FOCUS UNIVERSAL INC.

Previous wording

Human data entry of hundreds or thousands of financial numbers in the financial report imposes another challenge and presented by regularly occurring human error. This risk is compounded by a frequent requirement to update or revise these hundreds or thousands of numbers during the time-constrained review processes and auditing processes prior to submission.

Current wording

Human data entry of hundreds or thousands of financial numbers in the financial report imposes another challenge and regularly occurring human errors. This risk is compounded by a frequent requirement to update or revise these hundreds or thousands of numbers during the time-constrained review processes and auditing processes prior to submission.

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. The company has begun to file omnibus patents to combine certain patents under a unified central patent.

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 received an issue notification from the USPTO, indicating that patent application titled “Electronic Lock and Method of Operation” was 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

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.

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. 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.

Previous 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.

Current wording

Our consolidated gross revenue for the three months ended June 30, 2025 and 2024 was $35,330 and $11,234, respectively. Cost of revenue for the three months ended June 30, 2025 was $47,742, compared to $(4,050) for the three months ended June 30, 2024 . The increase in cost of revenue was due to higher cost of the LED materials for installation during this time period, though increases were somewhat nominal. In addition to the increase in revenue and cost of revenue, gross profit (loss) decreased to $(12,412) compared to $15,284 for the three months ended June 30, 2025 and 2024, respectively. As a result, the gross profits decreased for the same reason.

Previous 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.

Current wording

Selling expenses for the three months ended June 30, 2025 were $7,420, compared to $35,640 for the three months ended June 30, 2024. Selling expenses were mainly from third party advertising fees and marketing related fees. The decrease in selling expenses was due to a decrease in advertising fees.

Previous 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.

Current wording

Professional fees were $429,155 during the three months ended June 30, 2025, compared to $354,421 during the three months ended June 30, 2024. The increase in these professional fees compared to the prior period was due to an increase in legal fees for employment litigation defense.

Previous 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.

Current wording

General and administrative expenses for the three months ended June 30, 2025 was $501,119 compared to $505,561 during the three months ended June 30, 2024. The decrease 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 March 31, 2025 was $20,149, compared to $3,072 for the three months ended March 31, 2024.

Current wording

Other income for the three months ended June 30, 2025 was $37,112, compared to $13,011 for the three months ended June 30, 2024.

Previous 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.

Current wording

Loss from discontinued operations, net of tax was $0 and $146,276 during the three months ended June 30, 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 March 31, 2025 and 2024, we incurred net loss of $1,251,378 and $1,315,597 respectively, due to the factors discussed above.

Current wording

During the three months ended June 30, 2025 and 2024, we incurred net loss of $1,505,648 and $1,365,106 respectively, due to the factors discussed above.

Previous 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.

Current wording

Our net cash outflows from operating activities of $2,648,288 for the six months ended June 30, 2025 was primarily the result of our net loss of $2,757,026 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 $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.

Current 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, and operating activities from discontinued operations.

Previous 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.

Current wording

For the six months ended June 30, 2025 we had cash outflow from investing activities of $25,091 from the purchase of property and equipment of $25,091. 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 of $9,743.

Previous 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.

Current wording

For the six months ended June 30, 2025, we had cash inflows of $207,387 due to stock issued for private placement of $381,224 offset by the purchase of treasury stock of $173,837. For the six months ended June 30, 2024, we had cash inflows of $1,326,000 due to proceeds from third party loan of $350,000, proceeds from related party loan of $1,101,000 and repayment on third party loan of $125,000.

Previous wording

On November 11, 2024, we entered into a Share Purchase Agreement with Alumni Capital LP, a Delaware limited partnership. Pursuant to the Purchase Agreement, we have the right, but not the obligation to cause Alumni Capital to purchase up to $20,000,000 common stock, par value $0.00001, at certain purchase price during the period beginning on the execution date of the Agreement and ending on the earlier of (i) the date which Alumni Capital has purchased $20,000,000 of the Company’s common stock pursuant to the Purchase Agreement or (ii) November 11, 2027. As of the date of issuance of the unaudited consolidated financial statement, the Company has only executed a purchase notice for 94,825 shares to Alumni Capital, based on our Purchase Agreement, dated November 16, 2024, but the Closing Date has not been completed and proceeds have not been received.

Current wording

On November 11, 2024, we entered into a Share Purchase Agreement with Alumni Capital LP, a Delaware limited partnership. Pursuant to the Purchase Agreement, we have the right, but not the obligation to cause Alumni Capital to purchase up to $20,000,000 common stock, par value $0.00001, at certain purchase price during the period beginning on the execution date of the Agreement and ending on the earlier of (i) the date which Alumni Capital has purchased $20,000,000 of the Company’s common stock pursuant to the Purchase Agreement or (ii) November 11, 2027. As of the date of issuance of the unaudited consolidated financial statements, the Company has only executed a purchase notice for 94,825 shares to Alumni Capital, based on our Purchase Agreement, dated November 16, 2024, and the proceeds of $381,224 have been received and recorded for the period ended June 30,2025. Subsequently, the Company issued a purchase notice to Alumni Capital totaling 167,867 shares under the same purchase agreement, and received proceeds of $441,277, which were recorded in July 2025.

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 $1,251,378 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.

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 unaudited condensed consolidated financial statements. The Company has a net loss of $2,757,026 for the six months ended June 30, 2025. In addition, the Company had an accumulated deficit of $28,539,334 as of June 30, 2025, and negative cash flow from operating activities of $2,648,288 for the six months ended June 30, 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 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.

Current wording

At June 30, 2025, the Company had cash and cash equivalents, and short-term investments, in the amount of $1,150,614. 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. 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.