What changed in this filing

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Item 1. Financial Statements

2026-05-14 compared with 2025-11-10 · 461 added, 481 removed, 418 unchanged (69% of the section changed)

3 unchanged sentences

Index to the Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)

Condensed Consolidated Statements of Changes in Stockholder’s Equity for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (unaudited)

Condensed Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and 2025 (unaudited)

Condensed Consolidated Statements of Changes in Stockholder’s Equity for the Three Months Ended March 31, 2026 and 2025 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (unaudited)

Notes to the Unaudited Condensed Consolidated Financial Statements

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CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

1 unchanged sentence

Inventories, net

Other receivables

Prepaid expenses

Marketable securities

Deposits – current portion

Deposit – current portion

Total Current Assets

1 unchanged sentence

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

Other current liabilities

Lease liability, current portion

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Lease liability, less current portion

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;

6,447 and 7,263 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively

Contingencies

1 unchanged sentence

Common stock, par value $ 0.001 per share, 1,000,000,000 shares authorized;

7,386,705 and 7,153,647 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively

Treasury stock at cost ( 58,038 and 348,968 shares held at September 30, 2025 and December 31, 2024, respectively)

( 1,055,592 )

1,025,135 and 915,097 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively

Treasury stock ( 33,975 and 17,085 shares held at March 31, 2026 and December 31, 2025, respectively)

Additional paid-in capital

Shares to be issued, common shares

Shares to be issued, common shares ( 4,254 and 5,794 shares at March 31, 2026 and December 31, 2025, respectively)

Accumulated deficit

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Total Stockholders’ Equity

Total Liabilities and Stockholders' Equity

Total Liabilities, Redeemable Preferred Stock and Stockholders’ Equity

The accompanying notes are an integral part

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AND COMPREHENSIVE (LOSS)

Three Months Ended September 30,

Nine Months Ended September 30,

For the Three Months Ended March 31,

Cost of revenue

Gross profit (loss)

Operating Expenses

8 unchanged sentences

( 1,271,527 )

( 3,994,663 )

( 4,192,206 )

Other Income (Expense):

Interest income, net

Interest (expense) - related party

Gain on disposed of property

Unrealized gain (loss) on marketable equity securities

Rental income

Other income, net

Interest income (expense), net

Unrealized loss on marketable equity securities

Other income (expense), net

Total other income

Income (loss) from continuing operations

$ ( 1,246,078 )

$ ( 1,251,378 )

Income (loss) from discontinued operations, net of tax

$ ( 1,166,375 )

Accretion of redeemable preferred stock

Net loss available to common stockholders

$ ( 1,472,744 )

5 unchanged sentences

$ ( 1,257,746 )

$ ( 1,249,787 )

Basic net income loss per share:

Continuing operations

Discontinued operations

Basic net loss per share

Weighted Average Number of Common Shares Outstanding:

Net loss per common share:

Basic and Fully diluted

Weighted Average Number of Common Shares Outstanding:

Basic and Diluted

The accompanying notes are an integral part

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FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER

30, 2025 AND 2024

CONDENSED CONSOLIDATED

STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND

Redeemable Preferred Stock

Treasury stock

Additional Paid-In

Shares to be issued Common

Shares to be issued

Accumulated Other Comprehensive

Total Stockholders’

Balance – June 30, 2025

Balance – December 31, 2025

$ ( 494,390 )

3 unchanged sentences

Purchase of treasury stock

Stock issued for cash

Stock split rounding up

Conversion of Series B preferred stock to common stock

Preferred stock accretion

Other comprehensive income

1 unchanged sentence

( 1,246,078 )

Balance – September 30, 2025

$ ( 249,676 )

$ ( 29,705,709 )

Treasury Stock

Additional Paid-In

Shares to be issued Common

Accumulated Other Comprehensive

Total Stockholders'

Balance – June 30, 2024

$ ( 385,686 )

$ ( 25,262,873 )

Stock based compensation - options

Stock based compensation - shares

Stock issued for placement agent

Stock issued for private placement

Retirement of treasury stock

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

Other comprehensive loss

Balance – September 30, 2024

Balance – March 31, 2026

$ ( 649,007 )

$ ( 32,496,155 )

Redeemable Preferred Stock

Treasury stock

Additional Paid-In

Shares to be issued Common

Shares to be issued

Accumulated Other Comprehensive

7 unchanged sentences

Stock split rounding up

Retirement of treasury stock

( 1,055,242 )

Stock issued for cash

Other comprehensive loss

1 unchanged sentence

( 1,251,378 )

Balance – September 30, 2025

$ ( 249,676 )

$ ( 29,705,709 )

Treasury Stock

Additional Paid-In

Shares to be issued Common

Accumulated Other Comprehensive

Total Stockholders'

Balance – December 31, 2023

$ ( 434,048 )

$ ( 22,582,170 )

Stock based compensation - options

Stock based compensation - shares

Retirement of treasury stock

Stock issued for placement agent

Stock issued for private placement

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

Other comprehensive loss

( 1,238,776 )

Balance – September 30, 2024

Balance – March 31, 2025

$ ( 1,200,167 )

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash flows from operating activities:

2 unchanged sentences

Adjustments to reconcile net loss to net cash from operating activities:

Gain on sale of building

( 3,181,706 )

Bad debt expense

Inventory reserve

Depreciation expense

Unrealized (gain) and loss on marketable equity securities

Unrealized loss on marketable equity securities

Stock-based compensation – shares

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

Stock based compensation – options

7 unchanged sentences

Lease liabilities

Other liabilities

Net cash flows used in operating activities from continuing operations

( 3,709,104 )

( 3,724,122 )

Net cash flows provided by operating activities from discontinued operations

Net cash flows used in operating activities

3 unchanged sentences

Purchase of property and equipment

Proceeds from sale of property

Net cash flows provided by (used in) investing activities

Deposit on building

Capitalized software costs

Net cash flows used in investing activities

Cash flows from financing activities:

Proceeds from third party loan

Proceeds from related party loan

Repayment on related party loan

( 2,101,000 )

Repayment on third party loan

Stock issued for placement agent

Stock issued for private placement

Purchases of treasury stock

Net cash flows provided by financing activities

Net cash flows used in financing activities

Effect of exchange rate

1 unchanged sentence

( 1,922,241 )

( 1,393,718 )

Cash beginning of period

3 unchanged sentences

Cash paid for interest

Supplemental disclosure of non-cash investing and financing activities:

Accretion of redeemable series B preferred stock discount

Conversion of series B preferred stock to common stock

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

The accompanying notes are an integral part

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025

FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND

Note 1 – Organization and Operations

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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.

developer and manufacturer, headquartered in West Covina, 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 what it believes are five disruptive patented technology

platforms with 28 patents and patents pending in various phases and 8 trademarks to solve what it believes are 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 of the IoT and 5G networks.

smartphone or other mobile device serves as the foundation, where the user can see the sensor readouts and together with the Ubiquitor

device, performs the functions of multiple traditional scientific and engineering instruments.

The Company believes this product could

replace traditional, wired stand-alone instruments at a fraction of their cost.

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 what it believes are 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 serves as the foundation to the platform of our products where the user can review the sensor readouts together

which performs the function of many traditional scientific and engineering instruments.

The Company’s products are intended to replace

the traditional, wired stand-alone instruments at a fraction of their cost.

The Company has multiple subsidiaries, including

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

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

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

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

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

have since been discontinued.

Perfecular, 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.

AVX, incorporated on June 16, 2000, in the state

of California, is an IoT installation and management company specializing in high performance audio/video systems, home theaters, lighting

control, automation and integration.

Services provided by AVX include full integration of houses, apartments, commercial complexes, and

office spaces with audio, visual and control systems to fully integrate devices in the low voltage field, specializing in high end residential

smart IoT installation projects in areas throughout the Southern California area.

AVX’s services also include partial equipment

upgrade and installation.

AVX also markets and sells our IoT Products, such as high-end LED, live wall panel products and cameras, under

the Smart AVX name.

On December 23, 2021, Focus Shenzhen was founded

as a mainland China office for manufacturing procurement expertise and research and development support activities.

Focus Shenzhen is

designed to function as a branch office to source products and build relationships with manufacturers in China and as a lower cost form

of support, research and development as engineers abound in China.

On January 5, 2022, the Company founded a wholly

owned subsidiary named Lusher Bioscientific.

On April 30, 2024, the Company founded a wholly

owned subsidiary named Lusher Inc.

was founded to develop, market, and commercialize automation software, titled One Touch

Financial, initially targeting the financial reporting software market sector.

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.

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.

On April 1, 2026, the Company formed a wholly owned subsidiary named, Lusher LLC.

On April 16, 2026, the Company formed a wholly owned

subsidiary named, Lusher Service LLC.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed financial statements of

the Company for the three and nine months ended September 30, 2025 and 2024 have been prepared in accordance with accounting principles

generally accepted in the U.S.

(“GAAP”) for interim financial information and pursuant to the requirements for reporting on

Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting companies.

Accordingly, they do not include all the information

and footnotes required by GAAP for complete financial statements.

However, such information reflects all adjustments (consisting solely

of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company’s

financial position and results of operations.

Results shown for interim periods are not necessarily indicative of the results to be obtained

for a full fiscal year.

The balance sheet information as of December 31, 2024 was derived from the audited financial statements included

in the Company’s financial statements as of and for the years ended December 31, 2024 and 2023 contained in the Company’s

Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on February 28, 2025.

These financial statements

should be read in conjunction with that report.

The unaudited condensed consolidated

financial statements of the Company for the three months ended March 31, 2026 and 2025 have been prepared in accordance with

accounting principles generally accepted in the U.S.

(“GAAP”) for interim financial information and pursuant to the

requirements for reporting on Form 10-Q and Regulation S-K (“Regulation S-K”) for scaled disclosures for smaller

reporting companies.

Accordingly, they do not include all the information and footnotes required by GAAP for complete financial

However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in

the opinion of management, necessary for the fair presentation of the Company’s financial position and results of operations.

Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year.

sheet information as of December 31, 2025 was derived from the audited financial statements included in the Company’s

financial statements as of and for the years ended December 31, 2025 and 2024 contained in the Company’s Annual Report on Form

10-K filed with the Securities and Exchange Commission, or the SEC, on March 31, 2026.

These financial statements should be read in

conjunction with that report.

The accompanying unaudited condensed consolidated

financial statements include the accounts of Focus and its wholly-owned subsidiaries, Perfecular, AVX, Focus Shenzhen, Lusher and, until

August of 2024, AT Tech Systems (collectively, the “Company,” “we,” “our,” or “us”).

intercompany balances and transactions have been eliminated upon consolidation.

The Company’s unaudited condensed consolidated financial

statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

financial statements include the accounts of Focus and its wholly-owned subsidiaries, Perfecular, AVX, Focus Shenzhen, Lusher, Lusher

Holding LLC, and, until August of 2024, AT Tech Systems (collectively, the “Company,” “we,” “our,”

All intercompany balances and transactions have been eliminated upon consolidation.

The Company’s unaudited

condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United

States of America (“U.S.

Use of Estimates

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that the Company’s estimate of the allowance for doubtful accounts will change.

As of September 30, 2025 and December 31, 2024,

allowance for doubtful accounts amounted to $ 278,201 and $ 278,201 , respectively.

As of March 31, 2026 and December 31, 2025, allowance

for doubtful accounts amounted to $ 278,201 and $ 278,201 , respectively.

Concentrations of Credit and Business Risk

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Major customers

For the three months ended of September 30, 2025

and 2024, the Company’s revenue received from the following companies were set out as below:

For the three months ended of March 31, 2026 and

2025, the Company’s revenue received from the following companies were set out as below:

Schedule of concentrations of credit risk

Three months ended September 30,

For the nine months ended of September 30, 2025

and 2024, the Company’s revenue received from the following companies were set out as below:

Nine months ended September 30,

Three months ended March 31,

(*) Revenue for the period

ended had not exceeded 10% or more of the consolidated revenue.

As of March 31, 2026 and December 31, 2025, the

Company’s accounts receivable from the following companies were set out as below:

March 31, 2026

December 31, 2025

Major vendors

One major vendor accounted for more than 76 % of

our total purchases during the nine months ended September 30, 2025 and no major vendor accounted more than 10% of total purchase during

the nine months ended September 30, 2024.

No major vendors accounted for more than 10% of

our total purchases during the three months ended March 31, 2026, and two major vendors accounted more than 98 % of total purchase during

the three months ended March 31, 2025.

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

The Company accounts for stock-based

compensation to employees in conformity with the provisions of Accounting Standards Codification (“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

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The following table summarizes financial assets

and liabilities measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024:

and liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025:

Schedule of fair value of assets

and liabilities measured on recurring basis

September 30, 2025 (unaudited)

March 31, 2026 (unaudited)

Marketable securities:

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The Company’s other comprehensive

loss for the nine months ended September 30, 2025 and 2024 was comprised of foreign currency translation adjustments.

loss for the three months ended March 31, 2026 and 2025 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:

Revenue from the Company is recognized under ASC

Topic 606, Revenue from Contracts with Customers (“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;

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Perfecular and Lusher and (2) Corporate and IoT Products.

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.

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.

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.

expense will be included in cost of revenues.

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.

The Company has not capitalized any of its software

costs to date, though it believes it has the technological resources required to successfully develop.

We now believe we have met technological

feasibility in both the IoT and financial software products internally, and as evidenced by our subsequent news releases.

The final versions

of these products have been shown to the Company’s existing customer base prior to their general release.

The Company plans to capitalize

certain costs incurred related to the development of both the IoT and financial software products until the general release of those products.

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 Series B Convertible 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 Series B Convertible Preferred

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

Research and development

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Schedule of anti-dilutive shares

Nine Months Ended September 30,

Three Months Ended March 31,

Stock options

18 unchanged sentences

Schedule of exchange rates foreign currency

Average Rate for the Nine Months Ended

September 30,

Average Rate for the Three Months Ended

China Yuan (RMB)

1 unchanged sentence

Exchange Rate at

September 30, 2025

March 31, 2026

December 31, 2025

1 unchanged sentence

United States Dollar ($)

As of March 31, 2026 and December 31, 2025, the

Company had cash balances of $ 27,332 and $ 26,552 denominated in China Yuan (RMB), respectively.

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 condensed consolidated financial statements.

has a net loss of $ 3,923,401 for the nine months ended September 30, 2025.

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 condensed consolidated financial statements.

has a net loss of $ 1,246,078 for the three months ended March 31, 2026.

In addition, the Company had an accumulated deficit of $ 32,496,155

as of September 30, 2025, and negative cash flow from operating activities of $ 3,709,104 for the nine months ended September 30, 2025.

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 condensed consolidated financial statements have been prepared in conformity

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.

These conditions raise substantial doubt as to

its ability to continue as a going concern.

These unaudited condensed 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.

The Company’s independent registered public accounting firm, in its

report on the Company’s consolidated financial statements for the year ended December 31, 2024, has also expressed substantial doubt

about the Company’s ability to continue as a going concern.

At September 30, 2025, the Company had cash and

cash equivalents, and short-term investments, in the amount of $ 454,432 .

Subsequent to September 30, 2025, the Company raised $ 6,000,000 through

the sale of shares of its Preferred Stock.

(Note 10) 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.

Even if the Company

is able to obtain additional financing, such financing may bring about 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.

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.

as of March 31, 2026, and negative cash flow from operating activities of $ 1,148,500 for the three months ended March 31, 2026.

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 condensed 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.

The Company’s independent registered public accounting firm, in its report on the Company’s consolidated

financial statements for the year ended December 31, 2025, has also expressed substantial doubt about the Company’s ability to continue

as a going concern.

At March 31, 2026, the Company had cash and cash

equivalents, and short-term investments, in the amount of $ 6,021,591 .

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.

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.

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.

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

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;

In November 2024, the Financial Accounting Standards

Board (“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.

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

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Note 4 – Inventory

At September 30, 2025 and December 31, 2024, inventory

At March 31, 2026 and December 31, 2025, inventory

consisted of the following:

Schedule of inventory

September 30,

March 31, 2026

December 31, 2025

Finished goods

1 unchanged sentence

Note 5 – Property and Equipment

At September 30, 2025 and December 31, 2024, property and equipment

consisted of the following:

At March 31, 2026 and December 31, 2025, property and equipment consisted

of the following:

Schedule of property and equipment

September 30,

March 31, 2026

December 31, 2025

Building improvement

2 unchanged sentences

Property and equipment, net

Depreciation expense for the nine months ended

September 30, 2025 and 2024 amounted to $ 17,231 and $ 72,738 , respectively.

Depreciation expense for the three months ended

March 31, 2026 and 2025 amounted to $ 6,722 and $ 5,453 , respectively.

As of March 31, 2026, the Company had placed a $ 525,000 deposit on

a purchase of a building which is recorded in other assets on the accompanying balance sheet.

The building was subsequently purchased for

$17,700,000 (See Note 11).

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,

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 remained outstanding and the Series B Preferred Stock has been recorded at its redemption value of $ 5,946,284 .

During the three months ended March 31, 2025, 816

shares of Series B Preferred Stock were converted into 104,082

shares of common stock, and there was an accretion of the discount of $ 226,666

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

At March 31, 2026, 6,447 shares of the

Series B Preferred Stock remain outstanding and the Series B Preferred Stock has been recorded at its redemption value of $ 5,479,350 .

See note 11 for subsequent conversions and redemption demand.

As of March 31, 2026 and December 31, 2025

Series B Preferred Stock shares reflected on the balance sheet is reconciled on the following table:

Schedule of balance sheet reconciled

Gross proceeds

Preferred stock issuance costs

Value converted into common stock

( 1,520,650 )

Accretion of carrying value to redemption value

Preferred stock subject to possible redemption

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 $4,172) 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

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 $4,906) 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 terms, which is 10%.

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

the lease term.

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

The Company recorded a right of use assets and a lease obligation of

$ 175,271 upon inception of these leases.

Operating lease right-of-use assets represent

1 unchanged sentence

to make lease payments arising from the lease.

As of September 30, 2025 and December 31, 2024, operating lease right-of use assets and

lease liabilities were as follows:

As of March 31, 2026 and December 31, 2025, operating lease right-of use assets and lease

liabilities were as follows:

Schedule of operating lease right of use assets and lease liabilities

September 30,

March 31, 2026

December 31, 2025

Operating lease right-of-use assets, net

3 unchanged sentences

Schedule of lease term and discount rate

September 30,

March 31, 2026

December 31, 2025

Weighted average remaining lease term:

8 unchanged sentences

Year ending December 31, 2027

Year ending December 31, 2028

Total minimum lease payment

2 unchanged sentences

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

which was due upon execution of the lease.

The Company entered into a First Lease Amendment on March 21, 2025, extending the lease until

January 31, 2026, with no other changes to the original terms.

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.

The Company recorded an operating lease expense

of $ 256,733 and $ 146,523 for the nine months ended September 30, 2025 and 2024, respectively.

of $ 65,128 and $ 80,210 for the three months ended March 31, 2026 and 2025, respectively.

This is included in general and administrative

Note 8 – Stockholders’ Equity

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.

An additional 309,281 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 November 16, 2024, we entered into a Securities

Purchase Agreement (the “Agreement”) with Alumni Capital LP, a Delaware limited partnership.

Pursuant to the Agreement, we

have the right, but not the obligation to cause Alumni Capital LP to purchase up to $20,000,000 common stock, par value $0.001, at certain

purchase price during the period beginning on the execution date of the Agreement and ending on the earlier of (i) the date which Alumni

Capital LP has purchased $20,000,000 of the Company’s common stock pursuant to the Agreement or (ii) November 16, 2027.

to this Agreement, on April 28, 2025, Alumni Capital LP purchased 94,825 shares of our common stock for $ 381,224 .

The price for these

shares was $4.02 based on a 9% discount of the lowest of the 5-day VWAP of $4.41 from the closing date on May 6, 2025, accessible via

the Bloomberg terminal.

On July 15, 2025, and July 18, 2025, Alumni Capital LP purchased 25,000 and 142,867 of our common shares for $ 86,995

and $ 354,282 , respectively.

The price for these shares was $4.02 based on a 9% discount of the lowest of the 5-day VWAP of $4.41 from

the closing date on July 15, 2025, accessible via the Bloomberg terminal.

Therefore, as of the date of issuance of the unaudited consolidated

financial statements, the Company has only executed a purchase notice for an aggregate 262,692 shares to Alumni Capital LP, based on this

Agreement, and the aggregate proceeds of $ 822,501 have been received and recorded for the period ended September 30, 2025.

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

All share and per share amounts have been retroactively restated to reflect the split as if it occurred at the beginning of the

earliest period presented.

Treasury stock

During the nine months ended September 30,

2025, the Company repurchased 58,038

shares of its common stock for $ 249,675

in the public market at average price of $4.30 and placed them in treasury.

In the same period, the Company retired 348,968

shares of its common stock previously repurchased $ 1,055,591 .

As of September 30, 2025 and December 31, 2024, 58,038

shares remain as treasury shares, respectively.

These were all purchased as part of publicly announced plans or program, as also

noted in the Annual Report on Form 10-K for the year ended December 31, 2024.

During the three months ended March 31, 2026,

the Company repurchased 16,890 shares of its common stock for $ 154,617 in the public market at average price of $9.15 and placed them

As of March 31, 2026 and December 31, 2025, 33,975 and 17,085 shares remain as treasury shares, respectively.

all purchased as part of publicly announced plans or program and currently, as also noted in the previous 10-K filing.

Employee compensation

2 unchanged sentences

During the period ended

September 30, 2025, 4,953 shares with a fair value of $ 13,905 that previously vested were issued.

During the period ended September 30,

2024, an aggregate of 7,494 shares with a fair value of $ 48,564 vested and were recognized as compensation costs.

As of September 30,

March 31, 2026, 5,772 shares with a fair value of $ 63,441 that previously vested were issued.

During the period ended March 31, 2026,

an aggregate of 4,232 shares with a fair value of $ 15,275 vested during the period and were recognized as compensation costs.

31, 2026, 4,254 shares of common stock with a fair value of $ 19,443 remain vested but not issued.

8 unchanged sentences

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 periods

ended September 30, 2025 and 2024, 5,100 shares of common stock vested and the Company amortized $ 268,005 of this amount leaving an unamortized

balance of $ 446,675 at September 30, 2025.

As of September 30, 2025, 20,400 of the shares had vested.

During the year ended

December 31, 2025, the Company amortized $ 357,340 of this amount leaving an unamortized balance of $ 357,340 at December 31, 2025.

the period ended March 31, 2026, 510 shares of common stock vested and the Company amortized $ 89,335 of this amount leaving an unamortized

balance of $ 268,005 at March 31, 2026.

As of March 31, 2026, 2,800 of the shares had been vested.

Stock options

On January 2, 2025, each member of the Board was

granted 2,250 options to purchase shares at $ 3.45 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, 13,500 options were granted with a fair value of $ 41,124 .

During the nine months

ended September 30, 2025, the Company recognized $ 30,852 of compensation cost relating to the vesting of these options and $ 10,272 remained

unvested which will be amortized over the remainder of 2025.

For the nine months ended September 30, 2025 and

On January 2, 2026, each member of the Board

was granted 225

options to purchase shares at $ 8.5

per share with a fair value of $ 1,721 .

On March 27, 2026, one new member of the Board was granted 225

options to purchase shares at $ 3.83

per share with a fair value of $ 775 .

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

In the aggregate, 1,350

options were granted with a fair value of $ 9,380 .

During the three months ended March 31, 2026, the Company recognized $ 2,159

of compensation cost relating to the vesting of these options and $ 7,221

remained unvested which will be amortized over the remainder of 2026.

For the three months ended March 31, 2026 and

2025, the Company’s stock option compensation expenses amounted to $ 2,159 and $ 10,284 , respectively.

2 unchanged sentences

Schedule of assumptions

September 30, 2025

March 31, 2026

Risk-free interest rate

3.79 % and 3.83 %

Expected life of the options

Expected volatility

135.83 % and 134.99 %

Expected dividend yield

The following is a summary of the option activity

from December 31, 2024 to September 30, 2025:

from December 31, 2025 to March 31, 2026:

Schedule of option activity

5 unchanged sentences

Cancelled or forfeited

Outstanding at September 30, 2025

Exercisable as of September 30, 2025

Based on the closing fair market value of $3.09

per share on September 30, 2025, intrinsic value of $ 0 was attributed to exercisable but not exercised common stock options at September

Note 8 – 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 income (loss) from discontinued operations

presented in the statement of operations for the three months ended September 30, 2025 and 2024 as follows:

Schedule of discontinued operations

Three Months Ended September 30,

Cost of Revenue

Operating Expenses:

General and administrative

Total Operating Expenses

Loss from Operations

Other Income (Expense):

Other income, net

Total other income, net

The income (loss) from discontinued operations

presented in the statement of operations for the nine months ended September 30, 2025 and 2024 as follows:

Nine Months Ended September 30,

Cost of Revenue

Operating Expenses:

General and administrative

Total Operating Expenses

Loss from Operations

Other Income (Expense):

Other income, net

Total other income, net

$ ( 277,823 )

Total operating cash flows from discontinued operations

were $ 0 and $ 65,221 respectively, for the nine months ended September 30, 2025 and 2024.

Outstanding at March 31, 2026

Exercisable as of March 31, 2026

Note 9 – 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

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

(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.

The Company currently has two

operating and reportable 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

(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

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

5 unchanged sentences

The following tables summarize the financial information

of each operating segment of the Company for the nine months ended September 30, 2025:

of each operating segment of the Company for the three months ended March 31, 2026:

Schedule of segment reporting

For the Nine Months ended September 30, 2025

For the Three Months ended March 31, 2026

Perfecular & Lusher

14 unchanged sentences

$ ( 1,246,078 )

$ ( 3,923,401 )

The following tables summarize the financial information

of each operating segment of the Company for the nine months ended September 30, 2024:

For the Nine Months ended September 30, 2024

of each operating segment of the Company for the three months ended March 31, 2025:

For the Three Months ended March 31, 2025

Perfecular & Lusher

1 unchanged sentence

Cost of revenue

Gross profit (loss)

Operating expenses

9 unchanged sentences

Total other income

Loss from discontinued operations

$ ( 116,272 )

1 unchanged sentence

$ ( 1,251,378 )

Note 10 – Contingencies

In the normal course of business or otherwise,

the Company may become involved in legal proceedings.

The Company will accrue a liability for such matters when it is probable that a

liability has been incurred and the amount can be reasonably estimated.

When only a range of possible loss can be established, the most

probable amount in the range is accrued.

The accrual for a litigation loss contingency might include, for example, estimates of potential

damages, outside legal fees and other directly related costs expected to be incurred.

As described in Part II, Item 1 of this report,

a former engineer filed a claim against Focus Shenzhen in July 2025 alleging wrongful termination.

Approximately $23,703 (RMB 165,802)

in Focus Shenzhen's bank account has been frozen pending resolution.

The Company intends to vigorously defend itself.

The outcome remains

uncertain, and a reasonable estimate of potential loss cannot be determined at this time.

Note 11 – Subsequent Events

On September 15, 2025, the Company’s Board

and a majority of stockholders approved through a written consent an amendment and restatement of our Articles of Incorporation to increase

the number of shares we are authorized to issue to 1,000,000,000 shares of common stock, par value $0.001 per share (“Common Stock”)

and 100,000,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”) (the “Amended and Restated

The Company intends to file the Amended and Restated Articles with the Secretary of State of the State of Nevada on

or around November 17, 2025, as described in the 14C Information Statement filed on October 27, 2025.

As described in the 14C Information Statement

filed on October 27, 2025, on October 2, 2025 and October 10, 2025, the Company’s Board and a majority of stockholders, respectively,

through a written consent, authorized (1) management to use their discretion to consider the adoption of one or more digital asset treasury

(2) the issuance of up to $250 million in securities in one or more non-public offerings provided that (a) the total aggregate

consideration for securities we issue will not exceed $250 million (or 250 million shares of Common Stock issued directly or on conversion

of a convertible security), (b) the maximum discount at which securities (which may consist of shares of Common Stock or securities convertible

into Common Stock) will be equivalent to no more than a discount of 30% to the market price of our Common Stock at the date of issuance,

(c) such offerings will occur, if at all, on or before the date that is 90 days following the date of the 14C Information Statement, (d)

such other terms as our Board shall deem to be in the best interests of the Company and its stockholders, not inconsistent with the foregoing;

and (3) an amendment to our Articles of Incorporation to effect a potential reverse stock split of our Common Stock any time prior to

the first anniversary of the stockholders’ approval at a maximum ratio of 200-to-1, with the exact ratio to be determined at the

discretion of the Board.

On October 15, 2025,

the Company entered into a Series A Preferred Stock Purchase Agreement with the Chairman of the Board and one of our shareholders pursuant

to which we agreed to issue 500,000 and 250,000 shares of Series A Convertible Preferred Stock, par value $0.001 per share, at a price

of $4.00 per share, for an aggregate purchase price of $2,000,000 and $1,000,000, respectively.

The Company received the proceeds of $2,000,000

and $1,000,000 on October 17, 2025, and October 31, 2025, respectively.

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.

Designation as filed with the Secretary of State of Nevada is included as Exhibit 3.1 in the Current Report on Form 8-K ,

filed on October 27, 2025.

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.

Series B Designation as filed with the Secretary of State of Nevada is included as Exhibit 3.2 in the Current Report on Form

8-K , filed on October 27, 2025.

On October 22, 2025,

the Company entered into a Series B Preferred Stock Purchase Agreement with Spartan Capital Securities, LLC, pursuant to the terms and

conditions of the Series B 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.

will be 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 the initial proceeds of $3,000,000 on

October 23, 2025.

On April 1, 2026, and April 16, 2026, the Company

founded two wholly owned subsidiaries, Lusher LLC and Lusher Service LLC respectively, both registered under the laws of the State

of California.

Both of these subsidiaries were established to support the Company’s future planned financial services operations.

Subsequent to March 31, 2026, on April 6, 2026,

the holders of a majority of the outstanding shares of Series B Convertible Preferred Stock converted 5,216 shares of Series B Convertible

Preferred Stock into 665,328 shares of Common Stock.

The remaining outstanding shares of Series B Convertible Preferred Stock were held

by Great Point Capital LLC, and the Company entered into a redemption agreement dated April 13, 2026, with Great Point Capital LLC to

redeem such remaining shares at a price of $782 per share for an aggregate amount of $961,860.

As of the date of this filing, there are

no shares of Series B Convertible Preferred Stock outstanding.

On April 6, 2026, the Company entered into a

Securities Purchase Agreement (the “Purchase Agreement”) to issue and sell to Armistice Capital Master Fund Ltd.

(“Armistice”)

approximately $4,000,000 worth of Pre-Funded Units.

Pursuant to the terms of the Purchase Agreement, Armistice purchased an aggregate

of 1,117,318 Pre-Funded Units at a purchase price of $3.57999 per unit.

Each Pre-Funded Unit consists of (i) one (1) Pre-Funded Warrant

(the “Pre-Funded Warrant”), (ii) one (1) Series A PIPE Common Warrant (“Series A Common Warrant”) to purchase

one (1) share of common stock , and (iii) one (1) Series B PIPE Common Warrant (“Series

B Common Warrant”) to purchase one (1) share of common stock.

Each Pre-Funded Warrant is exercisable for one (1) share of common

stock at a nominal exercise price of $0.00001 per share, with the aggregate exercise price having been pre-funded to the Company and

is exercisable immediately upon issuance until all of the Pre-Funded Warrants are exercised in full.

Alternatively, the Pre-Funded Warrants

may be exercised on a cashless basis.

Armistice also received (i) a Series A Common Warrant to purchase up to 1,117,318 shares of Common

Stock with an exercise price of $3.33, which expires 24 months after its initial issuance date;

and (ii) a Series B Common Warrant to

purchase up to 1,117,318 shares of Common Stock at an exercise price of $3.33, which expires sixty (60) months after its initial issuance

The Series A Common Warrants and Series B Common Warrants are exercisable immediately upon issuance until their respective expiration

The number of shares of Common Stock issuable under the warrants are subject to adjustments for stock splits, dividends, and fundamental

transactions as further described in the agreement.

The Series A Common Warrants and Series B Common Warrants may be exercised on a cashless

basis if there is no effective registration statement registering the issuance or resale of the warrant shares at the time of exercise.

Subsequently, Armistice has exercised 379,318 shares of its Pre-Funded Warrant and as a result, the Company has issued 379,318 shares

of Common Stock.

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 was $17,700,000, with an escrow deposit

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.

Lusher Holding LLC, a subsidiary of the Company entered into a term loan agreement with East West

Bank (the “East West Loan”) to borrow $11,050,000, at 6.25% interest for the first 3-years, then floating at the Wall Street

Journal Prime Rate plus (+) 0.25% for the remaining term, with a floor interest rate at 6.25%.

The loan provides for 36 consecutive monthly

principal and interest payments of approximately $68,698.64, beginning on May 1, 2026 and subsequently, 83 monthly principal and interest

payments of an initially estimated amount of approximately $73,917.99 (subject to change based on Wall Street Journal Prime Rate plus

0.25%) beginning May 1, 2029.

A final principal and interest payment of approximately $9,533,143.67 (subject to change based on Wall Street

Journal Prime Rate plus 0.25%) is due on April 1, 2036.

Focus Universal Inc.

is listed as the primary guarantor of this East West Loan

with Desheng Wang listed as a backup guarantor.

Lusher Holding LLC on Friday, April 17, 2026, deposited $11 million, from the East West

Loan to escrow and $5.8 million as downpayment to close escrow.

As of April 17, 2026, the Company and Lusher Holding LLC have completed

the purchase of the building.

The building will serve as Focus Universal’s principal headquarters and is expected to carry the same

rent roll in 2026.

In April and May 2026, the Company repurchased

57,835 shares of its Common Stock for $99,243 in the public market at average price of $1.76 and placed them in treasury.

The Company has evaluated all other subsequent

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What changed 10-Q

Item 1. Financial Statements