What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-16 · 362 added, 223 removed, 322 unchanged (64% of the section changed)

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However, readers should carefully review the risk factors set forth herein and in other reports and documents that we file from time to

time with the Securities and Exchange Commission, particularly the Report on Form 10-K, Form 10-Q and any Current Reports on Form 8-K.

time with the Securities and Exchange Commission, particularly the Reports on Form 10-K and Form 10-Q and any Current Reports on Form

Narrative Description of the Business

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to replace the manual software designs which are currently in use and cannot satisfy the exponential growth of future IoT industry demand.

We believe our ultra-narrowband PLC enables our users to send data over existing electrical power cables and immediately establish a ubiquitous

data network without substantial new investment for a dedicated wiring infrastructure.

We believe our ultra-narrow band technology is

capable of overcoming the noise problems communicating through power lines that have hindered our competitors for over a century.

our wireless communication technology allows for longer-range coverage, is more energy effective and has much faster data sending speeds

than the current 5G technology speeds being used.

We also provide sensor devices and are a wholesaler of various air filters and digital,

analog, and quantum light meter systems.

For the three months ended March 31,

2023 and 2022, we generated significant amount of our revenue from sales of a broad selection of agricultural sensors and measurement

equipment which is our primary business.

Our Current Products Include:

Internal testing suggests that our ultra-narrowband PLC technology enables users to send data over existing electrical power cables, establishing

a ubiquitous data network without substantial investment for a new dedicated wiring infrastructure.

We believe our ultra-narrowband technology

is capable of overcoming the noise problems communicating through power lines that have hindered our competitors for over a century.

our view, our wireless communication technology allows for longer-range coverage, is more energy efficient and has much faster data sending

speeds than the current 5G technology speeds being used.

We also provide sensor devices and are a wholesaler of various air filters and

digital, analog, and quantum light meter systems.

For the six months ended June 30, 2023 and 2022,

we generated a significant amount of our revenue from sales of a broad selection of agricultural sensors and measurement equipment which

is our primary business.

Our Current Products

We are a wholesaler of various digital, analog,

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We are building a U.S.

already begun marketing our current AVX branded surveillance camera system (cameras and NVRs) and indoor and outdoor LED screens.

already begun marketing our current AVX-branded surveillance camera system (cameras and network video recorders (NVRs)) and indoor and

outdoor LED screens.

In our hydroponics segment, our honeycomb activated

carbon filter product has been issued a patent in October 2022, and the production of the products in several different formats has been

completed and are ready to ship to the USA for nationwide marketing.

carbon filter product was issued a patent in October 2022;

this product in several different forms is in inventory at our warehouse in

Ontario, CA ready for nationwide marketing.

Our products on the home automation front are

also beginning production.

Of note, (1) smart wall touch light switches, (2) digital control smart wall touch light switches, (3) smart

timers, and finally (4) smart controllers are ready for production.

Currently, our Shenzhen subsidiary unit mainly

focuses on product development and commercialization.

An important electrode with a “Total Dissolved Solids” (“TDS”)

meter design, with applications in all solubility measurements, was completed and approved by our US management team.

beginning the production cycle.

Of note, smart wall touch light switches, digital control smart wall touch light switches, smart timers,

and smart controllers are ready for production.

Sourcing of electronic parts for these products is completed, the cost analysis of

these products is completed, and most of the tooling for production has been completed.

Currently, our Shenzhen subsidiary mainly focuses

on product development and commercialization.

An important electrode with a “Total Dissolved Solids” (“TDS”) meter

design, with applications in all solubility measurements, was completed and approved by our U.S.

management team.

The designs of

our TDS sensor, carbon dioxide sensor, new quantum PAR sensor and total dissolved oxygen sensors are also completed.

Our testing against

the state-of-the-art sensors on the market suggests to us that the new sensors are at least as good as the best quality sensors on the

However, we believe that our sensors are much more cost effective.

The progress in our USIP for the IoT has been smooth,

and we have confidence that the first version of our USIP for the IoT can be demonstrated in the first quarter of 2024.

The Focus software machine auto design team has

also made significant progress.

With mathematical and graphical environments having been created, our team is focusing on developing the

3D user interface machine auto design.

The public reporting automation software is completed

and currently undergoing extensive testing.

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.

Meanwhile, SEC reporting deadlines are firm and inflexible.

This reality can interfere with other reporting timelines

and leave a time-strapped team scrambling for the resources needed to meet all its 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.

Focus is planning to commercialize this software either in the third or fourth quarter of 2023.

A cloud-based version of this software

is also under the development.

Focus has received and approved the Ubiquitor’s

casing design sample, and tooling for the Ubiquitor’s casing design has begun.

Furthermore, our devices and sensors with applications

within hydroponics, including (1) pH meter, (2) CO2 meter, (3) dissolved oxygen meter, (4) digital light meter, (5) new (and vastly improved)

quantum par meter are under intensive testing and we expect to receive new versions into our US headquarters for management approval in

November 2022.

within hydroponics, including a (1) pH meter, (2) CO2 meter, (3) dissolved oxygen meter, (4) digital light meter, (5) new (and vastly

improved) quantum par meter are under intensive testing;

and we expect to receive new versions into our U.S.

headquarters for management

In summary, our entire smart home and hydroponic

IoT line are expected to be completed by the end of 2022.

Beyond IoT products, as an NIPL (our software platform for interoperability

within IoT) derivative product, a complementary office automation software was developed, and we believe the remaining major technical

difficulties have been overcome.

This specific software was designated to assist in completing financial reports faster, more accurately,

and allow ease of update, eliminating the need for increased staffing especially in time sensitive projects.

It is designed to save CPAs,

auditors, accounting, and/or legal significant of time in preparation of SEC financial reports and other internal financial reporting.

Eighty percent (80%) of this software development has been completed and we hope to launch beta versions by the end of 2022.

IoT lines are expected to be completed by the end of 2023.

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.

While we will continue to sell the following products

through Hydrofarm.

We expect to have upgraded versions of certain of these products to re-introduce new versions after the older version

are discontinued:

through Hydrofarm, we expect to have upgraded versions of certain of these products to introduce in the event the older versions are discontinued:

Specifically, we sell the following products through

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of carbon filter devices.

These carbon filter devices are professional grade filters specifically designed and used to filter air in greenhouses

that might be polluted by fermenting organics.

One of these filters can be attached to a centrifugal fan to scrub the air in a constant

circle or can be attached to an exhaust line as a single pass filter, which moves air out of the growing area and filters unwanted odors

and removes pollens, dust, and other debris in the air.

These carbon filter devices are professional grade filters specifically designed and used to filter the air

in greenhouses that might be polluted by fermenting organics.

One of these filters can be attached to a centrifugal fan to scrub the air

in a constant circle or can be attached to an exhaust line as a single-pass filter, which moves air out of the growing area, filters unwanted

odors and removes pollens, dust, and other debris in the air.

The other filter is designed to be used with fans from 0-6000 C.F.M.

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large numbers of technologies, including cloud technology, wired and wireless communication technology, software programming, instrumentation

technology, artificial intelligence, PLC, and sensor networking into a single platform.

We believe the result of such integration is a

smaller, cheaper, and faster circuit system design than those currently offered in the instrumentation market.

technology, artificial intelligence, PLC technology, and sensor networking into a single platform.

We believe the result of such integration

is a smaller, cheaper, and faster circuit system design than those currently offered in the instrumentation market.

Our USIP technology that will make the Ubiquitor

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computers running either Windows OS or MacOS and Android- or iOS-based mobile devices and acts as a conduit that communicates with a group

of sensors or probes manufactured by different vendors in a manner that requires the user to have little or no knowledge of their unique

of sensors or probes manufactured by different vendors in a manner that requires the user to have little to no knowledge of their unique

specifications.

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Recently, we have devoted a substantial number

of resources to research and development in both the US and China to bring the Ubiquitor and its App to full production and distribution.

of resources to research and development in both the U.S.

and China to bring the Ubiquitor and its App to full production and distribution.

We anticipate that the sales and marketing involved with bringing the Ubiquitor to market will require us to hire a number of new sales

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The Ubiquitor will be a general platform that

collects data in real time, up to 100 Hz per second;

and thus, is intended to be adapted to many industrial uses.

collects data in real time, up to 100 Hz per second, and, thus, is intended to be adapted to many industrial uses.

By using the universal hardware or USIP, we believe

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Communication

Power Line Communication (“PLC”) is

a communication technology that enables sending data over existing power cables.

One advantage of this technology is that PLC does not

require substantial new investment for its communications infrastructure.

Rather, PLC utilizes existing power lines, thereby forming a

distribution network that already penetrates all residential, commercial and industrial premises.

Accordingly, connectivity via PLC is

potentially the most cost-effective, scalable interconnectivity approach for the IoT.

We believe PLC can be an integral part of our communication

infrastructure for the IoT, which enables reliable, real-time measurements, monitoring and control.

A large variety of appliances may

be interconnected by transmitting data through the same wires that provide electrical energy.

Power Line Communication (“PLC”) technology

is a communication technology that enables sending data over existing power cables.

One advantage of this technology is that PLC does

not require substantial new investment for its communications infrastructure.

Rather, PLC utilizes existing power lines, thereby forming

a distribution network that already penetrates all residential, commercial and industrial premises.

Accordingly, connectivity via PLC

technology is potentially the most cost-effective, scalable interconnectivity approach for the IoT.

We believe PLC technology can be an

integral part of our communication infrastructure for the IoT, which enables reliable, real-time measurements, monitoring and control.

A large variety of appliances may be interconnected by transmitting data through the same wires that provide electrical energy.

Our patented PLC technology uses an ultra-narrowband

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bandwidth to 4 megabits per second with the potential for more, while simultaneously effectively dealing with electrical noise and interference.

Based on the promising results of our internal testing, we have begun designing a proprietary PLC microchip and have set an intended

launch date for 2023.

Based on the promising results of our internal testing, we have begun designing a proprietary PLC microchip and have set an intended launch

date for 2023.

We believe that because residential and commercial

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We intend to apply the same concept to commercial and industrial applications.

On December 23, 2021, Focus Universal (Shenzhen)

Technology Co.

LTD was founded as a mainland China office for manufacturing procurement expertise and support research and development

Focus Universal (Shenzhen) Technology Co.

LTD is 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.

This last quarter of 2022, this office has continued to grow to double digit headcount and has also

begun to handle other online and simple phone marketing and marketing materials production activities, provided a cost and quality benefit

exists at the time.

On December 23, 2021, Focus Shenzhen was founded

as a mainland China office for manufacturing procurement expertise and support research and development activities.

Focus Shenzhen is

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 second

quarter of 2023, this office has continued to grow and increase its headcount to 41 employees.

We have added these new employees to the

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

Research and Development Efforts of 5G Cellular

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“Creating a faster 5G cellular technology by using ultra-narrowband

technology” in our 10-K Annual Report filed with the SEC on March 31, 2023.

technology” in our Annual Report on Form 10-K filed with the SEC on March 31, 2023.

Eventually, we hope to establish five divisions

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(1) AVX with new shared distributed smart home products powered by the Ubiquitor;

2) an IT division in

software machine design;

3) Universal Smart Instrumentation;

(2) an IT division

in software machine design;

(3) a Universal Smart Instrumentation division;

(4) a PLC technology division;

and (5) an IoT division.

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patent application

number 15/344,041 with the USPTO.

On March 5, 2018, we issued a press release announcing that the USPTO published an Issue Notification

number 15/344,041 with the U.S.

Patent and Trademark Office (USPTO).

On March 5, 2018, we issued a press release announcing that the USPTO

published an Issue Notification for U.S.

Patent Application No.

9924295 entitled “Universal Smart Device,” which covers a patent application regarding the

Company’s Universal Smart Device.

9924295 entitled “Universal Smart Device,” which covers a

patent application regarding the Company’s Universal Smart Device.

The patent was issued on March 20, 2018.

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to implement strong protections on the PLC technology worldwide.

In the fourth quarter of 2021, we hired the law

firm of Knobbe Martens, Olson & Bear, LLP to serve as outside intellectual property counsel for the Company.

The firm is working on

further transferring the Company’s provisional patent applications to formal patent applications which should number 13 according

if all proceed according to plan.

In addition, Knobbe Martens is also working on further filing four previously unfiled patents during

the same timeframe and extending an existing patent application into Europe and Australia.

In addition, in May 2022, the Company also

engaged Chang & Hale, LLP law firm as suggested by our counsel at Knobbe, Martens, Olsen & Bear, LLP to assist with two new patents,

however Knobbe Martens still remains our main IP counsel.

The company now has 24 total patents and patent applications in various phases

with the US Patent and Trademark Office, with three more provisional patents filed this quarter.

As a note, Focus Universal’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.”

We have identified several competitors we have

identified, specifically in the wireless sensor node industry, including traditional instruments or device manufacturers such as Hanna

Instruments and Extech Instruments.

Hach developed and launched the SC1000 Multi-parameter

Universal Controller, a probe module for connecting up to 32 digital sensors or analyzers.

However, their products are not compatible

with smart phones yet;

the fourth quarter of 2021, we hired the law firm of Knobbe, Martens, Olson & Bear, LLP (“Knobbe Martens”) to serve as

outside intellectual property counsel for the Company.

The firm is working on transferring the Company’s provisional patent applications

to formal patent applications, which should number 13 if all proceeds according to plan.

In addition, Knobbe Martens is working on filing

four previously unfiled patents and extending an existing patent application into Europe and Australia.

In addition, in May 2022, the

Company engaged Chang & Hale, LLP as suggested by our counsel at Knobbe Martens to assist with two new patents, noting that Knobbe

Martens still remains our main IP counsel.

The Company now has 28 total patents and patent applications in various phases with the USPTO,

with three more provisional patents filed this quarter.

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.”

We have identified several competitors specifically

in the wireless sensor node industry, including traditional instruments or device manufacturers.

Hach developed and launched the SC1000

Multi-parameter Universal Controller, a probe module for connecting up to 32 digital sensors or analyzers.

However, their products are

not compatible with smart phones yet;

and we believe their price point is still prohibitive to consumers.

Monnit Corporation offers a range of wireless

and remote sensors.

Many of Monnit’s products are web-based wireless sensors that usually are not portable because of their power

Monnit Corporation offers a

range of wireless and remote sensors.

Many of Monnit’s products are web-based wireless sensors that usually are not portable because

of their power consumption.

Also, the sensors’ real-time updates are slow;

and we believe security of the web-based sensor data acquisition may

also be a concern.

In addition to purchasing the device, consumers usually have to pay monthly fees for using web-based services.

We are not trying to compete with traditional

instruments or device manufacturers because we utilize our Ubiquitor device in conjunction with our smartphone application, which we believe

will be a completely different product category.

and we believe security of the web-based sensor data

acquisition may also be a concern.

In addition to purchasing the device, consumers usually have to pay monthly fees for using web-based

We are not trying to compete with traditional instruments or device manufacturers because we utilize our Ubiquitor device in

conjunction with our smartphone application, which we believe will be a completely different product category.

IoT Installation Industry

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from our competitors by offering a substantially lower price.

An installation by Crestron ranges between $20,000 and $100,000 and by Control4

between $20,000 and $40,000.

The cheapest competitor we can identify in this sector is Vivint Smart Home, which costs less than $5,000

however, we understand that the Vivint Smart Home focuses on security systems only and that users have no other smart applications,

which our smart home product line would include.

An installation by Crestron ranges between $20,000 and $100,000 and an installation

by Control4 ranges between $20,000 and $40,000.

The cheapest competitor we can identify in this sector is Vivint Smart Home, which costs

less than $5,000 to install;

however, we understand that the Vivint Smart Home focuses on security systems only and that users have no

other smart applications, which our smart home product line would include.

Air Filtration Systems and Meter Products

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is a niche industry.

Air purification methods are an effective way to control contaminants and improve indoor air quality and as a result,

Air purification methods are an effective way to control contaminants and improve indoor air quality;

and as a result,

many national and local governments overseeing indoor air quality and other emissions are enacting stricter workforce health and safety

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We believe universal wireless smart technology

will play a critical role for traditional instrument manufacturers, as currently simply the undertaking of an IoT project is too expensive

and difficult to develop for medium or smaller companies and carries 75% failure rate according to Cisco Systems 1 .

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.

factor is the first consideration when deciding whether a company wants to develop smart wireless technologies and implement them in

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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)

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.

We also expect our recent growth within our

IoT Installation Services segment and acquisition of AT Tech Systems to bolster and complement our AVX Design and Integration and

all other related installation businesses of these IoT products.

The number of new contracts we have signed thus far in a limited

amount of time through the segment is 13 with an average value of $13,355 and a total collection value of $485,618 in signed

contracts to date, of which we have already collected $233,801.

Additionally, thus far, we have an aggregate $1,041,897 in

contracts agreed in principle, of which we expect to be signed and deposits paid.

This is compared to our highest AVX revenue for

calendar year of $817,233 in 2019, $705,877 for 2020, $252,958 for 2021, and $260,871 for 2022 for the entire calendar year.

statistics regarding the IoT installation sectors are difficult to aggregate given that the work is often are pieced off into

various contractor service categories, the residential custom installation market ranges from $5.7B to $12.1B 5 , and we

would expect the commercial and industrial installation markets to be larger than the residential for IoT devices.

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.

We also expect our recent growth within our IoT

Installation Services segment and acquisition of AT Tech Systems to bolster and complement AVX and all other related installation businesses

of these IoT products.

The number of new contracts we have signed thus far in a limited amount of time through the six months ended June

30, 2023 is 17 with an average value of $32,225 and a total collection value of $547,825 in signed contracts to date, of which we have

already collected $281,717.

Additionally, thus far, we have an aggregate $1,351,493 in contracts agreed in principle, of which we expect

to be signed and deposits paid.

This is compared to our highest AVX revenue for a calendar year of $817,233 in 2019, followed by $705,877

in 2020, $252,958 in 2021, and $260,871 in 2022.

While statistics regarding the IoT installation sectors are difficult to aggregate given

that the work is often are pieced off into various contractor service categories, the residential custom installation market ranges from

$5.7 billion to $12.1 billion, and we would expect the commercial and industrial installation markets to be larger than the residential

for IoT devices.

Results of Operations

For the three months ended March 31, 2023 compared to the three

months ended March 31, 2022

For the three months ended June 30, 2023 compared to the three

months ended June 30, 2022

Revenue, cost of revenue and gross profit

For the three months ended June 30, 2023

For the three months ended June 30, 2022

Revenue – related party

Total Revenue

Cost of revenue

Our consolidated gross revenue for the three months

ended March 31, 2023 and 2022 was $236,095 and $157,167 respectively, which included revenue from related parties of $0 and $31,542, respectively.

Revenue for the three months ended March 31, 2023 increased $78,928 due to sales increase from new acquisition, AT Tech.

This increase

of revenue was mainly a result of the increase of IoT Installation Services being bolstered by additional resources such as increased

Cost of revenue for the three months ended March

31, 2023 was $180,744, compared to $143,523 for the three months ended March 31, 2022.

While the overall cost of revenue increased, as

a percent of revenue, costs went down as a result higher margin contracts for IoT Installation Services being signed.

In addition to the

increase in revenue, gross profit increase to $55,351 compared to $13,644 three months ended March 31, 2023 and 2022, respectively.

ended June 30, 2023 and 2022 was $215,391 and $64,642, respectively, which included revenue from related parties of $0 and $2,278, respectively.

Revenue for the three months ended June 30, 2023 increased $150,749 due to a sales increase from our acquisition of AT Tech Systems.

increase of revenue was mainly a result of the increase of IoT Installation Services being bolstered by additional resources such as increased

________________________

1 Cisco Systems, Connected Futures, Executive Business

Insights, May 2017, The Journey to IOT Value, Challenges, Breakthroughs, and Best Practices, https://www.slideshare.net/CiscoBusinessInsights/journey-to-iot-value-76163389,

https://newsroom.cisco.com/c/r/newsroom/en/us/a/y2017/m05/cisco-survey-reveals-close-to-three-fourths-of-iot-projects-are-failing.html

2 IoT Analytics, Market Insights

for the Internet of Things, February 7, 2023, Global IoT market size to grow 19% in 2023—IoT shows resilience despite economic

downturn, https://iot-analytics.com/iot-market-size/

3 Markets and Markets, IoT

Sensors Market by Sensor Type, Network Technology, Vertical, Application, and Geography – Global Forecast -2026, https://www.marketsandmarkets.com/Market-Reports/sensors-iot-market-26520972.html

4 Cision PRNewswire, Research

and Markets, Global $664.75 Billion 5G Services Markets to 2028:

Rising Need for High Bandwidth to Provide Reliable Communication to

IoT Devices is Expected to Boost Overall Market Growth, https://www.prnewswire.com/news-releases/global-664-75-billion-5g-services-markets-to-2028-rising-need-for-high-bandwidth-to-provide-

1 Cisco Systems,

Connected Futures, Executive Business Insights, May 2017, The Journey to IOT Value, Challenges, Breakthroughs, and Best Practices, https://newsroom.cisco.com/c/r/newsroom/en/us/a/y2017/m05/cisco-survey-reveals-close-to-three-fourths-of-iot-projects-are-failing.html

2 IoT Analytics,

Market Insights for the Internet of Things, February 7, 2023, Global IoT market size to grow 19% in 2023—IoT shows resilience despite

economic downturn, https://iot-analytics.com/iot-market-size/

and Markets, IoT Sensors Market by Sensor Type, Network Technology, Vertical, Application, and Geography – Global Forecast -2026,

https://www.marketsandmarkets.com/Market-Reports/sensors-iot-market-26520972.html

PRNewswire, Research and Markets, Global $664.75 Billion 5G Services Markets to 2028:

Rising Need for High Bandwidth to Provide Reliable

Communication to IoT Devices is Expected to Boost Overall Market Growth, https://www.prnewswire.com/news-releases/global-664-75-billion-5g-services-markets-to-2028-rising-need-for-high-bandwidth-to-provide-

reliable-communication-to-iot-devices-is-expected-to-boost-overall-market-growth-301432173.html

How Big is the Custom Installation Market?, February

5, 2018, https://www.cepro.com/news/how_big_is_custom_installation_market/

Cost of revenue for the three months ended June

30, 2023 was $149,259, compared to $57,776 for the three months ended June 30, 2022.

While the overall cost of revenue increased, as a

percent of revenue, costs went down as a result of higher margin contracts for IoT Installation Services being signed.

In addition to

the increase in revenue, gross profit increased to $66,132 for the three months ended June 30, 2023, compared to $6,866 for the three

months ended June 30, 2022.

Operating Expenses

The major components of our cost and operating

expenses for the three months ended March 31, 2023 and 2022 are outlined in the table below:

For the three months ended March 31, 2023

For the three months ended March 31, 2022

expenses for the three months ended June 30, 2023 and 2022 are outlined in the table below:

For the three months ended June 30, 2023

For the three months ended June 30, 2022

Selling expense

4 unchanged sentences

Total operating expenses

Selling expenses for the three months ended March

31, 2023 was $11,859, compared to $38,339 for the three months ended March 31, 2022.

Selling expense for the three months ended June

30, 2023 was $63,075, compared to $17,548 for the three months ended June 30, 2022.

Selling expense incurred was mainly from third party

advertising fees and marketing related fee.

The decrease of selling expense was due to a decrease in advertising fees.

Compensation – officers and directors were

$307,534 and $325,665 for the three months ended March 31, 2023 and 2022, respectively.

Research and development costs were $276,481 and

$561,744 for the three months ended March 31, 2023 and 2022, respectively.

The decrease was due to a decrease in number of

research and development employee headcount in the Ontario, California headquarters.

advertising fees and marketing related fees.

The increase of selling expense was due to an increase in advertising fees and trade show

– officers and directors was $253,403 and $283,625 for the three months ended June 30, 2023 and 2022, respectively.

was due to a decrease in the compensation received by the board of directors.

Research and development costs were $342,992

and $167,361 for the three months ended June 30, 2023 and 2022, respectively.

The increase was due to an increase in the number of research

and development employee headcount in the Ontario, California headquarters and the Shenzhen, China subsidiary.

Professional fees were $116,565 during the three

months ended March 31, 2023, compared to $360,866 during the three months ended March 31, 2022.

months ended June 30, 2023, compared to $153,091 during the three months ended June 30, 2022.

The decrease in these professional fees

compared to the prior period was due to a decrease in professional legal fees.

General and administrative expenses of $443,052

incurred during the three months ended March 31, 2023 primarily consisted of insurance expense of $107,473, amortization expense of $28,741,

payroll tax of $73,067, administrative salaries of $71,956, depreciation expense of $41,798 and rent of $46,080.

compared to the prior period was due to a decrease in new transaction-based legal paperwork for the Company (as much of this paperwork

was completed earlier) and a decrease in employment litigation legal fees.

General and administrative expenses for the

three months ended June 30, 2023 was $361,583, compared to $590,589 for the three months ended June 30, 2022.

The major decrease was

due to decreases in general and administrative salaries from $178,530 to $76,555 in 2023, a lease expense from $161,448 to $34,989

in 2023, and insurance expense from $81,579 to $66,317 in 2023.

Other Income (expense)

Other income for the three months ended June

30, 2023 was $53,320, compared to $144,051 for the three months ended June 30, 2022.

The decrease was due to there being no SBA PPP

forgiveness loan in 2023.

During the three months ended June 30, 2023 and

2022, we incurred net losses of $1,018,166 and $1,061,297, respectively, due to the factors discussed above.

For the six months ended June 30, 2023 compared to the six months

ended June 30, 2022

Revenue, cost of revenue and gross profit

For the six months ended June 30, 2023

For the six months ended June 30, 2022

Revenue – related party

Total Revenue

Cost of revenue

Our consolidated gross revenue for the six months

ended June 30, 2023 and 2022 was $451,486 and $221,809 respectively, which included revenue from related parties of $0 and $33,820, respectively.

Revenue for the six months ended June 30, 2023 increased $229,677 due to a sales increase from our acquisition of AT Tech Systems.

increase of revenue was mainly a result of the increase of IoT Installation Services being bolstered by additional resources such as increased

Cost of revenue for the six months ended June

30, 2023 was $330,003, compared to $201,171 for the six months ended June 30, 2022.

While the overall cost of revenue increased, as a

percent of revenue, costs went down as a result of higher margin contracts for IoT Installation Services being signed.

In addition to

the increase in revenue, gross profit increased to $121,483 for the six months ended June 30, 2023, compared to $20,638 for the six months

ended June 30, 2022.

Operating Expenses

The major components of our cost and operating

expenses for the six months ended June 30, 2023 and 2022 are outlined in the table below:

For the six months ended June 30, 2023

For the six months ended June 30, 2022

Selling expense

Compensation – officers and directors

Research and development

Professional fees

General and administrative

expenses of $650,891 incurred during the three months ended March 31, 2022 primarily consisted of employee compensation of $193,930, insurance

expense of $176,915, administrative salaries of $137,162, rent of $75,597 and depreciation expense of $40,163.

Total operating expenses

Selling expense for the six months ended June

30, 2023 was $74,934, compared to $55,887 for the six months ended June 30, 2022.

Selling expense incurred was mainly from third party

advertising fees and marketing related fees.

The increase of selling expense was due to an increase in advertising fees and trade show

Compensation – officers and directors were

$560,937 and $604,290 for the six months ended June 30, 2023 and 2022, respectively.

The decrease was due to a decrease in the compensation

received by the board of directors.

Research and development costs were $619,473 and

$729,105 for the six months ended June 30, 2023 and 2022, respectively.

The decrease was due to a decrease in the research and development

employee restricted stock award amount in the Ontario, California headquarters.

Professional fees were $373,964 during the six

months ended June 30, 2023, compared to $535,207 during the six months ended June 30, 2022.

The decrease in these professional fees compared

to the prior period was due to a decrease in new transaction-based legal paperwork for the Company (as much of this paperwork was completed

earlier) and a decrease in employment litigation legal fees.

General and administrative expenses for the

six months ended June 30, 2023 was $804,635, compared to $1,225,358 for the six months ended June 30, 2022.

The major decrease was

due to decreases in general and administrative salaries from $469,934 to $148,511 in 2023, lease expense from $237,045 to $81,069 in

2023, and insurance expense from $258,494 to $167,273 in 2023.

The relating decrease was due to the following reasons:

a) Decreased number of general and administrative

employees in our headquarters due to outsourcing of work to third parties;

b) Relocated Focus Shenzhen office to lower lease

c) Obtained better insurance deal from another insurance

Other Income (expense)

Other income of $210,431 incurred during the three

months ended March 31, 2023 primarily consisted of interest income of $14,436, gain on bargain purchase of $61,747, unrealized gain on

marketable equity securities of $32,570, realized loss on marketable equity securities of $14,901, rental income of $39,952 and other

expense of $7,073.

Other expenses of $54,931 incurred during the three months ended March 31, 2022 primarily consisted of interest expense

of $6, rental income of $46,372 and other income of $8,565.

During the three months ended March 31, 2023 and

Other income for the six months ended June

30, 2023 was $180,051, compared to $198,982 for the six months ended June 30, 2022.

The major decrease was due to there being no SBA

PPP forgiveness loan in 2023 or unrealized gain on marketable equity securities in 2023.

During the six months ended June 30, 2023 and

2022, we incurred net losses of $2,132,409 and $2,930,227, respectively, due to the factors discussed above.

6 unchanged sentences

selected cash flow information:

For the three months ended March 31, 2023

For the three months ended March 31, 2022

For the six months ended June 30, 2023

For the six months ended June 30, 2022

Net cash used in operating activities

$ (1,606,739 )

$ (1,749,492 )

Net cash provided by (used in) investing activities

3 unchanged sentences

$ (2,984,743 )

$ (2,018,257 )

Cash Flows from Operating Activities

Our net cash outflows from operating activities

of $838,535 for the three months ended March 31, 2023 was primarily the result of our net loss of $1,114,243 and changes in our operating

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.

The change in operating assets and liabilities includes a decrease

The change in operating assets and liabilities includes an increase

in accounts receivable of $27,741, a decrease in accounts receivable – related party of $34,507, a decrease in inventories of $15,526,

an increase in prepaid expense of $80,511, a decrease in deposit of $8,617, an increase in operating lease right-of-use asset of $16,075,

a decrease in accounts payable and accrued liabilities of $20,011, an increase in customer deposit of $98,838, and a decrease in lease

a decrease in prepaid expense of $46,109, an increase in deposit of $8,514, an increase in operating lease right-of-use asset of $4,983,

an increase in accounts payable and accrued liabilities of $73,823, an increase in customer deposit of $39,100, and a decrease in lease

liabilities of $55,012.

1 unchanged sentence

amortization of intangible assets, $14,249 in realized loss on marketable securities, $168,304 in stock-based compensation - shares, and

$133,403 in stock option compensation, reduces of $32,570 in unrealized gain on marketable equity securities and $61,747 in gain on bargain

Our net cash outflows from operating activities

of $902,283 for the three months ended March 31, 2022 was primarily the result of our net loss of $1,868,930 and changes in our operating

assets and liabilities offset by the add-back of non-cash expenses.

The change in operating assets and liabilities includes an increase

in accounts receivable of $96,258, an increase in accounts receivable – related party of $70,816, an increase in inventories of

$5,067, a decrease in other receivable of $13,057, a decrease in prepaid expense of $148,616, an increase in deposit of $35,142, a decrease

in operating lease right-of-use asset of $150,623, an increase in accounts payable and accrued liabilities of $38,000, a decrease in other

current liabilities of $17,135, a decrease in lease liabilities of $123,951, an increase in other liabilities of $14,736.

Non-cash expense

included add-backs of $42,080 in bad debt expense, $25,006 in reduction of inventory fair value adjustments, $40,165 in depreciation expense,

$656,370 in stock-based compensation - shares, $8,000 in stock-based compensation - services, and $228,375 in stock option compensation.

$266,806 in stock option compensation, reductions of $27,565 in unrealized gain on marketable equity securities and $61,747 in gain on

bargain purchase.

net cash outflows from operating activities of $1,749,492 for the six months ended June 30, 2022 was primarily the result of our net loss

of $2,930,227 and changes in our operating assets and liabilities offset by the add-back of non-cash expenses.

The change in operating

assets and liabilities includes an increase in accounts receivable of $47,454, an increase in accounts receivable – related party

of $73,094, an increase in inventories of $7,752, a decrease in other receivables of $13,057, a decrease in prepaid expense of $103,083,

an increase in deposit of $4,008, a decrease in operating lease right-of-use asset of $190,790, a decrease in accounts payable and accrued

liabilities of $106,104, a decrease in other current liabilities of $17,135, an increase in customer deposit of $6,131, a decrease in

lease liabilities of $60,576, and an increase in other liabilities of $14,736.

Non-cash expense included add-backs of $57,147 in bad debt

expense, $25,617 in reduction of inventory fair value adjustments, $82,063 in

depreciation expense, $74,626 in unrealized loss on marketable equity securities, $10,281 in realized gain on marketable securities, $158,547

in gain on forgiveness of debt, $692,920 in stock-based compensation - shares, and $456,750 in stock option compensation.

We expect that cash flows from operating activities

3 unchanged sentences

Cash Flows from Investing Activities

For the three months ended March 31, 2023, we

had cash inflow from investing activities of $61,824.

That was primarily the result from the purchase of property and equipment of $9,920,

For the six months ended June 30, 2023, we had

cash inflow from investing activities of $40,889.

That inflow 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.

For the three months ended

March 31, 2022 we had cash outflow from investing activities of $31,470 from the purchase of property and equipment.

For the six months

ended June 30, 2022, we had cash outflow from investing activities of $267,537.

That outflow was primarily the result from the purchase

of property and equipment of $39,702, purchase of marketable securities of $708,359, and proceeds from sales of marketable securities

Cash Flows from Financing Activities

For the three months ended March 31, 2023, we

had cash outflows of $1,000,000 due to purchase of treasury stock.

There were no financing activities for the three months

ended March 31, 2022.

For the six months ended June 30, 2023, we had

cash outflows of $1,420,686 due to purchase of treasury stock.

There were no financing activities for the six months ended June 30, 2022.

Going Concern

In August 2014, the FASB issued ASC 2014-15, Disclosure

of Uncertainties about an Entity’s Ability 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 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 $2,132,409 and

$2,930,227 for the six months ended June 30, 2023 and 2022, respectively.

In addition, the Company had an accumulated deficit of

$19,996,437 and $17,864,028 as of June 30,2023 and December 31, 2022, respectively, and negative cash flow from operating activities

of $1,606,739 and $1,749,492 for the six months ended June 30, 2023 and 2022, respectively.

These factors raise substantial doubt

about the Company’s ability to continue as a going concern.

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 is operating on a going

concern basis as of June 30, 2023.

Off-Balance Sheet Arrangements

As of March 31, 2023, we did not have any off-balance-sheet arrangements,

As of June 30, 2023, we did not have any off-balance-sheet arrangements,

as defined in Item 303(a)(4)(ii) of Regulation SK.

4 unchanged sentences

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 2. Management’s Discussion and Analysis