FOCUS UNIVERSAL INC. 10-Q

Table of Contents

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 June 30, 2024

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

SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-55247

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 Global 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 August 1, 2024, registrant had 64,867,760 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	21

Item 3. Quantitative and Qualitative Disclosures About Market Risk	32

Item 4. Controls and Procedures	32

PART II OTHER INFORMATION	33

Item 1. Legal Proceedings	33

Item 1A. Risk Factors	33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3. Defaults Upon Senior Securities	33

Item 4. Mine Safety Disclosures	33

Item 5. Other Information	33

Item 6. Exhibits	33

Signatures	34

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 June 30, 2024 (unaudited) and December 31, 2023	4

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	5

Condensed Consolidated Statements of Changes in Stockholder’s Equity for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	6

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (unaudited)	8

Notes to the Unaudited Condensed Consolidated Financial Statements	9

FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	June 30,			December 31,
	2024			2023
		(Unaudited)
ASSETS
Current Assets:
Cash	$	13,064		$	428,254
Accounts receivable, net		19,775			164,398
Inventory		495,944			282,071
Other receivables		–			20,519
Prepaid expenses		97,966			96,301
Marketable equity securities		27,580			36,735
Total Current Assets		654,329			1,028,278

Property and equipment, net		4,022,095			4,080,663
Operating lease right-of-use asset		153,061			201,048
Deposits		25,713			24,135

Total Assets	$	4,855,198		$	5,334,124

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	1,061,029		$	482,523
Related party loan		2,101,000			1,000,000
Short-term loan		225,000			–
Other current liabilities		177,142			84,951
Lease liability, current portion		99,570			90,172
Total Current Liabilities		3,663,741			1,657,646

Non-Current Liabilities:
Lease liability, less current portion		31,802			118,517
Other liability		–			12,335
Total Non-Current Liabilities		31,802			130,852

Total Liabilities		3,695,543			1,788,498

Contingencies		–			–

Stockholders' Equity:
Common stock, par value $0.001 per share, 75,000,000 shares authorized; 64,867,760 and 64,771,817 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		64,867			64,771
Treasury stock at cost (1,133,040 and 1,163,040 shares held at June 30, 2024 and December 31, 2023, respectively)		(385,686	)		(434,048	)
Additional paid-in capital		26,749,219			26,436,161
Shares to be issued, common shares (25,197 and 41,463 shares, respectively)		15,968			74,476
Accumulated deficit		(25,262,873	)		(22,582,170	)
Accumulated other comprehensive loss		(21,840	)		(13,564	)
Total Stockholders' Equity		1,159,655			3,545,626

Total Liabilities and Stockholders' Equity	$	4,855,198		$	5,334,124

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

FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Revenue	$	19,753		$	215,391		$	238,911		$	451,486

Cost of Revenue		31,834			149,259			251,191			330,003

Gross Profit (loss)		(12,081	)		66,132			(12,280	)		121,483

Operating Expenses:
Selling expense		35,640			63,075			74,925			74,934
Compensation - officers and directors		55,255			253,403			112,048			560,937
Research and development		296,248			342,992			639,525			619,473
Professional fees		354,421			116,565			707,032			373,964
General and administrative		625,492			361,583			1,153,137			804,635
Total Operating Expenses		1,367,056			1,137,618			2,686,667			2,433,943

Loss from Operations		(1,379,137	)		(1,071,486	)		(2,698,947	)		(2,312,460	)

Other Income (Expense):
Interest income (expense), net		(9,900	)		16,118			(11,153	)		30,554
Interest expense – related party		(56,098	)		–			(89,098	)		–
Gain on bargain purchase		–			–			–			61,747
Unrealized gain (loss) on marketable equity securities		(7,680	)		(5,005	)		(9,155	)		27,565
Realized gain (loss) on marketable equity securities		–			652			–			(14,249	)
Rental income		41,547			40,341			82,692			80,293
Other income (expense), net		46,162			1,214			44,958			(5,859	)
Total other income, net		14,031			53,320			18,244			180,051

Net Loss	$	(1,365,106	)	$	(1,018,166	)	$	(2,680,703	)	$	(2,132,409	)

Other comprehensive items
Foreign currency translation loss		(7,287	)		(3,883	)		(8,276	)		(208	)

Total comprehensive loss	$	(1,372,393	)	$	(1,022,049	)	$	(2,688,979	)	$	(2,132,617	)

Weight Average Number of Common Shares Outstanding: Basic and Diluted		64,837,385			65,171,740			64,804,420			55,377,422

Net Loss per common share: Basic and Diluted	$	(0.02	)	$	(0.02	)	$	(0.04	)	$	(0.04	)

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 SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(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 – March 31, 2024		64,771,817		$	64,771		$	(434,048	)	$	26,473,156		$	169,386		$	(23,897,767	)	$	(14,553	)	$	2,360,945

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

Stock based compensation – shares		125,943			126			–			287,400			(153,418	)		–			–			134,108

Retirement of treasury stock		(30,000	)		(30	)		48,362			(48,332	)		–			–			–			–

Other comprehensive income		–			–			–			–			–			–			(7,287	)		(7,287	)

Net loss		–			–			–			–			–			(1,365,106	)		–			(1,365,106	)

Balance – June 30, 2024		64,867,760		$	64,867		$	(385,686	)	$	26,749,219		$	15,968		$	(25,262,873	)	$	(21,840	)	$	1,159,655

	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 – March 31, 2023		64,769,490	$	64,769	$	–		$	25,833,643		$	12,500	$	(18,978,271	)	$	(2,868	)	$	6,929,773

Stock based compensation – options		–		–		–			133,403			–		–			–			133,403

Stock based compensation – shares		–		–		–			–			18,900		–			–			18,900

Purchase of treasury stock		–		–		(420,686	)		–			–		–			–			(420,686	)

Issued stock dividend		2,327		2		–			(2	)		–		–			–			–

Other comprehensive income		–		–		–			–			–		–			(3,883	)		(3,883	)

Net loss		–		–		–			–			–		(1,018,166	)		–			(1,018,166	)

Balance – June 30, 2023		64,771,817	$	64,771	$	(420,686	)	$	25,967,044		$	31,400	$	(19,996,437	)	$	(6,751	)	$	5,639,341

(continued)

	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		64,771,817		$	64,771		$	(434,048	)	$	26,436,161		$	74,476		$	(22,582,170	)	$	(13,564	)	$	3,545,626

Stock based compensation – options		–			–			–			73,990			–			–			–			73,990

Stock based compensation – shares		125,943			126			–			287,400			(58,508	)		–			–			229,018

Retirement of treasury stock		(30,000	)		(30	)		48,362			(48,332	)		–			–			–			–

Other comprehensive income		–			–			–			–			–			–			(8,276	)		(8,276	)

Net loss		–			–			–			–			–			(2,680,703	)		–			(2,680,703	)

Balance – June 30, 2024		64,867,760		$	64,867		$	(385,686	)	$	26,749,219		$	15,968		$	(25,262,873	)	$	(21,840	)	$	1,159,655


	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, 2022 *		65,296,383		$	65,297		$	(2,000,000	)	$	27,514,733		$	48,075		$	(17,864,028	)	$	(6,543	)	$	7,757,534

Stock based compensation – options		–			–			–			266,806			–			–			–			266,806

Stock based compensation – cashless exercise options		10,857			10			–			(10	)		–			–			–			–

Stock based compensation – shares		62,250			62			–			184,917			(16,675	)		–			–			168,304

Purchase of treasury stock		–			–			(420,686	)		–			–			–			–			(420,686	)

Retirement of treasury stock		(600,000	)		(600	)		2,000,000			(1,999,400	)		–			–			–			–

Issued stock dividend		2,327			2			–			(2	)		–			–			–			–

Other comprehensive income		–			–			–			–			–			–			(208	)		(208	)

Net loss		–			–			–			–			–			(2,132,409	)		–			(2,132,409	)

Balance – June 30, 2023		64,771,817		$	64,771		$	(420,686	)	$	25,967,044		$	31,400		$	(19,996,437	)	$	(6,751	)	$	5,639,341

*	Retroactively applied to the stock split

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 Six Months Ended June 30,
	2024			2023
Cash flows from operating activities:
Net Loss	$	(2,680,703	)	$	(2,132,409	)
Adjustments to reconcile net loss to net cash from operating activities:
Bad debt expense		60,570			4,675
Depreciation expense		67,354			84,616
Amortization of intangible assets		–			28,741
Unrealized gain on marketable equity securities		9,155			(27,565	)
Realized loss on marketable equity securities		–			14,249
Gain on bargain purchase		–			(61,747	)
Stock-based compensation – shares		229,018			168,304
Stock option compensation – options		73,990			266,806
Changes in operating assets and liabilities:
Accounts receivable		84,053			(27,741	)
Accounts receivable - related party		–			34,507
Inventory		(213,873	)		15,526
Other receivable		20,394			–
Prepaid expenses		(1,833	)		(46,109	)
Deposit		(2,223	)		8,514
Operating lease right-of-use asset		42,985			4,983
Accounts payable and accrued liabilities		581,696			73,823
Other current liabilities		92,191			39,100
Lease liabilities		(72,385	)		(55,012	)
Other liabilities		(12,335	)		–
Net cash flows used in operating activities		(1,721,946	)		(1,606,739	)

Cash flows from investing activities:
Purchase of property and equipment		(9,743	)		(17,203	)
Purchase of marketable securities		–			(43,644	)
Proceeds from sale of marketable securities		–			101,736
Net cash flows provided by (used in) investing activities		(9,743	)		40,889

Cash flows from financing activities:
Proceeds from third party loan		350,000			–
Proceeds from related party loan		1,101,000			–
Repayment on third party loan		(125,000	)		–
Purchase of treasury stock		–			(1,420,686	)
Net cash flows provided by (used in) financing activities		1,326,000			(1,420,686	)

Effect of exchange rate		(9,501	)		1,793

Net change in cash		(415,190	)		(2,984,743	)

Cash beginning of period		428,254			4,343,426

Cash end of period	$	13,064		$	1,358,683

Supplemental cash flow disclosure:
Cash paid for income taxes	$	–		$	–
Cash paid for interest	$	57,218		$	8,407

Supplemental disclosure for noncash financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities	$	–		$	266,101

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 SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(UNAUDITED)

Note 1 – Organization and Operations

Focus Universal Inc. (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. The Company 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 26 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, reduce product development timelines and energy usage while increasing range, speed, efficiency, and security of the IoT and 5G networks.

The Company has multiple subsidiaries, including Perfecular Inc. (“Perfecular”), Focus Universal (Shenzhen) Technology Company LTD (“Focus Shenzhen”), AVX Design & Integration, Inc. (“AVX,” also doing business as Smart AVX (“Smart AVX”)), Lusher Bioscientific, Inc. (“Lusher”), and AT Tech Systems LLC (“AT Tech Systems”). Perfecular, a wholly owned subsidiary of Focus that was founded in September 2009 and is headquartered in Ontario, California, is engaged in designing digital sensor products and selling 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 bound in China.

As of January 6, 2023, AT Tech Systems is a subsidiary of Focus specializing in commercial and industrial smart IoT installation projects in areas throughout Southern California. AT Tech Systems has several clients including medical/dental facilities and commercial and industrial projects, and several notable manufacturers and wholesalers, and provides clients with integrated network, security, and multimedia design solutions and technology systems. (See Note 11)

The Company has completed integration throughout its existing businesses, including key employees serving dual roles with its subsidiaries.

As of 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. As of the date of this filing, the Company has solely begun ongoing development of the software and founded the subsidiary after board approval, as other business activities are only in the introductory phase. As of May 11, 2024, the Company announced board approval for the eventual spin-off of Lusher to better prioritize the development of its SEC Financial Reporting Automation Software while also allowing the management of Focus Universal Inc. to better prioritize its core business. The Company plans to demo the software at the beginning of September 2024, and plans a company roadshow in 3Q of 2024.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed financial statements of the Company for the six months ended June 30, 2024 and 2023 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, 2023 was derived from the audited financial statements included in the Company’s financial statements as of and for the years ended December 31, 2023 and 2022 contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on April 1, 2024. 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”).

Segment Reporting

The Company currently has two operating segments in addition to our corporate overhead. 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, along with corporate overhead (which includes research and development) as follow, (1) Perfecular, AVX (doing business as and branded under Smart AVX) and Lusher jointly operate the “IoT Products” segment, which involves the wholesale, marketing, and production of our universal smart instruments and devices in the hydroponic and controlled agriculture segments and of our smart products into the commercial and home automation sectors, and (2) AVX (exclusive of the smart IoT Products sales under Smart AVX) and AT Tech Systems cooperatively run our “IoT Installation Services” segment, which handles our IoT installation and management business specializing in high performance and easy to use audio/video systems, home theaters, lighting control, automation, and integration.

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 lease term 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 June 30, 2024 and December 31, 2023, allowance for doubtful accounts amounted to $262,543 and $249,603, 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 June 30, 2024 and 2023, the Company’s revenue received from the following companies were set out as below:

Concentration of risk	Three months ended June 30,
	2024				2023
	Amount		% of Total Revenue		Amount		% of Total Revenue
Customer A	$	12,750		65%	$	(*)		(*)
Customer B		6,000		30%		(*)		(*)
Customer C		(*)		(*)		105,000		49%
Customer D		(*)		(*)		38,253		18%

_________________

(*)

Revenue had not exceeded 10% or more of the Company’s consolidated revenue of the Company.

For the six months ended of June 30, 2024 and 2023, the Company’s revenue received from the following companies were set out as below:

Six months ended June 30,

2024

2023

Amount

% of Total
Revenue

Amount

% of Total
Revenue

Customer F

69,325

29%

(*)

Customer G

51,761

22%

(*)

Customer H

34,492

14%

(*)

Customer C

(*)

105,000

23%

Customer D

(*)

63,711

_________________

(*)

Revenue had not exceeded 10% or more of the Company’s consolidated revenue of the Company.

As of June 30, 2024 and December 31, 2023, the Company’s accounts receivable from the following companies were set out as below:

June 30, 2024

December 31, 2023

Amount

% of Total
Accounts
Receivable

Amount

% of Total
Accounts
Receivable

Customer G

12,941

65%

(*)

Customer I

3,584

19%

(*)

Customer B

3,250

16%

(*)

Customer C

(*)

70,000

43%

_________________

(*)

Accounts receivable had not exceeded 10% or more of the Company’s consolidated accounts receivable of the Company.

Major vendors

No major vendor accounted more than 10% of total purchase during six months ended June 30, 2024 and 2023.

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 summarize financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:


	June 30, 2024 (unaudited)
	Fair Value						Carrying
	Level 1		Level 2		Level 3		Value
Assets
Marketable securities:
Stock	$	27,580	$	–	$	–	$	27,580
Total assets measured at fair value	$	27,580	$	–	$	–	$	27,580


	December 31, 2023
	Fair Value						Carrying
	Level 1		Level 2		Level 3		Value
Assets
Marketable securities:
Stock	$	36,735	$	–	$	–	$	36,735
Total assets measured at fair value	$	36,735	$	–	$	–	$	36,735

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 six months ended June 30, 2024 and 2023 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.

A summary of our revenue by product type for the three months ended June 30, 2024 and 2023 is as follows:

Schedule of revenue by product type
	June 30, 2024		June 30, 2023
IoT Products	$	11,234	$	64,867
IoT Project Construction and Installation Services		8,519		150,524
Total	$	19,753	$	215,391

A summary of our revenue by product type for the six months ended June 30, 2024 and 2023 is as follows:


	June 30, 2024		June 30, 2023
IoT Products	$	190,739	$	78,148
IoT Project Construction and Installation Services		48,172		373,338
Total	$	238,911	$	451,486

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 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.

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.

Due to the net loss incurred by the Company, 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
Six Months Ended June 30,	2024		2023
Stock options		570,124		457,934
Total		570,124		457,934

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
	Average Rate for the Six Months Ended June 30,
	2024		2023
	(Unaudited)		(Unaudited)
China Yuan (RMB)	RMB	7.1970	RMB	6.9243
United States Dollar ($)	$	1.0000	$	1.0000

	Exchange Rate at
	June 30, 2024		December 31, 2023
	(Unaudited)
China Yuan (RMB)	RMB	7.2651	RMB	7.0698
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 $2,680,703 and $2,132,409 for the six months ended June 30, 2024 and 2023, respectively. In addition, the Company had an accumulated deficit of $25,262,873 and $22,582,170 as of June 30, 2024 and December 31, 2023, respectively, and negative cash flow from operating activities of $1,721,946 and $1,606,739 for the six months ended June 30, 2024 and 2023, respectively. Substantial doubt about the Company’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the Company will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company currently suffered recurring 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, 2023, has also expressed substantial doubt about the Company’s ability to continue as a going concern.

At June 30, 2024, the Company had cash and cash equivalents, and short-term investments, in the amount of $40,644. 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. In addition, subsequent to June 30, 2024, the Company has sold its land and buildings which provided additional working capital to the Company. For more information on the sale of the land and buildings please see Note 11. 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. 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.

Note 3 – Recent Accounting Pronouncement

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. This standard will be effective for the Company on January 1, 2024 and interim periods beginning in fiscal year 2025, with early adoption permitted. The updates required by this standard should be applied retrospectively to all periods presented in the financial statements. The Company does not expect this standard to have a material impact on its results of operations, financial position or cash flows.

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 June 30, 2024 and December 31, 2023, inventory consisted of the following:

Schedule of inventory
	June 30, 2024		December 31, 2023
Parts	$	1,051	$	1,051
Finished goods		494,893		281,020
Inventory	$	495,944	$	282,071

Note 5 – Property and Equipment

At June 30, 2024 and December 31, 2023, property and equipment consisted of the following:

Schedule of property and equipment
	June 30, 2024			December 31, 2023
Warehouse	$	3,789,773		$	3,789,773
Land		731,515			731,515
Building improvement		240,256			240,256
Furniture and fixtures		42,100			39,223
Equipment		125,089			119,556
Software		1,995			1,995
Total cost		4,930,728			4,922,318
Less accumulated depreciation		(908,633	)		(841,655	)
Property and equipment, net	$	4,022,095		$	4,080,663

Depreciation expense for the six months ended June 30, 2024 and 2023 amounted to $67,354 and $84,616, respectively.

Note 6 – Related Party Loan

On September 7, 2023, the Company entered into a loan agreement with Golden Sunrise Investment LLC in the amount of $1,000,000. This loan is secured against the Company’s property, which serves as collateral, with a cost of $4.5 million pledged. At the time of entering the loan agreement, Golden Sunrise Investment LLC was owned by two of the Company’s shareholders who collectively owned approximately 19% of the Company’s outstanding shares. The loan has an annual interest rate of 12% and the principal amount has a due date of September 7, 2024. On March 5, 2024, the Company entered into an addendum to the loan agreement with Golden Sunrise Investment LLC, a related party obtaining an additional secured loan amount of $300,000 at an annual interest rate of 12% which is due September 7, 2024. The interest expense amount was $72,000 for the six months ended June 30, 2024. The loan accrued interest of $26,000 as of June 30, 2024, and the total principal outstanding loan amount was $1,300,000 as of June 30, 2024. The interest rate increases to 15% as of the maturity date of the loan on any unpaid principal balance outstanding. The principal and interest were paid off on July 3, 2024.

On April 2, 2024, the Company entered into a two-year loan agreement with the Company’s CEO Desheng Wang for the amount of $300,000. The loan has an annual interest rate of 12% and the principal and interest amount have a due date of April 1, 2026, as consistent with the previous and separate loan agreement with Golden Sunrise Investment LLC. Until June 30, 2024, the principal loan amount has been increased from $300,000 to $801,000. The interest expense amount was $17,098 for the six months ended June 30, 2024. The principal and interest were paid off on July 9, 2024.

Note 7 – Short-Term Loan

On January 2, 2024, the board of directors of the Company authorized the Company to enter into a revolving credit facility or series of promissory notes for up to $

SEC Form 10-Q filed by Focus Universal Inc.