Focus Universal sees cash lasting through Q2 2027
The acquired property generated $1,441,078 in rental revenue through September, while management continued to report substantial doubt about going concern.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Focus Universal Inc. reported $1,525,571 in revenue and a $4,154,461 net loss for the nine months ended September 30, 2026, compared with $254,274 in revenue and a $3,923,401 net loss a year earlier. The company says the periods are not directly comparable because rental operations began after its April property acquisition. Rental revenue was $1,441,078; operating cash outflow was $2,742,684, and cash was $4,440,231 at September 30, 2026.
It completed the purchase of a Monterey Park commercial property for $17,700,000 on April 17, 2026. Its subsidiary borrowed $11,050,000 under a term loan secured by the building; interest is 6.25% for the first three years and then the Wall Street Journal Prime Rate plus 0.25%, subject to a 6.25% floor. The loan matures April 1, 2036.
Focus Universal says conditions raise substantial doubt about its ability to continue as a going concern, citing recurring losses, operating cash outflows and accumulated deficit. Management believes its current cash position will fund operations through the second quarter of 2027 and says additional capital is needed. Board-authorized partnership and financing pathways remain subject to definitive agreements and required approvals.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointRental operations generated $1,441,078 in revenue through September 30, 2026.
Negative
- Major pointThe company cited substantial doubt and $2,742,684 of operating cash outflow.
- Moderate pointNine-month net loss rose to $4,154,461 from $3,923,401.
Filing Explained
Another 279,330 shares remain unissued under exercisable Series B warrants; any dilution from those shares depends on exercise.
Focus Universal’s quarterly report records completed common-share issuance from preferred-stock conversions and warrant exercises; these issued shares increase the share count and reduce existing holders’ percentage ownership.
The report lists 982,012 common shares outstanding at
Separately, the board recommended increasing the 2018 Stock Incentive Plan reserve to 10,000,000 shares, but the change has not taken effect and remains subject to stockholder approval and applicable requirements.
Key Figures
Key Terms
going concern financial
temporary equity financial
volume-weighted average price (VWAP) financial
EDGARization technical
XBRL tagging technical
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much revenue did FCUV report for the first nine months of 2026?
Why does FCUV report substantial doubt about its ability to continue as a going concern?
How occupied was FCUV's commercial property in September 2026?
What share reserve did FCUV's board recommend for its 2018 Stock Incentive Plan?
AI-generated analysis. How Rhea-AI works. Not financial advice.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended
SECURITIES EXCHANGE ACT OF 1934
Commission File No.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (IRS Employer Identification Number) |
| (Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
|
The (Nasdaq Capital Market) |
Indicate by check mark whether the registrant: (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject
to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405
of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files.
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large, accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
As of November 10, 2026, the registrant had outstanding
FORM 10-Q
FOCUS UNIVERSAL INC.
TABLE OF CONTENTS
| PART I FINANCIAL INFORMATION | 3 |
| Item 1. Condensed Consolidated Financial Statements (Unaudited) | 3 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 29 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 46 |
| Item 4. Controls and Procedures | 46 |
| PART II OTHER INFORMATION | 47 |
| Item 1. Legal Proceedings | 47 |
| Item 1A. Risk Factors | 47 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 54 |
| Item 3. Defaults Upon Senior Securities | 54 |
| Item 4. Mine Safety Disclosures | 54 |
| Item 5. Other Information | 54 |
| Item 6. Exhibits | 55 |
| Signatures | 57 |
| 2 |
PART I. FINANCIAL INFORMATION
References in this document to “us,” “we,” or “Company” refer to Focus Universal Inc.
ITEM 1. FINANCIAL STATEMENTS
FOCUS UNIVERSAL INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Index to the Financial Statements
| Contents | Page |
| Condensed Consolidated Balance Sheets as of September 30, 2026 (unaudited) and December 31, 2025 (audited) | 4 |
| Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2026 and 2025 (unaudited) | 5 |
| Condensed Consolidated Statements of Changes in Stockholder’s Equity for the Three and Nine Months Ended September 30, 2026 and 2025 (unaudited) | 6 |
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2026 and 2025 (unaudited) | 10 |
| Notes to the Unaudited Condensed Consolidated Financial Statements | 11 |
| 3 |
FOCUS UNIVERSAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Other receivables | ||||||||
| Prepaid expenses | ||||||||
| Marketable securities | ||||||||
| Deposit – current portion | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Capitalized software costs | ||||||||
| Deposits | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Other current liabilities | ||||||||
| Loan, current portion | ||||||||
| Lease liability, current portion | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities: | ||||||||
| Loan, less current portion | ||||||||
| Other liability | ||||||||
| Lease liability, less current portion | ||||||||
| Total Liabilities | ||||||||
| Redeemable Preferred Stock: | ||||||||
| Series B convertible redeemable preferred stock, par value $ | ||||||||
| Contingencies | – | |||||||
| Stockholders’ Equity: | ||||||||
| Common stock, par value $ | ||||||||
| Treasury stock ( | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Shares to be issued, common shares ( | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities, Redeemable Preferred Stock and Stockholders’ Equity | $ | $ | ||||||
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)
| Three Months Ended Sept 30, | Nine Months Ended Sept 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | ||||||||||||||||
| Rental revenue | $ | $ | $ | $ | ||||||||||||
| Other revenue | ||||||||||||||||
| Total Revenue | ||||||||||||||||
| Cost and Operating Expenses | ||||||||||||||||
| Property operating expenses | ||||||||||||||||
| Cost of other revenue | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Selling expense | ||||||||||||||||
| Compensation - officers and directors | ||||||||||||||||
| Research and development | ||||||||||||||||
| Professional fees | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total Cost and Operating Expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expense): | ||||||||||||||||
| Interest income (expense), net | ( | ) | ( | ) | ||||||||||||
| Unrealized gain on marketable equity securities | ||||||||||||||||
| Realized gain on marketable equity securities | ||||||||||||||||
| Other income (loss), net | ( | ) | ||||||||||||||
| Total other income (loss) | ( | ) | ( | ) | ||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Accretion of redeemable preferred stock | ( | ) | ||||||||||||||
| Net loss to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive items | ||||||||||||||||
| Foreign currency translation gain (loss) | ( | ) | ||||||||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic net income loss per share: | ||||||||||||||||
| Basic net loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Number of Common Shares Outstanding: Basic and Fully Diluted | ||||||||||||||||
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 AND NINE MONTHS ENDED SEPTEMBER 30, 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 – June 30, 2026 | | $ | – | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock based compensation - options | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Stock based compensation - shares issued for Award Agreement | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Stock based compensation - shares issued for employment contract | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Exercise of Series A warrants - Sep 2026 | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
| CEDE & CO - 63 shares cancelled per VStock (share count only) | – | ( | ) | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | ( | ) | – | ( | ) | ||||||||||||||||||||||||||||
| Balance - September 30, 2026 | $ | – | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| 6 |
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 – June 30, 2025 | | $ | – | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock based compensation - options | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Stock based compensation – shares | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
| Purchase of treasury stock | – | – | – | – | ( | ) | – | – | – | ( | ) | |||||||||||||||||||||||||||||
| Retirement of treasury stock | – | – | ||||||||||||||||||||||||||||||||||||||
| Stock issued for cash | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | ( | ) | – | ( | ) | ||||||||||||||||||||||||||||
| Balance – September 30, 2025 | $ | – | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| 7 |
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 | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Stock based compensation - options | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Stock based compensation - shares issued for Award Agreement | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
| Stock based compensation - employment contracts (incl Q3 stock to be issued) | – | – | – | ( | ) | – | – | |||||||||||||||||||||||||||||||||
| Purchase of treasury stock | – | – | – | – | ( | ) | – | – | – | – | ( | ) | ||||||||||||||||||||||||||||
| Stock split rounding and shares cancelled | – | ( | ) | |||||||||||||||||||||||||||||||||||||
| Conversion of Series B preferred stock to common stock | ( | ) | ( | ) | – | – | – | – | ||||||||||||||||||||||||||||||||
| Preferred stock accretion | – | – | – | – | – | – | ( | ) | – | ( | ) | |||||||||||||||||||||||||||||
| Repurchase and cancellation of Series B preferred stock | ( | ) | ( | ) | – | |||||||||||||||||||||||||||||||||||
| Gain on cancellation of preferred stock | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Shares issued for pre-funded units and warrant exercise | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | ( | ) | – | ( | ) | ||||||||||||||||||||||||||||
| Balance - September 30, 2026 | $ | – | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| 8 |
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 | $ | – | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||
| Stock based compensation - options | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Stock based compensation - shares | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | – | – | – | – | ( |
) | – | – | – | – | ( |
) | ||||||||||||||||||||||||||||
| Stock split rounding up | – | ( |
) | |||||||||||||||||||||||||||||||||||||
| Retirement of treasury stock | – | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||
| Stock issued for cash | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | – | – | – | – | – | – | – | – | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | ( |
) | – | ( |
) | ||||||||||||||||||||||||||||
| Balance – September 30, 2025 | $ | – | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 9 |
FOCUS UNIVERSAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended Sept 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
| Inventory reserve | ||||||||
| Depreciation expense | ||||||||
| Amortization expense | ||||||||
| Unrealized gain on marketable equity securities | ( | ) | ||||||
| Realized gain on marketable equity securities | ( | ) | ||||||
| Stock-based compensation – shares | ||||||||
| Stock based compensation – options | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ||||||
| Other receivable | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Deposit | ||||||||
| Operating lease right-of-use asset | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Other current liabilities | ( | ) | ||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Capitalized software costs | ( | ) | ||||||
| Proceeds from sale of marketable securities | ||||||||
| Net cash flows used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Redemption of preferred stock | ( | ) | ||||||
| Repayment on bank loan | ( | ) | ||||||
| Shares issued for pre-funded units | ||||||||
| Proceeds from stock issuance and warrant exercises | ||||||||
| Purchases of treasury stock | ( | ) | ( | ) | ||||
| Net cash flows provided by financing activities | ||||||||
| Effect of exchange rate | ( | ) | ||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash beginning of period | ||||||||
| Cash end of period | $ | $ | ||||||
| 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 | $ | $ | ||||||
| Conversion of series B preferred stock to common stock | $ | $ | ||||||
| Gain on cancellation of preferred stock | $ | $ | ||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
| Issuance to bank loan on building acquisition | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 10 |
FOCUS UNIVERSAL INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 Monterey Park, 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 also owns and operates a commercial real estate property.
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, 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. There were no significant transactions involving Lusher LLC through September 30, 2026.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements of the Company for the three and nine months ended September 30, 2026 and three and nine months ended September 30, 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 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.
| 11 |
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, Lusher Service LLC, as well as its 51% ownership interest in Lusher 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”).
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 September 30, 2026 and December 31, 2025, allowance
for doubtful accounts amounted to $
Concentration of Credit and Business Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash. The Company limits its exposure to credit loss by investing its cash with high credit quality financial institutions.
Major customers
Two major tenants accounted for approximately
One major customer accounted for approximately
| 12 |
Major vendors
No merchandise purchases were made during the three
months ended September 30, 2026. One major vendor accounted for approximately
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.
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. |
| 13 |
The following table summarizes financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025:
| Schedule of fair values on a recurring basis | ||||||||||||||||
| December 31, 2025 | ||||||||||||||||
| Fair Value | Carrying | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Value | |||||||||||||
| Assets | ||||||||||||||||
| Marketable securities: | ||||||||||||||||
| Stock | $ | $ | $ | $ | ||||||||||||
| Total assets measured at fair value | $ | $ | $ | $ | ||||||||||||
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. The carrying values of lease liabilities and long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.
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 nine months ended September 30, 2026 and nine months ended September 30, 2025 was comprised of foreign currency translation adjustments.
Revenue Recognition
Rental Income
Rental income from operating leases is recognized on a straight-line basis over the non-cancelable lease term when collectability is probable and the tenant has been provided access to and control of the leased premises. Rental income includes fixed contractual lease payments and, when applicable, variable lease payments that are recognized in the period in which the underlying conditions giving rise to such payments are satisfied.
The Company evaluates each lease to determine whether it is an operating or finance lease in accordance with ASC 842, Leases. The Company’s leases of office and commercial space are classified as operating leases. Lease payments received in advance are recorded as deferred revenue and recognized as rental income over the applicable lease term.
The Company recognizes reimbursements from tenants for operating expenses, including common area maintenance, property taxes and other recoverable costs, as rental income when the Company is the principal in providing the related services. Variable lease payments, including amounts based on tenant sales or other specified conditions, are recognized when the applicable conditions are met.
| 14 |
Other Revenue
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 Perfecular to service the financial reporting software sector, so the Company currently retains three operating and reportable segments which are (1) Perfecular and Lusher, (2) Corporate and IoT Products and (3) Lusher Holding LLC.
Cost of Revenue, excluding depreciation & amortization
Cost of revenue includes the cost of services, labor and products 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.
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.
| 15 |
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.
Warrants
We evaluate the appropriate balance sheet classification of warrants we issue as either equity or as a derivative liability. In accordance with ASC 815, we classify a warrant as equity if it is “indexed to the Company’s equity” and meets several specific conditions for equity classification. A warrant is not considered “indexed to the Company’s equity,” in general, when it contains certain types of exercise contingencies or potential adjustments to its exercise price. If a warrant is not indexed to the Company’s equity or it has net cash settlement provisions that result in the warrants being accounted for under ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) or ASC 815, it is classified as a derivative liability which is carried on the consolidated balance sheets at fair value with any changes in its fair value recognized in the statements of operations and comprehensive loss. At September 30, 2026 and 2025 all of the Company’s outstanding warrants were classified as 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) attributable to common stockholders by the weighted average number of shares outstanding during the period.
Diluted EPS reflects the potential dilution from securities that could result in the issuance of common stock. Potential common shares are included in diluted EPS only when their effect is dilutive. Securities whose inclusion would be antidilutive are excluded from the computation.
The Company reported net losses for the three and nine months ended September 30, 2026 and 2025. Potentially dilutive stock options and common stock warrants were excluded from diluted loss per share because their inclusion would have been antidilutive. Accordingly, basic and diluted loss per share were the same for each period presented.
| 16 |
The following table summarizes the common shares underlying potentially dilutive securities outstanding at September 30, 2026 and 2025 that were excluded from diluted loss per share:
| Schedule of anti-dilutive shares | ||||||||
| September 30, 2026 | September 30, 2025 | |||||||
| Stock options | ||||||||
| Series B common warrants | ||||||||
Series A common warrants were also excluded from diluted loss per share
while outstanding during the three and nine months ended September 30, 2026 because their effect would have been antidilutive. All
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 Nine Months Ended Sept 30, | ||||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| China Yuan (RMB) | RMB | RMB | ||||||
| United States Dollar ($) | $ | $ | ||||||
| Exchange Rate at | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| China Yuan (RMB) | RMB | RMB | ||||||
| United States Dollar ($) | $ | $ | ||||||
As of September 30, 2026 and December 31, 2025, the
Company had cash balances of $
| 17 |
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 $
At September 30, 2026, the Company had cash, and short-term
investments, in the amount of $
Reclassification
During the period we made certain reclassifications to the format of our statement of operations to more properly reflect the commencement of our rental operations.
Note 3 – Recent Accounting Pronouncements
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. The Company is 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.
| 18 |
Note 4 – Inventory
At September 30, 2026 and December 31, 2025, inventory consisted of the following:
| Schedule of inventory | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| Finished goods | $ | $ | ||||||
| Less: Inventory reserve | ( | ) | ( | ) | ||||
| Inventory | $ | $ | ||||||
Note 5 – Property and Equipment
On January 21, 2026, the Company entered a purchase,
sale and escrow agreement with 901 Corporate Center, LP to acquire the commercial property located at 901 Corporate Center Drive, Monterey
Park, California (the “Property”). The acquisition was completed on April 17, 2026, through the Company and its wholly owned
subsidiary, Lusher Holding LLC. The aggregate purchase price was $
The Property consists of four parcels comprising approximately 10.73 acres, with approximately 100,743 square feet of rentable Class A office space and a four-level parking structure. The parking facilities include a solar-panel canopy that is subject to a lease arrangement. At the time of acquisition, the Property was approximately 99.2% occupied by approximately 16 tenants. The existing tenant leases were retained in connection with the acquisition, and the Company does not intend to materially alter their terms. Most of the leases in place at acquisition had remaining terms of approximately five to eight years.
The Company preliminarily allocated approximately
$
The Property is intended to serve both as an income-producing commercial real estate investment and as the Company’s principal headquarters. The Company plans to use approximately 2,000 square feet of the Property for its own operations.
At September 30, 2026 and December 31, 2025, property and equipment consisted of the following:
| Schedule of property and equipment | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| Building | $ | $ | ||||||
| Land | ||||||||
| Building improvement | ||||||||
| Furniture and fixtures | ||||||||
| Equipment | ||||||||
| Software | ||||||||
| Total cost | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
The building is being depreciated over an estimated
| 19 |
Note 6 – Rental Operations
The Company began generating rental income from the Property following completion of the acquisition on April 17, 2026. Rental income is primarily derived from commercial tenants occupying office space at the Property and from other contractual arrangements associated with the Property, including the applicable lease arrangement for the solar-panel canopy. Rental income is recognized in accordance with the terms of the underlying agreements and applicable accounting principles.
For the three and nine months ended
September 30, 2026, rental revenue was approximately $
Property operating expenses for the three and
nine months ended September 30, 2026, consisted principally of property management fees, repairs and maintenance, utilities, insurance,
property taxes, other operating expenses. Such expenses totaled approximately $
The Company uses third-party property management services for the Property. Property management activities include, as applicable, tenant coordination, rent collection, lease administration, maintenance coordination and other customary property operations.
Tenant concentration is evaluated based on rental revenue and, where relevant, accounts receivable. As of September 30, 2026, the Property had approximately 12 tenants and an occupancy rate of approximately 99.2%.
The Property was financed in part through an
$
Rental income from operating leases, is recognized
on a straight-line basis over the lease term once we have determined that the collectability of substantially all of the lease payments
is probable. Accounts receivable, included $
The following operating lease maturity analysis presents the future contractual lease payments to be received by the Company as of September 30, 2026:
| Schedule of future rents receivable | ||||
| Year | Amount | |||
| Year ending December 31, 2026 | $ | |||
| Year ending December 31, 2027 | ||||
| Year ending December 31, 2028 | ||||
| Year ending December 31, 2029 | ||||
| Year ending December 31, 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
| 20 |
Note 7 – 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, Spartan 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 on October 23, 2025; (ii) $1,000,000 for the purchase of the Series B Preferred Stock funded on
December 15, 2025; and (iii) $3,000,000 for the purchase of the Series B Preferred Stock on December 19,2025. The Company received
net proceeds of $
The holders of the Series B Preferred Stock had the
right, at any time and from time to time, to require the Company to convert their Series B Preferred Stock shares into common stock. The
conversion price was to 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, could the conversion price be less than the floor price of $7.84. The Company initially classified
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 was not solely within the Company’s control. During the
year ended December 31, 2025,
| 21 |
As of September 30, 2026 and December 31, 2025 Series B Preferred Stock shares reflected on the balance sheet are reconciled on the following table:
| Schedule of balance sheet reconciled | ||||||||
September 30, 2026 | December 31, 2025 | |||||||
| Gross proceeds | $ | $ | ||||||
| Less: | ||||||||
| Preferred stock issuance costs | ( | ) | ( | ) | ||||
| Value converted into common stock | ( | ) | ( | ) | ||||
| Repurchase | ( | ) | ||||||
| Plus: | ||||||||
| Accretion of carrying value to redemption value | ||||||||
| Preferred stock subject to possible redemption | $ | $ | ||||||
Note 8 – Leases
Operating Lease
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
$2,141). The second lease commenced on February 1, 2026 and will expire on January 31, 2029, with a monthly rent of RMB 22,707 (approximately
$3,328). 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 $
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 September 30, 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, 2026 | December 31, 2025 | |||||||
| Operating lease right-of-use assets, net | $ | $ | ||||||
| Lease liabilities, current portion | $ | $ | ||||||
| Lease liabilities, less current portion | $ | $ | ||||||
Lease term and discount rate:
| Schedule of lease term and discount rate | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| Weighted average remaining lease term: | ||||||||
| Operating lease | ||||||||
| Weighted average discount rate: | ||||||||
| Operating lease | ||||||||
| 22 |
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 | ||||
| Year ending December 31, 2028 | ||||
| Total minimum lease payment | ||||
| Less: imputed interest | ( | ) | ||
| Present value of future minimum lease payments | $ | |||
Related Party Short-term Lease
On February 26, 2026,
Note 9 – Bank Loan
| Schedule of loan | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| East West Bank Loan | $ | $ | | |||||
| Less: current portion | $ | $ | ||||||
| Long term portion | $ | $ | ||||||
Interest expense incurred from the loan amounted to
$
Future maturities of payments on the bank loan are as follows as of September 30, 2026:
| Schedule of future maturities of bank loan payments | ||||
| Year | Amount | |||
| Year ending December 31, 2026 | $ | |||
| Year ending December 31, 2027 | ||||
| Year ending December 31, 2028 | ||||
| Year ending December 31, 2029 | ||||
| Year ending December 31, 2030 | ||||
| Thereafter | ||||
| Total | ||||
| Less: Amounts representing interest | ( | ) | ||
| Total | $ | |||
| 23 |
Note 10 – Stockholders’ Equity
Common stock
On February 9, 2026, the Company effected a reverse
stock split of its outstanding common stock on a
Treasury stock
During the nine months ended September 30, 2026, the
Company repurchased
Employee compensation
In prior years, the Company entered into several employment
agreements that require the issuance of common shares to employees, which vest on a quarterly basis. During the nine months ended September
30, 2026,
On February 11, 2022 (the “Vesting Date”),
the Company entered into a restricted stock award agreements (the “Award Agreement”) with eight employees for
Sale of pre-funded equity units
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 resulting in net proceeds to the Company of $3,547,348.
Pursuant to the terms of the Purchase Agreement, Armistice purchased an aggregate of 279,330 Pre-Funded Units at a purchase price of
$14.3199 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. During the nine months
ended September 30, 2026, Armistice exercised its Pre-Funded Warrant, and the Company has issued
The Series A Common Warrants have an exercise price of $13.32 and expire 24 months after their initial issuance date, and the Series B Common Warrant have an exercise price of $13.32 and expire sixty (60) months after their 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.
During September 2026, Armistice exercised all
| 24 |
The following table summarizes activity in the warrants issued to Armistice during the nine months ended September 30, 2026. Amounts represent the number of underlying common shares and reflect the June 2026 reverse stock split.
| Schedule of warrants activity | ||||||||||||
Pre-Funded Warrants | Series A Common Warrants | Series B Common Warrants | ||||||||||
| Outstanding at December 31, 2025 | ||||||||||||
| Issued | ||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||
| Expired or cancelled | ||||||||||||
| Outstanding at September 30, 2026 | ||||||||||||
All Pre-Funded Warrants were exercised before June 30, 2026. At September
30, 2026, the remaining
Stock options
On January 2, 2026, each member of the Board was granted
For the nine months ended September 30, 2026 and nine
months ended September 30, 2025, the Company’s stock option compensation expenses amounted to $
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 | |||
| September 30, 2026 | |||
| Risk-free interest rate | |||
| Expected life of the options | |||
| Expected volatility | |||
| Expected dividend yield | |||
The following is a summary of the option activity from December 31, 2025 to September 30, 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 | $ | |
||||||||||||||
| Granted | $ | – | – | |||||||||||||
| Exercised | – | – | ||||||||||||||
| Cancelled or forfeited | – | – | ||||||||||||||
| Outstanding at September 30, 2026 | $ | |||||||||||||||
| Exercisable as of September 30, 2026 | $ | |||||||||||||||
| 25 |
Note 11 – Segment Reporting
The Company currently has three 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 three operating and reportable segments. The Company consists of three types of operations. (1) The Company’s “Corporate & IoT” segment includes the operations of AVX, Smart AVX, Focus, and Focus Shenzhen. AVX and Smart AVX provide LED and IoT installation, management, and integration services for LED and display systems, audio/video systems, home theaters, lighting controls, and automation systems. Smart AVX also sells smart IoT products. Focus and Focus Shenzhen conduct research and development of IoT technologies and smart products for commercial and home automation applications. This segment also includes corporate financing activities, executive expenses, public company operating and investor relations expenses, and shared management costs across the Company’s subsidiaries. (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. (3) Lusher Holding LLC provide commercial real estate property management services.
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 September 30, 2026:
| Schedule of segment reporting | ||||||||||||||||
| For the Three Months ended September 30, 2026 | ||||||||||||||||
| Perfecular & Lusher | Corporate & IoT | Lusher Holding LLC | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost and operating expenses | ||||||||||||||||
| Property operating expenses | ||||||||||||||||
| Cost of other revenue | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Selling expense | ||||||||||||||||
| Compensation – officers and directors | ||||||||||||||||
| Research and development | ||||||||||||||||
| Professional fees | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total cost and operating expense | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 26 |
| For the Three Months ended September 30, 2025 | ||||||||||||||||
| Perfecular & Lusher | Corporate & IoT | Lusher Holding LLC | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost and operating expenses | ||||||||||||||||
| Property operating expenses | ||||||||||||||||
| Cost of other revenue | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Selling expense | ||||||||||||||||
| Compensation – officers and directors | ||||||||||||||||
| Research and development | ||||||||||||||||
| Professional fees | ||||||||||||||||
| General and administrative | – | |||||||||||||||
| Total cost and operating expense | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | – | ( | ) | |||||||||
| Total other income | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | – | $ | ( | ) | |||||
The following tables summarize the financial information of each operating segment of the Company for the nine months ended September 30, 2026:
| For the Nine Months ended September 30, 2026 | ||||||||||||||||
| Perfecular & Lusher | Corporate & IoT | Lusher Holding LLC | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost and operating expenses | ||||||||||||||||
| Property operating expenses | ||||||||||||||||
| Cost of other revenue | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Selling expense | ||||||||||||||||
| Compensation – officers and directors | ||||||||||||||||
| Research and development | ||||||||||||||||
| Professional fees | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total cost and operating expense | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
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The following tables summarize the financial information of each operating segment of the Company for the nine months ended September 30, 2025:
| For the Nine Months ended September 30, 2025 | ||||||||||||||||
| Perfecular & Lusher | Corporate & IoT | Lusher Holding LLC | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost and operating expenses | ||||||||||||||||
| Property operating expenses | ||||||||||||||||
| Cost of other revenue | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Selling expense | ||||||||||||||||
| Compensation – officers and directors | ||||||||||||||||
| Research and development | ||||||||||||||||
| Professional fees | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total cost and operating expense | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Note 12 – 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 $
Note 13 – Subsequent Events
The Company has evaluated subsequent events and transactions occurring after September 30, 2026, through the date the condensed consolidated financial statements were issued.
Based on its evaluation, management has determined that, there were no additional subsequent events requiring recognition in, or disclosure in the notes to, the Company’s condensed consolidated financial statements as of September 30, 2026.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in, Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements. Such forward-looking statements are based on current expectations, estimates, and projections about our industry, management beliefs, and certain assumptions made by our management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth herein and in other reports and documents that we file from time to time with the Securities and Exchange Commission, particularly the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.
Narrative Description of the Business
Focus Universal Inc. (the “Company,” “we,” “us,” or “our”) is a Nevada corporation. Prior to our acquisition of the commercial property located at 901 Corporate Center Drive, Monterey Park, California (the “Property”), we had two sources of revenue: generated from our Universal Smart Technology and our software to streamline SEC financial reporting.: Upon our acquisition of the Property in April 2026, our primary source of revenue shifted to revenue generated from rental of our Property. Accordingly, periods prior to the acquisition reflect the historical financial statements of the Company, and the results of operations of the Property are included beginning on the acquisition date. As a result, the results of operations, liquidity and capital resources information for the nine months ended September 30, 2026 is not directly comparable to the prior-year period.
During the nine months ended September 30, 2026, we generated $1,441,078 from rental income from the Property. We currently have executed leases for rental of 97,931 square feet of space through December 31, 2026 from 12 tenants and anticipate generating $1,464,523 of revenue for the period from April 17, 2026 through December 31, 2026 from the rental income derived from the Property assuming no current leases are terminated.
We have developed five proprietary technologies utilizing our patent portfolio which we believe solve the most fundamental problems plaguing the internet of things (“IoT”) industry through: (1) increasing overall chip integration by shifting integration from the component level to the device level; (2) creating a faster 5G cellular technology by using ultra-narrowband technology; (3) leveraging ultra-narrowband power line communication (“PLC”) technology; (4) proprietary User Interface Machine auto generation technology; and (5) incorporating all our core technologies into a single chip. Our Universal Smart Technology is designed to overcome instrumentation interoperability and interchangeability. The electronic design starts from a 90% completed common foundation we call our universal smart instrumentation platform (“USIP”), instead of the current method of building each stand-alone instrument from scratch. Our method has the potential to eliminates redundant hardware and software and results in significant cost savings and production efficiency. We also provide sensor devices and are a wholesaler of various air filters and digital, analog, and quantum light meter systems. We holds 27 patents and patents pending in various phases of the patent process.
Our Perfecular subsidiary is developing and designing a software to streamline SEC financial reporting for financial reporting and tax firms. Currently, we have completed the SEC financial reporting software in a Microsoft Word format. Our team is focused on streamlining the entire SEC financial reporting process for SEC attorneys, PCAOB accounting firms, and other financial reporting professionals. Our goal is that with a single click, our software automatically retrieves financial data from external accounting systems and generates consolidated financial statements and SEC reports in WORD, PDF, HTML, and XBRL formats—all within just a few minutes. Our developers are trying to eliminate human involvement when it comes to manually updating the numbers. This automation is designed to create an error-free, seamless process. Customer testing of the fully automated SEC financial reporting software began in July 2025.
Our common stock is listed on the Nasdaq Capital Market.
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Recent Developments
Certification of Universal Smart IoT Devices and Sensors
On August 20, 2026, the Company announced that its Universal Smart device and associated industrial sensors had completed certification testing by GRG Metrology & Test Group Co., Ltd. and Centre Testing International Group Co., Ltd. The products identified in the announcement include pH, total dissolved solids (TDS), oxidation-reduction potential (ORP), dissolved oxygen, and turbidity sensors. Management believes these certifications represent a step toward broader commercialization of the Company’s Universal Smart IoT platform and may facilitate marketing of the applicable products in domestic and international markets. Certification, however, does not establish customer demand or guarantee product sales, revenue, or profitability. The Company’s ability to commercialize these products will depend on factors including customer adoption, pricing, production capabilities, distribution, competition, and applicable market requirements.
Strategic Partnerships, Commercial Pathways and Potential Financing Activities
During August 2026, the Board adopted a unanimous written consent addressing the Company’s strategic partnership program, potential financing pathways, and use of the Company’s proprietary deterministic artificial intelligence technology (“Deterministic AI”) across additional commercial applications. The consent authorizes management, subject to applicable law, definitive agreements, available capital, and any required Board, stockholder, Nasdaq or regulatory approvals, to continue evaluating (i) a potential PIPE financing or strategic placement, including a transaction that may exceed the applicable 19.99% issuance threshold where permitted and approved, and (ii) multiple strategic partnership transactions structured, where practicable and legally permissible, below that threshold. No financing or securities issuance should be understood to have been completed solely as a result of the Board’s authorization.
The Board-authorized commercial pathways include domestic credit-card processing (which management has described as completed), international credit-card processing, vehicle financing, vehicle-dealer financing, crypto integration with equity financing subject to applicable securities, financial-services and digital-asset requirements, IoT product sales and financing, and freight-forwarding and logistics applications using Deterministic AI. The Company expects to pursue these opportunities through a partner-led “flywheel” model that seeks to use established counterparties’ customer relationships, operational infrastructure and distribution capabilities to accelerate technology adoption and expand software and related product sales. These initiatives remain subject to due diligence, definitive agreements, required approvals, execution and market acceptance; there can be no assurance that any proposed partnership or financing will be consummated or generate material revenue.
Management is also authorized under the Board consent, subject to applicable restrictions and approvals, to evaluate and make investments, expenditures, advances, deposits, capital contributions, loans, securities acquisitions, licensing arrangements, revenue-sharing arrangements and other commercially reasonable commitments in connection with these pathways. Such activities may require capital and may expose the Company to investment, counterparty, liquidity, regulatory, valuation and execution risks. The Company’s objective is to use its Deterministic AI platform as a common technology layer across partner channels, with the potential both to expand sales and licensing of the Company’s software and IoT products and to realize gains from investments or securities transactions. Any capital gains are uncertain, depend on the performance and disposition of investments, and should not be viewed as recurring operating revenue.
The Board consent also approved and recommended, subject to stockholder approval and applicable Nasdaq Listing Rules, an amendment to increase the aggregate shares reserved under the Company’s 2018 Stock Incentive Plan to 10,000,000 shares and to preserve the intended size of that pool notwithstanding a reverse stock split, to the maximum extent permitted by law and the governing plan. The consent further recommended a bylaw amendment to establish a stockholder-meeting quorum of 33 1/3% of outstanding shares entitled to vote, present in person, by remote communication or represented by proxy. These matters are not effective merely by virtue of the Board’s recommendation and remain subject to the required stockholder vote and other applicable requirements. The Board also authorized calling a special meeting of stockholders.
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Deterministic AI and Enterprise Workflow Automation
Through its Perfecular subsidiaries, the Company is developing and seeking to commercialize software designed to automate complex business processes using what the Company refers to as “Deterministic AI.” The Company’s approach is focused on workflows in which information must be processed according to defined business rules, accounting requirements, regulatory standards or other predetermined constraints. The objective is to automate the execution, validation and completion of these workflows with greater consistency, repeatability and efficiency than traditional manual processes.
The Company views Deterministic AI as complementary to generative artificial intelligence. Generative AI is commonly used to interpret information, create content and support tasks with multiple possible answers. The Company’s Deterministic AI technology is designed to address process-oriented tasks in which information must be reconciled, validated, formatted or processed according to defined requirements. The Company believes that combining these approaches may provide opportunities to automate portions of complex enterprise workflows that have historically required substantial manual intervention.
The Company’s initial applications focus on SEC financial reporting automation. The platform is designed to support financial reporting professionals by automating portions of the preparation and formatting of SEC filings, including EDGARization and XBRL tagging. As described in the Company’s public announcements, the technology is designed to identify financial reporting concepts within disclosures, select corresponding XBRL taxonomy elements, format documents for EDGAR submission and generate structured outputs. The Company is also developing financial auditing automation capabilities intended to support the review and validation of financial information.
In July 2026, the Company announced its Deterministic AI Forms Auto-Populate Engine, designed to process business documents from multiple sources, identify and extract relevant information, validate and correlate information across documents, and populate downstream business forms. Potential document inputs identified by the Company include purchase orders, invoices, contracts, bills of lading, shipping documents and customs documentation. Potential outputs include commercial invoices, packing lists, customs declarations, shipping instructions and other business documents. The commercial scope, supported document types and performance of these capabilities remain subject to the applicable product configuration, testing and customer requirements.
The Company believes the underlying technology may have applications beyond SEC financial reporting, including accounting, tax preparation, medical billing, freight forwarding, insurance and other business processes that rely on structured information and defined rules. These applications represent potential areas of expansion and should not be interpreted as indicating that the Company has completed commercial deployment, secured customers or generated material revenue in each of these markets.
The Company’s strategy is to develop its initial financial reporting applications while evaluating opportunities to apply its technology to additional enterprise workflows. The timing and extent of commercialization will depend on product readiness, testing, customer acceptance, pricing, distribution, integration requirements, competition, available resources and the Company’s ability to establish commercially viable sales and service arrangements.
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Deterministic AI Platform — Development and Commercialization Strategy
During 2026, the Company publicly described additional capabilities of its proprietary Deterministic AI technology and its intended application to enterprise workflow automation. The Company’s announced development areas include SEC financial reporting automation, financial auditing automation and the Deterministic AI Forms Auto-Populate Engine.
SEC financial reporting automation. The Company’s software is designed to automate portions of the preparation of SEC filings, including document formatting, EDGARization and XBRL tagging. The Company believes that reducing manual document preparation, taxonomy selection and formatting work may improve workflow efficiency and reduce the time required to prepare filings. The extent of any improvement will depend on the complexity of the filing, the quality and completeness of the source information, the applicable reporting requirements and the need for review by management and professional advisers.
Financial auditing automation. The Company has identified financial auditing automation as another application of its Deterministic AI technology. This application is intended to support the identification and validation of financial information and inconsistencies. The Company should describe specific functions as commercially available only to the extent that those functions have been developed, tested and made available for customer use.
Forms Auto-Populate Engine. In July 2026, the Company announced a document-processing engine designed to extract and correlate information from multiple business documents and populate downstream forms. The Company believes this technology may be applicable to workflows in accounting, logistics, freight forwarding, customs documentation and other areas where information is transferred among related documents. The extent of the potential commercial opportunity will depend on the system’s performance in actual customer environments, the complexity of customer workflows, integration requirements and customer willingness to pay.
Potential market expansion. The Company believes its technology may be applicable to additional industries that depend on rule-driven document processing, including tax preparation, medical billing and insurance. The Company is evaluating the potential to extend the technology to additional applications. Such expansion may require further development, testing, customer-specific configuration, integration work, sales and marketing expenditures, and the establishment of appropriate commercial relationships.
Commercialization and operating results. The Company’s ability to realize revenue from Deterministic AI will depend on its ability to convert development activities and product demonstrations into paying customers, execute customer agreements, deliver products that meet customer requirements, establish pricing and distribution arrangements, and provide ongoing support. Development announcements and descriptions of potential product capabilities do not, by themselves, establish customer adoption, recurring revenue or commercial profitability.
Commercialization remains at a development, testing and early customer-engagement stage.
The Company expects that further development and commercialization may require additional financial and personnel resources. There can be no assurance that the Company will successfully commercialize the technology, obtain a sufficient number of customers, achieve anticipated productivity improvements, or generate revenue sufficient to recover its development and commercialization costs.
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Product Pipeline and Deterministic AI Development
The Company is pursuing the development and commercialization of a portfolio of software and technology products based on its proprietary technologies, including its Deterministic AI platform and Universal Smart Internet of Things (“IoT”) platform. The Company’s product development strategy is focused on automating structured business processes, reducing manual data entry and document preparation, improving the consistency of information processing, and expanding the commercial applications of its existing technology platforms.
The Company’s current product pipeline includes the following principal areas:
1. Deterministic AI – SEC Financial Reporting Automation
Through its Perfecular subsidiary, the Company is developing software designed to automate portions of the preparation of public-company financial reports and SEC filings. The intended functionality includes the processing of financial information, preparation and formatting of financial statements and related filing documents, EDGARization and XBRL tagging.
The Company has previously completed a Microsoft Word-based version of its SEC financial reporting software, and customer testing of the automated financial reporting software began in July 2025. The Company is continuing to develop and refine the platform with the objective of automating additional portions of the financial reporting workflow and supporting the generation of filing documents in formats including Word, PDF, HTML and XBRL.
The Company believes that the platform may reduce the time and manual effort required to prepare financial reports. Actual results will depend on the completeness and accuracy of source information, the complexity of the applicable filing, software functionality, and review by management and other responsible professionals. The software is intended to support the financial reporting process and does not eliminate the responsibility of public companies, their management, auditors or legal advisers to review and approve required disclosures.
2. Deterministic AI – Financial Auditing Automation
The Company has identified financial auditing automation as an additional application of its Deterministic AI technology. The planned application is intended to assist with the organization, comparison and validation of financial information and the identification of inconsistencies among financial records and supporting documents.
The Company is evaluating the development and integration of these capabilities with its financial reporting software. The extent to which these functions can be incorporated into a commercial product will depend on further development, testing, validation and customer requirements. The Company has not assumed that planned auditing functionality will be commercially available until the applicable capabilities have been sufficiently developed and tested.
3. Deterministic AI – Forms Auto-Populate Engine
In July 2026, the Company announced a document-processing engine designed to extract and correlate information from multiple business documents and use the extracted information to populate related forms and documents. The Company is evaluating applications of this technology in workflows that involve the transfer of information among related documents, including accounting, logistics, freight forwarding and customs documentation.
The Company believes that this technology may provide a basis for additional industry-specific software applications. Commercial deployment may require further development, testing, integration with customer systems and configuration to accommodate individual customer workflows. The Company’s ability to commercialize these applications will depend on product performance, customer demand, pricing and the development of appropriate sales and distribution channels.
4. Deterministic AI – Additional Industry Applications
The Company is evaluating additional potential applications of its Deterministic AI technology in business processes involving structured information, document processing and rule-based workflows. Potential areas of application include tax preparation, medical billing, insurance documentation and other administrative and financial processes.
These areas represent potential extensions of the Company’s technology and are not necessarily separate completed or commercially available products. Any expansion into these markets may require additional product development, testing, regulatory or industry-specific review, customer integration and commercial investment. There can be no assurance that the Company will successfully develop or commercialize products for these additional applications.
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5. Universal Smart IoT Devices and Sensors
In addition to its software pipeline, the Company continues to pursue the development and commercialization of its Universal Smart IoT platform. The platform is designed around a common hardware and software foundation intended to support multiple interchangeable sensor devices, with the objective of reducing the need to develop separate hardware and software for each individual instrument.
On August 20, 2026, the Company announced that its Universal Smart device and associated industrial sensors had completed certification testing by GRG Metrology & Test Group Co., Ltd. and Centre Testing International Group Co., Ltd. The products identified in the announcement included pH, total dissolved solids (TDS), oxidation-reduction potential (ORP), dissolved oxygen and turbidity sensors.
The Company believes that the completion of certification testing represents progress toward commercialization of the applicable products. The Company has also reported commencement of mold tooling design for its Universal Smart IoT platform. Further commercialization will require the Company to complete applicable manufacturing, production, quality-control, distribution and customer-development activities. Certification and tooling activities do not, by themselves, establish commercial demand or guarantee product sales or profitability.
Development Priorities and Commercialization Risks
The Company’s development priorities include completing and refining its Deterministic AI software applications, evaluating additional commercial applications, advancing the Universal Smart IoT platform toward production, and identifying potential customers and strategic commercial relationships.
The Company’s ability to generate revenue from these products will depend on its ability to complete development and testing, demonstrate reliable product performance, obtain customer acceptance, establish commercially viable pricing, execute customer agreements and provide ongoing implementation and support. Certain products and applications described above remain under development or evaluation and may require additional capital, personnel and other resources before they can be commercially deployed.
The Company will continue to evaluate the allocation of development resources based on technical progress, customer feedback, commercial opportunities and available financial resources. There can be no assurance that any product under development will be completed on the anticipated schedule, achieve commercial acceptance, generate material revenue or become profitable.
Acquisition and Operations of 901 Corporate Center Drive
On April 17, 2026, the Company, through its wholly owned subsidiary, Lusher Holding LLC, completed the acquisition of the commercial property located at 901 Corporate Center Drive, Monterey Park, California, for an aggregate purchase price of $17.7 million, exclusive of closing costs. The Property consists of four parcels totaling approximately 10.73 acres, approximately 100,743 square feet of rentable Class A office space, and a four-level parking structure. The parking facilities include a solar-panel canopy subject to a lease arrangement.
At the time of acquisition, the Property was approximately 99.2% occupied by approximately 16 tenants. The existing tenant leases were retained in connection with the acquisition, and most leases then in place had remaining terms of approximately five to eight years. The Company has retained third-party property management services and intends to operate the Property as an income-producing commercial real estate asset while using approximately 2,000 square feet for its own operations.
The acquisition expanded the Company’s operations beyond its historical technology development, manufacturing and related business activities by adding commercial rental income and the associated costs and responsibilities of owning and operating a commercial property. The financial results from the Property depend on continued tenant occupancy, collection of contractual rent, lease renewals, property operating costs, required maintenance and capital expenditures, and the Company’s ability to service the debt incurred to finance the acquisition.
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Rental Revenue and Property Operating Results
For the three months ended September 30, 2026, the Property generated rental revenue of approximately $789,128. For the nine months ended September 30, 2026, rental revenue was approximately $1,441,078. No rental revenue generated in 2025 as the Company acquired the Property on April 17, 2026; accordingly, the 2026 results include only the period during which the Company owned or operated the Property, as applicable. Comparisons with 2025 should take into account that the Company did not own the Property during the corresponding prior-year periods.
Property-related operating expenses for the three and nine months ended September 30, 2026 were approximately $400,655 and $660,318, respectively. These expenses included property management, repairs and maintenance, utilities, insurance, and property. The Company should separately discuss any material changes in rental revenue, property operating expenses, depreciation or interest expense that affected its consolidated results.
The Property provides a source of recurring contractual rental income; however, rental revenue and operating results may fluctuate as leases expire, tenants renew or vacate, new leases are executed, rental rates change, or operating expenses increase.
Tenant Concentration and Lease Expirations
The Company’s rental revenue and tenant receivables are subject to concentration and credit risk. A default, bankruptcy, early termination or nonrenewal by a significant tenant could reduce rental revenue, increase vacancy and leasing costs, and adversely affect the Property’s operating results and cash flows.
As of September 30, 2026, certain tenants occupied space on a month-to-month basis, while certain fixed-term leases were scheduled to expire in 2027 and 2028. Lease expirations and nonrenewals could result in vacancy and reduced rental income. Actual rental income may differ from contractual amounts as a result of lease renewals, vacancies, rent concessions, tenant defaults or new leasing activity.
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Property Financing and Liquidity Considerations
The Company financed a portion of the acquisition with an $11.05 million term loan from East West Bank. The loan bears interest at 6.25% for the first three years and thereafter at the Wall Street Journal Prime Rate plus 0.25%, subject to a 6.25% floor, and is scheduled to mature on April 1, 2036. As of September 30, 2026, the outstanding principal balance was approximately $10,968,444. Interest expense attributable to the loan for the three and nine months ended September 30, 2026 was approximately $232,960 and $319,063, respectively.
The loan creates ongoing principal and interest payment obligations and exposes the Company to changes in interest rates after the initial fixed-rate period, subject to the contractual minimum rate. The Company’s ability to meet these obligations depends in part on rental collections, property operating costs, cash available from its other operations and access to financing. The loan agreement requires a minimum debt coverage ratio of 1.50 to 1.00, tested annually beginning December 31, 2026. Failure to meet the specified quarterly coverage condition triggers restrictions on distributions and requires certain excess cash flows to be applied to loan principal until the ratio is met for two consecutive quarters. The agreement also requires a $210,000 reserve account and restricts additional indebtedness, liens and certain asset transfers without the lender’s prior written consent.
Property-Related Risks and Outlook
The Property’s operating performance is subject to risks common to commercial real estate, including tenant concentration, lease renewal and vacancy risk, tenant creditworthiness, changes in local commercial real estate conditions, increases in property taxes, insurance and maintenance costs, and unanticipated capital expenditures. The Property also requires ongoing management and maintenance and may require additional capital investment to preserve its condition and competitiveness.
The Company believes the Property provides an opportunity to generate recurring rental income while housing a portion of its own operations. Nevertheless, the acquisition and the Property’s existing occupancy do not guarantee future rental revenue, operating profitability or positive cash flow. The Company’s future results will depend on tenant retention, lease renewals, collections, operating expenses, financing costs and other factors affecting commercial real estate operations.
Reverse Stock Split
On June 23, 2026, we effected a four-to-one reverse stock split of our common stock. Except as otherwise stated, all numbers in this Quarterly Report on Form 10-Q reflect the reverse stock split.
Our Current Products Include:
We are a wholesaler of various digital, analog, and quantum light meters and filtration products, including fan speed adjusters, carbon filters and HEPA filtration systems.
Ubiquitor Wireless Universal Sensor Device
We have developed a device we call the Ubiquitor (the "Ubiquitor"), which replaces the functions of traditional digital measurement and sensing products by integrating many digital sensors and measurement tools into one single digital device. We believe the platform represents a technological advancement in the IoT marketplace by integrating large numbers of technologies, including cloud technology, wired and wireless communication technology, software programming, instrumentation technology, artificial intelligence, PLC technology, and sensor networking into a single platform. We believe the result of such integration is a smaller, cheaper, and faster circuit system design than those currently offered in the instrumentation market.
Our USIP technology that will make Ubiquitor possible is an advanced software and hardware integrated instrumentation platform that uses a large-scale modular design approach. The large-scale modular design approach subdivides instruments into a foundation component (a USIP) and architecture-specific components (sensor nodes), which together are intended to replace the functions of traditional instruments at a fraction of their cost. The USIP has an open architecture, incorporating a variety of individual instrument functions, sensors, and probes from different industries and vendors. The platform features the ability to connect potentially thousands of different sensors or probes, addressing major limitations present in traditional instrumentation systems.
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Additional Focus Universal Inc. IoT Products under Smart AVX. We also sell integrated IoT equipment under the Smart AVX brand to connect devices across platform systems and to facilitate unified collaboration across audio-visual technologies, digital media technologies, security and surveillance technologies and communication technologies. This approach allows us to provide customers with ease of use, design and integration, and installation and maintenance by utilizing technology that integrates our five core technologies.
We have integrated our Smart AVX-branded products across the following strategic sub-sectors: LED Audio-visual Panel Products, large format Smart Multimedia Touch Screens, Pan Tilt Zoom (“PTZ”) Dome Cameras and Network Video Recorders (“NVRs”), and VOIP Phone Services.
| 1. | LED Audio-visual Panel Products. LED panel digital displays have become an integral and modern-day solution that addresses the communication and display demands of the residential and commercial customer base. Due to the flexible configuration of the LED panels, the modular design that enables the ability to incorporate a design into any size space, the flexibility of the standard size panels to accommodate curvature in the design space, the ability to address transparency in the panel displays and the ability to create new areas for delivering media to the public, our LED panel digital displays allow us to easily adapt our display design to spaces of any size and shape, making any customer space a customizable output and connected piece within a system. The option to create full-sized screens in any space, while addressing any environmental demands, allows us to use state-of-the-art media resulting in immersive, three-dimensional, captivating content delivery within any system. | |
| 2. | Large Format Smart Multimedia Touch Screens. Smart AVX-branded large format touch screens deliver interactive solutions for a wide variety of industries and applications, including education, healthcare, commercial, residential and government applications. While interacting with a touch display is commonplace in public-consumer spaces, we integrate large format Smart touch screens in small business, commercial applications such as dental offices and other business scenarios. These market applications continue to be underserved with touch-enabled devices, and our installation engineers and design staff can customize solutions for unique business and commercial application projects. The Company, through the Smart AVX brand, offers a myriad of customized choices and a long list of options within the current touch screen technology in a refined product. Our products allow future integration of our core platform technologies, such as the LED digital displays, the Ubiquitor, PTZ Dome Cameras and VOIP Phone Systems, allowing for pinch, zoom, scrolling, and videoconferencing within the touch screen format. |
Perfecular Corporate Services, One Touch Financial Software
Financial reporting is the annual and quarterly reporting process by which a public company keeps investors aware of a company’s financial condition, allowing them to have the information they need before making an investment decision.
Because of the depth and nature of the information they contain, reports on Forms 10-K and 10-Q can become time-consuming, especially given the complex processes that require a company’s internal teams to gather large amounts of data across multiple sources. The time and expertise required to complete the process is a substantial burden. SEC reporting deadlines are firm and inflexible.
Delays and mistakes in SEC financial reporting can have far-reaching consequences for companies and their shareholders including. SEC review, enforcement actions, and penalties. Late, inaccurate, or incomplete filings can often lead to a drop in the company’s stock price and a decrease in investor confidence.
Human data entry of hundreds or thousands of financial numbers in the financial report imposes another challenge and presented by regularly occurring human error. This risk is compounded by a frequent requirement to update or revise these hundreds or thousands of numbers during the time-constrained review processes and auditing processes prior to submission.
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Given the complexity and volume of data involved, companies are looking for solutions that not only save cost, and reduce the time and effort required to report in a timely manner but also improve accuracy and compliance.
We began customer testing of our fully automated SEC financial reporting software on July 22, 2025. The Company plans to launch a technology roadshow to showcase this groundbreaking platform. Interested clients, partners, corporate filers, and investors will be welcomed to contact us for meetings and product demonstrations.
Currently, several companies offer semi-automated solutions that address only part of the tagging process. We have developed a fully automated, end-to-end solution powered by both automation and Variegated AI. We believe technology enables the computer to conduct the activities for which the computer is designed and optimal, while allowing humans to remain in the decision loop and center upon what they excel at.
With a single click, our software can:
| · | Retrieve financial statements from accounting platforms, | |
| · | reformat data into spreadsheets for consolidated financial reporting, | |
| · | automatically generate consolidated financials, | |
| · | populate the word-processed version of SEC filings, | |
| · | convert the documents to SEC-compliant versions via formatting, and | |
| · | embed accurate tags into the HTML file — with very limited manual input. |
Research and Development Efforts of Power Line Communication
Power Line Communication (“PLC”) technology is a communication technology that enables sending data over existing power cables. One advantage of this technology is that PLC does not require substantial new investment for its communications infrastructure. Rather, PLC utilizes existing power lines, thereby utilizing a distribution network that already penetrates all residential, commercial and industrial premises. Accordingly, connectivity via PLC technology is potentially the most cost-effective, scalable interconnectivity approach for IoT. We believe PLC technology can be an integral part of our communication infrastructure for the IoT, which enables reliable, real-time measurements, monitoring, and control. A large variety of appliances may be interconnected by transmitting data through the same wires that provide electrical energy.
Our patented PLC technology uses an ultra-narrowband spectrum channel of less than 1 KHz to establish a long-distance link between transmitter and receiver. Thus, we believe that our proprietary ultra-narrowband PLC technology will offer a promising alternative to wireless networks and provide the backbone communication infrastructure for IoT devices.
The primary design goal of the power line network is electric power distribution, not data transmission. The harsh electrical noise present on power lines and variations in equipment and standards make data transmission over the power grid difficult. These technological challenges have impeded, or even halted, progression of PLC technology.
For a description of our products and services offering, please refer to Item 1. “Business” beginning on page 1 of our Annual Report on Form 10-K for the fiscal year ending December 31, 2025, filed with the Securities and Exchange Commission on March 31, 2026.
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Research and Development Efforts of 5G Cellular Technology
Just like our ultra-narrowband technology can be used to effectively reduce noise in powerline communication technology, our internal research suggests that our ultra-narrowband technology can be leveraged to create a type of 5G wireless communication technology that can achieve both low band 5G coverage and an estimated 1 Gbps high band speed. We employ an ultra-narrow spectrum channel (<1KHz) to establish an ultra-long-distance link between the 5G base station and the receiver which reduces noise and interference entering the bandwidth.
For a description of the ultra-narrowband technology and the 5G applications, see “Part I - Item 1. Business in our Annual Report on Form 10-K filed with the SEC on March 31, 2026.
We signed a contract with Shenzhen Donghui Precision Mold Manufacturing Co., Ltd. and officially commenced the mold tooling design for the Universal Smart Internet of Things (IoT). For our Company this marks a pivotal milestone in the commercialization of the Universal Smart IoT, a breakthrough that has been over a decade in the making. With over a decade of innovation, we are now ready to move forward with full-scale production and commercialization. In doing so, we hope not only fulfill our promise to shareholders but also demonstrate to the world that deploying complex IoT technology can be as easy as plugging in an office phone. Our internal research suggests that our platform provides both a competitive edge and cost savings when compared to traditional, non-IoT devices—thanks to universal hardware and software shared across all sensors. Switching from one sensor to another requires no change to the underlying device’s hardware or software, enabling true interoperability across devices.
Intellectual Property Protection
Currently, the Company has 18 pending U.S. nonprovisional patent applications and 9 issued U.S. patents.
Competitors
We have identified several competitors specifically in the wireless sensor node industry, including traditional instruments or device manufacturers. However, we are not trying to compete with traditional instruments or device manufacturers because we utilize our Ubiquitor device in conjunction with our smartphone application, which we believe will be a completely different product category.
There are many competitors in the SEC Financial Reporting software space, including Workiva, ActiveDisclosure, Datarails, and Carta. We believe that our product will be superior because our pricing will be substantially cheaper than the current competitors in the market. Also, since it is an integration for common desktop applications, we expect software implementation to be rapid, accessible, and straightforward.
IoT Installation Industry
There are several companies that compete with AVX in smart home installations, including Vivint Smart Home, Savant, Crestron and Control4. However, we believe we can distinguish ourselves from our competitors by offering substantially more customization and interoperability with existing platforms. While our service offerings do not rely on always providing the entire installation for the end client, our Company is able to seamlessly provide accenting, replacement, or conversion home automation systems which are easier to use and interoperate for the end client, and with limited rewiring. Complete installation by Crestron ranges between $100,000 and $500,000 and an installation by Control4 ranges between $70,000 and $250,000. The cheapest competitor we can identify in this sector is Vivint Smart Home, which costs less than $50,000 to install; however, we understand that the Vivint Smart Home focuses on security systems only and that users have no other smart applications, which our smart home product line would include. Our sales staff have encountered a growing client base of unhappy customers with the pre-existing and completely siloed platform systems that reportedly are not easy to use or program, require costly specialty service for simple operations, are subject to lengthy software and hardware backlogs, and despite being based on the same platform, fail to operate compatibly, possessing frequent errors and bugs. Our products are being designed to solve the foregoing problems.
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Air Filtration Systems and Meter Products Industry
The air filtration system and meter products industry is a niche industry. Air purification methods are an effective way to control contaminants and improve indoor air quality; and as a result, many national and local governments overseeing indoor air quality and other emissions are enacting stricter workforce health and safety regulations in this area, which drives demand.
Market Potential
We believe universal wireless smart technology will play a critical role for traditional instrument manufacturers, as currently the undertaking of an IoT project is simply too expensive and difficult to develop for medium or smaller companies and carries a 75% failure rate according to Cisco Systems. The cost factor is the first consideration when deciding whether a company wants to develop smart wireless technologies and implement them into their products or use them in their field testing. We also hope to play a role in academic laboratories, particularly with smaller academic laboratories that are sensitive to price. Regarding the larger IoT industry statistics, overall enterprise IoT spending increased to $201 billion in 2022, an increase of 21.5%. The outlook for growth in 2023 is 18.5% from this large base of enterprise spending. More specifically, the IoT sensors market is projected to reach $26 billion by 2026 from $11.1 billion in 2022. The IoT marketplace size assessments usually include the hardware components and the software components, which often contain a Software as a Service (SaaS) model. Additionally, the rising need for reliable high bandwidth communication for IoT devices is expected to rise to $664.75 billion in 2028, spearheaded by the currently predominant services in the 5G category. We would also expect this market to grow with the addition of new categories of services delivering reliable high bandwidth communication for IoT devices and would cannibalize and expand the existing services where the new services proved to be more effective and efficient.
The financial reporting software market size was estimated at 13.9 billion in 2022 and is projected to reach $36.6 billion by 2030. The expanding demand of software solutions to reduce the overall cost of compliance and boost efficiency is one of the main reasons the financial reporting software sector is projected to grow.
Results of Operations
Our results of operations for the three and nine months ended September 30, 2026, include the revenue generated from the Property and related expenses from April 17, 2026, through September 30, 2026 which is not included in our results of operations for the three and nine months ended September 30, 2025. Accordingly, the results of operations for the three and nine months ending September 30, 2026 is not directly comparable to the prior-year periods.
For the three months ended September 30, 2026 compared to the three months ended September 30, 2025
Revenue
| For the three months ended September 30, 2026 | For the three months ended September 30, 2025 | Increase (Decrease) $ | ||||||||||
| Rental revenue | $ | 789,128 | $ | – | $ | 789,128 | ||||||
| Other revenue | 13,300 | 28,689 | (15,389 | ) | ||||||||
| Total revenue | $ | 802,428 | $ | 28,689 | $ | 773,739 | ||||||
Our consolidated gross revenue for the three months ended September 30, 2026 and 2025 was $802,428 and $28,689, respectively. The increase in revenue was primarily attributable to an increase in rental revenue from Lusher Holding LLC.
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The major components of our cost and operating expenses for the three months ended September 30, 2026 and 2025 are outlined in the table below:
For the three months ended September 30, 2026 | For the three months ended September 30, 2025 | Increase (Decrease) $ | ||||||||||
| Property operating expense | $ | 400,655 | $ | – | $ | 400,655 | ||||||
| Cost of other revenue | 57,869 | 30,301 | 27,568 | |||||||||
| Depreciation and amortization | 235,838 | 6,272 | 229,566 | |||||||||
| Selling expense | 2,199 | 2,374 | (175 | ) | ||||||||
| Compensation – officers and directors | 117,642 | 124,981 | (7,339 | ) | ||||||||
| Research and development | 484,185 | 288,078 | 196,107 | |||||||||
| Professional fees | 303,761 | 321,917 | (18,156 | ) | ||||||||
| General and administrative | 356,163 | 435,142 | (78,979 | ) | ||||||||
| Total operating expenses | $ | 1,958,312 | $ | 1,209,065 | $ | 749,247 | ||||||
For comparability, $6,272 of depreciation expense included in general and administrative expenses in the 2025 financial statements has been presented separately in the table above. This presentation adjustment does not affect total expenses or net loss.
Property operating expense for the three months ended September 30, 2026 were $400,655, compared to $0 for the three months ended September 30, 2025. The increase in property operating expenses was primarily due to the acquisition of the commercial property on April 17, 2026.
Cost of other revenue for the three months ended September 30, 2026 were $57,869, compared to $30,301 for the three months ended September 30, 2025. The increase in the cost of other revenue was primarily due to an increase in the number and quantity of other revenue-generating transactions.
Depreciation and amortization for the three months ended September 30, 2026 were $235,838, compared to $6,272 for the three months ended September 30, 2025. The increase in depreciation and amortization expense was primarily due to depreciation expense recognized on the commercial property acquired on April 17, 2026.
Selling expenses for the three months ended September 30, 2026 were $2,199, compared to $2,374 for the three months ended September 30, 2025. Selling expenses were mainly from third party advertising fees and marketing related fees. The decrease was primarily attributable to lower advertising and marketing expenses.
Compensation – officers and directors were $117,642 and $124,981 for the three months ended September 30, 2026 and 2025, respectively. The decrease in cost was a result of the decrease in the share price, which reduced the stock-based compensation expense for the associated directors.
Research and development costs were $484,185 and $288,078 for the three months ended September 30, 2026 and 2025, respectively. The reason for the change is due to small fluctuations in the staffing and other routine development expenses related to R&D, especially with respect to the spend in the Focus Shenzhen Office.
Professional fees were $303,761 during the three months ended September 30, 2026, compared to $321,917 during the three months ended September 30, 2025. The reason for the change is mainly due to the decrease in advisory fee related to equity issuance.
General and administrative expenses for the three months ended September 30, 2026 was $356,163 compared to $435,142 during the three months ended September 30, 2025. The reason for the change is mainly due to the decrease in office expenditure.
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Other Income (expense)
Other expense for the three months ended September 30, 2026 was $233,541, compared to other income of $14,001 for the three months ended September 30, 2025.
Net Losses
During the three months ended September 30, 2026 and 2025, we incurred net loss of $1,389,425 and $1,166,375 respectively, due to the factors discussed above.
For the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025
Revenue
For the nine months ended September 30, 2026 | For the nine months ended September 30, 2025 | Increase (Decrease) $ | ||||||||||
| Rental revenue | $ | 1,441,078 | $ | – | $ | 1,441,078 | ||||||
| Other revenue | 84,493 | 254,274 | (169,781 | ) | ||||||||
| Total revenue | $ | 1,525,571 | $ | 254,274 | $ | 1,271,297 | ||||||
Our consolidated gross revenue for the nine months ended September 30, 2026 and nine months ended September 30, 2025 was $1,525,571 and $254,274, respectively. The increase in revenue was primarily attributable to an increase in rental revenue from Lusher Holding LLC.
The major components of our cost and operating expenses for the nine months ended September 30, 2026 and nine months ended September 30, 2025 are outlined in the table below:
For the nine months ended September 30, 2026 | For the nine months ended September 30, 2025 | Increase (Decrease) $ | ||||||||||
| Property operating expense | $ | 660,318 | $ | – | $ | 660,318 | ||||||
| Cost of other revenue | 107,825 | 237,754 | (129,929 | ) | ||||||||
| Depreciation and amortization | 443,584 | 17,231 | 426,353 | |||||||||
| Selling expense | 35,738 | 58,774 | (23,036 | ) | ||||||||
| Compensation – officers and directors | 352,831 | 375,725 | (22,894 | ) | ||||||||
| Research and development | 1,111,147 | 1,127,633 | (16,486 | ) | ||||||||
| Professional fees | 1,440,110 | 1,224,063 | 216,047 | |||||||||
| General and administrative | 1,351,188 | 1,207,757 | 143,431 | |||||||||
| Total operating expenses | $ | 5,502,741 | $ | 4,248,937 | $ | 1,253,804 | ||||||
For comparability, $17,231 of depreciation expense included in general and administrative expenses for the nine months ended September 30, 2025 has been presented separately in the table above. This presentation adjustment does not affect total expenses or net loss.
Property operating expense for the nine months ended September 30, 2026 were $660,318, compared to $0 for the nine months ended September 30, 2025. The increase in property operating expenses was primarily due to the acquisition of the commercial property on April 17, 2026.
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Cost of other revenue for the nine months ended September 30, 2026 were $107,825, compared to $237,754 for the nine months ended September 30, 2025. The decrease in the cost of other revenue was primarily due to a decrease in the number and quantity of other revenue-generating transactions.
Depreciation and amortization for the nine months ended September 30, 2026 were $443,584, compared to $17,231 for the nine months ended September 30, 2025. The increase in depreciation and amortization expense was primarily due to depreciation expense recognized on the commercial property acquired on April 17, 2026.
Selling expenses for the nine months ended September 30, 2026 were $35,738, compared to $58,774 for the nine months ended September 30, 2025. Selling expenses were mainly from third party advertising fees and marketing related fees. The reason for the decrease is mainly due to decrease in sales related to Focus Shenzhen Office.
Compensation – officers and directors were $352,831 and $375,725 for the nine months ended September 30, 2026 and nine months ended September 30, 2025, respectively. The reason for the decrease is primarily due to the departure of certain employee.
Research and development costs were $1,111,147 and $1,127,633 for the nine months ended September 30, 2026 and nine months ended September 30, 2025, respectively. The reason for the change is due to small fluctuations in the staffing and other routine development expenses related to R&D, especially with respect to the spend in the Focus Shenzhen Office.
Professional fees were $1,440,110 during the nine months ended September 30, 2026, compared to $1,224,063 during the nine months ended September 30, 2025. The increase in these professional fees compared to the prior period was primarily due to an increase in legal advisory fees related to preferred stock and other securities matters.
General and administrative expenses for the nine months ended September 30, 2026 was $1,351,188 compared to $1,207,757 during the nine months ended September 30, 2025. The increase in general and administrative expenses was primarily due to the additional administrative and overhead costs associated with the property acquired in April 2026.
Other Income (expense)
Other expense for the nine months ended September 30, 2026 was $177,291, compared to other income of $71,262 for the nine months ended September 30, 2025.
Net Losses
During the nine months ended September 30, 2026 and nine months ended September 30, 2025, we incurred net loss of $4,154,461 and $3,923,401 respectively, due to the factors discussed above.
Liquidity and Capital Resources
Working Capital
| September 30, 2026 | December 31, 2025 | |||||||
| Current Assets | $ | 4,857,865 | $ | 8,647,129 | ||||
| Current Liabilities | (989,317 | ) | (366,471 | ) | ||||
| Working Capital | $ | 3,868,548 | $ | 8,280,658 | ||||
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Cash Flows
The table below, for the periods indicated, provides selected cash flow information:
For the nine months ended September 30, 2026 |
For the nine months ended September 30, 2025 |
|||||||
| Net cash used in operating activities | $ | (2,742,684 | ) | $ | (3,709,104 | ) | ||
| Net cash used in investing activities | (6,632,412 | ) | (27,318 | ) | ||||
| Net cash provided by financing activities | 5,870,130 | 572,826 | ||||||
| Effect of exchange rate | 10,239 | (14,838 | ) | |||||
| Net change in cash | $ | (3,494,727 | ) | $ | (3,178,434 | ) | ||
Cash Flows from Operating Activities
Our net cash outflows from operating activities of $2,742,684 for the nine months ended September 30, 2026 was primarily the result of our net loss of $4,154,461 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses.
Our net cash outflows from operating activities of $3,709,104 for the nine months ended September 30, 2025 was primarily the result of our net loss of $3,923,401 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses.
We expect that cash flows from operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our net revenues and operating results, utilization of new revenue streams, in line with our shifting revenue streams, collection of accounts receivable, and timing of billings and payments.
Cash Flows from Investing Activities
For the nine months ended September 30, 2026 we had cash outflow from investing activities of $6,632,412 from the proceed from sale of marketable securities of $121,823 offset by the purchase of property and equipment of $6,656,391 and capitalized software cost of $97,844. For the nine months ended September 30, 2025 we had cash outflow from investing activities of $27,318 from the purchase of property and equipment of $27,318.
Cash Flows from Financing Activities
For the nine months ended September 30, 2026, we had cash inflows of $5,870,130, consisting of $3,547,348 in proceeds from the sale of pre-funded units in a private placement offering and $3,720,676 in proceeds from stock issuance and warrant exercises, offset by $961,860 of redemption of preferred stock, $81,891 of repayment on a bank loan, and $354,143 spent on the purchase of treasury stock. For the nine months ended September 30, 2025, we had cash inflows of $572,826, consisting of $822,501 of gross proceeds from the sale of stock issued in a private placement offering and offset by $249,675 spent on the purchase of treasury stock.
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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 incurred a net loss of $4,154,461 for the nine months ended September 30, 2026. In addition, the Company had an accumulated deficit of $35,404,538 as of September 30, 2026 and negative cash flow from operating activities of $2,742,684 for the nine months ended September 30, 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 Company believes its current cash position will be able to fund its operations through the second quarter of 2027. 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 September 30, 2026, the Company had cash, and short-term investments, in the amount of $4,440,231. 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.
Off-Balance Sheet Arrangements
As of September 30, 2026, we did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation SK.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
Our Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements. Except for ASU 2024-03, which the Company is currently evaluating as discussed in Note 3, the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a15(e) and 15d15(e) under the Securities Exchange Act of 1934, at the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our Company, particularly during the period when this report was being prepared.
Our management concluded we did not maintain effective controls over the Company’s financial reporting due to the weakness described below in internal controls. The material weaknesses in our internal control over financial reporting, caused principally by inadequate staffing and technical expertise in key positions, resulted in overly relying on outside consultants to make numerous adjustments to our financial statements. Additionally, the significant deficiencies or material weaknesses could result in future material misstatement of the consolidated financial statements that would not be prevented or detected. Management has concluded that the identified control deficiencies constitute a material weakness.
Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Internal Controls
Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors or mistakes or intentional circumvention of the established process.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 16, 2025, a former engineer filed a claim against Focus Shenzhen, a wholly owned subsidiary of the Company, alleging wrongful termination and other violations of the China Labor Code. On June 18, 2026, the appellate court issued its final judgment dismissing the appeal and affirming the original judgment. The Company accrued RMB 160,095.84 (approximately $23,880) related to the judgment, which remained unpaid as of September 30, 2026. Approximately RMB 165,802 (approximately $23,880) in Focus Shenzhen’s bank account remained frozen. See Note 12—Contingencies to the condensed consolidated financial statements.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”), which could materially affect our business, financial condition or future results. The risks described in the Annual Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or operating results. The following information updates, and should be read in conjunction with, the information disclosed in Part I, Item 1A, “Risk Factors,” contained in the Annual Report. Except as disclosed below, there have been no material changes from the risk factors disclosed in the Annual Report.
Our Deterministic AI technology may not achieve commercial acceptance or generate material revenue.
The Company is developing Deterministic AI software for SEC financial reporting, financial auditing automation, business document processing and other potential enterprise applications. Although the Company believes these technologies may provide opportunities to automate certain rule-driven business processes, the Company’s ability to commercialize them remains subject to significant uncertainty.
The Company may be unable to convert product development, demonstrations or customer testing into paid contracts or recurring revenue. Potential customers may be reluctant to adopt new software for financial reporting, auditing or other business-critical processes because of concerns regarding accuracy, reliability, regulatory requirements, data security, confidentiality, integration with existing systems, or the need for human review. Customers may also require customization, testing or support that increases the Company’s costs or delays deployment.
The Company’s technology may not perform as expected in all customer environments or with all document types, source data, accounting systems, regulatory requirements or business workflows. Errors in data extraction, reconciliation, document processing, XBRL taxonomy selection or output generation could require additional review and correction and could expose the Company or its customers to financial, operational, reputational or legal risks. The Company’s products may also face competition from established software providers, specialized service firms, generative AI providers and other automation technologies.
The Company’s potential expansion into accounting, tax preparation, medical billing, freight forwarding, insurance and other industries may require additional product development, industry-specific expertise, customer relationships, regulatory analysis and capital. The Company may not have sufficient resources to pursue all of these opportunities, and it may not achieve commercial adoption in any particular market.
Accordingly, there can be no assurance that the Company’s Deterministic AI products will achieve broad customer adoption, generate significant or recurring revenue, reduce costs as anticipated, or become profitable. If commercialization is delayed or unsuccessful, the Company may not recover its development and marketing expenditures, and its business, financial condition and results of operations could be materially adversely affected.
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We have a history of operating losses and going concern basis, and we may not be able to sustain profitability.
We were incorporated on December 4, 2012, and as of September 30, 2026, we had an accumulated deficit of $35,404,538. Our current liquidity position raises substantial doubt about our ability to continue as a going concern. We have assessed our ability to continue as a going concern for a period of one year from the date of the issuance of this Quarterly Report. We had a net loss of $4,154,461 and $3,923,401 for the nine months ended September 30, 2026 and nine months ended September 30, 2025, respectively and a net loss of $4,787,769 and $3,200,138 for the years ended December 31, 2025 and 2024, respectively. In addition, we had an accumulated deficit of $31,023,411 and $25,782,308 as of December 31, 2025 and 2024, respectively, and negative cash flow from operating activities of $5,102,771 and $4,656,754 for the years ended December 31, 2025 and 2024, respectively. If we are not successful in growing revenues and controlling costs, we will not achieve profitable operations or positive cash flow, and even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.
The late filing of certain financial statements in connection with the Property acquisition pursuant to Rule 3-14 of Regulation S-X and Item 9.01 of Form 8-K may limit our ability to raise capital.
On April 27, 2026, we filed a Current Report on Form 8-K to report the completion of our acquisition of the Property. Based on information available to us, we believe that the acquisition would qualify as a “significant” acquisition under Rule 1-02(w) of Regulation S-X and as a result, under Rule 3-14 of Regulation S-X, we are required to provide (i) historical audited financial statements for the Property and (ii) pro forma historical financial information combined to reflect the Property’s financial information (collectively, the “S-X financial information”).
On October 30, 2026, we filed Amendment No. 1 to our Current Report on Form 8-K originally filed on April 27, 2026, regarding our acquisition of the Property. The amendment included the Property’s audited financial statements for the year ended December 31, 2025 and the period from January 1, 2026 through April 16, 2026, together with unaudited pro forma condensed consolidated financial information. The pro forma information is presented for informational purposes only and does not represent actual results that would have occurred had the acquisition taken place on the dates assumed or project future operating results.
We have concluded that we have not maintained effective internal control over financial reporting through the nine months ended September 30, 2026 or the years ended December 31, 2025, and December 31, 2024. Significant deficiencies and material weaknesses in our internal control could have material adverse effects on us.
Our management has concluded that, as of September 30, 2026, our disclosure controls and procedures were, in design and operation, not effective at a reasonable assurance level due to the following material weaknesses in our internal control over financial reporting. The material weaknesses in our internal control over financial reporting, caused principally by inadequate staffing and technical expertise in key positions, resulted in overly relying on outside consultants to make numerous adjustments to our financial statements. It is important for us to maintain effective internal control over financial reporting, which is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
A material weakness in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information. If we are unsuccessful in implementing or following our remediation plan, we may not be able to timely or accurately report our financial condition, results of operations or cash flows or maintain effective disclosure controls and procedures. If we are unable to report financial information timely and accurately or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by the SEC, any one of which could adversely affect our business prospects.
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We expect that we will need additional future financing which may not be available on acceptable terms, if at all.
Unless we generate significant revenue from operations, we will need to raise additional capital to fund our operations, and we cannot be certain that funding will be available to us on acceptable terms on a timely basis, or at all. Unless our revenue increases from past historical revenue, our current cash, including proceeds from our recent completed public offerings and debt issuances, is anticipated to be sufficient to fund operations less than a year. To meet our financing needs, we are considering multiple alternatives, including, but not limited to, additional equity financings, which we expect will include sales of common stock, debt financings, equipment sale leasebacks, and/or funding from partnerships or collaborations. Our ability to raise capital through the sale of securities may be limited by our inability to utilize a registration statement on Form S-3 to raise capital due to the late filing of certain Current Reports on Form 8-K. We will not be eligible to use a registration statement on Form S-3 again until we have timely filed all materials and reports required to be filed pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934 for a period of at least twelve (12) calendar months immediately preceding the filing of a new registration statement on Form S-3. In addition, our current outstanding debt holders have certain covenants restricting our ability to raise capital. Any debt financing, if available, may involve restrictive covenants (such as those in our current debt financing) that may impact our ability to conduct our business.
If we are unable to maintain compliance with Nasdaq continued listing standards, including maintenance of at least $2.5 million of stockholders’ equity, maintenance of $5,000,000 of market value of listed securities, if the new Nasdaq continued requirement is enforced, and maintenance of a $1.00 minimum bid price, our common stock may be delisted from Nasdaq.
There can be no assurances that we will be able to maintain our Nasdaq listing in the future. In the event we are unable to maintain compliance with Nasdaq continued listing standards and our common stock is delisted from Nasdaq, it could likely lead to a number of negative implications, including an adverse effect on the price of our common stock, reduced liquidity in our common stock, the loss of federal preemption of state securities laws and greater difficulty in obtaining financing. In the event of a delisting, we would take actions to restore our compliance with Nasdaq’s continued listing standards, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s continued listing requirements.
On July 22, 2026, the SEC approved Nasdaq’s recently proposed rule changes to (i) adopt Nasdaq Listing Rule 5550(a)(6) to require issuers listed on the Nasdaq Capital Market to maintain a minimum Market Value of Listed Securities (as defined in Nasdaq Listing Rule 5005(a)(23)) (“MVLS”) of at least $5 million for a period of thirty (30) consecutive business days, and (ii) amend Rule 5810 to suspend trading and immediately delist from Nasdaq securities of issuers that do not satisfy the proposed new requirements, and Rule 5815 to set forth the procedures for requesting a hearing before a Hearings Panel and the scope of the Panel’s discretion. MVLS is generally calculated by multiplying the consolidated closing bid price by the number of shares of listed securities outstanding and, where a company has more than one class or series of equity security listed on Nasdaq, the values are aggregated. Under the new rule, if a company’s MVLS remains below $5 million for 30 consecutive business days, Nasdaq will issue a Staff Delisting Determination and immediately suspend trading of the company’s securities. On July 29, 2026, the SEC notified Nasdaq that it had received notices of intention to petition for review of the SEC’s July 22, 2026 order approving Nasdaq’s proposed rule change requiring listed companies to maintain a minimum MVLS of $5 million. Pursuant to Rule 431(e) of the SEC’s Rules of Practice, the July 22, 2026 approval order has been stayed pending further review.
There can be no assurance that our MVLS will remain at or above the $5 million threshold for periods long enough to comply with the new standard. Our MVLS may be adversely affected by factors outside of our control, including general market conditions, macroeconomic uncertainty, sector-specific developments, investor sentiment, and volatility in the trading price of our Common Stock. Because the rule is triggered by 30 consecutive business days below the threshold, even a sustained but temporary decline in our stock price could result in non-compliance and the immediate suspension and delisting of our Common Stock.
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If the new continued listing requirement is once again implemented as previously approved, unlike many other Nasdaq continued listing standards, the new MVLS requirement does not provide a compliance or cure period before a Staff Delisting Determination is issued. Additionally, a request for a hearing before the Hearings Panel does not automatically stay the suspension of trading. While the Hearings Panel may reverse a Staff Delisting Determination if it concludes that Nasdaq made an error, or in limited circumstances grant an exception of up to 180 calendar days for a company to demonstrate compliance with Nasdaq’s initial listing standards — which are generally more stringent than the continued listing standards — there can be no assurance that any such relief would be granted. A company may further appeal an adverse Hearings Panel decision to the Nasdaq Listing and Hearing Review Council; however, the company’s securities would generally trade in the over-the-counter market during the pendency of any such appeal.
If Nasdaq delists our securities from trading on its exchange at some future date, we would take actions to restore our compliance with The Nasdaq Capital Market’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below The Nasdaq Capital Market, minimum bid price requirement or prevent future non-compliance with The Nasdaq Capital Market’s listing requirements. In the event of a delisting, we could face significant material adverse consequences, including:
| · | a limited availability of market quotations for our securities; | |
| · | reduced liquidity with respect to our securities; | |
| · | a determination that our common stock is a “penny stock” which will require brokers trading in our ordinary shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our ordinary shares; | |
| · | a limited amount of news and analyst coverage for our company; and | |
| · | a decreased ability to issue additional securities or obtain additional financing in the future. |
The loan with East West Bank is secured by our assets and the assets of our subsidiaries, and a default thereunder could result in us losing the pledged assets.
The loan from East West Bank has certain negative and affirmative covenants and is secured by our assets. There is no assurance that we will generate sufficient revenue or raise sufficient capital to be able to make the required payments under the loan. We and each of our subsidiaries granted security interests in all of our assets for repayment of the loan. Unless waived, any default on any obligations owed under the loan including the affirmative and negative covenants contained therein, could result in our assets being foreclosed. Any action to proceed against our assets would likely have a serious disruptive effect on our business operations.
Interest rates will impact payments we are required to make under the East West Loan w.
Our loan with East West Bank requires payments floating at the Wall Street Journal Prime Rate plus (+) 0.25%. If interest rates meaningfully rise we may not generate sufficient revenue to pay the required loan payments. Any default on any obligations owed under the East West Loan including the affirmative and negative covenants contained therein, could result in our assets being foreclosed upon.
We rely upon a limited number of customers, and a significant portion of our revenue was generated from rental income from our Property.
A significant portion of our revenue for the nine months ended September 30, 2026 was derived from rental income from our new Property. There can be no guarantee that we will be successful in operating the Property or that our expenses will not increase in the future beyond the revenue derived from the Property.
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We recently began operating in a new line of business, which may subject us to additional risks.
In April 2026, we acquired the Property, which generated rents that constituted our principal source of revenue during the quarter ended September 30, 2026. There are risks and uncertainties associated with our activities in the real estate investment business. In developing this line of business, we may invest significant time and resources. In addition, this business may require different strategic management competencies and risk considerations compared to those of our existing management team. External factors, such as regulatory compliance obligations, competitive alternatives, and shifting market preferences, may also impact our success in the real estate investment business. Failure to successfully manage these risks in the this new line of business could have an adverse effect on our other lines of business, results of operations, and financial condition.
Our acquisition of the Property may not result in the strategic benefits that we anticipated.
Our acquisition of the Property was intended to provide certain strategic benefits that we believe would enable us to bring value to our stockholders, including diversifying our operations by adding a new source of revenue and reducing our rent expenses. The market price of our common stock may not reflect the value of these benefits. The market price of our common stock may decline if we do not achieve the perceived benefits of the acquisition as rapidly or to the extent anticipated by us or investors, financial analysts, or industry analysts. There can be no assurance that these anticipated benefits of the acquisition will materialize or that if they materialize will result in increased stockholder value or revenue stream to the company.
Legislative, regulatory, accounting or tax rules, and any changes to them or actions brought to enforce them, could adversely affect us.
We are subject to a wide range of legislative, regulatory, accounting and tax rules. The costs and efforts of compliance with these laws, or of defending against actions brought to enforce them, could adversely affect us. In addition, if there are changes to the laws, regulations or administrative decisions and actions that affect us, we may have to incur significant expenses in order to comply, or we may have to restrict or change our operations.
We have invested in the Property, which as a real property asset is subject to laws and regulations relating to the protection of the environment and human health and safety. These laws and regulations generally govern wastewater discharges, noise levels, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials and the remediation of contamination associated with disposals. Environmental laws and regulations may impose joint and several liabilities on tenants, owners or operators for the costs to investigate and remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. This liability could be substantial. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, could adversely affect our ability to sell, rent or pledge the Property as collateral for future borrowings. We intend to take commercially reasonable steps when we can to protect ourselves from the risks of environmental law liability; however, we may not always be able to obtain or maintain independent third-party environmental assessments for the Property or any other property we may acquire. In addition, any such assessments that we do obtain may not reveal all environmental liabilities, or whether a prior owner of a property created a material environmental condition not known to us. In addition, there are various local, state and federal fire, health, safety and similar regulations with which we may be required to comply, and that may subject us to liability in the form of fines or damages. In all events, the existing condition of the Property when we bought it, operations in the vicinity of the Property, or activities of unrelated third parties could all affect the Property in ways that lead to costs being imposed on us.
Any material expenditures, fines, damages or forced changes to our business or strategy resulting from any of the above could adversely affect our financial condition and results of operations.
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Our investment in the Property is subject to weather- and climate-related risks.
In April 2026, we acquired the Property, which generated rents that constituted our principal source of revenue during the quarter ended September 30, 2026. The Property is located in an area that may experience catastrophic weather and other natural events from time to time, including hurricanes or other severe weather, flooding fires, snow or ice storms, windstorms or earthquakes. These adverse weather and natural events could cause substantial damages or losses to the Property properties which could exceed our insurance coverage. In the event of a loss in excess of insured limits, we could lose our capital invested in the Property, as well as anticipated future revenue from that Property. We could also continue to be obligated to repay any mortgage indebtedness or other obligations related to the Property. Any such loss could materially and adversely affect our business and our financial condition and results of operations.
To the extent that significant changes in the climate occur, we may experience extreme weather and changes in precipitation and temperature, all of which may result in physical damage to or a decrease in demand for properties located in these areas or affected by these conditions. Should the impact of climate change be material in nature, including destruction of our Property, or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected. In addition, changes in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our Property or to protect it from the consequence of climate change.
Our insurance coverage on the Property may be inadequate to cover any losses we may incur and our insurance costs may increase.
We maintain insurance on the Property. However, there are certain types of losses, generally of a catastrophic nature, such as floods or acts of war or terrorism that may be uninsurable or not economical to insure. Further, insurance companies often increase premiums, require higher deductibles, reduce limits, restrict coverage, and refuse to insure certain types of risks, which may result in increased costs or adversely affect our business. We use our discretion when determining amounts, coverage limits and deductibles, for insurance, based on retaining an acceptable level of risk at a reasonable cost. This may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay the full current market value or current replacement cost of our lost investment. In addition, we may become liable for injuries and accidents at the Property that are underinsured. A significant uninsured loss or increase in insurance costs could materially and adversely affect our business, liquidity, financial condition and results of operations.
The business, results of operations, cash flows and financial condition of the Property are affected by the performance of the real estate industry.
The U.S. real estate industry is highly cyclical and is affected by global, national and local economic conditions, general employment and income levels, availability of financing, interest rates, and consumer confidence and spending. Other factors impacting real estate businesses include over-building, changes in traffic patterns, changes in demographic conditions, changes in tenant and buyer preferences and changes in government requirements, including tax law changes. These factors are outside of our control and may have a material adverse effect on our business, profits and the timing and amounts of our cash flows to the extent these are dependent on the Property.
Risks Related to Our Acquisition and Ownership of 901 Corporate Center Drive
The Property may not generate the rental income or operating cash flow we currently anticipate.
The value of the Property and the cash flow generated from its operations depend upon numerous factors, many of which are beyond our control, including market rental rates, occupancy levels, tenant demand, operating expenses, property taxes, insurance costs, economic conditions, and competition from other office properties. If the Property fails to generate anticipated rental income or incurs higher-than-expected operating expenses, our financial condition and results of operations could be adversely affected.
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Our rental revenue is dependent upon the continued occupancy and financial condition of our tenants.
The Property is currently leased to multiple tenants (16). While many of the tenants are quite stable and many are government related entities, if one or more significant tenants fail to renew their leases, default on lease obligations, become insolvent, reduce their leased space, or otherwise terminate occupancy, rental revenue may decline. Replacing tenants may require substantial leasing commissions, tenant improvements, rent concessions, and extended vacancy periods.
The commercial office market continues to experience uncertainty.
Overall demand for office space in the region has been affected by evolving workplace trends, including remote and hybrid work arrangements. Reduced demand for traditional office space may result in lower occupancy rates, downward pressure on rental rates, longer leasing periods, and decreased property values. These trends could adversely affect the operating performance and valuation of the Property.
The Property is subject to refinancing and interest rate risks.
A substantial portion of the acquisition was financed through indebtedness. The East West Bank loan bears a fixed interest rate for an initial period and subsequently converts to a floating rate based upon the Wall Street Journal Prime Rate plus an applicable margin. Increases in interest rates could increase our debt service obligations and reduce cash flow available for operations and future investments. In addition, there can be no assurance that future refinancing will be available on favorable terms, if at all.
The acquisition has increased our leverage and debt obligations.
The acquisition required us to incur significant indebtedness. Increased leverage may limit our financial flexibility, reduce funds available for research and development and other corporate initiatives, increase vulnerability to adverse economic conditions, and require a substantial portion of future cash flow to be dedicated to debt service obligations.
The Property may require capital expenditures greater than currently anticipated.
Commercial real estate assets require ongoing maintenance, repairs, renovations, tenant improvements, and capital expenditures. Unexpected structural issues, deferred maintenance, environmental conditions, building system failures, code compliance requirements, or other unforeseen matters could require substantial expenditure beyond those currently anticipated.
The value of the Property may fluctuate.
Commercial real estate values are influenced by numerous factors, including interest rates, capitalization rates, economic conditions, local market dynamics, tenant demand, operating performance, and investor sentiment. A decline in the value of the Property could adversely affect our financial condition and ability to obtain financing.
Property is subject to environmental and regulatory risks.
Owners of commercial real estate may be liable for environmental conditions existing on a property, regardless of whether the owner caused such conditions. The discovery of hazardous substances, environmental contamination, or non-compliance with applicable environmental laws could result in significant remediation costs, penalties, litigation, and limitations on the use or sale of the Property.
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Natural disasters and other catastrophic events could adversely affect Property.
The Property is in Southern California, a region susceptible to earthquakes, wildfires, flooding, and other natural disasters. Although we maintain insurance coverage that it believes is appropriate, certain losses may be uninsured or underinsured. Significant damage to the Property could result in substantial repair costs, business interruption, tenant losses, and reduced rental income.
The Property is subject to competition from other commercial properties.
The Property competes with numerous offices and mixed-use properties in the greater Los Angeles region. Competing properties may offer lower rental rates, more attractive amenities, newer facilities, or more favorable lease terms. Increased competition may adversely affect occupancy levels and rental income.
Our ability to realize the anticipated benefits of the acquisition is subject to execution risks.
We expect the acquisition to provide recurring rental income, long-term appreciation potential, and a strategic corporate location. There can be no assurance that these anticipated benefits will be realized within the expected timeframe or at all. If the Property does not perform as expected, our investment may not generate the returns anticipated by management.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Except as previously disclosed in our filings with the Securities and Exchange Commission, no unregistered shares of common stock were sold during the three months ended September 30, 2026.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the three-month period ended September 30, 2026.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our Company.
ITEM 5. OTHER INFORMATION
Our common stock is listed on the Nasdaq Capital Market under the symbol “FCUV.”
During the quarter ended September 30, 2026, no director
or officer of the Company
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ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q
Exhibits
The following financial information is filed as part of this report:
| (a) | (1) FINANCIAL STATEMENTS |
| (2) SCHEDULES | |
| (3) EXHIBITS. The following exhibits required by Item 601 to be filed herewith are incorporated by reference to previously filed documents: |
|
Exhibit Number |
Description |
| 3.1 | Certificate of Amendment to Articles of Incorporation of Focus Universal Inc. (incorporated by reference as Exhibit 3.1 to the Current Report on Form 8-K filed with SEC on June 18, 2026) |
| 4.1 | Form of PIPE Pre-Funded Warrant, dated April 6, 2026 (incorporated by reference as Exhibit 4.1 to the Current Report on Form 8-K filed with SEC on April 10, 2026) |
| 4.2 | Form of Series A PIPE Common Warrant, dated April 6, 2026 (incorporated by reference as Exhibit 4.2 to the Current Report on Form 8-K filed with SEC on April 10, 2026) |
| 4.3 | Form of Series B PIPE Common Warrant, dated April 6, 2026 (incorporated by reference as Exhibit 4.3 to the Current Report on Form 8-K filed with SEC on April 10, 2026) |
| 10.1 | Form of Securities Purchase Agreement between the Company and a certain purchaser, dated April 6, 2026 (incorporated by reference as Exhibit 10.1 to the Current Report on Form 8-K filed with SEC on April 10, 2026) |
| 10.2 | Form of Registration Rights Agreement between the Company and a certain purchaser, dated April 6, 2026 (incorporated by reference as Exhibit 10.2 to the Current Report on Form 8-K filed with SEC on April 10, 2026) |
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| 10.3 | Form of Placement Agent Agreement between the Company and Aegis Capital Corp., dated April 6, 2026 (incorporated by reference as Exhibit 10.3 to the Current Report on Form 8-K filed with SEC on April 10, 2026) |
| 10.4 | Lease Agreement with Cameron Court L.P dated January 22, 2026 (incorporated by reference as Exhibit 10.26 to the Registration Statement Form S-1 filed with SEC on April 23, 2026) |
| 10.5 | Business Loan Agreement between Lusher Holding LLC and East West Bank dated March 30, 2026, as filed with the SEC on April 23, 2026 (incorporated by reference as Exhibit 10.27 to the Registration Statement Form S-1 filed with SEC on April 23, 2026) |
| 10.6 | Promissory Note between Lusher Holding LLC and East West Bank dated March 30, 2026, as filed with the SEC on April 23, 2026 (incorporated by reference as Exhibit 10.28 to the Registration Statement Form S-1 filed with SEC on April 23, 2026) |
| 10.7 | Redemption Agreement between Focus Universal Inc and Great Point Capital LLC dated April 13, 2026 (incorporated by reference as Exhibit 10.29 to the Registration Statement Form S-1 filed with SEC on April 23, 2026) |
| 10.8 | Purchase and Sale Agreement between 901 Corporate Center, LP and Focus Universal Inc. dated January 21, 2026 (incorporated by reference as Exhibit 10.1 to the Current Report on Form 8-K filed with SEC on April 27, 2026) |
| 10.9 | First Amendment to the Purchase and Sale Agreement between 901 Corporate Center, LP and Focus Universal Inc. dated February 20, 2026 (incorporated by reference as Exhibit 10.2 to the Current Report on Form 8-K filed with SEC on April 27, 2026) |
| 10.10 | Second Amendment to the Purchase and Sale Agreement between 901 Corporate Center, LP and Focus Universal Inc. dated March 5, 2026 (incorporated by reference as Exhibit 10.3 to the Current Report on Form 8-K filed with SEC on April 27, 2026) |
| 10.11 | Third Amendment to the Purchase and Sale Agreement between 901 Corporate Center, LP and Focus Universal Inc. dated March 13, 2026 (incorporated by reference as Exhibit 10.4 to the Current Report on Form 8-K filed with SEC on April 27, 2026) |
| 31.1 | Certification of CEO pursuant to Sec. 302 |
| 31.2 | Certification of CFO pursuant to Sec. 302 |
| 32.1 | Certification of CEO pursuant to Sec. 906 |
| 32.2 | Certification of CFO pursuant to Sec. 906 |
| 101.INS | XBRL Instances Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Focus Universal Inc. | ||||
| Dated: November 10, 2026 | By: |
/s/ Desheng Wang Desheng Wang Chief Executive Officer | ||
| Dated: November 10, 2026 | By: |
/s/ Irving H. Kau Irving H. Kau Chief Financial Officer | ||
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