is recognized at the time of sale upon the delivery of the equipment to the customer and completion of performance obligation. · Service sales – revenue is recognized based on the service been provided and the agreed upon performance obligation has been completed to the customer. Revenue from our project construction is recognized over time using the percentage-of-completion method under the cost approach. The percentage of completion is determined by estimating stage of work completed. Under this approach, recognized contract revenue equals the total estimated contract revenue multiplied by the percentage of completion. Our construction contracts are unit priced, and an account receivable is recorded for amounts invoiced based on actual units produced. Currently, the software segment is not generating any revenue. Cost of Revenue, excluding depreciation & amortization Cost of revenue includes the cost of services, labor and product incurred to provide product sales, service sales and project sales. F- 13 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 Research and development costs are expensed as incurred. Research and development costs primarily consist of efforts to refine existing product models and develop new product models. Income Tax Provision The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, the Company does not foresee generating taxable income in the near future and utilizing its deferred tax asset, therefore, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented. Income taxes are accounted for using the asset and liability method. Deferred income taxes are provided for temporary differences in recognizing certain income, expense and credit items for financial reporting purposes and tax reporting purposes. Such deferred income taxes primarily relate to the difference between the tax basis of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized. There was no material deferred tax asset or liabilities as of December 31, 2025 and 2024. As of December 31, 2025 and 2024, the Company did no t identify any material uncertain tax positions. F- 14 Basic and Diluted Net Income (Loss) Per Share Net income (loss) per share is computed pursuant to ASC 260-10-45. Basic net income (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) by the weighted average number of shares of stock and potentially outstanding shares of stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants. Due to the net loss incurred by the Company, potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive. Schedule of anti-dilutive shares Year ended December 31, 2025 2024 Stock options 7,614 6,264 Total 7,614 6,264 Foreign Currency Translation and Transactions The reporting and functional currency of Focus is the USD. 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 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 of operations. The exchange rates used for consolidated financial statements are as follows: Schedule of exchange rates foreign currency Average Rate for the Year Ended December 31, 2025 2024 China Yuan (RMB) RMB 7.1872 RMB 7.0714 United States Dollar ($) $ 1.0000 $ 1.0000 Exchange Rate at December 31, 2025 December 31, 2024 China Yuan (RMB) RMB 6.9949 RMB 7.2975 United States Dollar ($) $ 1.0000 $ 1.0000 Going Concern 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 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. 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. F- 15 At December 31, 2025, the Company had cash and cash equivalents, and short-term investments, in the amount of $ 7,957,845 . The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings, and it expects to continue to rely on these sources of capital in the future. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, 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 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses. The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement disclosures. Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances. Note 4 – Inventory At December 31, 2025 and 2024, inventory consisted of the following: Schedule of inventory December 31, 2025 December 31, 2024 Finished goods $ 304,967 $ 337,085 Less: Inventory reserve ( 205,154 ) ( 211,014 ) Inventories $ 99,813 $ 126,071 Note 5 – Property and Equipment At December 31, 2025 and 2024, property and equipment consisted of the following: Schedule of property and equipment December 31, 2025 December 31, 2024 Building improvement $ 14,620 $ 14,620 Furniture and fixture 42,676 42,033 Equipment 168,749 137,966 Software 1,995 1,995 Total cost 228,040 196,614 Less accumulated depreciation ( 161,335 ) ( 136,129 ) Property and equipment, net $ 66,705 $ 60,485 F- 16 Depreciation expense for the years ended December 31, 2025 and 2024 amounted to $ 23,801 and $ 73,611 , respectively. On July 3, 2024, the Company completed a purchase agreement (the “Purchase Agreement”) with a third-party purchaser (the “Buyer”) to sell the Company’s warehouse. The net book value of the sales of the property consisted of the following: Schedule of net book value of the sales of the property Amount Warehouse $ 3,789,773 Land 731,515 Building improvement 225,636 Total carrying amount 4,746,924 Less: Accumulated depreciation 782,822 Net book value $ 3,964,102 The purchase price for the property was $ 7,460,250 . The Company received net proceeds of $ 7,145,808 after closing costs, of which $ 1,481,208 was paid directly to settle certain outstanding debt and accrued interest and other amounts owed. In addition, the Company incurred $ 314,442 of closing costs resulting in a gain of $ 3,181,706 from the sale of the property. On July 8, 2024, the Company entered into a twelve-month Standard Industrial/Commercial Single-Tenant Lease with the buyer for an approximately 14,004 square foot office and warehouse space. The lease commenced on July 4, 2024 and expired on July 31, 2025. The monthly rent is $16,804 on a month-to-month basis (See Note 7). Note 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; and (iii) $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 control. 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. Subsequent redemption periods will each last thirty days and commence on the following dates: (i) July 1, 2026; (ii) October 1, 2026; (iii) December 1, 2026; (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. The 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. The Company 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. F- 17 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 $ 7,000,000 Less: Preferred stock issuance costs ( 680,000 ) Value converted into common stock ( 827,050 ) Plus: Accretion of carrying value to redemption value 453,334 Preferred stock subject to possible redemption $ 5,946,284 Note 7 – Leases Operating Leases On January 16, 2023, Focus Universal (Shenzhen) Technology Co. LTD entered into a thirty-six month commercial lease with a third party for an approximately 2,017 square foot office space. The lease commenced on February 1, 2023 and will end on January 31, 2026. The monthly rent is RMB 29,974 (approximately $4,171) 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%. Lease expense for the lease is recognized on a straight-line basis over the lease term. On February 22, 2023, Focus Universal (Shenzhen) Technology Co. 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 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 10%. 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, 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 December 31, 2025 December 31, 2024 Operating lease right-of-use assets, net $ 12,501 $ 108,270 Lease liabilities, current portion $ 8,464 $ 106,706 Lease liabilities, less current portion $ – $ 8,114 F- 18 Lease term and discount rate: Schedule of lease term and discount rate December 31, 2025 December 31, 2024 Weighted average remaining lease term: Operating lease 0.08 to 0.25 years 0.83 to 1.00 years Weighted average discount rate: Operating lease 10 % 10 % The minimum future lease payments are as follows: Schedule of minimum future lease payments Amount Year ending December 31, 2026 $ 8,989 Total minimum lease payment 8,989 Less: imputed interest ( 525 ) Present value of future minimum lease payments $ 8,464 Short-term leases On July 8, 2024, the Company entered into a Standard Industrial/Commercial Single-Tenant Lease (the “Lease”) with the Veena Asset Management, LLC to lease the same Focus Universal premises located at 2311 East Locust Court, Ontario, CA 91761 back for one year commencing at the close of escrow of the Purchase Agreement and ending on July 31, 2025, for 14,004 square foot office and warehouse space. Base monthly rent is $16,804, with a total of $58,812 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 expenses. Note 8 – Stockholders’ Equity 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 Edward Lee. All of the Series A Preferred Stock has been converted, and there are currently no issued and outstanding shares of Series A Preferred Stock. F- 19 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. The 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. As a result 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. Common stock On September 15, 2024, the Company entered into a placement agency agreement (the “Placement Agency Agreement”), with Univest Securities, LLC (the “Placement Agent”). Pursuant to the Placement Agency Agreement, the Placement Agent agrees to use its reasonable best efforts to sell the Company’s common stock, par value $0.001 per share (the “Common Stock”) in a registered direct offering (the “Offering”). In the Offering, an aggregate of 37,500 shares of Common Stock (the “Common Shares”) of the Company will be sold to a certain institutional purchaser, pursuant to a securities purchase agreement, dated September 15, 2024 (the “Securities Purchase Agreement”). The purchase price of each Common Share was $32.00. The net proceeds from the Offering, after deducting placement agent discounts, commissions, and estimated offering expenses payable by the Company, was approximately $ 1,086,000 . On September 18, 2024, the Company completed the sale of 43,000 shares of Common Stock (the “Shares”) in a private placement to certain eligible investors for an aggregate purchase price of $ 1,290,000 , or $30.00 per share (the “Private Placement”). As part of the offering, Dr. Desheng Wang, Chief Executive Officer, Secretary, and Director of the Company, and Dr. Edward Lee, Chairman of the Board of the Company entered into a Subscription Agreements pursuant to which the Company agreed to issue and sell 10,000 shares of the Company’s Common Stock for $300,000 in cash to each of these individuals (for an aggregate sale of 20,000 shares for proceeds of $ 600,000 in cash.) The Subscription Agreements contain customary representations and warranties and was exempt from registration under Section 4(a)(2) of the Securities Act. The Company determined that the officer and director were granted an inherent compensation/benefit since the trading price at the issuance date was $47.00. As such, the Company recorded stock compensation cost of $ 340,000 related to the issuance of these shares during the year ended December 31, 2024. On November 16, 2024, the Company entered into a securities purchase agreement with Alumni Capital LP (“Alumni Capital”) relating to the offer and sale of 200,000 shares of Common Stock (the “Common Stock”), par value $0.001 per share, offered by a prospectus supplement and accompanying prospectus. Pursuant to the securities purchase agreement with Alumni Capital, the Company may offer and sell up to $20,000,000 in shares of its Common Stock, from time to time at a purchase price of 91% of the previous 5 Business Days’ VWAP, as defined in the agreement. The Company has also agreed to pay Alumni Capital an upfront commitment fee in shares of Common Stock equal to 1.25% of the full $20,000,000 commitment amount, as defined in the agreement, which shall count towards the life of the securities purchase agreement, divided by the VWAP for the trading day immediately prior to the shares being issued. 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 June 11, 2024, the Company retired 300 shares with a cost of $ 48,362 and restored them to the status of authorized and unissued shares. F- 20 As part of the Company’s repurchase program, during the year ended December 31, 2024, the Company repurchased 24,330 shares of its common stock for $ 669,906 in the public market at average price of $27.80 and placed them in treasury. During the year 2025, the Company repurchased 17,085 shares of its common stock for $ 494,389 in the public market at average price of $28.94 and placed them in treasury. As of December 31, 2025, 494,390 shares remain as treasury shares. Employee compensation In prior years, the Company entered into several employment agreements that require the issuance of common shares for services that vest on a quarterly basis. During the year ended December 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 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 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 January 2, 2024, each member of the Board was granted 225 options to purchase shares at $ 150.00 per share with a fair value of $ 29,595 . The options vest monthly over 1 year, and may be exercised during a 10 -year term. In the aggregate, 1,125 options were granted with a fair value of $ 147,975 . During the year ended 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 term. 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, the Company’s stock option compensation expenses amounted to $ 41,136 and $ 147,975 , respectively. The fair value of the stock options issued during the periods was determined using the Black-Scholes option pricing model with the following assumptions: Schedule of assumptions December 31, 2025 Risk-free interest rate 3.94 % Expected life of the options 5.5 years Expected volatility 126.73 % Expected dividend yield 0 % F- 21 The following is a summary of options activity from December 31, 2023 to December 31, 2025: Schedule of option activity Number of Options Weighted average exercise price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding at December 31, 2023 5,139 $ 405.50 7.25 – Granted 1,125 $ 150.00 – – Exercised – $ – – – Cancelled or forfeited – $ – – – Outstanding at December 31, 2024 6,264 $ 359.60 6.74 – Granted 1,350 $ 34.50 – – Exercised – $ – – – Cancelled or forfeited – $ – – – Outstanding at December 31, 2025 7,614 $ 302.00 6.32 – Exercisable at December 31, 2025 7,614 $ 302.00 6.32 – Note 9 – Discontinued Operation 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 direct report team members. The Company discontinued operations of AT Tech Systems on August 21, 2024, with a termination cost of $ 22,000 . The loss from discontinued operations presented 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 Revenue $ 50,772 Cost of Revenue 241,327 Gross Profit (loss) ( 190,555 ) Operating Expenses: Selling expense 9,834 General and administrative 81,375 Total Operating Expenses 91,209 Loss from Operations ( 281,764 ) Other Income: Other income, net 3,501 Total other income, net 3,501 Net Loss $ ( 278,263 ) F- 22 Total operating cash flows from discontinued operations were $ 52,700 for the years ended December 31, 2024. Note 10 – Segment reporting The Company currently has two operating segments. In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company considers operating segments to be components of the Company’s business for which separate financial information is available and evaluated regularly by Management in deciding how to allocate resources and to assess performance. Management reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it has two operating and reportable segments. The Company consists of two types of operations. (1) AVX and Smart AVX (inclusive of the smart IoT Products sales under Smart AVX) cooperatively run our “LED and IoT Installation Services” segment, which handles our LED and IoT installation and management business specializing in high performance and easy to use LED and display systems, audio/video systems, home theaters, lighting control, automation, and integration. This includes the Focus and Focus Shenzhen collectively operate our “Corporate and R&D” segment focused on R&D development for the IoT, which involves the non-specific financing, executive expense, operations and investor relations of our public entity, and the general shared management and costs across the Company’s subsidiaries that spread across all functional categories and research and development of these IoT technology products and of our smart products into the commercial and home automation sectors. (2) Perfecular and Lusher jointly operate the SEC Financial Software segment, which involves the development, marketing, and production of our SEC Financial Reporting AI-Driven Automation Software package and also includes our universal smart instruments and devices in the hydroponic and controlled agriculture segments. Asset information by operating segment is not presented as the Chief Executive Officer does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s consolidated financial statements. The management team reviews financial information on a consolidated level and allocates resources based on net loss, which also serves as the key metric for evaluating financial performance. The following tables summarize the financial information of each operating segment of the Company for the year ended December 31, 2025: Schedule of segment reporting For the Year ended December 31, 2025 Perfecular & Lusher Corporate & IoT Total Revenue $ 26,019 $ 229,004 $ 255,023 Cost of revenue 34,398 255,877 290,275 Gross profit (loss) ( 8,379 ) ( 26,873 ) ( 35,252 ) Operating expenses Selling expense 1,165 59,124 60,289 Compensation – officers and directors – 499,852 499,852 Research and development 30,508 889,457 919,965 Professional fees – 1,302,800 1,302,800 General and administrative 2,566 2,072,541 2,075,107 Total operating expense 34,239 4,823,774 4,858,013 Loss from operations ( 42,618 ) ( 4,850,647 ) ( 4,893,265 ) Total other income 1 105,495 105,496 Loss from discontinued operations, net of tax – – – Net loss $ ( 42,617 ) $ ( 4,745,152 ) $ ( 4,787,769 ) F- 23 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 Perfecular & Lusher Corporate & IoT Total Revenue $ 26,052 $ 372,085 $ 398,137 Cost of revenue 39,772 348,164 387,936 Gross profit ( 13,720 ) 23,921 10,201 Operating expenses Selling expense 24,866 75,323 100,189 Compensation – officers and directors – 951,845 951,845 Research and development 213,487 1,168,450 1,381,937 Professional fees – 1,660,590 1,660,590 General and administrative 19,866 2,096,025 2,115,891 Total operating expense 258,219 5,952,233 6,210,452 Loss from operations ( 271,939 ) ( 5,928,312 ) ( 6,200,251 ) Total other income 1,329 3,277,047 3,278,376 Loss from discontinued operations, net of tax – ( 278,263 ) ( 278,263 ) Net loss $ ( 270,610 ) $ ( 2,929,528 ) $ ( 3,200,138 ) Note 11 – Contingencies 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. 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 The United States of America The Company is subject to taxation in the United States and certain state jurisdictions. The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 21 % to the net loss before provision for income taxes. Accordingly, the Company reevaluated its deferred tax assets on net operating loss carryforward in the U.S. As of December 31, 2024, due to uncertainties surrounding future utilization, the Company recorded a full valuation allowance against the deferred tax assets based upon management’s assessment as to their realization. People’s Republic of China Effective January 1, 2008, the New Taxation Law of PRC stipulates that domestic enterprises and foreign invested enterprises (the “FIEs”) are subject to a uniform tax rate of 25 %. Under the PRC tax law, companies are required to make quarterly estimate payments based on 25% tax rate; companies that received preferential tax rates are also required to use a 25% tax rate for their installment tax payments. The overpayment, however, will not be refunded and can only be used to offset future tax liabilities. Our effective tax rate differs from the statutory federal income tax rate, primarily as a result of the changes in valuation allowance, nondeductible permanent differences, credits, and state income taxes. F- 24 A reconciliation of the federal statutory income tax to our effective income tax is as follows: Reconciliation of income tax 2025 2024 Amount % Amount % Federal statutory rates $ ( 1,004,000 ) 21 % ( 691,000 ) 21 % State income taxes ( 311,000 ) 9 % ( 146,000 ) 9 % Foreign income taxes ( 50,000 ) 4 % ( 66,000 ) 4 % Permanent differences – – – – Valuation allowance against net deferred tax assets 1,365,000 ( 33 % ) 903,000 ( 33 % ) Effective rate $ – – $ – – The tax effect of temporary differences that give rise to a significant portion of the deferred tax assets and liabilities at December 31, 2025 and 2024 is presented below: Schedule of deferred tax assets and liabilities 2025 2024 Deferred income tax asset Net operating loss carryforwards $ 8,310,208 $ 7,514,325 Interest 48,067 45,128 Total deferred income tax asset 8,358,275 7,559,453 Less: valuation allowance ( 8,358,275 ) ( 7,559,453 ) Total deferred income tax asset $ – $ – The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company’s net deferred income tax asset is not more likely than not to be realized due to the lack of sufficient sources of future taxable income and cumulative losses that have resulted over the years. During the year ended December 31, 2025 the valuation allowance increased by $ 1,364,568 . As of December 31, 2025, we had cumulative net operating loss carryforwards for federal and state income tax purposes of $ 28,597,946 , and available tax credit carryforwards of approximately $ 739,597 for federal income tax purposes, which can be carried forward to offset future taxable income. The federal net operating loss carryforwards consists of $ 23,821,513 of losses incurred prior to January 1, 2025 and which can be used to offset 100% of future taxable income and, $ 1,364,568 of losses incurred after January 1, 2025, which can be used to offset up to 80% of taxable income in subsequent years. Note 13 – Subsequent Events In January 2026, Focus Universal (Shenzhen) Technology Co., Ltd. entered into two thirty-six-month commercial leases with a third party for office spaces of approximately 3,700 and 4,230 square feet. The first lease commenced on January 31, 2026 and will expire on January 30, 2029, with a monthly rent of RMB 14,612 (approximately $2,033). The second lease commenced on February 1, 2026 and will expire on January 31, 2029, with a monthly rent of RMB 24,771 (approximately $3,447). 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 lease term. 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. F- 25 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. ft. 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 $525,000. 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. Dr. 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 events through the date these consolidated financial statements were issued and determined that there were no other subsequent events or transactions that require recognition or disclosures in the consolidated financial statements. F- 26 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.