What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-15 compared with 2023-11-17 · 390 added, 907 removed, 369 unchanged (78% of the section changed)

3 unchanged sentences

Index to the Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)

Condensed Consolidated Statements of Changes in Stockholder’s Equity for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (unaudited)

Condensed Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (unaudited)

Condensed Consolidated Statements of Changes in Stockholder’s Equity for the Three Months Ended March 31, 2024 and 2023 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited)

Notes to the Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Accounts receivable, net

Accounts receivable – related party

Other receivables

3 unchanged sentences

Property and equipment, net

Operating lease right-of-use assets

Operating lease right-of-use asset

LIABILITIES AND STOCKHOLDERS' EQUITY

2 unchanged sentences

Related party loan

Treasury stock payable

Short-term loan

Other current liabilities

Lease liabilities, current portion

Lease liability, current portion

Total Current Liabilities

Non-Current Liabilities:

Lease liabilities, less current portion

Lease liability, less current portion

Other liability

1 unchanged sentence

Total Liabilities

Contingencies (Note 13)

Contingencies

Stockholders' Equity:

Common stock, par value $ 0.001 per

share, 75,000,000 shares authorized;

and 65,296,383

shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Treasury stock at cost ( 1,183,040 shares and 400,000 shares held at September 30, 2023 and December 31, 2022, respectively)

( 2,000,000 )

Common stock, par value $ 0.001 per share, 75,000,000 shares authorized;

64,771,817 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Treasury stock at cost ( 1,163,040 shares held at March 31, 2024 and December 31, 2023, respectively)

Additional paid-in capital

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

September 30,

Nine Months Ended

September 30,

Revenue - related party

Total Revenue

For the Three Months Ended March 31,

Cost of Revenue

Gross Profit (Loss)

Operating Expenses:

Selling expense

Compensation - officers and directors

Compensation - officers

Research and development

5 unchanged sentences

( 1,240,974 )

( 4,103,175 )

Other Income (Expense):

Interest income (expense), net

Gain on bargain purchase

Interest (expense) - related party

Unrealized gain (loss) on marketable equity securities

Realized gain (loss) on marketable equity securities

Realized loss on marketable equity securities

Rental income

Other income (expense), net

Total other income, net

Loss before income taxes

( 3,100,442 )

( 3,872,247 )

Income tax expense

$ ( 968,033 )

$ ( 942,020 )

Total other income

$ ( 1,315,597 )

1 unchanged sentence

Other comprehensive items

Foreign currency translation gain (loss)

Foreign currency translation gain and (loss)

Total comprehensive loss

1 unchanged sentence

$ ( 1,120,782 )

$ ( 3,100,889 )

$ ( 3,872,126 )

Weight Average Number of Common Shares Outstanding:

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER

30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND

Treasury Stock

3 unchanged sentences

Total Stockholders’

Balance – June 30, 2023

Balance – December 31, 2023

$ ( 434,048 )

2 unchanged sentences

Stock based compensation – shares

Amendment stock purchase agreement – treasury stock

Other comprehensive income

Balance – September 30, 2023

( 1,315,597 )

Balance – June 30, 2022*

$ ( 15,867,318 )

Stock based compensation - options

Stock based compensation - shares

Purchase of treasury stock

( 2,000,000 )

Other comprehensive income

Balance – September 30, 2022*

Balance – March 31, 2024

$ ( 434,048 )

$ ( 23,897,767 )

FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER

30, 2023 AND 2022

Treasury Stock

9 unchanged sentences

Stock based compensation – shares

Purchase of treasury stock

Retirement of treasury stock

( 1,999,400 )

Amendment stock purchase agreement – treasury stock

Other comprehensive income

Issued stock dividend

( 1,114,243 )

Balance – September 30, 2023

$ ( 385,686 )

$ ( 20,964,470 )

Balance – December 31, 2021*

$ ( 12,937,091 )

Stock based compensation - options

Stock based compensation - shares

Purchase of treasury stock

( 2,000,000 )

Common stock issued for this period service

Common stock issued for prior period service

Common stock issued for cashless exercise of warrants

( 1,776,044 )

Other comprehensive income

( 3,872,247 )

Balance – September 30, 2022*

$ ( 2,000,000 )

Balance – March 31, 2023

$ ( 18,978,271 )

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Ended September 30,

For the Three Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Bad debt expense

Inventory fair value net realizable

Depreciation expense

Amortization of intangible assets

Unrealized (gain) loss on marketable equity securities

Unrealized gain on marketable equity securities

Realized loss on marketable equity securities

SBA loan forgiveness

Gain on bargain purchase

Stock-based compensation – shares

Stock-based compensation – options

Stock option compensation – options

Changes in operating assets and liabilities:

1 unchanged sentence

Accounts receivable - related party

Other receivables

Other receivable

Prepaid expenses

Operating lease right-of-use assets

Operating lease right-of-use asset

Accounts payable and accrued liabilities

1 unchanged sentence

Lease liabilities

Other liabilities

Net cash flows used in operating activities

( 2,603,545 )

( 2,435,157 )

Cash flows from investing activities:

1 unchanged sentence

Purchase of marketable securities

Proceeds from sale of marketable

Proceeds from sale of marketable securities

Net cash flows provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from short-term loan

Proceeds from related party loan

Repayment on third party loan

Purchase of treasury stock

( 1,000,000 )

Net cash flows used in financing activities

Net cash flows provided by (used in) financing activities

( 1,000,000 )

Effect of exchange rate

1 unchanged sentence

( 1,772,951 )

( 2,616,247 )

Cash beginning of period

3 unchanged sentences

Cash paid for interest

Supplemental disclosure for noncash investing and financing activities:

Right-of-use assets obtained

in exchange for operating lease liabilities

Treasury stock payable

Cashless exercise of options

Supplemental disclosure for noncash financing activities:

Right-of-use assets obtained in exchange for operating lease liabilities

The accompanying notes are an integral part

2 unchanged sentences

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER

30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND

Note 1 – Organization and Operations

25 unchanged sentences

and integration.

Services provided by AVX include full integration of houses, apartments, commercial complexes, office spaces with audio,

visual and control systems to fully integrate devices in the low voltage field, specializing in high end residential smart IoT install

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.

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

On December 23, 2021, Focus Shenzhen was founded

2 unchanged sentences

designed to function as a branch office accessing high level ability to source products and build relationships with manufacturers in

the region and as a lower cost form of support research and development as engineers are more plentiful in the region.

During the third

quarter of 2023, this office has continued to grow and increase its headcount to 28 employees.

Employees of Focus Shenzhen are added to

the engineering staff, the sales staff, and the marketing and market analysis staff in house to enhance the internal capabilities of the

China and as a lower cost form of support, research and development as engineers bound in China.

During the third quarter of 2023, this

office continued to grow and increase its headcount to 28 employees.

Employees of Focus Shenzhen are added to the engineering staff, the

sales staff, and the marketing and market analysis staff in house to enhance the internal capabilities of the Company.

As of January 6, 2023, AT Tech Systems is a subsidiary

of Focus specializing in commercial and industrial smart IoT install projects in areas throughout the Southern California area.

Systems has several clients from medical/dental facilities and commercial and industrial projects, including several with notable manufacturers

and wholesalers, and provides clients with integrated network, security, and multimedia design solutions and technology systems.

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.

The Company has completed integration throughout

5 unchanged sentences

Basis of Presentation

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”).

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

The unaudited condensed financial statements of

the Company for the three months ended March 31, 2024 and 2023 have been prepared in accordance with accounting principles generally accepted

(“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

Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year.

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

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.

Segment Reporting

The Company currently has three operating segments.

First, Focus and Focus Shenzhen collectively operate our “Corporate and R&D” segment, which involves the non-specific

financing, executive expense, operations and investor relations of our public entity, and the general shared management and costs across

the Company’s subsidiaries that spread across all functional categories and research and development of technology products.

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 third, 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.

The Company currently has two operating segments.

In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company considers operating segments to be components

of the Company’s business for which separate financial information is available and evaluated regularly by Management in deciding

how to allocate resources and to assess performance.

Management reviews financial information presented on a consolidated basis for purposes

of allocating resources and evaluating financial performance.

Accordingly, the Company has determined that it has three operating and

reportable segments.

The Company consists of three types of operations.

(1) Focus and Focus Shenzhen collectively operate our “Corporate

and R&D” segment, which involves the non-specific financing, executive expense, operations and investor relations of our public

entity, and the general shared management and costs across the Company’s subsidiaries that spread across all functional categories

and research and development of technology products.

(2) 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.

(3) 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

13 unchanged sentences

Significant estimates in the accompanying

financial statements include the lease term impacting right-of-use asset with the estimate discount rate and lease liability, useful

lives of property and equipment, useful lives of intangible assets, allowance for doubtful accounts, inventory reserves, stock

option valuation, share-based compensation, fair value of warrants, and the valuation allowance on deferred tax assets.

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.

regularly evaluates its estimates and assumptions.

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 limits.

As of September 30, 2023 and December 31, 2022, respectively, approximately $ 616,174 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 either September 30, 2023 or 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

3 unchanged sentences

that the Company’s estimate of the allowance for doubtful accounts will change.

As of September 30, 2023 and December 31, 2022,

allowance for doubtful accounts amounted to $ 229,843 and $ 222,972 , respectively.

Concentrations of Credit Risk

As of March 31, 2024 and December 31, 2023, allowance

for doubtful accounts amounted to $ 249,603 and $ 249,603 , respectively.

Concentrations of Credit and Business Risk

Financial instruments that potentially subject

2 unchanged sentences

loss by investing its cash with high credit quality financial institutions.

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 (“FIFO

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

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 net realized value of our inventory is less than cost, we make provisions in order to reduce its carrying

value to its net realizable 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 based on the

Unrealized gains and losses are recognized the fair value differences of unsold trading securities for the period end based

on the FIFO Method.

Both realized and unrealized gains and losses are recorded in other income (expense).

Property and Equipment

Property and equipment are stated at cost.

cost and accumulated depreciation of assets sold or retired are removed from the respective accounts and any gain or loss is included

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

Long-Lived Assets

The Company applies the provisions of Financial

Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 September 30,

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 Systems due to customer relationships using the multi-period excess earnings method.

These intangible assets

were valued based on the AT Tech Systems business acquisition during January 2023.

The value is 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 as of September 30, 2023.

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.

Major customers

Three customers accounted for 69 % of the total

revenue for the three months ended March 31, 2024 and four customers accounted for 59 % of the total revenue for the three months ended

March 31, 2023.

One customer accounted for 31 % of the total accounts receivable as of March 31, 2024 and one customer accounted for 43 %

of the total accounts receivable as of December 31, 2023.

Major vendors

No major vendor accounted more than 10% of total

purchase during three months ended March 31, 2024 and 2023.

Share-based Compensation

The Company accounts for stock-based compensation

to employees in conformity with the provisions of FASB 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.

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

The measurement of stock-based compensation is

2 unchanged sentences

The Company calculates the fair value of option

grants utilizing the Black-Scholes pricing model (see Note 12) 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.

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.

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 Topic 480, Distinguishing Liabilities from Equity and FASB ASC Topic 815, Derivatives and Hedging.

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 Company calculates the fair value

of warrants utilizing the Black-Scholes pricing model.

The Company does no t have any outstanding warrants as of September 30, 2023 and

December 31, 2022, respectively.

Stock Dividends

The Company issued a fifty percent (50%) stock

dividend of the Company’s common stock to its shareholders for a stock dividend of one share of common stock for every two shares

of common stock held.

The Company follows paragraph ASC 505-20-25 in treating its stock dividend as a stock split due to the stock dividend

being greater than 25% of the shares then outstanding.

On March 23, 2023 and April 3, 2023, the Company issued 21,592,164 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.

Company also adheres to paragraph ASC 260-10-55-12, wherein it retroactively adjusted its statement of stockholders’ equity for

all presented periods to incorporate the alteration in capital structure.

The retroactive treatment is based on a fifty percent (50%)

stock dividend of the Company’s common stock to its shareholders on March 23, 2023.

The Company does not capitalize its retained

earnings, and there is no impact to the Company’s overall equity or its total assets.

Fair Value of Financial Instruments

2 unchanged sentences

measure the fair value of its financial instruments.

Paragraph 820-10-35-37 establishes a framework for measuring fair value in conformity

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 that prioritizes the inputs to valuation

techniques used to measure fair value into three 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 levels of fair value hierarchy

defined by Paragraph 820-10-35-37 are described below:

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:

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

2 unchanged sentences

The following table summarize financial assets

and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:

Schedule of fair value assets and liabilities measured on recurring basis

September 30, 2023 (unaudited)

and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023:

Schedule of financial assets

and liabilities measured at fair value

March 31, 2024 (unaudited)

Marketable securities:

3 unchanged sentences

Total assets measured at fair value

The carrying amount of the Company’s

financial assets and liabilities, such as cash, accounts receivable, inventory, other receivables, prepaid expenses, deposits,

accounts payable, treasury stock payable and accrued expenses, other current liabilities, and customer deposits, 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

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.

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)

3 unchanged sentences

The Company’s other comprehensive

loss for the nine months ended September 30, 2023 and for the year ended December 31, 2022 was comprised of foreign currency translation

loss for the three months ended March 31, 2024 and 2023 was comprised of foreign currency translation adjustments.

Revenue Recognition

On September 1, 2018, the Company adopted FASB

ASC Topic 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.

of adopting ASC 606 was not material to the unaudited condensed consolidated financial statements.

Revenue from the Company is recognized under ASC

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:

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;

4 unchanged sentences

These five elements, as applied to each of the

Company’s revenue categories, 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.

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

4 unchanged sentences

percentage of completion.

Our construction contracts are unit priced, and an accounts receivable is recorded for amounts invoiced based

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.

A summary of our revenue by product type for the

three months ended March 31, 2024 and 2023 is as follows:

Schedule of revenue by product type

March 31, 2024

March 31, 2023

IoT Project Construction and Installation Services

Research and development

1 unchanged sentence

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

Related Parties

The Company follows Section 10 of FASB ASC Topic

850, Related Party Disclosures 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;

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:

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;

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 Section 20 of FASB ASC Topic

450, Contingencies to report accounting for loss 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.

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 FASB 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

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 were no material deferred tax assets or liabilities as of September 30, 2023 and December 31, 2022.

As of September 30, 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 Section 10-45 of FASB ASC Topic 260, Earnings Per Share.

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.

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 arrangements, stock options or warrants.

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

4 unchanged sentences

Schedule of anti-dilutive shares

Nine Months Ended September 30,

Three Months Ended March 31,

Stock options

While the EPS treatment was applied in the quarter

ended September 30, 2023, and a fifty percent stock dividend adjustment on March 23, 2023 is also retroactive accordingly.

Reclassification

Certain reclassifications have been made to the

unaudited condensed consolidated financial statements for the 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

dollar (USD).

The functional currency of Focus Shenzhen is the renminbi (RMB).

For financial reporting purposes, the

financial statements of Focus Shenzhen, which are prepared using the RMB, are translated into the 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.

resulting from the translation are recorded as a separate component of accumulated other comprehensive loss in stockholders’

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

Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive loss in stockholders’

Transactions denominated in currencies other than

3 unchanged sentences

The exchange rates used for unaudited condensed consolidated financial statements are as follows:

Schedule of intercompany foreign currency balances

Average Rate for the Nine Months Ended

September 30,

Schedule of exchange rates

Average Rate for the Three Months Ended

China Yuan (RMB)

1 unchanged sentence

Exchange Rate at

September 30, 2023

March 31, 2024

December 31, 2023

2 unchanged sentences

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 unconsolidated financial statements.

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 unaudited condensed consolidated financial statements have been prepared in conformity with U.S.

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 has a net loss of $ 3,100,442

and $ 3,872,247 for the

nine months ended September 30, 2023 and 2022, respectively.

In addition, the Company had an accumulated deficit of $ 20,964,470

and $ 17,864,028

as of September 30, 2023 and December 31, 2022, respectively, and negative cash flow from operating activities of $ 2,603,545

and $ 2,435,157

for the nine months ended September 30, 2023 and 2022, respectively.

As noted above, the Company’s ability to continue as a

going concern is dependent on its ability to raise additional capital.

The Company’s consolidated financial statements do not

include any 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 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.

has a net loss of $ 1,315,597 and $ 1,114,243 for the three months ended March 31, 2024 and 2023, respectively.

In addition, the Company

had an accumulated deficit of $ 23,897,767 and $ 22,582,170 as of March 31, 2024 and December 31, 2023, respectively, and negative cash

flow from operating activities of $ 892,089 and $ 838,535 for the three months ended March 31, 2024 and 2023, respectively.

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 March 31, 2024, the Company had cash and

cash equivalents, and short-term investments, in the amount of $ 114,096 .

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

In addition, subsequent to year end, the Company has entered into a letter of intent from a secondary buyer to potentially

sell its land and buildings which upon completion, would provide additional working capital to the Company.

No assurance can be

given that the sale of the land and building will occur, or 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 June 2016, the FASB issued Accounting

Standards Update (“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 Securities and Exchange Commission 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

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

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.

2 unchanged sentences

Note 4 – Inventory

At September 30, 2023 and December 31, 2022, inventory

At March 31, 2024 and December 31, 2023, inventory

consisted of the following:

Schedule of inventory

September 30, 2023

March 31, 2024

December 31, 2023

Finished goods

Note 5 – Deposits

The deposits balance as of September 30, 2023

amounted to $ 23,420 for lease agreement and utility deposits and third-party payroll service deposits.

The deposits balance as of December

31, 2022 amounted to $ 33,264 for lease agreement and utility deposits.

Note 5 – Property and Equipment

As of September 30, 2023 and December 31, 2022, property and equipment

consisted of the following:

At March 31, 2024 and December 31, 2023, property and equipment consisted

of the following:

Schedule of property and equipment

September 30, 2023

March 31, 2024

December 31, 2023

4 unchanged sentences

Depreciation expense for the three months ended

September 30, 2023 and 2022 amounted to $ 43,723

and $ 41,845 , respectively.

Depreciation expense

for the nine months ended September 30, 2023 and 2022 amounted to $ 127,171

and $ 123,908 , respectively.

Note 7 – Intangible Assets, Net

The following table presents the intangible assets balances as of September

30, 2023 and December 31, 2022:

Schedule of intangible assets

September 30, 2023

December 31, 2022

Customer Relationships

Less accumulated amortization

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 $ 33,820 for the nine months ended September 30, 2023 and 2022, respectively.

The accounts receivable balance due from Vitashower Corp.

amounted to $ 0 and $ 34,507 as of September 30, 2023 and December 31, 2022, respectively.

March 31, 2024 and 2023 amounted to $ 35,330 and $ 42,041 , respectively.

Note 6 – Related Party Loan

On August 3, 2023, the Company submitted a written

consent, and the Board approved a loan amount from $1 million to $5 million.

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 net book value 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

The interest expense amount was $ 8,333

for the nine months ended September 30, 2023.

accrued interest as of September 30, 2023 and the total principal outstanding loan amount was $ 1,000,000

as of September 30, 2023.

As a note, the interest rate increases to 15% as of the due date of loan on any unpaid principal balance

Note 10 – Business Concentration and Risks

Major customers

One customer accounted for 46 % of the total accounts

receivable as of September 30, 2023 and four customers accounted for 11 % of the total accounts receivable as of December 31, 2022.

customer accounted for 30 % of the total revenue for the nine months ended September 30, 2023, and three customers accounted for 43 % of

total revenue for the nine months ended September 30, 2022.

Major vendors

No major vendor accounted more than 10 % of total

purchases during the nine months ended September 30, 2023, One vendor, Tianjin Guanglee, accounted for 0 % of total accounts payable at

September 30, 2022;

and this vendor accounted for 24 % of total purchases during the nine months ended September 30, 2022.

Of subsequent

note, Tianjin Guanglee was once owned by the Chief Executive Officer, as fully disclosed in our annual report in 2017.

In 2018, the Chief

Executive Officer transferred ownership of the entity to an unrelated third party in a transaction not considered a related party transaction

per the relevant guidelines.

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

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 $ 33,000 for

the three months ended March 31, 2024.

There was no accrued interest as of March 31, 2024, and the total principal outstanding loan amount

was $ 1,300,000 as of March 31, 2024.

The interest rate increases to 15% as of the maturity date of the loan on any unpaid principal balance

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 $ 5 million with one

or more lenders.

The Company accepted the first $ 300,000 tranche on January 9, 2024 (the “Loan”) with a third-party private

lender (the “Lender”) whereby the Lender loaned $ 300,000 to the Company (the “Principal Amount”).

an annual 3 % compound interest rate and note payments begins on February 4, 2024 (“Due Date”) whereby the Company will pay

Lender in 12 equal installment payments of $ 25,408 .11 beginning on the Due Date.

The interest amount for the three months ended March

31, 2024 was $ 816 , and the total principal outstanding loan amount was $ 250,000 as of March 31, 2024.

Note 8 – Lease

The Company recorded its operating lease expense

of $ 104,156 and $ 280,311 for the nine months ended September 30, 2023 and 2022, respectively.

of $ 27,687 and $ 46,080 for the three months ended March 31, 2024 and 2023, respectively.

This is included in general and administrative

On December 7, 2021, Focus Shenzhen 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 was scheduled to end on February 28, 2025.

The monthly rent was RMB70,097 (approximately $9,610) with approximately

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 $4,152) with approximately

an 11.1% to 12.5% increase rate in each additional year.

The incremental borrowing rate for a lease is the rate of interest the Company

would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar terms, which

Lease expense for this lease is recognized on a straight-line basis over the lease term.

This lease was terminated on February

On January 16, 2023, Focus Shenzhen 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 $4,109) with approximately an 11.1% to 12.5% increase

rate in each additional year.

The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized

basis to borrow an amount equal to the lease payments for the asset under similar terms, which is 10%.

Lease expense for this lease is

recognized on a straight-line basis over the lease term.

On February 22, 2023, Focus Shenzhen entered into

a thirty-six month commercial lease with a third party for an approximately 3,449 square foot office space.

The lease commenced on March

31, 2023 and will end on February 28, 2026.

The monthly rent is RMB35,246 (approximately $4,832) with approximately an 11.1% to 12.5%

increase rate in each additional year.

The incremental borrowing rate for a lease is the rate of interest the Company would have to pay

on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar terms, which is 10%.

Lease expense

for this lease is recognized on a straight-line basis over the lease term.

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

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 $4,882) 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

Lease expense for the lease is recognized on a straight-line basis over the lease term.

Operating lease right-of-use assets represent

1 unchanged sentence

to make lease payments arising from the lease.

As of September 30, 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

September 30, 2023

As of March 31, 2024 and December 31, 2023, operating lease right-of use assets and lease

liabilities were as follows:

Schedule of operating lease right of use assets and lease

March 31, 2024

December 31, 2023

Operating lease right-of-use assets

Operating lease right-of-use assets, net

3 unchanged sentences

Schedule of lease term and discount rate

September 30, 2023

March 31, 2024

December 31, 2023

2 unchanged sentences

1.83 to 2.00 years

2.08 to 2.25 years

Weighted average discount rate

1 unchanged sentence

The minimum future lease payments are as follows:

Schedule of maturity of lease payments

Year ending December 31, 2023

Schedule of minimum future lease payments

Year ending December 31, 2024

5 unchanged sentences

Note 9 – 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

On March 23, 2023, the Company issued a fifty

percent (50%) stock dividend of the Company’s common stock to its shareholders for a stock dividend of one share of common stock

for every two shares of common stock held.

During the nine months ended September 30,

2023, the Company issued 75,434

shares of common stock, not including the abovementioned stock dividend.

On January 17, 2023, the Company retired the 400,000 shares

(representing 600,000 shares of common stock after a fifty percent stock dividend adjustment on March 23, 2023, and then valued at

$ 2,000,000 .

The value of $1,965,000 was determined several months later for a total of 1.3 million shares) obtained pursuant to a prior stock

repurchase agreement as announced in a current report on October 7, 2022.

Stock Dividend

On March 23, 2023, the Company issued a fifty percent (50%) stock dividend

of the Company’s common stock to its shareholders for a stock dividend of one share of common stock for every two shares of common

The Company followed paragraph ASC 505-20-25

in treating its stock dividend as a stock split due to the stock dividend being greater than 25% of the shares then outstanding.

such, on March 23, 2023 and April 3, 2023, the Company issued 21,592,164

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.

The Company adhered to paragraph ASC 260-10-55-12, wherein it retroactively adjusted its statement of

stockholders’ equity for all presented periods to incorporate the alteration in capital structure.

On February 13, 2023, the Company issued 62,250

shares (for consideration of $ 184,979 ,

based on their share price on grant date of $4.03 and $4.27) to employees based on their Restricted Stock Award Agreements (see Employee

stock-based compensation below).

shares with a fair value of $ 149,404 to employees based on their Restricted Stock Award Agreements (see Employee stock-based compensation

On February 21, 2023, the Company issued 10,857

shares (for consideration of $ 41,401 ,

based on their share price on grant date of $5.72) to a prior board member who exercised his options with cashless

On April 3, 2023, the Company issued 2,327 shares

to round up the stock dividend effective on March 23, 2023.

During the nine months ended September 30, 2022,

the Company issued 403,761 shares of common stock.

On April 4, 2022, the Company issued 181,723 shares

of its common stock to Boustead Securities LLC (“Boustead”), which were for the warrants exercised by Boustead on September

The warrants were issued to Boustead in connection with the Company’s initial public offering with an exercise price of

The shares issued to Boustead were valued at $ 1,776,044 upon the cashless exercise option of the warrants.

On May 2, 2022, the Company issued 48,941 shares

to consultants in exchange for professional services rendered.

The shares were valued at $ 154,709 based on the closing price of the Company’s

common stock on the dates that the shares were deemed earned, according to the terms of the related agreements.

On August 17, 2022, the Company issued 82,347

shares to two board members who exercised their options.

The board members exercised a combined 107,500

options, and the shares were valued at $ 652,501

upon the cashless exercise option of the options.

On August 22, 2022, the Company issued 90,750

shares (for consideration of $ 642,789 ,

based on their share price on grant date of $7.44) to employees based on the Restricted Stock Award Agreement (see Employee

stock-based compensation ).

As of September 30, 2023 and December 31, 2022,

the Company had 64,771,817 shares and 65,296,383 shares of common stock issued and outstanding, respectively.

shares to a prior board member who exercised his options with cashless exercise.

Treasury stock

On August 10, 2022, the Company entered a

stock purchase agreement (the “Stock Purchase Agreement”) with a private shareholder to repurchase 400,000 shares

(600,000 shares after a fifty percent stock dividend adjustment on March 23, 2023) of its common stock for $2,000,000.

private shareholder transferred the shares on October 4, 2022, forming a binding agreement, which the Company placed in treasury;

On August 10, 2022, the Company entered a stock

purchase agreement (the “Stock Purchase Agreement”) with a private shareholder to repurchase 600,000 shares of its common

stock for $2,000,000.

The private shareholder transferred the shares on October 4, 2022, forming a binding agreement, which the Company

placed in treasury;

and on October 6, 2022, the Company wired the first $1,000,000 of the purchase price.

Subsequently, on July 14, 2023, the Company

entered into an amendment to the Stock Purchase Agreement that increased the number of shares of its common stock the Company would

purchase to 1,300,000 shares

and revised the total purchase price of the shares to $ 1,965,000 .

The remaining $ 965,000 was

paid on July 14, 2023.

Subsequently, on July 14, 2023,

the Company entered into an amendment to the Stock Purchase Agreement that increased the number of shares of its common stock the Company

would purchase to 1,300,000 shares and revised the total purchase price of the shares to $ 1,965,000 resulting in a $35,000 change in our

obligation to purchase Treasury stock.

The remaining $ 965,000 was paid on July 14, 2023.

Upon receipt of the additional 900,000 shares,

the Company also placed them in treasury.

As of January 17, 2023, the Company retired the initial 400,000 shares

(600,000 shares after a fifty percent stock dividend adjustment on March 23, 2023) and restored them to the status of authorized and unissued shares.

As part of the Company’s repurchase

program, during the nine months ended September 30, 2023 the Company repurchased 233,040

shares of its common stock for $ 420,686

in the public market at average price of $1.80 and placed them in treasury.

As of September 30, 2023 and December 31,

2022, the Company had 1,183,040

treasury shares, respectively.

The intention of the Company is to retire the additional 900,000 shares obtained pursuant to the

amendment to the Stock Purchase Agreement along with the additional 233,040 shares repurchased during the nine months ended

September 30, 2023.

Employee stock-based compensation

During the nine months ended September 30, 2023,

the Company entered into employment contracts with three employees of its engineering staff.

These employment contracts contained provisions

for a total bonus of restricted stock grants valued at $ 50,000

based on the share price upon the date of completion of the performance metrics described in the employment contracts.

value of the above employee compensation was $ 16,250

(approximately 9,931

shares) as of September 30, 2023.

On February 11, 2022 (the “Vesting

Date”), the Company entered into a restricted stock award agreement (the “Award Agreement”) with eight employees

for 280,000 shares of the Company’s common stock subject to the terms and to the fulfillment of the conditions set forth in

the Company’s equity incentive plan.

As of January 17, 2023, the Company retired the initial 600,000 shares and restored them to

the status of authorized and unissued shares.

Employee compensation

On February 11, 2022 (the “Vesting Date”),

the Company entered into a restricted stock award agreements (the “Award Agreement”) with eight employees for 280,000 shares

of the Company’s common stock subject to the terms and to the fulfillment of the conditions set forth in the Company’s equity

incentive plan.

The first 20% of the restricted shares were granted and vested on February 11, 2022.

additional 20% of the restricted shares will vest on each anniversary of the Vesting Date until the fourth anniversary of

the Vesting Date.

There were 51,000

shares granted as of February 13, 2023.

The fair value of the above employee compensation was $ 136,904

as of September 30, 2023.

In November 2021, the Company entered into a one-year

employment agreement with the then 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 the Company’s common stock, which will be granted in blocks of 2,500 shares for every

quarter certain performance metrics are achieved.

The share price will be determined based on the closing price as of the last day of

each quarter.

Pursuant to the terms of the employment agreement, if the Company determined it was satisfied with the performance of the

VP, his position would be promoted to Chief Financial Officer after the one-year anniversary.

In November 2022, the Company entered into

an amendment agreement to amend the performance metrics and extend the term.

As of September 30, 2023, 7,500 shares have vested, collectively

valued at $14,925.

In October 2022, the Company entered into an employee

agreement with the VP of the Company, pursuant to which the Company awarded a 10,000-share bonus consisting of shares of the Company’s

common stock, which will be granted in blocks of 2,500 shares every quarter.

As of September 30, 2023, 7,500 shares have vested, collectively valued at $ 14,925 .

During the nine months ended September 30, 2023

and 2022, the total employee stock-based compensation amount for all employees in the company, was $ 183,004 and $ 671,901 , respectively.

An additional 20% of the restricted

shares will vest on each anniversary of the Vesting Date until the fourth anniversary of the Vesting Date.

The initial fair value of the

awards on the date of grant was determined to be $ 2,942,800 which is being amortized over the 5 year vesting period.

As of December 31,

2023 the unamortized amount of the award was $ 1,072,020 .

During the three months ended March 31, 2024 the Company amortized $ 89,335 of

this amount leaving an unamortized balance of $ 982,685 at March 31, 2024.

As of March 31, 2024, 135,000 of the shares had been vested

and 88,000 of the shares had been forfeited.

The company has entered into two employment

agreements that require the annual award of 15,000 shares of common stock to each of these employees to be vested on a quarterly

During the period ended March 31, 2024, 7,500 shares of common stock with a fair value of $ 3,075 had vested.

In addition, the

Company entered into another employment contract that contained provisions for a total bonus of restricted stock grants valued at

$ 50,000 based on the share price upon the date of completion of the performance metrics described in the employment contracts.

During the period the employee earned 6,098 shares with a fair value of $ 2,500 during the period ended March 31, 2024.

31, 2024, 55,241 shares of common stock earned under these contracts have vested but not been issued.

During the three months ended March 31, 2024 and

2023, the total employee stock-based compensation amount for all employees in the Company was $ 94,910 and $ 149,404 , 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 September 30, 2023, there were 615,063 options

granted, 497,092 options vested and exercisable, 39,158 options unvested, and 536,249 outstanding stock options.

For the nine months ended September 30, 2023 and

On January 2, 2024, each member of the Board

was granted 22,500 options to purchase shares at $ 1.50 per share with a fair value of $ 29,595 .

The options vest on a monthly basis

over 1 year, and have a 10 year life.

In the aggregate, 112,500 options were granted with a fair value of $ 147,975 .

During the three

months ended March 31, 2023, the Company recognized $ 36,995 of compensation cost relating to the vesting of these options and

$ 110,980 remained unvested which will be amortized over the remainder of 2024.

For the three months ended March 31, 2024 and

2023, the Company’s stock option compensation expenses amounted to $ 36,995 and $ 133,403 , 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 the stock options activity

December 31, 2022

The fair value of the stock options issued during

the periods was determined using the Black-Scholes option pricing model with the following assumptions:

Schedule of assumptions

March 31, 2024

Risk-free interest rate

3 unchanged sentences

The following is a summary of the option activity

from December 31, 2022 to September 30, 2023:

from December 31, 2023 to March 31, 2024:

Schedule of option activity

4 unchanged sentences

Outstanding at December 31, 2023

Vested at December 31, 2022

Exercisable at December 31, 2022

Forfeited or expired

Outstanding at September 30, 2023

Vested as of September 30, 2023

Exercisable at September 30, 2023

Note 13 – Commitments and Contingencies

In the normal course of business or otherwise,

the Company may become involved in legal proceedings.

The Company will accrue a liability for such matters when it is probable that a

liability has been incurred and the amount can be reasonably estimated.

When only a range of possible loss can be established, the most

probable amount in the range is accrued.

The accrual for a litigation loss contingency might include, for example, estimates of potential

damages, outside legal fees, and other directly related costs expected to be incurred.

There were no recorded litigation loss contingencies

as of September 30, 2023 and December 31, 2022.

Cancelled or forfeited

Outstanding at March 31, 2024

Vested as of March 31, 2024

Exercisable as of March 31, 2024

Note 10 – Segment reporting

10 unchanged sentences

and integration.

The following tables summarize the performance

of each operating segment of the Company for the three months ended September 30, 2023 and the performance of the IoT Installation Service

segment broken out between its residential and commercial services for the same period:

Schedules of segment reporting

Three Months Ended September 30, 2023

IoT Installation

Revenue – related party

Total revenue

The following tables summarize the financial

information of each operating segment of the Company for the three months ended March 31, 2024:

Schedule of operating segment

For the Three Months Ended March 31, 2024

IoT Installation Services

Cost of revenue

Operating Expenses

Selling expense

Compensation – officers and directors

Research and development

Professional fees

General and administrative

Total Operating Expenses

Gross profit (loss)

Total operating expense

Income (loss) from operations

1 unchanged sentence

( 1,319,810 )

Other Income (Expense):

Interest income (expense), net

Unrealized loss on marketable equity securities

Realized income on marketable equity securities

Rental income

Other income (expense), net

Total other income (expense)

Income (loss) before income taxes

( 1,005,806 )

Net income (loss)

1 unchanged sentence

$ ( 1,315,597 )

Three Months Ended September 30, 2023

Total IoT Installation

Revenue – related party

Total revenue

Cost of revenue

Operating Expenses

Selling expense

General and administrative

Total Operating Expenses

Income (loss) from Operations

Other Income (Expense):

Interest income (expense), net

Other income (expense), net

Total other income (expense)

Income (loss) before income taxes

Net Income (Loss)

The following tables summarize the performance

of each operating segment of the Company for the three months ended September 30, 2022 and the performance of the IoT Installation Service

segment broken out between its residential and commercial services for the same period:

Three Months Ended September 30, 2022

IoT Installation

Revenue – related party

Total revenue

Cost of revenue

Operating Expenses

Selling expense

Compensation – officers and directors

Research and development

Professional fees

General and administrative

Total Operating Expenses

Loss from Operations

Other Income (Expense):

Interest income (expense), net

Unrealized income on marketable equity securities

Realized loss on marketable equity securities

Rental income

Other income (expense), net

Total other income (expense)

Loss before income taxes

$ ( 659,837 )

$ ( 244,969 )

$ ( 942,020 )

Three Months Ended September 30, 2022

Total IoT Installation

Revenue – related party

Total revenue

The following tables summarize the financial information

of each operating segment of the Company for the three months ended March 31, 2023:

For the Three Months Ended March 31, 2023

IoT Installation Services

Cost of revenue

Operating Expenses

Selling expense

General and administrative

Total Operating Expenses

Total operating expense

Loss from operations

Other Income (Expense):

Interest income (expense), net

Other income (expense), net

Total other income (expense)

Loss before income taxes

The following tables summarize the performance

of each operating segment of the Company for the nine months ended September 30, 2023 and the performance of the IoT Installation Service

segment broken out between its residential and commercial services for the same period:

Nine Months Ended September 30, 2023

IoT Installation

Revenue – related party

Total revenue

Cost of revenue

Operating Expenses

Selling expense

Compensation – officers and directors

Research and development

Professional fees

General and administrative

Total Operating Expenses

Income (loss) from Operations

( 1,237,660 )

( 1,240,974 )

Other Income (Expense):

Interest income (expense), net

Gain on bargain purchase

Unrealized income on marketable equity securities

Realized loss on marketable equity securities

Rental income

Other income (expense), net

Total other income (expense)

Income (loss) before income taxes

$ ( 1,108,825 )

$ ( 1,114,243 )

Net Income (loss)

$ ( 3,115,037 )

$ ( 3,100,442 )

Nine Months Ended September 30, 2023

IoT Installation

Revenue – related party

Total revenue

Cost of revenue

Operating Expenses

Selling expense

Compensation – officers and directors

Research and development

Professional fees

General and administrative

Total Operating Expenses

Income (loss) from Operations

Other Income (Expense):

Interest income (expense), net

Other income (expense), net

Total other income (expense)

Income (loss) before income taxes

Net Income (loss)

The following tables summarize the performance of each operating segment

of the Company for the nine months ended September 30, 2022 and the performance of the IoT Installation Service segment broken out between

its residential and commercial services for the same period:

Nine Months Ended September 30, 2022

IoT Installation

Revenue – related party

Total revenue

Cost of revenue

Operating Expenses

Selling expense

Compensation – officers and directors

Research and development

Professional fees

General and administrative

Total Operating Expenses

Income (loss) from Operations

( 3,939,923 )

( 4,103,175 )

Other Income (Expense):

Interest income (expense), net

Gain on bargain purchase

Unrealized loss on marketable equity securities

Realized loss on marketable equity securities

Rental income

Other income (expense), net

Total other income (expense)

Income (loss) before income taxes

( 3,702,521 )

( 3,872,247 )

Net Income (loss)

$ ( 3,702,521 )

$ ( 177,930 )

$ ( 3,872,247 )

Nine Months Ended September 30, 2022

Total IoT Installation

Revenue – related party

Total revenue

Cost of revenue

Operating Expenses

Selling expense

General and administrative

Total Operating Expenses

Loss from Operations

Other Income (Expense):

Interest income (expense), net

Other income (expense), net

Total other income (expense)

Loss before income taxes

$ ( 177,930 )

The following table summarizes the total assets

of each operating segment of the Company as of September 30, 2023:

Schedule of segment assets

September 30, 2023

IoT Installation

The following table summarizes the total assets

of each operating segment of the Company as of December 31, 2022:

December 31, 2022

IoT Installation

Note 15 – Business Combination

On January 6, 2023, the Company completed the

business combination of AT Tech Systems for a purchase price of $1 in cash.

The Company’s intangible assets were acquired from

AT Tech Systems due to customer relationships using the multi-period excess earnings method.

Amortization on the intangible assets was

fully amortized during the nine months ended September 30, 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 Systems’ 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:

Schedule of fair value of the assets acquired and liabilities assumed

Accounts receivable

Intangible assets

Total assets acquired

Accounts payable

Total liabilities assumed

Purchase Price

Total bargain purchase gain

As a result of above information that existed

as of the combination date, the Company recorded a bargain purchase gain of $ 61,747 during the nine months ended September 30, 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 Systems was appropriate and required under U.S.

The Company believes the seller was motivated to complete

the transaction as part of an overall repositioning of its business.

Note 11 – Subsequent Events

The Company has evaluated all subsequent events

through the date these unaudited condensed consolidated financial statements were issued and determined that there were no subsequent

events or transactions that require recognition or disclosures in the unaudited condensed consolidated financial statements.

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 has a due date of April 1, 2026, as consistent with the previous and separate loan agreement with

Golden Sunrise Investment LLC.

On April 5, 2024, the Company hired Warren Wang

as Vice President and Chief Strategy Officer.

Wang’s employment agreement is for a term of 2 years, and he will receive a base

compensation of $10,000 per month for providing investor outreach and investor relations services for the Company.

On May 7, 2024, the Company entered into a purchase

agreement (the “Purchase Agreement”) with a third-party purchaser (the “Buyer”) to sell the Company’s warehouse.

The purchase price for the Property is $7,460,250 with $2,611,088 paid directly to the Company in cash, and the remaining $4,849,162 will

be financed by the Buyer and paid to the Company upon approval of the financing.

The Purchase Agreement allows for a contingency period

of thirty days and includes a requirement for Buyer to deposit $100,000 into escrow, which has been satisfied.

Additional contingencies

are set forth in the Purchase Agreement and the closing date will occur thirty days after their satisfaction or waiver.

On April 26, 2024, the Company issued a press

release announcing a planned spinoff of its wholly owned subsidiary Lusher Inc.

along with a presentation about its core business, which

is a provider of patented hardware and software design technologies for Internet of Things (IoT) and 5G.

The company had previously dedicated

resources and employees toward development of this software, which has been expensed.

On May 9, 2024, Focus

Universal Inc., received a letter from the Listing Qualifications Department of the Nasdaq Stock Market.

The May 9, 2024, letter notified

the Company that based on the Staff’s review of the Company’s Market Value of Publicly Held Shares, the Company’s MVPHS

has fallen below the required minimum of $15,000,000 for the last 32 consecutive business days.

Therefore, the Company no longer meets

the Nasdaq Listing Rule 5450(b)(2)(C) and 5450(b)(3)(C).

The notification received has no immediate effect on the Company’s Nasdaq

In accordance with Nasdaq Listing Rule 5810(c)(3)(A) and 5810(c)(3)(C), the Company has been provided an initial period of 180

calendar days, or until November 5, 2024, to regain compliance with the MVPHS Rules.

If, at any time before the Compliance Date, the Company’s

MVPHS closes at $15,000,000 or more for a minimum of ten consecutive business days, the Staff will provide written confirmation of compliance

to the Company and this matter will be closed with respect to the MVPHS Rules.

As of April 30, 2024, the Company founded a wholly

owned subsidiary named Lusher Inc.

This company Lusher Inc.

was founded to develop, market, and commercialize automation software initially

for 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.

The Company has evaluated all other subsequent

events through the date these consolidated financial statements were issued and determined that there were no other subsequent events

or transactions that require recognition or disclosures in the consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements