Focus Universal(FCUV) - 2024 Q2 - Quarterly Report

Technology and Innovation - Focus Universal Inc. has developed five proprietary technologies aimed at solving fundamental issues in the IoT industry, including a faster 5G cellular technology and ultra-narrowband power line communication[78]. - The company holds 28 patents and patents pending, focusing on increasing chip integration and reducing production costs through its Universal Smart Technology[78]. - The Shenzhen subsidiary has completed designs for several sensors, including a TDS meter and carbon dioxide sensor, which are expected to be cost-effective compared to existing market options[81]. - The Ubiquitor device integrates multiple digital sensors into one platform, aiming to reduce production costs and development efforts for new sensor products[86]. - The company’s proprietary ultra-narrowband PLC technology aims to provide a cost-effective communication infrastructure for IoT devices[104]. - The company has 18 pending U.S. nonprovisional patent applications and 9 issued U.S. patents, indicating a strong focus on intellectual property development[108]. Product Development and Marketing - A new line of products is set to be launched, phasing out traditional lower-margin products, with a focus on controlled agriculture and home automation industries[79]. - The U.S.-based sales team is actively marketing Smart AVX-branded products, including large format multimedia touch screens and surveillance camera systems[80]. - Smart AVX-branded products include LED audio-visual panel products and VOIP phone services, targeting various commercial applications[90][94]. - The company aims to enhance its product offerings by integrating core technologies across its Smart AVX-branded equipment, facilitating unified collaboration across different technologies[89]. - The company is developing a Microsoft-based software to automate SEC reporting processes, with plans to commercialize it in Q4 2024 or Q1 2025[82]. - A complementary office automation software product is 80% complete, designed to streamline financial report preparation for CPAs and auditors[83]. Financial Performance - Consolidated gross revenue for the three months ended June 30, 2024, was $19,753, a decrease of $195,638 compared to $215,391 for the same period in 2023[118]. - Cost of revenue for the three months ended June 30, 2024, was $31,834, down from $149,259 in 2023, resulting in a decrease of $117,425[118]. - Gross profit for the three months ended June 30, 2024, was a loss of $12,081, compared to a profit of $66,132 in 2023, reflecting a decrease of $78,213[118]. - Revenue for the six months ended June 30, 2024 was $238,911, a decrease of $212,575 compared to $451,486 for the same period in 2023[127]. - Cost of revenue for the six months ended June 30, 2024 was $251,191, down from $330,003 in 2023, resulting in a gross loss of $(12,280) compared to a profit of $121,483 in 2023[127]. - Net losses for the six months ended June 30, 2024 were $2,680,703, compared to $2,132,409 for the same period in 2023[132]. Operating Expenses - Total operating expenses for the six months ended June 30, 2024 were $2,686,667, an increase of $252,724 from $2,433,943 in 2023[129]. - Selling expenses for the six months ended June 30, 2024 were $74,925, nearly unchanged from $74,934 in 2023[129]. - Research and development costs increased to $639,525 for the six months ended June 30, 2024, compared to $619,473 in 2023[130]. - Professional fees rose significantly to $707,032 in the six months ended June 30, 2024, up from $373,964 in 2023, attributed to increased legal fees[130]. - General and administrative expenses increased to $1,153,137 for the six months ended June 30, 2024, compared to $804,635 in 2023[130]. Market Trends and Projections - The IoT installation service experienced a reduction in the number of projects in 2024, contributing to the decline in revenue[118]. - The IoT sensors market is projected to reach $26 billion by 2026, up from $11.1 billion in 2022, indicating significant growth potential[115]. - Overall enterprise IoT spending increased to $201 billion in 2022, reflecting a growth rate of 21.5%[115]. - The rising need for reliable high bandwidth communication for IoT devices is expected to grow to $664.75 billion by 2028, driven by 5G services[115]. Financial Position - Current assets as of June 30, 2024 were $654,329, down from $1,028,278 as of December 31, 2023, resulting in negative working capital of $(3,009,412)[133]. - Cash outflows from operating activities for the six months ended June 30, 2024 were $(1,721,946), compared to $(1,606,739) in 2023[135]. - As of June 30, 2024, there were no off-balance-sheet arrangements reported by the company[141]. - The company qualifies as a smaller reporting company under Rule 12b-2 of the Exchange Act[141]. - The company is not required to provide quantitative and qualitative disclosures about market risk[141].