FOCUS UNIVERSAL INC. Form 10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended September 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-40770

FOCUS UNIVERSAL INC.

(Exact Name of Small Business Issuer as specified in its charter)

Nevada	46-3355876
(State or other jurisdiction	(IRS Employer File Number)
of incorporation)

2311 E. Locust Court, Ontario, CA	91761
(Address of principal executive offices)	(Zip Code)

(626) 272-3883

(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

Common Stock, $0.001 par value

FCUV

The Nasdaq Stock Market LLC

(Nasdaq Capital Market)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes ☒ No ☐

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. Yes ☒ No ☐

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 ☐
Non-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, 2025, registrant had 7,386,705 shares outstanding of the registrant's common stock at a par value of $0.001 per share.

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	23

Item 3. Quantitative and Qualitative Disclosures About Market Risk	33

Item 4. Controls and Procedures	33

PART II OTHER INFORMATION	34

Item 1. Legal Proceedings	34

Item 1A. Risk Factors	34

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3. Defaults Upon Senior Securities	34

Item 4. Mine Safety Disclosures	34

Item 5. Other Information	34

Item 6. Exhibits	34

Signatures	35

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, 2025 (unaudited) and December 31, 2024	4

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	5

Condensed Consolidated Statements of Changes in Stockholder’s Equity for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	6

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (unaudited)	8

Notes to the Unaudited Condensed Consolidated Financial Statements	9

FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30,			December 31,
	2025			2024
	(Unaudited)
ASSETS
Current Assets:
Cash	$	410,884		$	3,589,318
Accounts receivable, net		7,125			5,584
Inventories, net		138,370			126,071
Prepaid expenses		107,969			100,730
Marketable securities		43,548			24,660
Deposits – current portion		63,181			–
Total Current Assets		771,077			3,846,363

Property and equipment, net		71,710			60,485
Operating lease right-of-use asset		37,658			108,270
Deposits		–			65,195

Total Assets	$	880,445		$	4,080,313

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued liabilities	$	685,104		$	702,065
Other current liabilities		–			68,204
Lease liability, current portion		20,534			106,706
Total Current Liabilities		705,638			876,975

Non-Current Liabilities:
Lease liability, less current portion		–			8,114
Total Non-Current Liabilities		–			8,114

Total Liabilities		705,638			885,089

Contingencies		–			–

Stockholders' Equity:
Common stock, par value $0.001 per share, 15,000,000 shares authorized; 7,386,705 and 7,153,647 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively		7,387			7,154
Treasury stock at cost (58,038 and 348,968 shares held at September 30, 2025 and December 31, 2024, respectively)		(249,676	)		(1,055,592	)
Additional paid-in capital		30,105,018			30,025,587
Shares to be issued, common shares		52,733			25,573
Accumulated deficit		(29,705,709	)		(25,782,308	)
Accumulated other comprehensive loss		(34,946	)		(25,190	)
Total Stockholders' Equity		174,807			3,195,224

Total Liabilities and Stockholders' Equity	$	880,445		$	4,080,313

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Revenue	$	28,689		$	74,215		$	254,274		$	264,954

Cost of revenue		30,301			42,530			237,754			127,686

Gross profit (loss)		(1,612	)		31,685			16,520			137,268

Operating expenses
Selling expense		2,374			30,936			58,774			96,027
Compensation - officers and directors		124,981			575,255			375,725			687,303
Research and development		288,078			308,516			1,127,633			948,041
Professional fees		321,917			278,336			1,224,063			985,368
General and administrative		441,414			585,491			1,224,988			1,612,735
Total operating expenses		1,178,764			1,778,534			4,011,183			4,329,474

Loss from operations		(1,180,376	)		(1,746,849	)		(3,994,663	)		(4,192,206	)

Other income (expense):
Interest income, net		5,747			14,001			39,765			2,653
Interest (expense) - related party		–			–			–			(89,098	)
Gain on disposed of property		–			3,181,706			–			3,181,706
Unrealized gain (loss) on marketable equity securities		4,135			(537	)		18,888			(9,692	)
Rental income		–			13,849			–			96,541
Other income, net		4,119			6,541			12,609			49,143
Total other income		14,001			3,215,560			71,262			3,231,253

Income (loss) from continuing operations		(1,166,375	)		1,468,711			(3,923,401	)		(960,953	)
Income (loss) from discontinued operations, net of tax		–			(26,784	)		–			(277,823	)
Net loss	$	(1,166,375	)	$	1,441,927		$	(3,923,401	)	$	(1,238,776	)

Other comprehensive items
Foreign currency translation income (loss)		677			(2,735	)		(9,756	)		(11,011	)

Total comprehensive loss	$	(1,165,698	)	$	1,439,192		$	(3,933,157	)	$	(1,249,787	)

Basic net income loss per share:
Continuing operations	$	(0.16	)	$	0.22		$	(0.54	)	$	(0.15	)
Discontinued operations		–			(0.00	)		–			(0.04	)
Basic net loss per share	$	(0.16	)	$	0.22		$	(0.54	)	$	(0.19	)

Weighted Average Number of Common Shares Outstanding: Basic and Fully Diluted		7,357,465			6,572,483			7,260,223			6,512,469

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(UNAUDITED)


	Common Stock				Treasury Stock			Additional Paid-In		Shares to be issued Common		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
Description	Shares		Amount		at Cost			Capital		Shares		Deficit			Loss			Equity
Balance – June 30, 2025		7,218,838	$	7,219	$	(173,838	)	$	29,564,293	$	22,864	$	(28,539,334	)	$	(35,623	)	$	845,581

Stock based compensation - options		–		–		–			10,284		–		–			–			10,284

Stock based compensation - shares		–		–		–			89,332		29,869		–			–			119,201

Purchase of treasury stock		–		–		(75,838	)		–		–		–			–			(75,838	)

Stock issued for cash		167,867		168		–			441,109		–		–			–			441,277

Other comprehensive income		–		–		–			–		–		–			677			677

Net loss		–		–		–			–		–		(1,166,375	)		–			(1,166,375	)

Balance – September 30, 2025		7,386,705	$	7,387	$	(249,676	)	$	30,105,018	$	52,733	$	(29,705,709	)	$	(34,946	)	$	174,807

	Common Stock						Treasury Stock			Additional Paid-In			Shares to be issued Common		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
Description	Shares			Amount			at Cost			Capital			Shares		Deficit			Loss			Equity
Balance – June 30, 2024		6,486,776		$	6,487		$	(385,686	)	$	26,807,599		$	15,968	$	(25,262,873	)	$	(21,840	)	$	1,159,655

Stock based compensation - options		–			–			–			36,995			–		–			–			36,995

Stock based compensation - shares		–			–			–			89,335			4,480		–			–			93,815

Stock issued for placement agent		375,000			375			–			1,085,625			–		–			–			1,086,000

Stock issued for private placement		430,000			430			–			1,289,570			–		–			–			1,290,000

Retirement of treasury stock		(3,000	)		(3	)		48,362			(48,359	)		–		–			–			–

Stock based compensation related to discount on shares sold to related parties		–			–			–			340,000			–		–			–			340,000

Other comprehensive loss		–			–			–			–			–		–			(2,735	)		(2,735	)

Net income		–			–			–			–			–		1,441,927			–			1,441,927

Balance – September 30, 2024		7,291,776		$	7,292		$	(385,686	)	$	29,649,124		$	20,448	$	(23,820,946	)	$	(24,575	)	$	5,445,657


	Common Stock						Treasury Stock			Additional Paid-In			Shares to be issued Common		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
Description	Shares			Amount			at Cost			Capital			Shares		Deficit			Loss			Equity
Balance – December 31, 2024		7,153,647		$	7,154		$	(1,055,592	)	$	30,025,587		$	25,573	$	(25,782,308	)	$	(25,190	)	$	3,195,224

Stock based compensation - options		–			–			–			30,852			–		–			–			30,852

Stock based compensation - shares		10,053			10			–			281,892			27,160		–			–			309,062

Purchase of treasury stock		–			–			(249,675	)		–			–		–			–			(249,675	)

Stock split rounding up		309,281			309			–			(309	)		–		–			–			–

Retirement of treasury stock		(348,968	)		(349	)		1,055,591			(1,055,242	)		–		–			–			–

Stock issued for cash		262,692			263			–			822,238			–		–			–			822,501

Other comprehensive loss		–			–			–			–			–		–			(9,756	)		(9,756	)

Net loss		–			–			–			–			–		(3,923,401	)		–			(3,923,401	)

Balance – September 30, 2025		7,386,705		$	7,387		$	(249,676	)	$	30,105,018		$	52,733	$	(29,705,709	)	$	(34,946	)	$	174,807

	Common Stock						Treasury Stock			Additional Paid-In			Shares to be issued Common			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
Description	Shares			Amount			at Cost			Capital			Shares			Deficit			Loss			Equity
Balance – December 31, 2023		6,477,182		$	6,477		$	(434,048	)	$	26,494,455		$	74,476		$	(22,582,170	)	$	(13,564	)	$	3,545,626

Stock based compensation - options		–			–			–			110,985			–			–			–			110,985

Stock based compensation - shares		12,594			13			–			376,848			(54,028	)		–			–			322,833

Retirement of treasury stock		(3,000	)		(3	)		48,362			(48,359	)		–			–			–			–

Stock issued for placement agent		375,000			375			–			1,085,625			–			–			–			1,086,000

Stock issued for private placement		430,000			430			–			1,289,570			–			–			–			1,290,000

Stock based compensation related to discount on shares sold to related parties		–			–			–			340,000			–			–			–			340,000

Other comprehensive loss		–			–			–			–			–			–			(11,011	)		(11,011	)

Net loss		–			–			–			–			–			(1,238,776	)		–			(1,238,776	)

Balance – September 30, 2024		7,291,776		$	7,292		$	(385,686	)	$	29,649,124		$	20,448		$	(23,820,946	)	$	(24,575	)	$	5,445,657

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the Nine Months Ended September 30,
	2025			2024
Cash flows from operating activities:
Net Loss	$	(3,923,401	)	$	(1,238,776	)
Adjustments to reconcile net loss to net cash from operating activities:
Gain on sale of building		–			(3,181,706	)
Bad debt expense		–			4,459
Inventory reserve		1,644			–
Depreciation expense		17,231			72,738
Unrealized (gain) and loss on marketable equity securities		(18,888	)		9,692
Stock-based compensation – shares		309,062			322,833
Stock based compensation related to discount on shares sold to related parties		–			340,000
Stock based compensation – options		30,852			110,985
Changes in operating assets and liabilities:
Accounts receivable		(1,541	)		9,069
Inventories		(13,943	)		(196,749	)
Other receivable		–			20,407
Deposit		2,604			(41,435	)
Prepaid expenses		(6,665	)		(36,480	)
Operating lease right-of-use asset		72,298			65,364
Accounts payable and accrued liabilities		(14,347	)		114,831
Other current liabilities		(68,204	)		(6,496	)
Lease liabilities		(95,806	)		(80,523	)
Other liabilities		–			(12,335	)
Net cash flows used in operating activities from continuing operations		(3,709,104	)		(3,724,122	)
Net cash flows provided by operating activities from discontinued operations		–			65,221
Net cash flows used in operating activities		(3,709,104	)		(3,658,901	)

Cash flows from investing activities:
Purchase of property and equipment		(27,318	)		(13,250	)
Proceeds from sale of property		–			7,145,808
Net cash flows provided by (used in) investing activities		(27,318	)		7,132,558

Cash flows from financing activities:
Proceeds from third party loan		–			350,000
Proceeds from related party loan		–			1,101,000
Repayment on related party loan		–			(2,101,000	)
Repayment on third party loan		–			(275,000	)
Stock issued for placement agent		–			1,086,000
Stock issued for private placement		822,501			1,290,000
Purchases of treasury stock		(249,675	)		–
Net cash flows provided by financing activities		572,826			1,451,000

Effect of exchange rate		(14,838	)		(11,681	)

Net change in cash		(3,178,434	)		4,912,976

Cash beginning of period		3,589,318			428,254

Cash end of period	$	410,884		$	5,341,230

Supplemental cash flow disclosure:
Cash paid for income taxes	$	3,807		$	–
Cash paid for interest	$	–		$	112,038

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

FOCUS UNIVERSAL INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(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 Ontario, California, specializing in the development and commercialization of novel and proprietary universal smart technologies and instruments. Focus Universal Inc. is also a provider of patented hardware and software design technologies for Internet of Things (“IoT”) and 5G. The Company has developed what it believes are five disruptive patented technology platforms with 28 patents and patents pending in various phases and 8 trademarks to solve what it believes are the major problems facing hardware and software design and production within the industry today. These technologies combined have the potential to reduce costs, product development timelines and energy usage while increasing range, speed, efficiency, and security of the IoT and 5G networks. The smartphone or other mobile device serves as the foundation, where the user can see the sensor readouts and together with the Ubiquitor device, performs the functions of multiple traditional scientific and engineering instruments. The Company believes this product could replace traditional, wired stand-alone instruments at a fraction of their cost.

The Company has multiple subsidiaries, including Perfecular Inc. (“Perfecular”), AVX Design & Integration, Inc. (“AVX,” also doing business as Smart AVX (“Smart AVX”)), Focus Universal (Shenzhen) Technology Company LTD (“Focus Shenzhen”), Lusher Bioscientific, Inc. and Lusher, Inc. (together “Lusher”), and until August, 2024, AT Tech Systems LLC (“AT Tech LLC”), which activities’ have since been discontinued.

Perfecular, a wholly owned subsidiary of Focus, was founded in September 2009 and is headquartered in Ontario, California, and is engaged in designing certain digital sensor products and sells a broad selection of horticultural sensors and filters in North America and Europe.

AVX, incorporated on June 16, 2000, in the state of California, is an IoT installation and management company specializing in high performance audio/video systems, home theaters, lighting control, automation and integration. Services provided by AVX include full integration of houses, apartments, commercial complexes, and office spaces with audio, visual and control systems to fully integrate devices in the low voltage field, specializing in high end residential smart IoT installation projects in areas throughout the Southern California area. AVX’s services also include partial equipment upgrade and installation. AVX also markets and sells our IoT Products, such as high-end LED, live wall panel products and cameras, under the Smart AVX name.

On December 23, 2021, Focus Shenzhen was founded as a mainland China office for manufacturing procurement expertise and research and development support activities. Focus Shenzhen is designed to function as a branch office to source products and build relationships with manufacturers in China and as a lower cost form of support, research and development as engineers abound in China.

On January 5, 2022, the Company founded a wholly owned subsidiary named Lusher Bioscientific.

On April 30, 2024, the Company founded a wholly owned subsidiary named Lusher Inc. Lusher Inc. was founded to develop, market, and commercialize automation software, titled One Touch Financial, initially targeting the financial reporting software market sector.

AT Tech Systems was a subsidiary of Focus and specialized in commercial and industrial smart IoT installation projects in areas throughout Southern California. On August 5, 2024, the Company and the segment manager of AT Tech Systems LLC reached a tentative oral agreement to terminate his employment, and the employment of his two team members. The Company discontinued operations of AT Tech Systems on August 21, 2024, with a termination cost of $22,000 and is now presenting these operations as discontinued. (See Note 8)

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed financial statements of the Company for the three and nine months ended September 30, 2025 and 2024 have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting companies. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company’s financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2024 was derived from the audited financial statements included in the Company’s financial statements as of and for the years ended December 31, 2024 and 2023 contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on February 28, 2025. These financial statements should be read in conjunction with that report.

The accompanying unaudited condensed consolidated financial statements include the accounts of Focus and its wholly-owned subsidiaries, Perfecular, AVX, Focus Shenzhen, Lusher and, until August of 2024, AT Tech Systems (collectively, the “Company,” “we,” “our,” or “us”). 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, 2025 and December 31, 2024, allowance for doubtful accounts amounted to $278,201 and $278,201, respectively.

Concentrations of Credit and Business Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company limits its exposure to credit loss by investing its cash with high credit quality financial institutions.

Major customers

For the three months ended of September 30, 2025 and 2024, the Company’s revenue received from the following companies were set out as below:


	Three months ended September 30,
	2025				2024
	Amount		% of Total Revenue		Amount		% of Total Revenue
Customer A	$	28,500		99%	$	–		–
Customer B		–		–		37,981		51%
Customer C		–		–		18,923		25%

For the nine months ended of September 30, 2025 and 2024, the Company’s revenue received from the following companies were set out as below:


	Nine months ended September 30,
	2025				2024
	Amount		% of Total Revenue		Amount		% of Total Revenue
Customer A	$	132,531		52%	$	–		–
Customer D		80,942		32%		–		–
Customer E		26,019		10%		–		–
Customer F		–		–		69,325		26%
Customer G		–		–		51,761		20%
Customer H		–		–		37,981		14%

Major Vendors

One major vendor accounted for more than 76% of our total purchases during the nine months ended September 30, 2025 and no major vendor accounted more than 10% of total purchase during the nine months ended September 30, 2024.

Share-Based Compensation

The Company accounts for stock-based compensation to employees in conformity with the provisions of ASC Topic 718, Stock-Based Compensation. Stock-based compensation to employees consist of stock options, grants, and restricted shares that are recognized in the statement of operations based on their fair values at the date of grant.

The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period during which services are received.

The Company calculates the fair value of option grants utilizing the Black-Scholes pricing model and estimates the fair value of the stock based upon the estimated fair value of the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.

The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service period of the award.

Fair Value of Financial Instruments

The Company follows paragraph ASC 825-10-50-10 for disclosures about fair value of its financial instruments and paragraph ASC 820-10-35-37 (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements.

To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

	·	Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

	·	Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

	·	Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.

The following table summarizes financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024:


	September 30, 2025 (unaudited)
	Fair Value						Carrying
	Level 1		Level 2		Level 3		Value
Assets
Marketable securities:
Stock	$	43,548	$	–	$	–	$	43,548
Total assets measured at fair value	$	43,548	$	–	$	–	$	43,548

	December 31, 2024
	Fair Value						Carrying
	Level 1		Level 2		Level 3		Value
Assets
Marketable securities:
Stock	$	24,660	$	–	$	–	$	24,660
Total assets measured at fair value	$	24,660	$	–	$	–	$	24,660

The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts receivable, inventories, other receivable, prepaid expenses, deposit, accounts and accrued expenses, payable, treasury stock payable, short-term loan, other current liabilities, customer deposit, approximate their fair value because of the short maturity of those instruments.

Comprehensive Income (Loss)

Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. The Company’s other comprehensive loss for the nine months ended September 30, 2025 and 2024 was comprised of foreign currency translation adjustments.

Revenue Recognition

Revenue from the Company is recognized under Topic 606 in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements:

	·	executed contracts with the Company’s customers that it believes are legally enforceable;

	·	identification of performance obligations in the respective contract;

	·	determination of the transaction price for each performance obligation in the respective contract;

	·	allocation of the transaction price to each performance obligation; and

	·	recognition of revenue only when the Company satisfies each performance obligation.

These five elements, as applied to each of the Company’s revenue category, is summarized below:

	·	Product sales – revenue is recognized at the time of sale upon the delivery of the equipment to the customer and completion of performance obligation.

	·	Service sales – revenue is recognized based on the service been provided and the agreed upon performance obligation has been completed to the customer.

Revenue from our project construction is recognized over time using the percentage-of-completion method under the cost approach. The percentage of completion is determined by estimating stage of work completed. Under this approach, recognized contract revenue equals the total estimated contract revenue multiplied by the percentage of completion. Our construction contracts are unit priced, and an account receivable is recorded for amounts invoiced based on actual units produced. The Company discontinued operations of AT Tech Systems in August 2024, and added the operations of Lusher to service the financial reporting software sector, so the Company currently retains two operating and reportable segments which are (1) Perfecular and Lusher and (2) Corporate and IoT Products.

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.

The Company has not capitalized any of its software costs to date, though it believes it has the technological resources required to successfully develop. We now believe we have met technological feasibility in both the IoT and financial software products internally, and as evidenced by our subsequent news releases. The final versions of these products have been shown to the Company’s existing customer base prior to their general release. The Company plans to capitalize certain costs incurred related to the development of both the IoT and financial software products until the general release of those products.

Research and Development

Research and development costs are expensed as incurred. Research and development costs primarily consist of efforts to refine existing product models and develop new product models.

Basic and Fully Diluted Net Income (Loss) Per Share

Net income (loss) per share is computed pursuant to ASC 260-10-45. Basic net income (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period.

Fully diluted EPS is computed by dividing net income (loss) by the weighted average number of shares of stock and potentially outstanding shares of stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants, unless these shares are covered by anti-dilutive protections. The denominator comprises the Company’s weighted average number of outstanding shares to extent the related shares are dilutive and, if dilutive, and other contracts to issue shares of common stock and stock options. As a result, they are included in the fully diluted EPS computation to the extent that the effect would be dilutive.

As of each period end, all potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.

Schedule of anti-dilutive shares
Nine Months Ended September 30,	2025	2024
Stock options	76,137	62,637

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:


	Average Rate for the Nine Months Ended September 30,
	2025		2024
	(Unaudited)		(Unaudited)
China Yuan (RMB)	RMB	7.2197	RMB	7.1843
United States Dollar ($)	$	1.0000	$	1.0000

	Exchange Rate at
	September 30, 2025		December 31, 2024
	(Unaudited)
China Yuan (RMB)	RMB	7.198	RMB	7.2975
United States Dollar ($)	$	1.0000	$	1.0000

Going Concern

The Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these condensed consolidated financial statements. The Company has a net loss of $3,923,401 for the nine months ended September 30, 2025. In addition, the Company had an accumulated deficit of $29,705,709 as of September 30, 2025, and negative cash flow from operating activities of $3,709,104 for the nine months ended September 30, 2025. Substantial doubt about the Company’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the Company will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company currently suffered recurring loss from operations, generated negative cash flow from operating activities, has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These conditions raise substantial doubt as to its ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2024, has also expressed substantial doubt about the Company’s ability to continue as a going concern.

At September 30, 2025, the Company had cash and cash equivalents, and short-term investments, in the amount of $454,432. Subsequent to September 30, 2025, the Company raised $6,000,000 through the sale of shares of its Preferred Stock. (Note 10) The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings, and it expects to continue to rely on these sources of capital in the future. Even if the Company is able to obtain additional financing, such financing may bring about undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing, or grant unfavorable terms in future licensing agreements. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company.

Note 3 – Recent Accounting Pronouncement

In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses. The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement disclosures.

Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

Note 4 – Inventory

At September 30, 2025 and December 31, 2024, inventory consisted of the following:

Schedule of inventory
	September 30, 2025			December 31, 2024
Finished goods	$	351,028		$	337,085
Less: Inventory reserve		(212,658	)		(211,014	)
Inventory	$	138,370		$	126,071

Note 5 – Property and Equipment

At September 30, 2025 and December 31, 2024, property and equipment consisted of the following:

Schedule of property and equipment
	September 30, 2025			December 31, 2024
Building improvement	$	14,620		$	14,620
Furniture and fixtures		42,404			42,033
Equipment		166,772			137,966
Software		1,995			1,995
Total cost		225,791			196,614
Less accumulated depreciation		(154,081	)		(136,129	)
Property and equipment, net	$	71,710		$	60,485

Depreciation expense for the nine months ended September 30, 2025 and 2024 amounted to $17,231 and $72,738, respectively.

Note 6 – Leases

Operating Leases

On January 16, 2023, Focus Universal (Shenzhen) Technology Co. LTD entered into a thirty-six month commercial lease with a third party for an approximately 2,017 square foot office space. The lease commenced on February 1, 2023 and will end on January 31, 2026. The monthly rent is RMB 29,974 (approximately $4,172) with approximately an 11.1% to 12.5% increase rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term, which is 10%. Lease expense for the lease is recognized on a straight-line basis over the lease term.

On February 22, 2023, Focus Universal (Shenzhen) Technology Co. LTD entered into a thirty-six month commercial lease with a third party for an approximately 3,449 square foot office space. The lease commenced on March 31, 2023 and will end on February 28, 2026. The monthly rent is RMB 35,246 (approximately $4,906) with approximately an 11.1% to 12.5% increase rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar terms, which is 10%. Lease expense for the lease is recognized on a straight-line basis over the lease term.

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, 2025 and December 31, 2024, operating lease right-of use assets and lease liabilities were as follows:


	September 30, 2025		December 31, 2024
Operating lease right-of-use assets, net	$	37,658	$	108,270
Lease liabilities, current portion	$	20,534	$	106,706
Lease liabilities, less current portion	$	–	$	8,114

Lease term and discount rate:


	September 30, 2025		December 31, 2024
Weighted average remaining lease term:
Operating lease		0.33 to 0.50 years		1.08 to 1.25 years
Weighted average discount rate:
Operating lease		10%		10%

The minimum future lease payments are as follows:


	Amount
Year ending December 31, 2025	$	13,518
Year ending December 31, 2026		8,215
Total minimum lease payment		21,733
Less: imputed interest		(1,199	)
Present value of future minimum lease payments	$	20,534

Short Term Leases

On July 8, 2024, the Company entered into a Standard Industrial/Commercial Single-Tenant Lease (the “Lease”) with the Veena Asset Management, LLC to lease the same Focus Universal premises located at 2311 East Locust Court, Ontario, CA 91761 back for one year commencing at the close of escrow of the Purchase Agreement and ending on July 31, 2025, for 14,004 square foot office and warehouse space. Base monthly rent is $16,804, with a total of $58,812 which was due upon execution of the lease. The Company entered into a First Lease Amendment on March 21, 2025, extending the lease until January 31, 2026, with no other changes to the original terms.

The Company recorded an operating lease expense of $256,733 and $146,523 for the nine months ended September 30, 2025 and 2024, respectively. This is included in general and administrative expenses.

Note 7 – Stockholders’ Equity

Common stock

On January 31, 2025, we effected a 10 for 1 reverse stock split of the Company’s authorized stock, and issued and outstanding shares of Common Stock by filing a Certificate of Change pursuant to pursuant to Nevada Revised Statutes (“NRS”) Section 78.209. As a result of the reverse split, the Company is authorized to issue 15,000,000 common shares (the Company’s authorized common shares were reduced in the same ratio (10-for-1) as its outstanding Common Stock shares were reduced). All share and per share amounts were retroactively adjusted to reflect this split as if it occurred at the earliest period presented.

An additional 309,281 common stock shares were included in the Company’s issued and outstanding shares as a result of rounding-up fractional shares into whole shares as a result of the reverse stock split.

On November 16, 2024, we entered into a Securities Purchase Agreement (the “Agreement”) with Alumni Capital LP, a Delaware limited partnership. Pursuant to the Agreement, we have the right, but not the obligation to cause Alumni Capital LP to purchase up to $20,000,000 common stock, par value $0.001, at certain purchase price during the period beginning on the execution date of the Agreement and ending on the earlier of (i) the date which Alumni Capital LP has purchased $20,000,000 of the Company’s common stock pursuant to the Agreement or (ii) November 16, 2027. Pursuant to this Agreement, on April 28, 2025, Alumni Capital LP purchased 94,825 shares of our common stock for $381,224. The price for these shares was $4.02 based on a 9% discount of the lowest of the 5-day VWAP of $4.41 from the closing date on May 6, 2025, accessible via the Bloomberg terminal. On July 15, 2025, and July 18, 2025, Alumni Capital LP purchased 25,000 and 142,867 of our common shares for $86,995 and $354,282, respectively. The price for these shares was $4.02 based on a 9% discount of the lowest of the 5-day VWAP of $4.41 from the closing date on July 15, 2025, accessible via the Bloomberg terminal. Therefore, as of the date of issuance of the unaudited consolidated financial statements, the Company has only executed a purchase notice for an aggregate 262,692 shares to Alumni Capital LP, based on this Agreement, and the aggregate proceeds of $822,501 have been received and recorded for the period ended September 30, 2025.

Treasury stock

During the nine months ended September 30, 2025, the Company repurchased 58,038 shares of its common stock for $249,675 in the public market at average price of $4.30 and placed them in treasury. In the same period, the Company retired 348,968 shares of its common stock previously repurchased $1,055,591. As of September 30, 2025 and December 31, 2024, 58,038 and 348,968 shares remain as treasury shares, respectively. These were all purchased as part of publicly announced plans or program, as also noted in the Annual Report on Form 10-K for the year ended December 31, 2024.

Employee compensation

In prior years, the Company entered into several employment agreements that require the issuance of common shares for services that vest on a quarterly basis. During the period ended September 30, 2025, 4,953 shares with a fair value of $13,905 that previously vested were issued. During the period ended September 30, 2024, an aggregate of 7,494 shares with a fair value of $48,564 vested and were recognized as compensation costs. As of September 30, 2025, 20,723 shares of common stock with a fair value of $52,733 remain vested but not issued.

On February 11, 2022 (the “Vesting Date”), the Company entered into a restricted stock award agreements (the “Award Agreement”) with eight employees for 42,000 shares of the Company’s common stock subject to the terms and to the fulfillment of the conditions set forth in the Company’s equity incentive plan. The first 20% of the restricted shares were granted and vested on February 11, 2022. An additional 20% of the restricted shares will vest on each anniversary of the Vesting Date until the fourth anniversary of the Vesting Date. The initial fair value of the awards on the date of grant was determined to be $2,942,800 which is being amortized over the 5 year vesting period. During the periods ended September 30, 2025 and 2024, 5,100 shares of common stock vested and the Company amortized $

SEC Form 10-Q filed by Focus Universal Inc.