FOCUS UNIVERSAL INC.

Previous wording

Financial reporting is the process by which a company keeps investors aware of a company’s financial condition, allowing them to have the information they need before making an investment decision.

Current wording

Financial reporting is the annual and quarterly reporting process by which a public company keeps investors aware of a company’s financial condition, allowing them to have the information they need before making an investment decision.

Previous wording

Because of the depth and nature of the information they contain, reports on Forms 10-K and 10-Q can become time-consuming, especially given the complex processes that require a company’s internal teams to gather large amounts of data across multiple sources. The time and expertise required to complete the process is a substantial burden. SEC reporting deadlines are firm and inflexible. These reporting requirements can interfere with other reporting timelines and leave a time-strapped team scrambling for the resources needed to meet mandated reporting requirements.

Current wording

Because of the depth and nature of the information they contain, reports on Forms 10-K and 10-Q can become time-consuming, especially given the complex processes that require a company’s internal teams to gather large amounts of data across multiple sources. The time and expertise required to complete the process is a substantial burden. SEC reporting deadlines are firm and inflexible.

Previous wording

Given the complexity and volume of data involved, companies are looking for solutions that not only save cost, and reduce the time and effort required to report in a timely manner but also improve accuracy and compliance. We have developed an automated software solution to address these challenges effectively and efficiently in the following ways:

Current wording

Given the complexity and volume of data involved, companies are looking for solutions that not only save cost, and reduce the time and effort required to report in a timely manner but also improve accuracy and compliance.

Previous wording

We believe universal wireless smart technology will play a critical role for traditional instrument manufacturers, as currently the undertaking of an IoT project is simply too expensive and difficult to develop for medium or smaller companies and carries a 75% failure rate according to Cisco Systems.1 The cost factor is the first consideration when deciding whether a company wants to develop smart wireless technologies and implement them into their products or use them in their field testing. We also hope to play a role in academic laboratories, particularly with smaller academic laboratories that are sensitive to price. Regarding the larger IoT industry statistics, overall enterprise IoT spending increased to $201 billion in 2022, an increase of 21.5%. The outlook for growth in 2023 is 18.5% from this large base of enterprise spending.2 More specifically, the IoT sensors market is projected to reach $26 billion by 2026 from $11.1 billion in 2022.3 The IoT marketplace size assessments usually include the hardware components and the software components, which often contain a Software as a Service (SaaS) model. Additionally, the rising need for reliable high bandwidth communication for IoT devices is expected to rise to $664.75 billion in 2028, spearheaded by the currently predominant services in the 5G category.4 We would also expect this market to grow with the addition of new categories of services delivering reliable high bandwidth communication for IoT devices and would cannibalize and expand the existing services where the new services proved to be more effective and efficient.

Current wording

We believe universal wireless smart technology will play a critical role for traditional instrument manufacturers, as currently the undertaking of an IoT project is simply too expensive and difficult to develop for medium or smaller companies and carries a 75% failure rate according to Cisco Systems. The cost factor is the first consideration when deciding whether a company wants to develop smart wireless technologies and implement them into their products or use them in their field testing. We also hope to play a role in academic laboratories, particularly with smaller academic laboratories that are sensitive to price. Regarding the larger IoT industry statistics, overall enterprise IoT spending increased to $201 billion in 2022, an increase of 21.5%. The outlook for growth in 2023 is 18.5% from this large base of enterprise spending. More specifically, the IoT sensors market is projected to reach $26 billion by 2026 from $11.1 billion in 2022. The IoT marketplace size assessments usually include the hardware components and the software components, which often contain a Software as a Service (SaaS) model. Additionally, the rising need for reliable high bandwidth communication for IoT devices is expected to rise to $664.75 billion in 2028, spearheaded by the currently predominant services in the 5G category. We would also expect this market to grow with the addition of new categories of services delivering reliable high bandwidth communication for IoT devices and would cannibalize and expand the existing services where the new services proved to be more effective and efficient.

Previous wording

Our consolidated gross revenue for the three months ended September 30, 2024 and 2023 was $74,215 and $71,854, respectively. Cost of revenue for the three months ended September 30, 2024 was $42,530, compared to $44,386 for the three months ended September 30, 2023. In addition to the increase in revenue and decrease cost of revenue, gross profit increased to $31,685 compared to $27,468 for the three months ended September 30, 2024 and 2023, respectively. The result is attributed to the Company selling more LED products this year compared to last year, with LED products yielding higher profit margins than hydroponic products.

Current wording

Our consolidated gross revenue for the three months ended March 31, 2025 and 2024 was $190,255 and $179,505, respectively. Cost of revenue for the three months ended March 31, 2025 was $159,711, compared to $89,206 for the three months ended March 31, 2024. In addition to the increase in revenue and cost of revenue, gross profit decreased to $30,544 compared to $90,299 for the three months ended March 31, 2025 and 2024, respectively.

Previous 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.

Current wording

Selling expenses for the three months ended March 31, 2025 were $48,980, compared to $39,285 for the three months ended March 31, 2024. 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 $575,255 and $267,002 for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Compensation – officers and directors were $125,387 and $56,793 for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

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

Current wording

Research and development costs were $372,258 and $343,277 for the three months ended March 31, 2025 and 2024, respectively.

Previous 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.

Current wording

Professional fees were $472,991 during the three months ended March 31, 2025, compared to $352,611 during the three months ended March 31, 2024. The increase in these professional fees compared to the prior period was due to a increase in legal fees for employment litigation defense.

Previous 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.

Current wording

General and administrative expenses for the three months ended March 31, 2025 was $282,455 compared to $512,239 during the three months ended March 31, 2024. The increase of general and administrative expenses was primarily due to the Company received its employee retention credit from internal revenue service in 2025.

Previous 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.

Current wording

Other income for the three months ended March 31, 2025 was $20,149, compared to $3,072 for the three months ended March 31, 2024.

Previous wording

Income (loss) from discontinued operations, net of tax

Current wording

Loss from discontinued operations, net of tax

Previous wording

Income (loss) from discontinued operations, net of tax was $(26,748) during the three months ended September 30,2024, compared to $61,194 during the three months ended September 30,2023. The decrease was due to the discontinued operations of AT Tech Systems LLC in August 2024.

Current wording

Loss from discontinued operations, net of tax was $0 and $104,763 during the three months ended March 31, 2025 and 2024, respectively. The decrease was due to the discontinued operations of AT Tech Systems LLC in August 2024.

Previous 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.

Current wording

During the three months ended March 31, 2025 and 2024, we incurred net loss of $1,251,378 and $1,315,597 respectively, due to the factors discussed above.

Previous 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.

Current wording

Our net cash outflows from operating activities of $1,220,089 for the three months ended March 31, 2025 was primarily the result of our net loss of $1,251,378 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 $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.

Current wording

Our net cash outflows from operating activities of $892,089 for the three months ended March 31, 2024 was primarily the result of our net loss of $1,315,597 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 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.

Current wording

For the three months ended March 31, 2025 we had cash outflow from investing activities of $23,380 from the purchase of property and equipment of $23,380. For the three months ended March 31, 2024, we had cash outflow from investing activities of $5,044 from the purchase of property and equipment of $5,044.

Previous 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.

Current wording

For the three months ended March 31, 2025, we had cash outflows of $144,575 due to purchase of treasury stock of $144,575. For the three months ended March 31, 2024, we had cash inflows of $550,000 due to proceeds from third party loan of $300,000, proceeds from related party loan of $300,000 and repayment on third party loan of $50,000.

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 $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.

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 $1,251,378 for the three months ended March 31, 2025. In addition, the Company had an accumulated deficit of $27,033,686 as of March 31, 2025, and negative cash flow from operating activities of $1,220,049 for the three months ended March 31, 2025. 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 condensed 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, 2024, has also expressed substantial doubt about the Company’s ability to continue as a going concern.

Previous 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.

Current wording

At March 31, 2025, the Company had cash and cash equivalents, and short-term investments, in the amount of $2,217,268. 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. 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.