FOCUS UNIVERSAL INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS FOCUS UNIVERSAL INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Index to the Financial Statements Contents Page Condensed Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025 4 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and 2025 (unaudited) 5 Condensed Consolidated Statements of Changes in Stockholder’s Equity for the Three Months Ended March 31, 2026 and 2025 (unaudited) 6 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (unaudited) 7 Notes to the Unaudited Condensed Consolidated Financial Statements 8 3 FOCUS UNIVERSAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, December 31, 2026 2025 (Unaudited) ASSETS Current Assets: Cash $ 6,012,717 $ 7,934,958 Accounts receivable, net 9,650 7,125 Inventories, net 90,705 99,813 Other receivables – 20,000 Prepaid expenses 581,929 492,953 Marketable securities 8,874 22,887 Deposit – current portion 79,302 69,393 Total Current Assets 6,783,177 8,647,129 Property and equipment, net 60,921 66,705 Operating lease right-of-use asset 157,857 12,501 Capitalized software costs 256,098 159,179 Deposits 539,213 – Total Assets $ 7,797,266 $ 8,885,514 LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable and accrued liabilities $ 454,309 $ 358,007 Lease liability, current portion 53,601 8,464 Total Current Liabilities 507,910 366,471 Non-Current Liabilities: Lease liability, less current portion 59,213 – Total Liabilities 567,123 366,471 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 5,479,350 5,946,284 Contingencies – Stockholders’ Equity: Common stock, par value $ 0.001 per share, 1,000,000,000 shares authorized; 1,025,135 and 915,097 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively 1,025 915 Treasury stock ( 33,975 and 17,085 shares held at March 31, 2026 and December 31, 2025, respectively) ( 649,007 ) ( 494,390 ) Additional paid-in capital 34,901,858 34,038,158 Shares to be issued, common shares ( 4,254 and 5,794 shares at March 31, 2026 and December 31, 2025, respectively) 19,443 82,884 Accumulated deficit ( 32,496,155 ) ( 31,023,411 ) Accumulated other comprehensive loss ( 26,371 ) ( 31,397 ) Total Stockholders’ Equity 1,750,793 2,572,759 Total Liabilities, Redeemable Preferred Stock and Stockholders’ Equity $ 7,797,266 $ 8,885,514 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 4 FOCUS UNIVERSAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) (UNAUDITED) For the Three Months Ended March 31, 2026 2025 Revenue $ 47,973 $ 190,255 Cost of revenue 32,729 159,711 Gross Profit 15,244 30,544 Operating Expenses Selling expense 32,848 48,980 Compensation - officers and directors 117,551 125,387 Research and development 264,797 372,258 Professional fees 385,205 472,991 General and administrative 486,554 282,455 Total Operating Expenses 1,286,955 1,302,071 Loss from Operations ( 1,271,711 ) ( 1,271,527 ) Other Income (Expense): Interest income (expense), net 40,090 21,888 Unrealized loss on marketable equity securities ( 14,013 ) ( 2,992 ) Other income (expense), net ( 444 ) 1,253 Total other income 25,633 20,149 Net loss $ ( 1,246,078 ) $ ( 1,251,378 ) Accretion of redeemable preferred stock ( 226,666 ) – Net loss available to common stockholders $ ( 1,472,744 ) $ ( 1,251,378 ) Other comprehensive items Foreign currency translation income (loss) 5,026 ( 6,368 ) Total comprehensive loss $ ( 1,467,718 ) $ ( 1,257,746 ) Net loss per common share: Basic and Fully diluted $ ( 1.48 ) $ ( 1.68 ) Weighted Average Number of Common Shares Outstanding: Basic and Diluted 994,059 743,849 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 5 FOCUS UNIVERSAL INC. CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED) 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, 2025 7,263 $ 5,946,284 915,097 $ 915 $ ( 494,390 ) $ 34,038,158 $ 82,884 $ ( 31,023,411 ) $ ( 31,397 ) $ 2,572,759 Stock based compensation - options – – – – – 2,159 – – – 2,159 Stock based compensation - shares – – 6,282 6 – 168,045 ( 63,441 ) – – 104,610 Purchase of treasury stock – – – – ( 154,617 ) – – – ( 154,617 ) Stock split rounding up – – ( 326 ) – – – – – – – Conversion of Series B preferred stock to common stock ( 816 ) ( 693,600 ) 104,082 104 – 693,496 – – – 693,600 Preferred stock accretion – 226,666 – – – – – ( 226,666 ) – ( 226,666 ) Other comprehensive income – – – – – – – – 5,026 5,026 Net loss – – – – – – – ( 1,246,078 ) – ( 1,246,078 ) Balance – March 31, 2026 6,447 $ 5,479,350 1,025,135 $ 1,025 $ ( 649,007 ) $ 34,901,858 $ 19,443 $ ( 32,496,155 ) $ ( 26,371 ) $ 1,750,793 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, 2024 – $ – 715,365 $ 715 $ ( 1,055,592 ) $ 30,032,026 $ 25,573 $ ( 25,782,308 ) $ ( 25,190 ) $ 3,195,224 Stock based compensation - options – – – – – 10,284 – – – 10,284 Stock based compensation - shares – – 1,005 1 – 103,239 ( 8,278 ) – – 94,962 Purchase of treasury stock – – – – ( 144,575 ) – – – – ( 144,575 ) Stock split rounding up – – 30,928 31 – ( 31 ) – – – – Other comprehensive loss – – – – – – – – ( 6,368 ) ( 6,368 ) Net loss – – – – – – – ( 1,251,378 ) – ( 1,251,378 ) Balance – March 31, 2025 – $ – 747,298 $ 747 $ ( 1,200,167 ) $ 30,145,518 $ 17,295 $ ( 27,033,686 ) $ ( 31,558 ) $ 1,898,149 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 6 FOCUS UNIVERSAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2026 2025 Cash flows from operating activities: Net Loss $ ( 1,246,078 ) $ ( 1,251,378 ) Adjustments to reconcile net loss to net cash from operating activities: Depreciation expense 6,722 5,453 Unrealized loss on marketable equity securities 14,013 2,992 Stock-based compensation – shares 104,610 94,962 Stock based compensation – options 2,159 10,284 Changes in operating assets and liabilities: Accounts receivable ( 2,525 ) ( 4,399 ) Inventories 9,108 62,024 Other receivable 20,000 – Prepaid expenses ( 88,161 ) ( 45,490 ) Deposit ( 22,953 ) – Operating lease right-of-use asset 30,560 22,964 Accounts payable and accrued liabilities 95,423 3,457 Other current liabilities – ( 48,841 ) Lease liabilities ( 71,378 ) ( 72,077 ) Net cash flows used in operating activities ( 1,148,500 ) ( 1,220,049 ) Cash flows from investing activities: Purchase of property and equipment ( 297 ) ( 23,380 ) Deposit on building ( 525,000 ) – Capitalized software costs ( 96,919 ) – Net cash flows used in investing activities ( 622,216 ) ( 23,380 ) Cash flows from financing activities: Purchases of treasury stock ( 154,617 ) ( 144,575 ) Net cash flows used in financing activities ( 154,617 ) ( 144,575 ) Effect of exchange rate 3,092 ( 5,714 ) Net change in cash ( 1,922,241 ) ( 1,393,718 ) Cash beginning of period 7,934,958 3,589,318 Cash end of period $ 6,012,717 $ 2,195,600 Supplemental cash flow disclosure: Cash paid for income taxes $ – $ – Cash paid for interest $ – $ – Supplemental disclosure of non-cash investing and financing activities: Accretion of redeemable series B preferred stock discount $ 226,666 $ – Conversion of series B preferred stock to common stock $ 693,600 $ – Right-of-use assets obtained in exchange for operating lease liabilities $ 175,271 $ – The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 7 FOCUS UNIVERSAL INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED) Note 1 – Organization and Operations Focus Universal Inc. (“Focus” or the “Company”) was incorporated under the laws of the State of Nevada on December 4, 2012. The Company is a universal smart instrument 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 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 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., Lusher, Inc., Lusher Holding LLC, (together “Lusher”), and until August, 2024, AT Tech Systems LLC (“AT Tech LLC”), which activities have since been 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 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 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, 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, Lusher Holding LLC, and, until August of 2024, AT Tech Systems (collectively, the “Company,” “we,” “our,” or “us”). 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. GAAP”). 8 Use of Estimates The preparation of unaudited condensed 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 unaudited condensed 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 assumptions impacting right-of use asset and lease liability, useful lives of property and equipment, allowance for doubtful accounts, inventory reserves, and the valuation allowance on deferred tax assets. The Company regularly evaluates its estimates and assumptions. 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 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 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 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 March 31, 2026 2025 Amount % of Total Revenue Amount % of Total Revenue Customer A $ – – $ 101,831 54 % Customer B (* ) (* ) 50,597 27 % Customer C – – 19,966 10 % Customer D 28,000 58 % – – Customer E 8,822 18 % – – Customer F 5,650 12 % – – (*) Revenue for the period ended had not exceeded 10% or more of the consolidated revenue. 9 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 Amount % of Total Accounts Receivable Amount % of Total Accounts Receivable Customer A $ – – $ 7,125 100 % Customer D 4,000 41 % – – Customer F 5,650 59 % – – Major vendors 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 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 subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period during which services are received. 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. 10 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 summarizes financial assets 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 March 31, 2026 (unaudited) Fair Value Carrying Level 1 Level 2 Level 3 Value Assets Marketable securities: Stock $ 8,874 $ – $ – $ 8,874 Total assets measured at fair value $ 8,874 $ – $ – $ 8,874 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 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, short-term loan, other current liabilities, customer deposit, approximate their fair value because of the short maturity of those instruments. 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. The Company’s other comprehensive loss for the three months ended March 31, 2026 and 2025 was comprised of foreign currency translation adjustments. 11 Revenue Recognition 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; · 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. The Company discontinued operations of AT Tech Systems in August 2024, and added the operations of Lusher to service the financial reporting software sector, so the Company currently retains two operating and reportable segments which are (1) 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. Capitalization ceases when the product is ready for release. 12 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 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 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. Basic and Fully 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. Fully 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, unless these shares are covered by anti-dilutive protections. The denominator comprises the Company’s weighted average number of outstanding shares to extent the related shares are dilutive and, if dilutive, and other contracts to issue shares of common stock and stock options. As a result, they are included in the fully diluted EPS computation to the extent that the effect would be dilutive. As of each period end, all 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 Three Months Ended March 31, 2026 2025 Stock options 8,964 7,614 13 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 unaudited condensed consolidated statements of operations. The exchange rates used for unaudited condensed consolidated financial statements are as follows: Schedule of exchange rates foreign currency Average Rate for the Three Months Ended March 31, 2026 2025 (Unaudited) (Unaudited) China Yuan (RMB) RMB 6.9261 RMB 7.2712 United States Dollar ($) $ 1.0000 $ 1.0000 Exchange Rate at March 31, 2026 December 31, 2025 (Unaudited) China Yuan (RMB) RMB 6.9033 RMB 6.9949 United States Dollar ($) $ 1.0000 $ 1.0000 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. The Company 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 March 31, 2026, and negative cash flow from operating activities of $ 1,148,500 for the three months ended March 31, 2026. 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 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. 14 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, 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. 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 March 31, 2026 and December 31, 2025, inventory consisted of the following: Schedule of inventory March 31, 2026 December 31, 2025 Finished goods $ 299,983 $ 304,967 Less: Inventory reserve ( 209,278 ) ( 205,154 ) Inventory $ 90,705 $ 99,813 Note 5 – Property and Equipment At March 31, 2026 and December 31, 2025, property and equipment consisted of the following: Schedule of property and equipment March 31, 2026 December 31, 2025 Building improvement $ 14,620 $ 14,620 Furniture and fixtures 42,881 42,676 Equipment 170,022 168,749 Software 1,995 1,995 Total cost 229,518 228,040 Less accumulated depreciation ( 168,597 ) ( 161,335 ) Property and equipment, net $ 60,921 $ 66,705 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). 15 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 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 March 31, 2026 December 31, 2025 Gross proceeds $ 7,000,000 $ 7,000,000 Less: Preferred stock issuance costs ( 680,000 ) ( 680,000 ) Value converted into common stock ( 1,520,650 ) ( 827,050 ) Plus: Accretion of carrying value to redemption value 680,000 453,334 Preferred stock subject to possible redemption $ 5,479,350 $ 5,946,284 16 Note 7 – Leases Operating Leases 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. 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 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 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 March 31, 2026 December 31, 2025 Operating lease right-of-use assets, net $ 157,857 $ 12,501 Lease liabilities, current portion $ 53,601 $ 8,464 Lease liabilities, less current portion $ 59,213 $ – Lease term and discount rate: Schedule of lease term and discount rate March 31, 2026 December 31, 2025 Weighted average remaining lease term: Operating lease 2.75 to 2.83 years 0.08 to 0.25 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 $ – Year ending December 31, 2027 64,873 Year ending December 31, 2028 64,873 Total minimum lease payment 129,746 Less: imputed interest ( 16,932 ) Present value of future minimum lease payments $ 112,814 17 Short-term leases 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 $ 65,128 and $ 80,210 for the three months ended March 31, 2026 and 2025, respectively. This is included in general and administrative expenses. Note 8 – Stockholders’ Equity Common 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. 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 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 in treasury. As of March 31, 2026 and December 31, 2025, 33,975 and 17,085 shares remain as treasury shares, respectively. These were all purchased as part of publicly announced plans or program and currently, as also noted in the previous 10-K filing. 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 period ended 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. As of March 31, 2026, 4,254 shares of common stock with a fair value of $ 19,443 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 year ended December 31, 2025, the Company amortized $ 357,340 of this amount leaving an unamortized balance of $ 357,340 at December 31, 2025. During 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. 18 Stock options 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 term. 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. 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 March 31, 2026 Risk-free interest rate 3.79 % and 3.83 % Expected life of the options 5.5 years Expected volatility 135.83 % and 134.99 % Expected dividend yield 0 % The following is a summary of the option activity from December 31, 2025 to March 31, 2026: Schedule of option activity Number of Options Weighted average exercise price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding at December 31, 2025 7,614 $ 302.00 6.32 – Granted 1,350 $ 7.72 – – Exercised – – – – Cancelled or forfeited – – – – Outstanding at March 31, 2026 8,964 $ 257.35 6.14 – Exercisable as of March 31, 2026 7,896 $ 291.50 6.21 – Note 9 – Segment Reporting 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 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. 19 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 three months ended March 31, 2026: Schedule of segment reporting For the Three Months ended March 31, 2026 Perfecular & Lusher Corporate & IoT Total Revenue $ 4,000 $ 43,973 $ 47,973 Cost of revenue 3,988 28,741 32,729 Gross profit 12 15,232 15,244 Operating expenses Selling expense – 32,848 32,848 Compensation – officers and directors – 117,551 117,551 Research and development 64,800 199,997 264,797 Professional fees – 385,205 385,205 General and administrative 46 486,508 486,554 Total operating expense 64,846 1,222,109 1,286,955 Loss from operations ( 64,834 ) ( 1,206,877 ) ( 1,271,711 ) Total other income – 25,633 25,633 Net loss $ ( 64,834 ) $ ( 1,181,244 ) $ ( 1,246,078 ) 20 The following tables summarize the financial information 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 Corporate & IoT Total Revenue $ 6,624 $ 183,631 $ 190,255 Cost of revenue 5,373 154,338 159,711 Gross profit 1,251 29,293 30,544 Operating expenses Selling expense 1,165 47,815 48,980 Compensation – officers and directors – 125,387 125,387 Research and development 115,890 256,368 372,258 Professional fees – 472,991 472,991 General and administrative 469 281,986 282,455 Total operating expense 117,524 1,184,547 1,302,071 Loss from operations ( 116,273 ) ( 1,155,254 ) ( 1,271,527 ) Total other income 1 20,148 20,149 Net loss $ ( 116,272 ) $ ( 1,135,106 ) $ ( 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 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. 21 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 date. The Series A Common Warrants and Series B Common Warrants are exercisable immediately upon issuance until their respective expiration dates. 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. ft. 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 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. 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 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. 22