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, 2023 (unaudited) and December 31, 2022 4 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (unaudited) 5 Condensed Consolidated Statements of Changes in Stockholder’s Equity for the Three Months Ended March 31, 2023 and 2022 (unaudited) 6 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (unaudited) 7 Notes to the Unaudited Condensed Consolidated Financial Statements 8 3 FOCUS UNIVERSAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31, December 31, 2023 2022 (Unaudited) ASSETS Current Assets: Cash $ 2,570,475 $ 4,343,426 Accounts receivable, net 64,367 78,313 Accounts receivable – related party – 34,507 Inventory 90,663 103,772 Prepaid expenses 222,934 142,342 Marketable equity securities 51,395 105,470 Total Current Assets 2,999,834 4,807,830 Property and equipment, net 4,196,588 4,228,630 Operating lease right-of-use asset 270,481 253,336 Deposits 24,823 33,264 Total Assets $ 7,491,726 $ 9,323,060 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities $ 214,726 $ 267,685 Treasury stock payable – 1,000,000 Other current liabilities 105,334 6,496 Lease liability, current portion 82,388 113,058 Total Current Liabilities 402,448 1,387,239 Non-Current Liabilities: Lease liability, less current portion 147,170 165,952 Other liability 12,335 12,335 Total Non-Current Liabilities 159,505 178,287 Total Liabilities 561,953 1,565,526 Contingencies (Note 12) – – Stockholders' Equity: Common stock, par value $ 0.001 per share, 75,000,000 shares authorized; 64,769,490 shares issued and outstanding as of March 31, 2023 and 43,530,915 shares issued and outstanding as of December 31, 2022 64,769 43,531 Treasury stock at cost ( 0 shares and 400,000 shares held at March 31, 2023 and December 31, 2022, respectively) – ( 2,000,000 ) Additional paid-in capital 25,833,643 27,536,499 Shares to be issued, common shares 12,500 48,075 Accumulated deficit ( 18,978,271 ) ( 17,864,028 ) Accumulated other comprehensive income (loss) ( 2,868 ) ( 6,543 ) Total Stockholders' Equity 6,929,773 7,757,534 Total Liabilities and Stockholders' Equity $ 7,491,726 $ 9,323,060 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 4 FOCUS UNIVERSAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, 2023 2022 Revenue $ 236,095 $ 125,625 Revenue - related party – 31,542 Total Revenue 236,095 157,167 Cost of Revenue 180,744 143,523 Gross Profit 55,351 13,644 Operating Expenses: Selling expense 11,859 38,339 Compensation - officers 307,534 325,665 Research and development 276,481 561,744 Professional fees 257,399 360,866 General and administrative 443,052 650,891 Total Operating Expenses 1,296,325 1,937,505 Loss from Operations ( 1,240,974 ) ( 1,923,861 ) Other Income (Expense): Interest income (expense), net 14,436 ( 6 ) Gain on bargain purchase 61,747 – Unrealized gain (loss) on marketable equity securities 32,570 – Realized loss on marketable equity securities ( 14,901 ) – Rental income 39,952 46,372 Other income (expense), net ( 7,073 ) 8,565 Total other income (expense) 126,731 54,931 Loss before income taxes ( 1,114,243 ) ( 1,868,930 ) Income tax expense – – Net Loss $ ( 1,114,243 ) $ ( 1,868,930 ) Other comprehensive items Foreign currency translation gain and (loss) 3,675 552 Total comprehensive loss $ ( 1,110,568 ) $ ( 1,868,378 ) Weight Average Number of Common Shares Outstanding: Basic and Diluted 45,149,834 43,259,741 Net Loss per common share: Basic and Diluted $ ( 0.02 ) $ ( 0.04 ) 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, 2023 AND 2022 (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, 2022 43,530,915 $ 43,531 $ ( 2,000,000 ) $ 27,536,499 $ 48,075 $ ( 17,864,028 ) $ ( 6,543 ) $ 7,757,534 Stock based compensation - options – – – 133,403 – – – 133,403 Stock based compensation – cashless exercise options 7,238 7 – ( 7 ) – – – – Stock based compensation - shares 41,500 41 – 184,938 ( 35,575 ) – – 149,404 Retirement of treasury stock ( 400,000 ) ( 400 ) 2,000,000 ( 1,999,600 ) – – – – Issued stock dividend 21,589,837 21,590 – ( 21,590 ) – – – – Other comprehensive income – – – – – – 3,675 3,675 Net loss – – – – – ( 1,114,243 ) – ( 1,114,243 ) Balance – March 31, 2023 64,769,490 $ 64,769 $ – $ 25,833,643 $ 12,500 $ ( 18,978,271 ) $ ( 2,868 ) $ 6,929,773 Common stock Additional Paid-In Shares to be issued Common  Accumulated Accumulated Other Comprehensive Income  Total Stockholders’ Description Shares Amount Capital Shares Deficit (Loss) Equity Balance - December 31, 2021 43,259,741 $ 43,259 $ 24,093,075 $ 1,922,753 $ ( 12,937,091 ) $ ( 4 ) $ 13,121,992 Stock based compensation - options – – 228,375 – – – 228,375 Employee compensation – – – 656,370 – – 656,370 Common stock to be issued for services – – – 8,000 – – 8,000 Other comprehensive loss – – – – – 552 552 Net loss – – – – ( 1,868,930 ) – ( 1,868,930 ) Balance - March 31, 2022 43,259,741 $ 43,259 $ 24,321,450 $ 2,587,123 $ ( 14,806,021 ) $ 548 $ 12,146,359 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) Three Months Ended March 31, 2023 2022 Cash flows from operating activities: Net Loss $ ( 1,114,243 ) $ ( 1,868,930 ) Adjustments to reconcile net loss to net cash from operating activities: Bad debt expense 5,114 42,080 Inventory fair value net realizable – ( 25,006 ) Depreciation expense 42,041 40,165 Amortization of intangible assets 28,741 – Unrealized gain on marketable equity securities ( 32,570 ) – Realized loss on marketable equity securities 14,901 – Gain on bargain purchase ( 61,747 ) – Stock-based compensation – shares 149,404 656,370 Stock-based compensation – services – 8,000 Stock option compensation – options 133,403 228,375 Changes in operating assets and liabilities: Accounts receivable 8,832 ( 96,258 ) Accounts receivable - related party 34,507 ( 70,816 ) Inventory 13,109 ( 5,067 ) Other receivable – 13,057 Prepaid expenses ( 80,511 ) 148,616 Deposit 8,617 ( 35,142 ) Operating lease right-of-use asset ( 16,075 ) 150,623 Accounts payable and accrued liabilities ( 20,011 ) 38,000 Other current liabilities – ( 17,135 ) Customer deposit 98,838 – Lease liabilities ( 50,885 ) ( 123,951 ) Other liabilities – 14,736 Net cash flows used in operating activities ( 838,535 ) ( 902,283 ) Cash flows from investing activities: Purchase of property and equipment ( 9,920 ) ( 31,470 ) Purchase of marketable securities ( 17,690 ) – Proceeds from sale of marketable securities 89,434 – Net cash flows provided by (used in) investing activities 61,824 ( 31,470 ) Cash flows from financing activities: Purchase of treasury stock ( 1,000,000 ) – Net cash flows used in financing activities ( 1,000,000 ) – Effect of exchange rate 3,760 24 Net change in cash ( 1,772,951 ) ( 933,729 ) Cash beginning of period 4,343,426 8,678,665 Cash end of period $ 2,570,475 $ 7,744,936 Supplemental cash flow disclosure: Cash paid for income taxes $ – $ – Cash paid for interest $ 4,085 $ 2,752 Supplemental disclosure for noncash financing activities: Right-of-use assets obtained in exchange for operating lease liabilities $ 270,481 $ – 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, 2023 AND 2022 (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 (“Inception”). It 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 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, 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, foundation, and sensor readouts together perform the functions of many traditional scientific and engineering instruments and are intended to replace the traditional, wired stand-alone instruments at a fraction of their cost. The company has multiple subsidiary units, including Perfecular Inc. (“Perfecular”), AVX Design and Integration Inc. (“AVX”), Focus Universal (Shenzhen) Technology Company LTD (“Focus Shenzhen”), Lusher Bioscientific, Inc. (“Lusher”), and AT Tech Systems LLC (“AT Tech LLC”). Perfecular Inc. 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 Design & Integration, Inc. was incorporated on June 16, 2000, in the state of California. AVX is an internet of things (“IoT”) installation and management company specializing in high performance and easy to use Audio/Video, Home Theater, Lighting Control, Automation and Integration. Services provided by AVX include full integration of houses, apartment, commercial complex, office spaces with audio, visual and control systems to fully integrate devices in the low voltage field. AVX’s services also include partial equipment upgrade and installation. Focus set up a branch in Shenzhen China, Focus Universal (Shenzhen) Technology Company LTD to be engaged in IoT research and development, equipment sales, and application services, software development and sales, amongst other activities. On January 5, 2022, the Company founded a wholly owned subsidiary named Lusher Bioscientific, Inc. Lusher Bioscientific was founded to promote the Company’s horticultural sensors and filters with the hydroponic and controlled agriculture market and to assist in the product development of IoT technology products within this sector. As of the date of this filing, Lusher’s activities are in the introductory phase. As of January 6, 2023, the Company completed the business combination of AT Tech Systems. The transaction included AT Tech Systems’ business, including its cash and cash equivalents, accounts receivable, professional licenses, customer lists and corresponding client relationships, trademarks, trade names, brand names, goodwill and related intangible assets, inventory, and all other assigned contracts. While the agreement was signed on December 19, 2022, in order to complete control, a new entity AT Tech Systems LLC needed to be formed, which was completed on January 6, 2023. The Company also hired certain employees of AT Tech Systems’ business, assuming employment obligations as of December 30, 2023, despite the control of the entity being completed thereafter. AT Tech Systems LLC is now a subsidiary of Focus Universal, as defined in ASC 805, Business Combinations . The Company has integrated the acquired assets and employees throughout its existing business, including key employees serving dual roles with AVX Design and Integration. For example, Mr. Anthony Tejeda will serve as the Company’s director of installation services, as the vice president of operations of AVX, and as chief operating officer of AT Tech Systems LLC. In addition to the provision of services in the positions mentioned above, Mr. Tejeda shall assist with AVX’s management and train certain of its personnel in performing installations. The employment agreement of Mr. Tejeda is for a term of 5 years. The onboarding of Mr. Tejeda, who has extensive experience and expertise in commercial smart installations, will complement the smart installation services and allow Focus and AVX to enter the commercial smart installation market. AT Tech Systems has several clients from medical/dental facilities, commercial, and industrial projects, including notable manufacturers and wholesalers, and provides clients with integrated network, security, and multimedia design solutions and technology systems. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Focus and its wholly-owned subsidiaries, Perfecular Inc., AVX Design & Integration, Inc., Focus Universal (Shenzhen) Technology Co., LTD, Lusher Bioscientific and AT Tech Systems LLC (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”). 8 Segment Reporting The Company currently has three operating segments. (1) Focus and Focus Shenzhen (“Corporate and R&D”) involve non-specific financing, executive expense, operations and investor relations of the public entity, and general shared management and costs across subsidiary units which spread across all functional categories and research and development of technology products. (2) Perfecular and Lusher (“IoT Products”) involve wholesale, marketing, and production of universal smart instruments and devices in the hydroponic and controlled agricultural segments. (3) AVX and AT Tech (“IoT Installation Services”) is an IoT installation and management company specializing in high performance and easy to use audio/video, home theater, 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, useful lives of intangible assets, allowance for doubtful accounts, inventory reserves, debt discounts, valuation of derivatives, and the valuation allowance on deferred tax assets. The Company regularly evaluates its estimates and assumptions. Cash The Company considers all highly liquid investments with a maturity of three months or less to be cash. At times, such investments may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limit. As of March 31, 2023 and December 31, 2022, approximately $ 2,651,309 and $ 3,120,763 of the Company’s cash was not insured by the FDIC. There were no cash equivalents held by the Company as of March 31, 2023 and December 31, 2022. Accounts Receivable The Company grants credit to clients that sell the Company’s products or engage in construction service under credit terms that it believes are customary in the industry and do not require collateral to support customer receivables. The accounts receivable balances are generally collected within 30 to 180 days of the product sale. 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, 2023 and December 31, 2022, allowance for doubtful accounts amounted to $ 228,086 and $ 222,972 , respectively. Concentrations of Credit 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 Inventory Inventory consists primarily of parts and finished goods and is valued at the lower of the inventory’s cost or net realizable value under the first-in-first-out method. Management compares the cost of inventory with its market value and a fair value adjustment is made to write down inventory to market value, if lower. Inventory fair value adjustments are recorded for obsolete or slow-moving inventory based on assumptions about future demand and marketability of products, the impact of new product introductions and specific identification of items, such as discontinued products. These estimates could vary significantly from actual requirements, for example, if future economic conditions, customer inventory levels or competitive conditions differ from expectations. The Company regularly reviews the value of inventory based on historical usage and estimated future usage. If estimated realized value of our inventory is less than cost, we make provisions in order to reduce its carrying value to its estimated market value. Marketable Equity Securities The Company invests part of its excess treasury cash in equity securities and money market funds according to company treasury and investment policies. Marketable securities represent trading securities bought and held primarily for sale in the near-term to generate income on short-term price differences and are stated at fair value. Realized gains and losses are recognized the fair value differences when the trading securities been sold. Unrealized gains and losses are recognized the fair value differences of unsold trading securities for the period end. Both realized and unrealized gains and losses are recorded in other income (expense). Property and Equipment Property and equipment are stated at cost. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts and any gain or loss is included in earnings. Maintenance and repairs are expensed currently. Major renewals and betterments are capitalized. Depreciation is computed using the straight-line method. Estimated useful lives are as follows: Schedule of estimated useful lives of property, plant and equipment Fixed assets Useful life Furniture 5 years Equipment 5 years Warehouse 39 years Improvement 5 years Land N/A Long-Lived Assets The Company applies the provisions of FASB ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that those fair values are reduced for the cost of disposal. Long-term assets of the Company are reviewed when circumstances warrant as to whether their carrying value has become impaired. The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. Based on its review at March 31, 2023 and December 31, 2022, the Company believes there was no impairment of its long-lived assets. Intangible Assets The Company’s intangible assets were acquired from AT Tech due to customer relationship using multi-period excess earnings method. These intangible assets were valued based on the AT Tech business acquisition. The value based on the assessed income expected to be generated from the existing customer list, namely the carry-over of the existing contracts after a careful evaluation of the customer list. Amortization on the intangible assets was computed by the percentage completed for these existing assets and fully amortized this quarter. Treasury stock Purchases and sales of treasury stock are accounted for using the cost method. Under this method, shares acquired are recorded at the acquisition price directly to the treasury stock account. The Company does not recognize a gain or loss to income from the purchase and sale of treasury stock. 10 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. Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the warrants was estimated using a Black-Scholes pricing model (see Note 11). The Company does no t have any outstanding warrants as of March 31, 2023 and December 31, 2022, respectively. 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. 11 The following table summarize financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023: Schedule of Fair Value Assets And Liabilities Measured On Recurring Basis March 31, 2023 (unaudited) Fair Value Carrying Level 1 Level 2 Level 3 Value Assets Marketable securities: Stock $ 51,395 $ – $ – $ 51,395 Total assets measured at fair value $ 51,395 $ – $ – $ 51,395 The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts receivable, inventory, other receivables, prepaid expenses, deposit, accounts payable, treasury stock payable and accrued expenses, other current liabilities, customer deposit, approximate their fair value because of the short maturity of those instruments. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. However, it is not practical to determine the fair value of advances from stockholders, if any, due to their related party nature. 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, 2023 and for the year ended December 31, 2022 was comprised of foreign currency translation adjustments. Revenue Recognition On September 1, 2018, the Company adopted ASC 606 – Revenue from Contracts with Customers using the modified retrospective transition approach. The core principle of ASC 606 is that revenue should be recognized in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled for exchange of those goods or services. The Company’s updated accounting policies and related disclosures are set forth below, including the disclosure for disaggregated revenue. The impact of adopting ASC 606 was not material to the Consolidated Financial Statements. 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. 12 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 equipment to the customer. · Service sales – revenue is recognized based on the service having 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. Cost of Revenue, excluding depreciation & amortization Cost of revenue includes the cost of services, labor and product incurred to provide product sales, service sales and project sales. 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. Related Parties The Company follows ASC 850-10 for the identification of related parties and disclosure of related party transactions. Pursuant to ASC 850-10-20 the related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of ASC 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The unaudited condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of unaudited condensed consolidated financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the unaudited condensed consolidated financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Commitments and Contingencies The Company follows ASC 450-20 to report accounting for contingencies. Certain conditions may exist as of the date the unaudited condensed consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. 13 If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s unaudited condensed consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. Gain on Bargain Purchase A bargain purchase gain is recognized when the net assets acquired in a business combination have a higher fair value than the consideration paid. Income Tax Provision The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, the Company does not foresee generating taxable income in the near future and utilizing its deferred tax asset, therefore, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented. Income taxes are accounted for using the asset and liability method. Deferred income taxes are provided for temporary differences in recognizing certain income, expense and credit items for financial reporting purposes and tax reporting purposes. Such deferred income taxes primarily relate to the difference between the tax basis of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized. There was no material deferred tax asset or liabilities as of March 31, 2023 and December 31, 2022. As of March 31, 2023 and December 31, 2022, the Company did no t identify any material uncertain tax positions. 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 Three Months Ended March 31, 2023 2022 Stock options 423,457 432,562 Total 423,457 432,562 14 Reclassification Certain reclassifications have been made to the unaudited condensed consolidated financial statements for prior period to the current year’s presentation. Such reclassifications have no effect on net income as previously reported. 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 Intercompany Foreign Currency Balances Average Rate for the Three Months Ended March 31, 2023 (Unaudited) 2022 (Unaudited) China Yuan (RMB) RMB 6.8413 RMB 6.3452 United States Dollar ($) $ 1.0000 $ 1.0000 Exchange Rate at March 31, 2023 December 31, 2022 (Unaudited) China Yuan (RMB) RMB 6.8667 RMB 6.8973 United States Dollar ($) $ 1.0000 $ 1.0000 Note 3 – Recent Accounting Pronouncement In June 2016, the FASB issued ASU No. 2016-13, (Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, rather than the “incurred loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments. In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company believes the adoption of ASU No. 2016-13 will not have a material impact on its financial position and results of operations. Management does not believe that any 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. 15 Note 4 – Inventory At March 31, 2023 and December 31, 2022, inventory consisted of the following: Schedule of Inventory March 31, 2023 December 31, 2022 Parts $ 1,051 $ 3,767 Finished goods 89,612 100,005 Inventory $ 90,663 $ 103,772 Note 5 – Deposits Deposit balance as of March 31, 2023 amounted to $ 24,823 for lease agreement and utility deposit and third-party payroll service deposit. Deposit balance as of December 31, 2022 amounted to $ 33,264 for lease agreement and utility deposit. Note 6 – Property and Equipment At March 31, 2023 and December 31, 2022, property and equipment consisted of the following: Schedule of property and equipment March 31, 2023 December 31, 2022 Warehouse $ 3,789,773 $ 3,789,773 Land 731,515 731,515 Building improvement 240,256 240,256 Furniture and fixture 39,580 37,785 Equipment 109,293 101,076 Software 1,995 1,995 Total cost 4,912,412 4,902,400 Less accumulated depreciation ( 715,824 ) ( 673,770 ) Property and equipment, net $ 4,196,588 $ 4,228,630 Depreciation expense for the three months ended March 31, 2023 and 2022 amounted to $ 42,041 and $ 40,165 , respectively. Note 7 – Intangible Assets, net The following table presents intangible assets balance at March 31, 2023 and December 31, 2022: Schedule of intangible assets March 31, 2023 December 31, 2022 Customer Relationship $ 28,741 $ – Total cost 28,741 – Less accumulated amortization ( 28,741 ) – Intangible assets, net of amortization – – Impairment loss – – Intangible assets, net $ – $ – Note 8 – Related Party Transactions Revenue generated from Vitashower Corp., a company owned by the Chief Executive Officer’s wife, amounted to $ 0 and $ 31,542 for the three months ended March 31, 2023 and 2022, respectively. Account receivable balance due from Vitashower Corp. amounted to $ 0 and $ 34,507 as of March 31, 2023 and December 31, 2022, respectively. Note 9 – Business Concentration and Risks Major customers Four customers accounted for 15 % of the total accounts receivable as of March 31, 2023 and four customers accounted for 11 % of the total accounts receivable as of December 31, 2022. These four customers accounted for 59 % of the total revenue for the three months ended March 31, 2023 and four customers accounted for 67 % of total revenue for the three months ended March 31, 2022. 16 Major vendors No major vendor accounted more than 10 % of total purchase during three months ended March 31, 2023. One vendor, Tianjin Guanglee, accounted for 0 % of total accounts payable at March 31, 2022 and this vendor accounted 30 % of total purchases during the three months ended March 31, 2022. Of subsequent note, Tianjin Guanglee was once owned by the Chief Executive Officer Desheng Wang, as fully disclosed in the annual report in 2017. In 2018, Dr. Wang transferred the ownership of the entity to an unrelated third party in a transaction not considered a related party transaction per the guidelines. Note 10 – Lease The Company recorded its operating lease expense of $ 46,080 and $ 75,597 for the three months ended March 31, 2023 and 2022, respectively. This is included in general and administrative expenses. On December 7, 2021, Focus Universal (Shenzhen) Technology Co. LTD entered into a thirty-eight month commercial lease with a third party for an approximately 5,895 square foot office space. The lease commenced on December 25, 2021 and will end on February 28, 2025. The monthly rent is RMB70,097 (approximately $11,053) 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. This lease was terminated on February 22, 2023. 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 $4,365) 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 RMB35,246 (approximately $5,133) 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. 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, 2023 and December 31, 2022, operating lease right-of use assets and lease liabilities were as follows: Schedule of operating Right-of-use asset and liability March 31, 2023 December 31, 2022 Operating lease right-of-use assets $ 270,481 $ 253,336 Lease liabilities, current portion $ 82,388 $ 113,058 Lease liabilities, less current portion $ 147,170 $ 165,952 Lease term and discount rate: Schedule Lease term and discount rate March 31, 2023 December 31, 2022 Weighted average remaining lease term Operating lease 2.83 to 2.92 years 2.17 years Weighted average discount rate Operating lease 10 % 10 % 17 The minimum future lease payments are as follows: Schedule of maturity of lease liabilities Amount Year ending December 31, 2023 $ 31,429 Year ending December 31, 2024 107,866 Year ending December 31, 2025 118,032 Year ending December 31, 2026 8,730 Total minimum lease payment 266,057 Less: imputed interest ( 36,500 ) Present value of future minimum lease payments $ 229,557 Note 11 – Stockholders’ Equity Shares authorized Upon formation, the total number of shares of all classes of stock that the Company is authorized to issue is seventy-five million ( 75,000,000 ) shares of common stock, par value $ 0.001 per share. Common stock During the three months ended March 31, 2023, the Company issued 21,589,837 shares of common stock in a one-for-two dividend to its shareholders. On January 17, 2023, the Company retired 400,000 shares from prior stock repurchase agreement as announced in a current report on October 7, 2022. On February 13, 2023, the Company issued 41,500 shares to employee based on the Restricted Stock Award Agreements (see Employee compensation ) On February 21, 2023, the Company issued 7,238 shares to one of the prior board members who exercised his options with cashless exercise. On March 23, 2023, the Company issued 21,589,837 stock dividends to its shareholders for a stock dividend of one share of common stock for every two shares of common stock issued and outstanding. During the three months’ ended March 31, 2022, the Company did no t issue any shares of common stock. As of March 31, 2023 and December 31, 2022, the Company had 64,769,490 shares and 43,530,915 shares of common stock issued and outstanding, respectively. Treasury stock On August 10, 2022, the Company entered a stock purchase agreement with a private shareholder to repurchase 400,000 shares of its common stock for $ 2,000,000 and placed it in treasury. The private shareholder transferred the shares on October 4, 2022, forming a binding agreement, and on October 6, 2022, the Company wired the first $1,000,000 of the purchase price. The remaining $1,000,000 was paid on March 31, 2023. The Company terminated those 400,000 shares on January 17, 2023. As of March 31, 2023 and December 31, 2022, the Company has 0 and 400,000 shares of Treasury stock outstanding, respectively. 18 Employee compensation On February 11, 2022 (“Vesting Date”), the Company entered into a Restricted Stock Award Agreement (“Award Agreement”) with eight employees for 280,000 shares of the $0.001 par value voting common stock subject to the terms and to the fulfillment of the conditions set in the Company’s equity incentive plan. The first 20% of the restricted shares were granted and vested on February 11, 2022. Twenty percent of the restricted shares will vest on each anniversary of the Vesting Date until fourth anniversary of the Vesting Date. There were 41,500 shares granted as of February 13, 2023. The fair value of above employee compensation was $ 136,904 as of March 31, 2023. In November 2021, the Company entered into a one-year employment agreement with VP of Finance and Head of Investor Relations of the Company, pursuant to which the Company awarded a 10,000-share bonus consisting of shares of $0.001 par value voting common stock, which will be granted in 2,500 blocks every quarter based on certain performance metrics. In November 2022, the Company entered into an amendment agreement to amend the performance metrics. As of March 31, 2023, 2,500 shares have vested. In October 2022, the Company entered into an employee agreement with VP of the Company, pursuant to which the Company awarded a 10,000-share bonus consisting of shares of $0.001 par value voting common stock, which will be granted in 2,500 shares every quarter. As of March 31, 2023, 2,500 shares have vested. During the three months ended March 31, 2023 and 2022, the total employee compensation amount for all employees in the company, was $ 149,404 and $ 656,370 , respectively. Stock options On August 6, 2019, each member of the Board was granted 45,000 options to purchase shares at $ 3.80 per share. On January 4, 2021, each member of the Board was granted 22,500 options to purchase shares at $ 2.00 per share. On December 31, 2021, each member of the Board was granted 22,500 options to purchase shares at $ 5.91 per share. On December 31, 2022, each member of the Board was granted 22,500 options to purchase shares at $ 4.27 per share. As of March 31, 2023, there were 615,061 options granted, 423,457 options vested, 116,620 options unvested, and 536,250 outstanding stock options. For the three months ended March 31, 2023 and 2022, the Company’s stock option compensation expenses amounted to $ 133,403 and $ 228,375 , respectively. The fair value of the stock options listed above was determined using the Black-Scholes option pricing model with the following assumptions: Schedule of fair value of stock option activity March 31, 2023 December 31, 2022 Risk-free interest rate 4.22 % 4.22 % Expected life of the options 3 years 3 years Expected volatility 42.63 % 42.63 % Expected dividend yield 0 % 0 % The following is a summary of the option activity from December 31, 2022 to March 31, 2023: Schedule of options activity Options Shares Weighted average exercise price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding at December 31, 2022 615,061 $ 5.93 8.04 – Granted – $ – – – Exercised ( 78,812 ) $ 5.38 – – Forfeited or expired – $ – – – Outstanding at March 31, 2023 536,250 $ 3.96 7.80 45,000 Vested as of March 31, 2023 423,457 $ 4.03 7.62 45,000 Exercisable at March 31, 2023 423,457 $ 4.03 7.62 45,000 19 Note 12 – Segment reporting Segment Reporting Three Months Ended March 31, 2023 Corporate and R&D IoT Products IoT Installation Services Total Revenue $ – $ 13,281 $ 222,814 $ 236,095 Revenue – related party – – – – Total revenue – 13,281 222,814 236,095 Cost of revenue – 8,803 171,941 180,744 Gross Profit – 4,478 50,873 55,351 Operating Expenses Selling expense 5,248 2,875 3,736 11,859 Compensation – officers and directors 307,534 – – 307,534 Research and development 276,481 – – 276,481 Professional fees 257,399 – – 257,399 General and administrative 390,998 3,546 48,508 443,052 Total Cost and Operating Expenses 1,237,660 6,421 52,244 1,296,325 Loss from Operations ( 1,237,660 ) ( 1,943 ) ( 1,371 ) ( 1,240,974 ) Other Income (Expense): Interest income (expense), net 14,475 1 ( 40 ) 14,436 Gain on bargain purchase 61,747 – – 61,747 Unrealized loss on marketable equity securities 32,570 – – 32,570 Realized loss on marketable equity securities ( 14,901 ) – – ( 14,901 ) Rental income 39,952 – – 39,952 Other income (expense), net ( 5,008 ) 108 ( 2,173 ) ( 7,073 ) Total other income (expense) 128,835 109 ( 2,213 ) 126,731 Loss before income taxes ( 1,108,825 ) ( 1,834 ) ( 3,585 ) ( 1,114,243 ) Tax expense – – – – Net Loss $ ( 1,108,825 ) $ ( 1,834 ) $ ( 3,585 ) $ ( 1,114,243 ) 20 Segment Reporting Three Months Ended March 31, 2022 Corporate and R&D IoT Products IoT Installation Services Total Revenue $ – $ 40,500 $ 85,125 $ 125,625 Revenue – related party – 31,542 – 31,542 Total revenue – 72,042 85,125 157,167 Cost of revenue – 59,409 84,114 143,523 Gross Profit – 12,633 1,011 13,644 Operating Expenses Selling expense – 34,001 4,338 38,339 Compensation – officers and directors 325,665 – – 325,665 Research and development 561,744 – – 561,744 Professional fees 360,866 – – 360,866 General and administrative 261,189 333,907 55,795 650,891 Total Cost and Operating Expenses 1,509,464 367,908 60,133 1,937,505 Loss from Operations ( 1,509,464 ) ( 355,275 ) ( 59,122 ) ( 1,923,861 ) Other Income (Expense): Interest income (expense), net 282 ( 288 ) – ( 6 ) Gain on bargain purchase – – – – Unrealized loss on marketable equity securities – – – – Realized loss on marketable equity securities – – – – Rental income 46,372 – – 46,372 Other income (expense), net 11,029 – ( 2,464 ) 8,565 Total other income (expense) 57,683 ( 288 ) ( 2,464 ) 54,931 Loss before income taxes ( 1,451,781 ) ( 355,563 ) ( 61,586 ) ( 1,868,930 ) Tax expense – – – – Net Loss $ ( 1,451,781 ) $ ( 355,563 ) $ ( 61,586 ) $ ( 1,868,930 ) 21 Note 13 – Business Combination On January 6, 2023, the Company completed the acquisition of 100 % of AT Tech for a purchase price of $1 in cash. The Company’s intangible assets were acquired from AT Tech due to customer relationship. Amortization on the intangible assets was fully amortized during the three months ended March 31, 2023. A bargain purchase gain is recognized when the net assets acquired in a business combination have a higher fair value than the consideration paid. The result of AT Tech’s operations has been included in the condensed consolidated financial statement since that date. The following table summarizes the purchase consideration and fair value of the assets acquired and liabilities assumed as of January 6, 2023: Fair value of assets acquired and liabilities assumed Assets: Accounts receivable $ 33,007 Intangible 28,741 Total assets acquired $ 61,747 Liabilities: Accounts payable $ – Total liabilities assumed – Purchase Price ( 1 ) Total bargain purchase gain $ 61,747 As a result of above information that existed as of the acquisition date, the Company recorded a bargain purchase gain of $ 61,747 during the three months ended March 31, 2023. The excess of the aggregate net fair value of assets acquired and liabilities assumed over the fair value of consideration transferred as the purchase price has been recorded as a bargain purchase gain. Upon completion of the valuation of the acquired assets, the Company concluded that recording a bargain purchase gain with respect to AT Tech was appropriate and required under U.S. GAAP. The Company believes the seller was motivated to complete the transaction as part of an overall repositioning of its business. Note 14 – Subsequent Events On April 5, 2023, the board of directors of the Company approved the Company’s establishment of a share repurchase program (the “Repurchase Program”) authorizing the Company to purchase up to $7 million of the Company’s common stock. Pursuant to the Repurchase Program, the Company may, from time to time, repurchase its common stock in the open market, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions. The timing and total amount of any repurchases made under the Repurchase Program will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The authorization expires on April 1, 2025, and may be suspended or discontinued at any time, and does not obligate the company to acquire any amount of common stock. The Company has evaluated all subsequent events through the date these unaudited condensed consolidated financial statements were issued and determined that there were no other subsequent events or transactions other than this election of director event that require recognition or disclosures in the unaudited condensed consolidated financial statements. 22