FOCUS UNIVERSAL INC

Previous wording

Our software machine auto design team has also made significant progress during the last period. Having the mathematical and graphical environments created, our team is focused on developing the 3D-user interface machine auto design. Our public reporting automation software is completed and currently undergoing extensive testing. As reports on Forms 10-Q and 10-K are time-consuming, complex processes that require each company’s financial team to gather and translate large amounts of data from multiple sources, the time and expertise required to complete the process is a substantial burden for any company, large or small. Meanwhile, SEC reporting deadlines are firm and inflexible. This conflict can interfere with other reporting and internal timelines and leave teams time-strapped and scrambling for the resources needed to meet any reporting requirements. We have developed a Microsoft®-based add-on software that aims to streamline and automate the SEC reporting preparation process. We believe the software will significantly simplify the Form 10-Q and Form 10-K preparation processes and make creating, editing and managing documents both simple and accurate. We are planning to commercialize this software in the fourth quarter of 2024 or the first quarter of 2025. A cloud-based version of this software is also under the development.

Current wording

Our software machine auto design team has also made significant progress during the nine months ending September 30, 2024. Having the mathematical and graphical environments created, our team is focused on developing the 3D-user interface machine auto design. Our public reporting automation software is completed and currently undergoing extensive testing. As reports on Forms 10-Q and 10-K are time-consuming, complex processes that require each company’s financial team to gather and translate large amounts of data from multiple sources, the time and expertise required to complete the process is a substantial burden for any company, large or small. Meanwhile, SEC reporting deadlines are firm and inflexible. This conflict can interfere with other reporting and internal timelines and leave teams time-strapped and scrambling for the resources needed to meet any reporting requirements. We have developed a Microsoft®-based add-on software that aims to streamline and automate the SEC reporting preparation process. We believe the software will significantly simplify the Form 10-Q and Form 10-K preparation processes and make creating, editing and managing documents both simple and accurate. We are planning to commercialize this software in the fourth quarter of 2024 or the first quarter of 2025. A cloud-based version of this software is also under the development.

Previous wording

Beyond IoT products, as a developer of a Natural Integrated Programming Language (NIPL) derivative product (i.e., our software platform for interoperability within the IoT), we have developed a complementary office automation software product. This specific software was designed to assist in completing financial reports faster, more accurately, and with greater ease of update, thereby eliminating the need for increased staffing especially in time sensitive projects. It is designed to save CPAs, auditors, accounting, and/or legal a significant amount of time in the preparation of SEC financial reports and other internal financial reporting. Eighty percent of this software development has been completed and we hope to launch a beta version of this product.

Current wording

Beyond IoT products, our R&D software team has developed a derivative product (i.e., our software platform for interoperability within the IoT), we have developed a complementary office automation software product. This specific software was designed to assist in completing financial reports faster, more accurately, and with greater ease of update, thereby eliminating the need for increased staffing especially in time sensitive projects. It is designed to save CPAs, auditors, accounting, and/or legal a significant amount of time in the preparation of SEC financial reports and other internal financial reporting. Eighty percent of this software development has been completed and we hope to launch a beta version of this product.

Previous wording

The Company’s patent number 11,488,468 was allowed and subsequently issued on November 1, 2022. The patent is titled “Sensor for Detecting the Proximity of an IEEE 802.11 Protocol Connectable Device.” On November 7, 2023, our patent application titled “Activated Carbon Air Filter” issued as U.S. Patent No. 11,806,654. We also just received an issue notification from the USPTO, indicating that our patent application titled “Electronic Lock and Method of Operation” will issue on November 21, 2023, as U.S. Patent No. 11,823,513.

Current wording

The Company’s patent number 11,488,468 was allowed and subsequently issued on November 1, 2022. The patent is titled “Sensor for Detecting the Proximity of an IEEE 802.11 Protocol Connectable Device.” On November 7, 2023, our patent application titled “Activated Carbon Air Filter” issued as U.S. Patent No. 11,806,654. We also just received an issue notification from the USPTO, indicating that our patent application titled “Electronic Lock and Method of Operation” will issue on November 21, 2023, as U.S. Patent No. 11,823,513. The company has begun to file omnibus patents to combine certain patents under a unified central patent.

Previous wording

Selling expenses for the three months ended June 30, 2024 was $35,640, compared to $63,075 for the three months ended June 30, 2023. Selling expense incurred was mainly from third party advertising fees and marketing related fees. The decrease of selling expense was due to a decrease in advertising fees.

Current wording

Selling expenses for the three months ended September 30, 2024 were $30,936, compared to $25,193 for the three months ended September 30, 2023. Selling expenses were mainly from third party advertising fees and marketing related fees. The increase in selling expenses was due to an increase in advertising fees.

Previous wording

Compensation – officers and directors were $55,255 and $253,403 for the three months ended June 30, 2024 and 2023, respectively.

Current wording

Compensation – officers and directors were $575,255 and $267,002 for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Research and development costs were $296,248 and $342,992 for the three months ended June 30, 2024 and 2023, respectively.

Current wording

Research and development costs were $308,516 and $305,872 for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Professional fees were $354,421 during the three months ended June 30, 2024, compared to $116,565 during the three months ended June 30, 2023. The increase in these professional fees compared to the prior period was due to an increase in professional legal fees for prior employment litigation.

Current wording

Professional fees were $278,336 during the three months ended September 30, 2024, compared to $132,914 during the three months ended September 30, 2023. The increase in these professional fees compared to the prior period was due to an increase in legal fees for employment litigation defense and SEC securities attorney legal fees.

Previous wording

General and administrative expenses for the three months ended June 30, 2024 was $625,492 compared to $361,583 during the three months ended June 30, 2023. The increase of general and administrative expenses was primarily due to an increase in the number of office employees in 2024.

Current wording

General and administrative expenses for the three months ended September 30, 2024 was $585,491 compared to $387,764 during the three months ended September 30, 2023. The increase of general and administrative expenses was primarily due to an increase in the number of office employees in 2024.

Previous wording

Other income for the three months ended June 30, 2024 was $14,031, compared to $53,320 for the three months ended June 30, 2023. The decrease was due to increased interest expense.

Current wording

Other income for the three months ended September 30, 2024 was $3,215,560, compared to $62,050 for the three months ended September 30, 2023. The increase was due to gain on sale of the property.

Previous wording

During the six months ended June 30, 2024 and 2023, we incurred net losses of $2,680,703 and $2,132,409 respectively, due to the factors discussed above.

Current wording

During the three months ended September 30, 2024 and 2023, we incurred net income (loss) of $1,441,927 and $(968,033) respectively, due to the factors discussed above.

Previous wording

The major components of our cost and operating expenses for the six months ended June 30, 2024 and 2023 are outlined in the table below:

Current wording

The major components of our cost and operating expenses for the nine months ended September 30, 2024 and 2023 are outlined in the table below:

Previous wording

Compensation – officers and directors were $112,048 and $560,937 for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Compensation – officers and directors were $687,303 and $827,939 for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Research and development costs were $639,525 and $619,473 for the six months ended June 30, 2024 and 2023, respectively. The increase was due to an increase in the number of research and development patent fees.

Current wording

Research and development costs were $948,041 and $925,345 for the nine months ended September 30, 2024 and 2023, respectively. The increase was due to an increase in the number of research and development patent fees.

Previous wording

Professional fees were $707,032 during the six months ended June 30, 2024, compared to $373,964 during the six months ended June 30, 2023. The increase in these professional fees compared to the prior period was due to an increase in professional legal fees for prior employment litigation.

Current wording

Professional fees were $985,368 during the nine months ended September 30, 2024, compared to $506,878 during the nine months ended September 30, 2023. The increase in these professional fees compared to the prior period was due to an increase in legal fees for employment litigation defense and SEC securities attorney legal fees.

Previous wording

General and administrative expenses for the six months ended June 30, 2024 was $1,153,137 compared to $804,635 during the six months ended June 30, 2023. The increase of general and administrative expenses was primarily due to an increase in the number of office employees in 2024.

Current wording

General and administrative expenses for the nine months ended September 30, 2024 was $1,612,735 compared to $1,160,915 during the nine months ended September 30, 2023. The increase of general and administrative expenses was primarily due to an increase in the number of office employees in 2024.

Previous wording

Other income for the six months ended June 30, 2024 was $18,244, compared to $180,051 for the six months ended June 30, 2023. The decrease was due to increased interest expense during the period.

Current wording

Other income for the nine months ended September 30, 2024 was $3,231,253, compared to $240,360 for the nine months ended September 30, 2023. The increase was due to gain on sale of the property.

Previous wording

During the three months ended June 30, 2024 and 2023, we incurred net losses of $1,365,106 and $1,018,166 respectively, due to the factors discussed above.

Current wording

During the nine months ended September 30, 2024 and 2023, we incurred net losses of $1,238,776 and $3,100,442 respectively, due to the factors discussed above.

Previous wording

Our net cash outflows from operating activities of $1,721,946 for the six months ended June 30, 2024 was primarily the result of our net loss of $2,680,703 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses.

Current wording

Our net cash outflows from operating activities of $477,195 for the nine months ended September 30, 2024 was primarily the result of our net loss of $898,776 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses, and operating activities from discontinued operations.

Previous wording

Our net cash outflows from operating activities of $1,606,739 for the six months ended June 30, 2023 was primarily the result of our net loss of $2,132,409 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses.

Current wording

Our net cash outflows from operating activities of $2,603,545 for the nine months ended September 30, 2023 was primarily the result of our net loss of $3,100,442 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses, and operating activities from discontinued operations.

Previous wording

For the six months ended June 30, 2024 we had cash outflow from investing activities of $9,743 from the purchase of property and equipment. For the six months ended June 30, 2023, we had cash inflow from investing activities of $40,889. That was primarily the result from the purchase of property and equipment of $17,203, purchase of marketable securities of $43,644, and proceeds from sales of marketable securities of $101,736.

Current wording

For the nine months ended September 30, 2024 we had cash inflow from investing activities of $3,950,852 from the purchase of property and equipment of $13,250 and proceeds from sale of property of $3,964,102. For the nine months ended September 30, 2023, we had cash inflow from investing activities of $54,472. That was primarily the result from the purchase of property and equipment of $20,294, purchase of marketable securities of $144,907, and proceeds from sales of marketable securities of $219,673.

Previous wording

For the six months ended June 30, 2024, we had cash inflows of $1,326,000 due to proceeds from third party and related party loan amount of $1,451,000 and repayment on third party loan amount of $125,000. For the six months ended June 30, 2023, we had cash outflows of $1,420,686 due to purchase of treasury stock.

Current wording

For the nine months ended September 30, 2024, we had cash inflows of $1,451,000 due to proceeds from third party and related party loan amount of $1,451,000 and repayment on third party and related party loan amount of $2,376,000, stock issued for placement agent of $1,086,000, and stock issued for private placement of $1,290,000. For the nine months ended September 30, 2023, we had cash outflows of $385,686 due to proceeds from related party loan of $1,000,000 and purchase of treasury stock of $1,385,686.

Previous wording

The Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these condensed consolidated financial statements. The Company has a net loss of $2,680,703 and $2,132,409 for the six months ended June 30, 2024 and 2023, respectively. In addition, the Company had an accumulated deficit of $25,262,873 and $22,582,170 as of June 30, 2024 and December 31, 2023, respectively, and negative cash flow from operating activities of $1,721,946 and $1,606,739 for the six months ended June 30, 2024 and 2023, respectively. Substantial doubt about the Company’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the Company will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company currently suffered recurring loss from operations, generated negative cash flow from operating activities, has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These conditions raise substantial doubt as to its ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2023, has also expressed substantial doubt about the Company’s ability to continue as a going concern.

Current wording

The Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these condensed consolidated financial statements. The Company has a net loss of $1,238,776 and $3,100,442 for the nine months ended September 30, 2024 and 2023, respectively. In addition, the Company had an accumulated deficit of $23,820,946 and $22,582,170 as of September 30, 2024 and December 31, 2023, respectively, and negative cash flow from operating activities of $3,658,901 and $2,603,545 for the nine months ended September 30, 2024 and 2023, respectively. Substantial doubt about the Company’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the Company will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company currently suffered recurring loss from operations, generated negative cash flow from operating activities, has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These conditions raise substantial doubt as to its ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2023, has also expressed substantial doubt about the Company’s ability to continue as a going concern.

Previous wording

At June 30, 2024, the Company had cash and cash equivalents, and short-term investments, in the amount of $40,644. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings, and it expects to continue to rely on these sources of capital in the future. In addition, subsequent to June 30, 2024, the Company has sold its land and buildings which provided additional working capital to the Company. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing, or grant unfavorable terms in future licensing agreements.

Current wording

At September 30, 2024, the Company had cash and cash equivalents, and short-term investments, in the amount of $5,368,273. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings, and it expects to continue to rely on these sources of capital in the future. In addition, before September 30, 2024, the Company has sold its land and buildings which provided additional working capital to the Company. For more information on the sale of the land and buildings please see Note 5. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing, or grant unfavorable terms in future licensing agreements.