FOCUS UNIVERSAL INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS FOCUS UNIVERSAL INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Index to the Financial Statements Contents Page Condensed Consolidated Balance Sheets as of March 31, 2025 (unaudited) and December 31, 2024 4 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2025 and 2024 (unaudited) 5 Condensed Consolidated Statements of Changes in Stockholder’s Equity for the Three Months Ended March 31, 2025 and 2024 (unaudited) 6 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024 (unaudited) 7 Notes to the Unaudited Condensed Consolidated Financial Statements 8 3 FOCUS UNIVERSAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, December 31, 2025 2024 (Unaudited) ASSETS Current Assets: Cash $ 2,195,600 $ 3,589,318 Accounts receivable, net 9,983 5,584 Inventories, net 64,047 126,071 Prepaid expenses 146,248 100,730 Marketable securities 21,668 24,660 Deposits – current portion 65,333 – Total Current Assets 2,502,879 3,846,363 Property and equipment, net 78,666 60,485 Operating lease right-of-use asset 85,862 108,270 Deposits – 65,195 Total Assets $ 2,667,407 $ 4,080,313 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities $ 706,654 $ 702,065 Other current liabilities 19,363 68,204 Lease liability, current portion 43,241 106,706 Total Current Liabilities 769,258 876,975 Non-Current Liabilities: Lease liability, less current portion – 8,114 Total Non-Current Liabilities – 8,114 Total Liabilities 769,258 885,089 Contingencies – – Stockholders' Equity: Common stock, par value $ 0.001 per share, 15,000,000 shares authorized; 7,472,981 and 7,153,647 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively 7,473 7,154 Treasury stock at cost ( 380,638 and 348,968 shares held at March 31, 2025 and December 31, 2024, respectively) ( 1,200,167 ) ( 1,055,592 ) Additional paid-in capital 30,138,792 30,025,587 Shares to be issued, common shares 17,295 25,573 Accumulated deficit ( 27,033,686 ) ( 25,782,308 ) Accumulated other comprehensive loss ( 31,558 ) ( 25,190 ) Total Stockholders' Equity 1,898,149 3,195,224 Total Liabilities and Stockholders' Equity $ 2,667,407 $ 4,080,313 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 INCOME (LOSS) (UNAUDITED) For the Three Months Ended March 31, 2025 2024 Revenue $ 190,255 $ 179,505 Cost of revenue 159,711 89,206 Gross Profit 30,544 90,299 Operating Expenses Selling expense 48,980 39,285 Compensation - officers and directors 125,387 56,793 Research and development 372,258 343,277 Professional fees 472,991 352,611 General and administrative 282,455 512,239 Total Operating Expenses 1,302,071 1,304,205 Loss from Operations ( 1,271,527 ) ( 1,213,906 ) Other Income (Expense): Interest income (expense), net 21,888 ( 2,394 ) Interest (expense) - related party – ( 33,000 ) Unrealized loss on marketable equity securities ( 2,992 ) ( 1,475 ) Rental income – 41,145 Other income (expense), net 1,253 ( 1,204 ) Total other income 20,149 3,072 Loss from continuing operations ( 1,251,378 ) ( 1,210,834 ) Loss from discontinued operations, net of tax – ( 104,763 ) Net Loss $ ( 1,251,378 ) $ ( 1,315,597 ) Other comprehensive items Foreign currency translation loss ( 6,368 ) ( 989 ) Total comprehensive loss $ ( 1,257,746 ) $ ( 1,316,586 ) Basic and fully diluted net loss per share: Continuing operations $ ( 0.17 ) $ ( 0.19 ) Discontinued operations $ – $ ( 0.01 ) Net loss $ ( 0.17 ) $ ( 0.20 ) Weighted Average Number of Common Shares Outstanding: Basic and Diluted 7,438,493 6,477,181 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 5 FOCUS UNIVERSAL INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 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 – 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 – – – 10,284 – – – 10,284 Stock based compensation - shares 10,053 10 – 103,230 ( 8,278 ) – – 94,962 Purchase of treasury stock – – ( 144,575 ) – – – – ( 144,575 ) Stock split rounding up 309,281 309 – ( 309 ) – – – – Other comprehensive income – – – – – – ( 6,368 ) ( 6,368 ) Net income – – – – – ( 1,251,378 ) – ( 1,251,378 ) Balance – March 31, 2025 7,472,983 $ 7,473 $ ( 1,200,167 ) $ 30,138,792 $ 17,295 $ ( 27,033,686 ) $ ( 31,558 ) $ 1,898,149 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 – – – 36,995 – – – 36,995 Stock based compensation - shares – – – – 94,910 – – 94,910 Other comprehensive income – – – – – – ( 989 ) ( 989 ) Net loss – – – – – ( 1,315,597 ) – ( 1,315,597 ) Balance – March 31, 2024 6,477,182 $ 6,477 $ ( 434,048 ) $ 26,531,450 $ 169,386 $ ( 23,897,767 ) $ ( 14,553 ) $ 2,360,945 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 6 FOCUS UNIVERSAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net Loss $ ( 1,251,378 ) $ ( 1,315,597 ) Adjustments to reconcile net loss to net cash from operating activities: Bad debt expense – 7,629 Depreciation expense 5,453 35,330 Unrealized loss on marketable equity securities 2,992 1,475 Stock-based compensation – shares 94,962 94,910 Stock based compensation – options 10,284 36,995 Changes in operating assets and liabilities: Accounts receivable ( 4,399 ) ( 22,481 ) Inventories 62,024 ( 125,286 ) Other receivable – 20,435 Prepaid expenses ( 45,490 ) ( 16,877 ) Operating lease right-of-use asset 22,964 21,039 Accounts payable and accrued liabilities 3,457 270,590 Other current liabilities ( 48,841 ) 68,957 Lease liabilities ( 72,077 ) ( 96,003 ) Net cash flows used in operating activities from continuing operations ( 1,220,049 ) ( 1,018,884 ) Net cash flows provided by operating activities from discontinued operations – 126,795 Net cash flows used in operating activities ( 1,220,049 ) ( 892,089 ) Cash flows from investing activities: Purchase of property and equipment ( 23,380 ) ( 5,044 ) Net cash flows used in investing activities ( 23,380 ) ( 5,044 ) Cash flows from financing activities: Proceeds from third party loan – 300,000 Proceeds from related party loan – 300,000 Repayment on third party loan – ( 50,000 ) Purchases of treasury stock ( 144,575 ) – Net cash flows provided by (used in) financing activities ( 144,575 ) 550,000 Effect of exchange rate ( 5,714 ) ( 2,285 ) Net change in cash ( 1,393,718 ) ( 349,418 ) Cash beginning of period 3,589,318 428,254 Cash end of period $ 2,195,600 $ 78,836 Supplemental cash flow disclosure: Cash paid for income taxes $ – $ – Cash paid for interest $ – $ 33,816 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 7 FOCUS UNIVERSAL INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 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 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 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 the traditional, wired stand-alone instruments at a fraction of their cost. The Company has multiple subsidiaries, including Perfecular Inc. (“Perfecular”), AVX Design & Integration, Inc. (“AVX,” also doing business as Smart AVX (“Smart AVX”)), Focus Universal (Shenzhen) Technology Company LTD (“Focus Shenzhen”), Lusher Bioscientific, Inc. 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 accessing high level ability 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) 8 Note 2 – Summary of Significant Accounting Policies Basis of Presentation The unaudited condensed financial statements of the Company for the three months ended March 31, 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 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 March 31, 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. 9 Major customers For the three months ended of March 31, 2025 and 2024, the Company’s revenue received from the following companies were set out as below: Schedule of concentrations of credit risk Three months ended March 31, 2025 2024 Amount % of Total Revenue Amount % of Total Revenue Customer A $ 101,831 54 % $ – – Customer B 50,597 27 % – – Customer C 19,966 10 % – – Customer D – – 69,325 32 % Customer E – – 51,761 24 % Customer F – – 31,043 14 % As of March 31, 2025 and December 31, 2024, the Company’s accounts receivable from the following companies were set out as below: March 31, 2025 December 31, 2024 Amount % of Total Accounts Receivable Amount % of Total Accounts Receivable Customer B $ 9,983 100 % $ – – Customer F – – 5,584 100 % Major vendors Two major vendors accounted for more than 98% of our total purchases during the three months ended March 31, 2025 and no major vendor accounted more than 10% of total purchase during the three months ended March 31, 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. 10 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 summarize financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024: Schedule of fair value of assets and liabilities measured on recurring basis March 31, 2025 (unaudited) Fair Value Carrying Level 1 Level 2 Level 3 Value Assets Marketable securities: Stock $ 21,668 $ – $ – $ 21,668 Total assets measured at fair value $ 21,668 $ – $ – $ 21,668 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. 11 Comprehensive Income (Loss) Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. The Company’s other comprehensive loss for the three months ended March 31, 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. 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. 12 Fully diluted EPS is computed by dividing net income (loss) by the weighted average number of shares of stock and potentially outstanding shares of stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants, unless these shares are covered by anti-dilutive protections. The denominator comprises the Company’s weighted average number of outstanding shares to extent the related shares are dilutive and, if dilutive, and other contracts to issue shares of common stock and stock options. As a result, they are included in the fully diluted EPS computation to the extent that the effect would be dilutive. As of each period end, all potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive. Schedule of anti-dilutive shares Three Months Ended March 31, 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: Schedule of exchange rates foreign currency Average Rate for the Three Months Ended December 31, 2025 2024 (Unaudited) (Unaudited) China Yuan (RMB) RMB 7.2712 RMB 7.1555 United States Dollar ($) $ 1.0000 $ 1.0000 Exchange Rate at March 31, 2025 December 31, 2024 (Unaudited) China Yuan (RMB) RMB 7.2572 RMB 7.2975 United States Dollar ($) $ 1.0000 $ 1.0000 13 Going Concern The Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these condensed consolidated financial statements. The Company has a net loss of $ 1,251,378 for the three months ended March 31, 2025. In addition, the Company had an accumulated deficit of $ 27,033,686 as of March 31, 2025, and negative cash flow from operating activities of $ 1,220,049 for the three months ended March 31, 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 March 31, 2025, the Company had cash and cash equivalents, and short-term investments, in the amount of $ 2,217,268 . The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings, and it expects to continue to rely on these sources of capital in the future. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing, or grant unfavorable terms in future licensing agreements. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company Note 3 – Recent Accounting Pronouncement In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement 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. 14 Note 4 – Inventory At March 31, 2025 and December 31, 2024, inventory consisted of the following: Schedule of inventory March 31, 2025 December 31, 2024 Finished goods $ 275,061 $ 337,085 Less: Inventory reserve ( 211,014 ) ( 211,014 ) Inventory $ 64,047 $ 126,071 Note 5 – Property and Equipment At March 31, 2025 and December 31, 2024, property and equipment consisted of the following: Schedule of property and equipment March 31, 2025 December 31, 2024 Building improvement $ 14,620 $ 14,620 Furniture and fixtures 42,116 42,033 Equipment 161,648 137,966 Software 1,995 1,995 Total cost 220,379 196,614 Less accumulated depreciation ( 141,713 ) ( 136,129 ) Property and equipment, net $ 78,666 $ 60,485 Depreciation expense for the three months ended March 31, 2025 and 2024 amounted to $ 5,453 and $ 35,330 , respectively. On July 8, 2024, the Company entered into a twelve-month Standard Industrial/Commercial Single-Tenant Lease with a third party for an approximately 14,004 square foot office and warehouse space. The lease commenced on July 4, 2024 and will end on July 31, 2025. The monthly rent is $16,804. The Company entered into a First Lease Amendment on March 21, 2025, extending the lease until January 31, 2026, with no changes to the original terms. Note 6 – Leases The Company recorded an operating lease expense of $ 80,210 and $ 27,687 for the three months ended March 31, 2025 and 2024, respectively. This is included in general and administrative expenses. 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 RMB29,974 (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. 15 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 RMB35,246 (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 term, which is 10%. Lease expense for the lease is recognized on a straight-line basis over the lease term. 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 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. Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. As of March 31, 2025 and December 31, 2024, operating lease right-of use assets and lease liabilities were as follows: Schedule of operating lease right of use assets and lease liabilities March 31, 2025 December 31, 2024 Operating lease right-of-use assets, net $ 85,862 $ 108,270 Lease liabilities, current portion $ 43,241 $ 106,706 Lease liabilities, less current portion $ – $ 8,114 Lease term and discount rate: Schedule of lease term and discount rate March 31, 2025 December 31, 2024 Weighted average remaining lease term: Operating lease 0.83 to 1.00 years 1.08 to 1.25 years Weighted average discount rate: Operating lease 10 % 10 % The minimum future lease payments are as follows: Schedule of minimum future lease payments Amount Year ending December 31, 2025 $ 36,968 Year ending December 31, 2026 8,215 Total minimum lease payment 45,183 Less: imputed interest ( 1,942 ) Present value of future minimum lease payments $ 43,241 16 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. Treasury stock During the three months ended March 31, 2025, the Company repurchased 31,670 shares of its common stock for $ 144,575 in the public market at average price of $4.91 and placed them in treasury. As of March 31, 2025 and December 31, 2024, 380,638 and 348,968 shares remain as treasury shares, respectively. These were all purchased as part of publicly announced plans or program and currently, as also noted in the previous 10-K filing. Employee compensation In prior years, the Company entered into several employment agreements that require the issuance of common shares for services that vest on a quarterly basis. During the period ended March 31, 2025, 4,953 shares with a fair value of $ 13,905 that previously vested were issued. During the period ended March 31, 2025, an aggregate of 1,350 shares with a fair value of $ 5,627 vested during the period and were recognized as compensation costs. As of March 31, 2025, 2,078 shares of common stock with a fair value of $ 17,295 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 year ended December 31, 2024, the Company amortized $ 357,340 of this amount leaving an unamortized balance of $ 714,680 at December 31, 2024. During the period ended March 31, 2025, 5,100 shares of common stock vested and the Company amortized $ 89,335 of this amount leaving an unamortized balance of $ 625,345 at March 31, 2025. As of March 31, 2025, 20,400 of the shares had been vested. Stock options On January 2, 2025, each member of the Board was granted 2,250 options to purchase shares at $ 3.45 per share with a fair value of $ 6,854 . The options vest monthly over one (1) year, and may be exercised during a 10 -year term. In the aggregate, 13,500 options were granted with a fair value of $ 41,124 . During the three months ended March 31, 2025, the Company recognized $ 10,284 of compensation cost relating to the vesting of these options and $ 30,840 remained unvested which will be amortized over the remainder of 2025. For the three months ended March 31, 2025 and 2024, the Company’s stock option compensation expenses amounted to $ 10,284 and $ 36,995 , respectively. 17 The fair value of the stock options issued during the periods was determined using the Black-Scholes option pricing model with the following assumptions: Schedule of assumptions March 31, 2025 Risk-free interest rate 3.45 % Expected life of the options 5.5 years Expected volatility 128.40 % Expected dividend yield 0 % The following is a summary of the option activity from December 31, 2024 to March 31, 2025: Schedule of option activity Number of Options Weighted average exercise price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding at December 31, 2024 62,637 $ 35.96 6.74 – Granted 13,500 $ 3.45 – – Exercised – – – – Cancelled or forfeited – – – – Outstanding at March 31, 2025 76,137 $ 30.20 7.08 8,100 Exercisable as of March 31, 2025 66,015 $ 34.30 6.66 2,027 Based on the closing fair market value of $4.17 per share on March 31, 2025, intrinsic value of $ 2,027 was attributed to exercisable but not exercised common stock options at March 31, 2025. Note 8 – Discontinued Operation On August 5, 2024, the Company and the segment manager of AT Tech Systems LLC reached a tentative oral agreement to terminate his employment and the employment of his two direct report team members. The Company discontinued operations of AT Tech Systems on August 21, 2024 with a termination cost of $ 22,000 . The income (loss) from discontinued operations presented in the statement of operations for the three months ended March 31, 2025 and 2024 as follows: Schedule of discontinued operations Three Months Ended March 31, 2025 2024 Revenue $ – $ 39,653 Cost of Revenue – 130,151 Gross Loss – ( 90,498 ) Operating Expenses: General and administrative – 15,406 Total Operating Expenses – 15,406 Loss from Operations – ( 105,904 ) Other Income (Expense): Other income, net – 1,141 Total other income, net – 1,141 Net Loss $ – $ ( 104,763 ) Total operating cash flows from discontinued operations were $ 0 and $ 126,795 , respectively, for the three months ended March 31, 2025 and 2024. 18 Note 9 – Segment Reporting The Company currently has two operating segments. In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company considers operating segments to be components of the Company’s business for which separate financial information is available and evaluated regularly by Management in deciding how to allocate resources and to assess performance. Management reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it has two operating and reportable segments. The Company consists of two types of operations. (1) AVX and Smart AVX (inclusive of the smart IoT Products sales under Smart AVX) cooperatively run our “LED and IoT Installation Services” segment, which handles our LED and IoT installation and management business specializing in high performance and easy to use LED and display systems, audio/video systems, home theaters, lighting control, automation, and integration. This includes the Focus and Focus Shenzhen collectively operate our “Corporate and R&D” segment focused on R&D development for the IoT, which involves the non-specific financing, executive expense, operations and investor relations of our public entity, and the general shared management and costs across the Company’s subsidiaries that spread across all functional categories and research and development of these IoT technology products and of our smart products into the commercial and home automation sectors. (2) Perfecular and Lusher jointly operate the SEC Financial Software segment, which involves the development, marketing, and production of our SEC Financial Reporting AI-Driven Automation Software package and also includes our universal smart instruments and devices in the hydroponic and controlled agriculture segments. Asset information by operating segment is not presented as the Chief Executive Officer does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s consolidated financial statements. The management team reviews financial information on a consolidated level and allocates resources based on net loss, which also serves as the key metric for evaluating financial performance. The following tables summarize the financial information of each operating segment of the Company for the three months ended March 31, 2025: Schedule of segment reporting For the Three Months ended March 31, 2025 Perfecular & Lusher Corporate & IoT Total Revenue $ 6,624 $ 183,631 $ 190,255 Cost of revenue 5,373 154,338 159,711 Gross profit 1,251 29,293 30,544 Operating expenses Selling expense 1,165 47,815 48,980 Compensation – officers and directors – 125,387 125,387 Research and development 115,890 256,368 372,258 Professional fees – 472,991 472,991 General and administrative 469 281,986 282,455 Total operating expense 117,524 1,184,547 1,302,071 Loss from operations ( 116,273 ) ( 1,155,254 ) ( 1,271,527 ) Total other income 1 20,148 20,149 Net loss $ ( 116,272 ) $ ( 1,135,106 ) $ ( 1,251,378 ) 19 The following tables summarize the financial information of each operating segment of the Company for the three months ended March 31, 2024: For the Three Months ended March 31, 2024 Perfecular & Lusher Corporate & IoT Total Revenue $ 2,116 $ 177,389 $ 179,505 Cost of revenue 2,315 86,891 89,206 Gross profit (loss) ( 199 ) 90,498 90,299 Operating expenses Selling expense 2,454 36,831 39,285 Compensation – officers and directors – 56,793 56,793 Research and development 46,810 296,467 343,277 Professional fees – 352,611 352,611 General and administrative 3,175 509,064 512,239 Total operating expense 52,439 1,251,766 1,304,205 Loss from operations ( 52,638 ) ( 1,161,268 ) ( 1,213,906 ) Total other income 335 2,737 3,072 Loss from discontinued operations – ( 104,763 ) ( 104,763 ) Net loss $ ( 52,303 ) $ ( 1,263,294 ) $ ( 1,315,597 ) Note 10 – Contingencies In the normal course of business or otherwise, the Company may become involved in legal proceedings. The Company will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonable 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 of the date of this quarterly report, the Company has resolved certain material legal proceedings described in Note 11. Note 11 – Subsequent Events On April 28, 2025 Alumni Capital purchased 94,825 of our common shares for $381,224, based on our Equity Line of Credit (ELOC) Purchase Agreement, dated November 16, 2024. 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. The Company repurchased 31,670 shares of its common stock for $144,575 with our broker Paulson Securities in the public market at an average price of $4.91 and placed them in treasury. All these shares were purchased as part of publicly announced plans or program and currently, as also noted in the previous 10-K filing. 20 On August 26, 2024, a former software engineer filed an action against Perfecular Inc., a wholly owned subsidiary of the Company, in the Superior Court for the County of San Bernardino, State of California alleging wrongful termination and other violations of the California Labor Code. The complaint sought unspecified economic and non-economic losses, as well as attorneys’ fees. On April 25, 2025, the Company and the software engineer entered into a confidential settlement agreement which concluded this matter and releases all claims against the Company. This new impact has been accounted for in these financial statements. On October 28, 2024, MGR Real Estate, Inc. a California corporation, filed an action in the Superior Court of the State of California, County of San Bernardino, against the Company and CFO Irving Kau. The complaint alleged a variety of items including breach of contract and declaratory relief. On April 10, 2025, the Company, Mr. Kau, and MGR Real Estate, Inc. entered into a confidential settlement agreement which concluded this matter and releases all claims against the Company. This reduced impact has been accounted for in these financial statements. The Company has evaluated all other subsequent events through the date these consolidated financial statements were issued and determined that there were no other subsequent events or transactions that require recognition or disclosures in the consolidated financial statements. 21