FCUV 10-K & 10-Q changes, risk factors and insider trading

Our common stock is subordinated to our preferred stock.

As described in the Certificate of Designations, Preferences and Rights of the Series A Preferred Stock and Series B Preferred Stock, shares of Series A and Series B Preferred Stock rank senior to shares of Common Stock, with respect to rights on the distribution of assets in any voluntary or involuntary liquidation, dissolutions or winding up of the affairs of the Company.

Starting on January 19, 2026, the outstanding shares of Series B Preferred Stock will be redeemable at the holder of such shares option.

Beginning on January 19, 2026, the outstanding shares of Series B Preferred Stock is redeemable at the Series B holder’s option during certain periods over two (2) years. Redemption of the Series B Preferred Stock would result in the Company to meet such redemption obligations in cash or by finding a third party to purchase such shares of Series B Preferred Stock. No assurances can be given that we will have the funds available in the event a holder of Series B Preferred Stock elects to exercise the redemption rights nor that any third party will be willing to purchase such shares of Series B Preferred Stock. Our ability to meet such redemption obligations will depend on our earnings and cash flow. Furthermore, in the event of a redemption, the Company’s requirement to meet such redemption obligations could reduce funds available to further our business and business strategy. On January 19, 2026, the holders of the Series B Preferred Stock provided the Company with Redemption Notices requesting the Company to redeem all of their outstanding shares of Series B Preferred Stock. While the allotted time period for redemption (20 days), has passed, the Company and the Series B Holders remain engaged in negotiations to find an amicable solution. On February 19,2026, the Series B investors sent a redemption demand letter for 3,716 outstanding Series B Preferred shares, totaling $3,158,600. This demand letter was subsequently rescinded by the Series B holders while the Series B holders and management attempted to negotiate a settlement. On March 17, 2026, after the parties could not negotiate a successful settlement, the Series B investors renewed their redemption requests by emailing Company management a notice of default. The Company has engaged external advisors to assist in discussions with the holders of the Series B Preferred Stock and is currently engaged in ongoing negotiations to determine the most appropriate resolution that maximizes value for all stockholders, including the Series B shareholders.

On February 9, 2026, the Company effected a reverse stock split of its outstanding common stock on a 1-for-10 basis. No adjustment was made to the Company’s authorized shares of capital stock.

As previously disclosed, on June 30, 2025, we received a letter from Nasdaq’s Listing Qualifications Department (the “Staff”) that said our Market Value of Listed Securities had fallen below $35,000,000, and therefore, we no longer satisfy the requirements under Nasdaq Listing Rule 5550(b)(2) (the “MVLS Rule”). The Company has been provided an initial period of 180 calendar days, or until December 29, 2025 (the “Compliance Date”), to regain compliance with the MVLS Rule. If at any time before the Compliance Date, the Company’s MVLS closes at $35,000,000 or more for a minimum of ten consecutive business days, then this matter will be closed. If the Company does not regain compliance with the MVLS Rule prior to the expiration of the Compliance Date, the Company will receive notification from the Staff that its securities are subject to delisting.

As previously disclosed, on December 22, 2025, the Company received a conditional compliance letter from the Staff of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that based on the Company’s disclosure on Form 8-K filed with the SEC on December 17, 2025, through which the Company discloses its belief of meeting the requirement of maintaining the minimum $2,500,000 in Stockholders’ equity, the Staff has determined that the Company complies with the MVLS Rule. However, the Staff provides that if the Company fails to provide evidence of compliance upon filing its next periodic report, the Company may be subject to delisting.

On January 21, 2026, the Company entered into a purchase, sale, and escrow agreement with 901 Corporate Center, LP to acquire a 100,743 sq. ft. office and commercial building, along with a four-level parking structure, located in Monterey Park, California. While investment in a building is not a core business activity for the Company, the planned acquisition of a new office building does present the Company with a very low real estate expense, in addition to a conservative 9-10% cap rate with a desirable location and market, based on industry professional analysis. The additional cash flow shall be used to offset corporate and general costs while the company continues to expect the IoT and financial software divisions to be able to generate revenues soon to bear those associated expenses.

Our net cash outflows from operating activities of $5,102,771 for the year ended December 31, 2025, was primarily the result of our net loss of $4,787,769 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses, and operating activities from discontinued operations.

For the year ended December 31, 2025, we had cash outflow from investing activities of $185,760. That was primarily the result from the purchase of property and equipment of $28,106, and capitalized software costs of $157,654. For the year ended December 31, 2024, we had cash inflow from investing activities of $7,127,121. That was primarily the result from the purchase of property and equipment of $18,687 and proceeds from sales of property of $7,145,808.

For the year ended December 31, 2024, cash inflows from financing activities of $706,094. That was primarily the result proceeds from third party loan of $350,000, proceeds from related party loan of $1,101,000, repayment on related party loan of $2,101,000, repayment on third party loan of $350,000, common stock issued for placement agent $1,086,000, common stock issued for private placement of $1,290,000 and purchases of treasury stock of $669,906.

On January 21, 2026, the Company entered into a purchase, sale, and escrow agreement with 901 Corporate Center, LP to acquire a 100,743 sq. ft. office and commercial building, along with a four-level parking structure, located in Monterey Park, California. The purchase price is $17,700,000, with an escrow deposit of $525,000. The escrow was initially scheduled to close within sixty days of opening escrow. The $525,000 deposit was placed into the escrow account on January 26, 2026. Both parties have executed several amendments to extend the closing date from February to March 2026. Subsequently, on March 20, 2026, the parties entered into a fifth amendment extending the contingency period to April 10, 2026. At this point in time, the Company has made significant progress towards financing, however there is no assurance that the financing will be completed or that it will be on terms acceptable to the Company.

On January 19, 2026, the Company received requests for redemption (the “Redemption Notices”) from the holders of the outstanding shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”). Pursuant to the Certificate of Designation of Series B Preferred Stock, as amended, the holders of the outstanding shares of Series B Preferred Stock have the option to require the Company, to redeem all or less than all of the outstanding shares of Series B Preferred Stock. From the date the Company receives the Redemption Notice, the Company had 20 trading days (the “Time Period”) to redeem the shares of Series B Preferred Stock set forth in the notice for a price equal to the Purchase Price multiplied by the number of shares of Series B Preferred Stock subject to such redemption. Since the Company has received the Redemption Notice, the Time Period the Company had to redeem the shares of Series B Preferred Stock has since lapsed. As provided in the Certificate of Designation, with respect to redemption, the Company must comply with Nevada state law which prohibits certain distributions or redemptions. Therefore, management of the Company took the position that under Nevada law, the Series B Transaction documents do not require the Company to redeem the Series B holders under the specific conditions demanded by the investors. As of March 16, 2026, a total of 6,447 shares of Series B Preferred Stock or an aggregate of $5,479,950 remain subject to redemption. On February 19, 2026, the Series B investors sent a redemption demand letter for 3,716 outstanding Series B Preferred shares, totaling $3,158,600. This demand letter was subsequently rescinded by the Series B holders while the investors and management attempted to negotiate a settlement. On March 17, 2026, after the parties could not successfully negotiate a settlement, the Series B holders renewed their redemption requests by emailing Company management a notice of default. The Company has engaged external advisors to assist in discussions with the holders of the Series B Preferred Stock and is currently engaged in ongoing negotiations to determine the most appropriate resolution that maximizes value for all stockholders. In addition, management is actively working to identify potential buyers to purchase the Series B Preferred Stock from holders seeking redemption on mutually acceptable terms.

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.

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 June 30, 2026, we had an accumulated deficit of $34,015,113. 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 $2,765,036 and $2,757,026 for the six months ended June 30, 2026 and June 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.

Our failure to file 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 will 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”).

We are not able to obtain financial information sufficient to be able to provide the S-X financial information. Therefore, there is limited public information regarding the operations of the Property and we are not in compliance with the requirements of Rule 3-14 of Regulation S-X. We have requested a waiver from the Securities and Exchange Commission with respect to such requirements, but there is no assurance that our request will be granted. Unless we file the S-X financial information, the Securities and Exchange Commission will not declare effective registration statements or post-effective amendments filed by us until twelve months following the date on which we have filed a periodic report with the Securities and Exchange Commission that meets the requirements of Regulation S-X, and affiliates will be not be permitted to make sales of securities pursuant to Rule 144 pursuant to the Securities Act of 1933, as amended.

We have concluded that we have not maintained effective internal control over financial reporting through the six months ended June 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 June 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.

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 to raise capital due to the late filing of a Current Report on Form 8-K disclosing certain financial statements related to the Property. In addition, even if we are able to disclose the required financial information, we will not be able to use a registration statement on Form S-3 until August 2027. 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.

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:

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.

For the six months ended June 30,2026, we derived 35% and 26% of our revenue and accounts receivable from one customer. The loss of such customer would have a material adverse effect on us. A significant portion of our revenue for the six months ended Juen 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

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 June 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.

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 June 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.

Focus Universal Inc. (the “Company,” “we,” “us,” or “our”) is a Nevada corporation. Prior to our acquisition of the Property (as defined below), 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 six months ended June 30, 2026 is not directly comparable to the prior-year period.

During the six months ended June 30, 2026, we generated $651,950 from rental income from the Property. We currently have executed leases for rental of 91,366 space through December 31, 2026 from 12 tenants and anticipate generating $1,464,523 of revenue through December 31, 2026 from the rental income derived from the Property assuming no current leases are terminated.

Recent Developments

Acquisition of Office and Commercial Building

On April 17, 2026, our wholly owned subsidiary, Lusher Holding LLC (the “Lusher Holding”), closed the acquisition of a Class A office and commercial building along with a four-level parking structure, located at 901 Corporate Center Drive, Monterey Park, California 91754 (the “Property”). The Seller of the Property was 901 Corporate Center, LP (the “Seller”).

The aggregate purchase price of the Property was $17,700,000, exclusive of closing costs (the “Purchase Price”). We made an initial down payment of $525,000 on January 26, 2026. On April 17, 2026, we funded the Purchase Price with a loan of $11,050,000 facilitated by a term loan agreement with East West Bank and $5,797,152 in cash as a downpayment to close escrow. The Purchase Price was discounted approximately $419,153 due to rent prorations, security deposits, and other such pre-paid amounts which resulted in the Company receiving a balance of $2,434 after closing costs. The surveyed aggregate land area of the Property amounts to approximately 464,955 useable square feet or 10.73 acres, which is comprised of four parcels (i.e., Parcel Numbers, 5237-022-014, 046, 047, and 5237-002-021) (the “Parcels”). The Parcels, including its land and improvements, have an aggregate value of approximately $28,424,982 in 2026 according to the Los Angeles County Assessor.

The Property provides approximately 100,743 sq. ft. in rentable Class A office space and has a parking ratio of 4.1/1,000, offering a blend of surface parking and adjacent four-level parking structure with a canopy of solar panels that are currently leased. Currently, the Property is 99.2% occupied by approximately 16 tenants. The Company does not intend to alter the terms of lease agreements in place with the current tenants, most of which have a term of 5 to 8 years. The Company plans to occupy approximately 2,000 square feet of space.

Loan with East West Bank

Lusher Holding entered into a loan with East West Bank to borrow $11,050,000 to pay the Purchase Price, at 6.25% interest for the first 3 years, then floating at the Wall Street Journal Prime Rate plus (+) 0.25% for the remaining term, with a floor interest rate at 6.25% to facilitate the purchase of the Property (“East West Loan”).

The East West Loan provides for 83 consecutive monthly principal and interest payments of approximately $68,698.64, beginning on May 1, 2026, and subsequently, 83 consequent instalments of principal and interest payments of an estimated amount of approximately $73,917.99 (subject to change based on Wall Street Journal Prime Rate plus 0.25%) each beginning May 1, 2029. A final principal and interest payment of approximately $9,533,143.67 is due on April 1, 2036 (subject to change based on Wall Street Journal Prime Rate plus 0.25%).

We are listed as the primary guarantor of the East West Loan and our Chief Executive Officer, Dr. Desheng Wang, is listed as a secondary guarantor.

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.

Currently, the Company has 18 pending U.S. nonprovisional patent applications and 9 issued U.S. patents.

Our results of operations for the three and six months ended June 30, 2026 include the revenue generated from the Property and related expenses from April 17, 2026 through June 30, 2026 which is not included in our results of operations for the three and six months ended June 30, 2025. Accordingly, the results of operations for the three and six months ended June 30, 2026 is not directly comparable to the prior-year periods.

Revenue

Our consolidated gross revenue for the three months ended June 30, 2026 and 2025 was $675,170 and $35,330, respectively. The increase in revenue was primarily attributable to an increase in rental revenue from Lusher Holding LLC.

Cost of other revenue for the three months ended June 30, 2026 were $17,227, compared to $47,742 for the three months ended June 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 three months ended June 30, 2026 were $201,024, compared to $5,506 for the three months ended June 30, 2025. The increase in depreciation and amortization expense was primarily due to depreciation expense recognized on the commercial property acquired during the quarter.

Selling expenses for the three months ended June 30, 2026 were $691, compared to $7,420 for the three months ended June 30, 2025. Selling expenses were mainly from third party advertising fees and marketing related fees. The decrease in selling expenses was due to a decrease in advertising fees.

Compensation – officers and directors were $117,638 and $125,357 for the three months ended June 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 $362,165 and $467,297 for the three months ended June 30, 2026 and 2025, respectively. The decrease was primarily due to a reduction in the number of research and development employees during the current year.

Professional fees were $751,144 during the three months ended June 30, 2026, compared to $429,155 during the three months ended June 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 three months ended June 30, 2026 was $515,193 compared to $495,613 during the three months ended June 30, 2025. The increase in general and administrative expenses was primarily due to the Company having received its employee retention credit from the Internal Revenue Service in 2025, which reduced that year’s comparable expenses.

For the six months ended June 30, 2026 compared to the six months ended June 30, 2025

Revenue

Our consolidated gross revenue for the six months ended June 30, 2026 and 2025 was $723,143 and $225,585, 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 six months ended June 30, 2026 and 2025 are outlined in the table below:

Property operating expense for the six months ended June 30, 2026 were $259,663, compared to $0 for the six months ended June 30, 2025. The increase in property operating expenses was primarily due to the acquisition of the commercial property during the quarter.

Cost of other revenue for the six months ended June 30, 2026 were $49,956, compared to $207,453 for the six months ended June 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 six months ended June 30, 2026 were $207,746, compared to $10,959 for the six months ended June 30, 2025. The increase in depreciation and amortization expense was primarily due to depreciation expense recognized on the commercial property acquired during the quarter.

Selling expenses for the six months ended June 30, 2026 were $33,539, compared to $56,400 for the six months ended June 30, 2025. Selling expenses were mainly from third party advertising fees and marketing related fees. The decrease in selling expenses was due to a decrease in advertising fees.

Compensation – officers and directors were $235,189 and $250,744 for the six months ended June 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 $626,962 and $839,555 for the six months ended June 30, 2026 and 2025, respectively. The decrease was due to software costs being capitalized in the current year.

Professional fees were $1,136,349 during the six months ended June 30, 2026, compared to $902,146 during the six months ended June 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 six months ended June 30, 2026 was $995,025 compared to $772,615 during the six months ended June 30, 2025. The increase in general and administrative expenses was primarily due to the Company having received its employee retention credit from the Internal Revenue Service in 2025, which reduced that year’s comparable expenses.

Other Income (expense)