What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-17 compared with 2023-08-14 · 493 added, 264 removed, 420 unchanged (64% of the section changed)

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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.

For the nine months ended September 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

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directly to consumers through retail distribution channels and, in some cases, places its own branding on our products.

During the development

phase, the Company uses generic electronic device casings to house the prototype equipment before the final design and manufacturing process.

As an update to our product line development,

we plan to phase out the traditional, lower-margin products and are preparing to launch a new line of products that have been in development

for several years.

These newer technology products will be released in phases, and we intend that increasing amounts of technology will

be layered upon these products.

Additionally, we plan to continue to increase our efforts in protecting more intellectual property and

have continued to develop technologies for long-term growth.

We have developed products in both the controlled agriculture industry and

home automation industries.

We have existing relationships in both sectors.

In an effort to continually develop our product

lines, we plan to phase out the traditional, lower-margin products and are preparing to launch a new line of products that have been in

development for several years.

These newer technology products will be released in phases, and we intend that increasing amounts of technology

will be layered upon these products.

Additionally, we plan to continue to increase our efforts in protecting more intellectual property

and have continued to develop technologies for long-term growth.

We have developed products in both the controlled agriculture industry

and home automation industries, taking advantage of our existing relationships in both sectors.

We are building a U.S.

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

outdoor LED screens.

sales team to market

our product lines.

The team has already begun marketing our current Smart AVX-branded large format multimedia touch screens,

surveillance camera system (cameras and network video recorders (NVRs)), indoor and outdoor LED screens, and Focus Universal-branded

VOIP phone service systems.

In our hydroponics segment, our honeycomb activated

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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 progress in our USIP for the IoT has been

smooth, and we have confidence that the first version of our USIP for the IoT is now ready for public demonstration.

The Company has announced

that it will reveal its Ubiquitor products at the 12th Annual MJBizCon being held from November 28 through December 1, 2023 at the Las

Vegas Convention Center and at the 2024 Annual Conference & California School Business Expo being held from April 7 through April

10, 2024 at the Palm Springs Convention Center in California.

The Focus software machine auto design team has

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3D user interface machine auto design.

The public reporting automation software is completed

Our public reporting automation software is completed

and currently undergoing extensive testing.

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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.

Focus is planning to commercialize this software either in the fourth quarter of 2023 or the first quarter of 2024.

A cloud-based version

of this software is also under the development.

In 2023, Focus Universal Inc., through its Smart

AVX subsidiary, received a Best of Show industry award for its Flexible Transparent Film Display during InfoComm 2023.

InfoComm is North

America's largest technology exhibition and conference focused on the professional audiovisual industry.

The exhibition is produced by

the Audiovisual and Integrated Experience Association (AVIXA) and currently ranks as a top 30 largest trade show in the United States

by Trade Show Executive.

Furthermore, our devices and sensors with applications

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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

Fan speed adjuster device .

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Ubiquitor Wireless Universal Sensor Device

We are developing a device we call the Ubiquitor,

We have developed a device we call the Ubiquitor,

which replaces the functions of traditional digital measurement and sensing products by integrating many digital sensors and measurement

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and marketing employees in order to gain traction in the market.

We expect to continue this process throughout 2023.

We expect this to be a continual process.

We intend to introduce

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analytics software in a cohesive package that provides a holistic view of the sensor data it is reading.

During the development phase,

we use generic electronic device casings to house the prototype equipment before final design and manufacturing process.

The physical hardware of the Ubiquitor will consist

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of a second generation Ubiquitor device, but once we demonstrate the market for this product, we intend to begin such research and development.

Currently our research and development is focused on concepts we can implement in the current first generation Ubiquitor device.

Accordingly, our current research and development is focused on concepts we can implement in the current first generation Ubiquitor device.

Additional Focus Universal Inc.

Products under Smart AVX.

Focus Universal Inc.

is integrating its own Smart AVX- branded IoT equipment to connect devices across

platform systems and to facilitate unified collaboration across audiovisual technologies, digital media technologies, security and

surveillance technologies and communication technologies.

This approach allows the Company to service its customers for ease of use,

design and integration, and installation and maintenance by utilizing technology that integrates our five core technologies.

We have integrated our branded products across

the following strategic sub-sectors:

LED Audio-visual Panel Products, large format Smart Multimedia Touch Screens, Pan Tilt Zoom (“PTZ”)

Dome Cameras and Network Video Recorders (“NVRs”), and VOIP Phone Services.

LED Audio-visual Panel Products.

LED panel digital displays have become an integral and modern-day solution that address the

communication and display demands of the residential and commercial customer base.

the flexible configuration of the LED panels, the modular design that enables the ability

to incorporate a design into any size space, the flexibility of the standard size panels

to accommodate curvature in the design space, the ability to address transparency in the

panel displays and create new areas for delivering media to the public, our LED panel digital

displays allow us to easily adapt our display design to spaces of any size and shape, making

any customer space a customizable output and connected piece within a system.

to create full size screens in any space, while addressing any environmental demands, allows

us to use state-of-the-art media resulting in immersive, three-dimensional, captivating content

delivery within any system.

Large Format Smart Multimedia Touch Screens.

Smart AVX-branded large format touch screens deliver interactive solutions

for a wide variety of industries and applications, including education, healthcare, commercial, residential and government applications.

While interacting with a touch display is commonplace in public-consumer spaces, Focus Universal Inc.

integrates large format Smart touch

screens in small business, commercial applications such as dental offices and other business scenarios.

These market applications continue

to be underserved with touch-enabled devices, and our install engineers and design staff can customize solutions for unique business commercial

application projects.

The Company, through the Smart AVX brand, offers a myriad of customized choices and a long list of options within

the current touch screen technology in a refined product.

Our products allow future integration of our core platform technologies, such

as the LED digital displays, the Ubiquitor, PTZ Dome Cameras and VOIP Phone Systems, allowing for pinch, zoom, scrolling, and videoconferencing

within the touch screen format.

Pan Tilt Zoom (PTZ) Dome Cameras and

Network Video Recorders (NVRs).

Pan Tilt Zoom (PTZ) Dome Cameras and Network Video Recorders

Dome security cameras are easily recognizable for their circular, dome encasing.

AVX-branded dome surveillance cameras are highly versatile and can be used in both indoor

and outdoor environments, providing wide coverage for nearly any use condition.

Smart AVX-branded

dome security cameras have a vandal-proof dome casing, an infrared camera for night vision

capabilities, and a sturdy metal base to protect against damage or tampering, making the

cameras an integrated solution for reliable surveillance in many use conditions.

The cameras are

PTZ, meaning that they are built with mechanical parts that allow for swiveling left to right,

tilting up and down, and zooming in and out of a scene.

They’re typically used to monitor

wide open areas requiring a 180- or 360-degree view and are often deployed in guard stations

where personnel can operate them through a remote controller.

Depending on the camera or

software, they can also be set to automatically follow motion-triggered activity to a pre-set

PTZ cameras are generally implemented in tandem with a large surveillance system,

in which the PTZ tracks movement while a fixed camera takes detailed shots.

VOIP Phone Services.

Internet Protocol (VoIP), also called IP telephony, is a method and group of technologies

for voice calls for the delivery of voice communication sessions over Internet

Protocol (IP) networks, such as the Internet.

Focus Universal Inc.

plans to provide

daily use VOIP services in an integrated fashion to the existing commercial customer base,

allowing for extensive usage in small business, commercial applications such as dental offices

and other business scenarios.

Focus Universal Corporate Services

Financial reporting is the process by

which an organization communicates its financial performance to management, investors, creditors, and regulators.

Companies routinely

file financial reports, such as an annual report on Form 10-K and the financial statements included therein, to give a comprehensive view

of the financial health of the organization to regulators and company stakeholders.

These financial reports also keep investors aware

of a company’s financial condition, allowing them to have the information they need before making an investment decision.

An annual report on Form 10-K is a

comprehensive report filed annually by a publicly traded company detailing its financial performance.

The annual report on Form 10-K

contains more detail than the company’s annual report sent to its shareholders.

Some of the information a company is required

to document in the report on Form 10-K includes its history, organizational structure, financial statements, earnings per share,

subsidiaries, executive compensation, and other relevant data.

The quarterly report on Form 10-Q is

a comprehensive report of a company’s quarterly performance that must be submitted by all public companies to the SEC.

The quarterly

report on Form 10-Q is generally submitted with unaudited financial statements.

In the quarterly report, companies are required to disclose

additional relevant information regarding their financial position.

These requirements generally include providing condensed financial

statements, a management discussion and analysis on the financial condition of the company, and disclosures regarding market risk and

internal controls.

It is critical that companies and their

accountants and auditors understand all aspects and requirements of these periodic reports on Forms 10-K and 10-Q, including an understanding

of how specific regulations like Sarbanes-Oxley and others are embedded within these reports and the attached financial statements.

Because of the depth and nature of the

information they contain, reports on Forms 10-K and 10-Q can become long and complicated.

Preparation of these reports can become time-consuming,

especially given the complex processes that require a company’s finance 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.

However, 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 all of their mandated reporting requirements.

Delays and mistakes in SEC financial

reporting can have far-reaching consequences for companies and even for their shareholders.

The consequences may include SEC review, enforcement

actions, and penalties.

Late filings can often lead to a drop in the company’s stock price and a decrease in investor confidence.

However, it is critically important

that the company’s financial reporting is accurate, thorough, and up to date.

Office software packages are widely used in all report

While this software can do an excellent job on word processing, it often fails in the creation of the rigorously formatted

tables and spreadsheets needed to populate the requisite financial information in the reports.

Furthermore, because of the frequent incompatibility

between programs in office software packages, the formatted tables required by financial reporting standards that are created by spreadsheets

programs are destroyed when they are transferred a word processing file.

Creating a formatted table using word processing is time-consuming

and tedious work.

Human data entry of hundreds or thousands

of financial numbers in the financial report imposes another challenge and presents risk of human error.

This risk is compounded by the

frequent requirement to update or revise these hundreds or thousands of numbers during the reviewing and auditing processes before submission.

Automation in financial reporting is,

therefore, becoming increasingly important, 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.

Universal Inc.

has developed an automated software solutions to address these challenges effectively and efficiently in the following

Data Entry Automation:

Our software’s

automated data entry function reduces the risk of human errors and saves time.

It is able to extract data from various sources and populate

financial reports accurately.

Validation Checks:

Our software includes

built-in validation checks to ensure that the data is accurate and compliant with regulatory requirements.

It also helps in identifying

potential errors early in the reporting process.

Formatted Table Creation:

Creating formatted

tables which are often required in SEC financial reports, is a time-consuming task.

Our software generates these tables accurately and

AI-Driven Analytics:

AI-driven analytics

helps in identifying potential mistakes or areas for improvement in the reports.

Our software provides insights and suggestions for enhancing

the quality and accuracy of financial reporting.

Integration with existing

financial systems and software is essential for a seamless reporting process.

Our software connects with multiple data sources and financial

software frequently used by reporting companies.

Security and Compliance:

data is critical, especially when dealing with sensitive financial data.

Our software adheres to industry standards and regulations to

ensure data security and compliance with reporting requirements.

It is worth noting that there are established

companies like Insightsoftware, Workvia, and Toppan Merrill already providing SEC reporting automation solutions.

These companies bring

experience and expertise to the field.

However, Insightsoftware concentrates on SEC reporting process design and offers a full-service

solution for XBRL (eXtensible Business Reporting Language) submission.

Workvia specializes in streamlining processes, connecting data

and teams, and ensuring consistency in a secure, audit-ready, cloud platform.

Toppan Merrill offers Bridge, a single, secure, integrated

SaaS platform that connects a company’s team, data, and documents.

Their focus is on providing a unified platform for handling various

aspects of financial reporting, making it easier for teams to collaborate and maintain compliance.

Focus Universal Inc.

is targeting to

commercialize its financial reporting automation software by the end of 2023.

Potential users can subscribe to our service and pay a monthly

fee for access and use.

IoT Installation Services under AVX (Residential)

and AT Tech Systems (Commercial and Industrial)

Smart Home IoT Installations.

Beyond standard doorbells and thermostats, Focus Universal Inc., through its AVX subsidiary,

provides customized and high-end IoT Smart home solutions to upgrade the standard home to

an integrated home platform.

AVX utilizes its existing tech-savvy installation staff to integrate

the Smart AVX line of IoT products for a customized home solution with designed smart home

AVX meets client safety concerns and meshes modern convenience for a complete solution

for homeowners to easily control their homes’ digital input and output points with

wired, integrated systems throughout the build.

PTZ dome cameras give wide view home

security through the network providing the views of four cameras with in the install space

of a single camera.

LED digital displays and large format multimedia touch screens provide

state-of-the art output displays for eye catching and high-end centerpieces for homeowners.

With the suite of Smart AVX home devices and the AVX professional install team, design and

customized creation within a high-end home system can be standard for the customer base.

These installations include integration of home VOIP phone systems, network and computer

system integration, multimedia display systems, door access control systems, voice and data

cabling, security alarm systems, PC upgrade and software installations, home audio-visual

control center design and installation and systems integration, home security data backup

systems, home network design and installation, HDTV signal and reception boost, and multi-room

audio and ambient music phone systems.

Commercial and Industrial Installations.

Focus Universal Inc.

through the acquired AT

Tech Systems company brand also designs and builds IoT technologies to fit unique business

requirements.

Utilizing the aforementioned IoT product solutions within the designed platform

for a business system, AT Tech Systems provides IoT installations and integrations for industries

including security and surveillance, smart commercial and industrial, healthcare, broadcast

media and entertainment, manufacturing, food retail, and industrial warehousing.

Systems design and install experts have decades of hands-on experience in integrated systems

of smart sensor devices, IoT data management platforms, client applications and analytics

for complete end-to-end IoT commercial solutions.

AT Tech Systems excels in the area of IoT

interoperability within the future Focus Universal Inc.

platform, again utilizing the Smart

AVX-branded products such as the LED digital displays, large format multimedia Smart touch

screens, PTZ dome Cameras, and VOIP phone systems.

These installations include integration

of the commercial grade phone fax and extension VOIP systems, networking and computer system

integration for commercial application, multimedia and conferencing display systems, industrial

office and commercial access control systems, voice and data cabling, security and surveillance

perimeter alarm systems, PC upgrade and software installations, office and commercial control

center design and installation systems, automatic data backup systems, server design and

installation, HDTV signal and reception boost, ambient client music systems, and multi-room

and facility audio phone systems.

Research and Development Efforts of Power Line

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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.

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 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

Just like our ultra-narrowband technology can

be used to reduce noise in powerline communication technology, our internal research suggests that our ultra-narrowband technology can

be leveraged to create a type of 5G wireless communication technology that can achieve both low band 5G coverage and an estimated 1 Gbps

high band speed.

We employ an ultra-narrow spectrum channel (<1KHz) to establish an ultra-long-distance link between the 5G base station

and the receiver which reduces noise and interference entering the bandwidth.

be used to effectively reduce noise in powerline communication technology, our internal research suggests that our ultra-narrowband technology

can be leveraged to create a type of 5G wireless communication technology that can achieve both low band 5G coverage and an estimated

1 Gbps high band speed.

We employ an ultra-narrow spectrum channel (<1KHz) to establish an ultra-long-distance link between the 5G

base station and the receiver which reduces noise and interference entering the bandwidth.

For a description of the ultra-narrowband technology

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

Eventually, we hope to establish five divisions

to bring our technology together:

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

(2) an IT division

in software machine design;

(3) a Universal Smart Instrumentation division;

(4) a PLC technology division;

and (5) an IoT division.

Intellectual Property Protection

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The patent was issued on March 20, 2018.

Subsequent to our internal research and development

efforts, we filed with the USPTO on June 2, 2017 a patent application regarding a process for improving a spectral response curve of a

photo sensor.

The small and cost-effective multicolor sensor and its related software protected by the patent we believe could achieve

a spectral response that approximates an ideal photo response to take optical measurement.

The patent was issued on February 26, 2019.

In addition, we have been notified that the USPTO

published a notice of allowance for a patent application we filed on March 12, 2018 as application No.

The patent title is

a “Universal Smart Device,” which is a universal smart instrument that unifies heterogeneous measurement probes into a single

device that can analyze, publish, and share the data analyzed.

The issue fee was paid on March 14, 2019.

Subsequent to our internal research and

development efforts, we filed with the USPTO on June 2, 2017 a patent application regarding a process for improving a spectral

response curve of a photo sensor.

The small and cost-effective multicolor sensor and its related software protected by the patent we

believe could achieve a spectral response that approximates an ideal photo response to take optical measurement.

The resulting U.S.

10,251,037 was issued on February 26, 2019.

In addition, we have been notified that the

USPTO published a notice of allowance for a patent application we filed on March 19, 2018, U.S.

Patent Application No.

The patent title is a “Universal Smart Device,” which is a universal smart instrument that unifies

heterogeneous measurement probes into a single device that can analyze, publish, and share the data analyzed.

The resulting U.S.

10,251,037 was issued on April 2, 2019.

On November 29, 2019, the Company filed an international

utility patent application filed through the patent cooperation treaty as application PCT/US2019/63880.

In April 2020, the Company was

notified that it received a favorable international search report from the International Searching Authority regarding this patent application,

which patents the Company’s PLC technology.

The World International Property Organization report cited only three category “A”

utility patent application through the Patent Cooperation Treaty (PCT) as International Patent Application No.

PCT/US2019/63880.

On September 6, 2022, the International Searching Authority (ISA) issued a favorable International Preliminary Report of Patentability

(IPRP) regarding this patent application, which describes the Company’s PLC technology.

The IPRP cited only three category “A”

documents, indicating that the Company’s application met both the novelty and non-obviousness patentability requirements.

Consequently,

the Company is optimistic that the patent covering the claims for its PLC technology will be issued in due course and will allow the Company

to implement strong protections on the PLC technology worldwide.

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 is optimistic that a patent including claims directed to its PLC technology will be issued in due course and will allow the

Company to protect its PLC technology.

In 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

The firm is working on converting the Company’s provisional patent applications to formal nonprovisional patent applications

and expanding existing patent portfolios.

In addition, Knobbe Martens is working on filing four previously unfiled patents and pursuing

patent coverage in 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.

Currently, the Company

has 18 pending U.S.

nonprovisional patent applications and 9 issued U.S.

The Company’s patent number 11,488,468 was

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The patent is titled “Sensor for Detecting the Proximity of an IEEE 802.11

Protocol Connectable Device.”

Protocol Connectable Device.” On November 7, 2023, our patent application titled “Activated Carbon Air Filter” issued

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.

We have identified several competitors specifically

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There are several companies that compete with

AVX in smart home installations, including Vivint Smart Home, Crestron and Control4.

AVX in smart home installations, including Vivint Smart Home, Savant, Crestron and Control4.

However, we believe we can distinguish ourselves

from our competitors by offering a substantially lower price.

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.

from our competitors by offering substantially more customization and interoperability with existing platforms.

While our service offerings

do not rely on always providing the entire installation for the end client, our company is able to seamlessly provide accenting, replacement,

or conversion home automation systems which are easier to use and interoperate for the end client, and with limited rewiring.

installation by Crestron ranges between $100,000 and $500,000 and an installation by Control4 ranges between $70,000 and $250,000.

cheapest competitor we can identify in this sector is Vivint Smart Home, which costs less than $50,000 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.

Our sales staff have encountered a growing client base of unhappy customers with the pre-existing and completely siloed

platform systems that reportedly are not easy to use or program, require costly specialty service for simple operations, are subject to

lengthy software and hardware backlogs, and despite being based on the same platform, fail to operate compatibly, possessing frequent

errors and bugs.

Air Filtration Systems and Meter Products

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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

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.

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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.

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.

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)

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.

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.

Installation Services segment and acquisition of AT Tech Systems coupled with the new management within AVX to bolster and complement

both companies, 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 nine months ended September 30, 2023 is 22 with an average value of $42,125 and a total collection

value of $796,850 in signed contracts.

Additionally, thus far, we have an aggregate $1,818,668 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.

Our sales target for the year are 31 service contracts, of which we have

already signed 22.

We have targeted 16 LED contracts for 2023, of which we have signed 9 thus far.

We have also target distribution and

partnerships agreements and phone line contracts, all of which have already begun in the third quarter of 2023.

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, 5 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 June 30, 2023 compared to the three

months ended June 30, 2022

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

three months ended September 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

For the three months ended September 30, 2023

For the three months ended September 30, 2022

Revenue – related party

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Our consolidated gross revenue for the three months

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

ended September 30, 2023 and 2022 was $318,370 and $60,654, respectively, which included revenue from related parties of $0 and $5,968,

respectively.

Revenue for the three months ended September 30, 2023 increased $257,716 due to a sales increase from our acquisition of

AT Tech Systems and sales increase in AVX sales due to ramping up marketing efforts.

This increase of revenue was mainly a result of the

increase of IoT Installation Services being bolstered by additional resources such as increased headcount.

________________________

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-

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/

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-

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

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.

5 How Big Is the Custom Installation Market?, February 5,

2018 (updated July 17, 2023), https://www.cepro.com/news/how_big_is_custom_installation_market/.

Cost of revenue for the three months ended September

30, 2023 was $201,394, compared to $42,441 for the three months ended September 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.

to the increase in revenue, gross profit increased to $116,976 for the three months ended September 30, 2023, compared to $18,213 for

the three months ended September 30, 2022.

Operating Expenses

The major components of our cost and operating

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

The major components of our operating expenses

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

For the three months ended September 30, 2023

For the three months ended September 30, 2022

Selling expense

4 unchanged sentences

Total operating expenses

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 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.

Selling expense for the three months ended September

30, 2023 was $33,636, compared to $76,984 for the three months ended September 30, 2022.

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 and trade

show expenses.

Compensation – officers and directors was

$267,002 and $265,449 for the three months ended September 30, 2023 and 2022, respectively.

The increase was due to an increase in the

compensation amount received by the board of directors.

Research and development costs were $305,872 and

$133,109 for the three months ended September 30, 2023 and 2022, respectively.

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

1 unchanged sentence

Professional fees were $132,914 during the three

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 new transaction-based legal paperwork for the Company (as much of this paperwork

months ended September 30, 2023, compared to $150,943 during the three months ended September 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

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.

three months ended September 30, 2023 was $407,851, compared to $365,694 for the three months ended September 30, 2022.

reason for the increase was due to an increase in overall payroll tax 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

Other income for the three months ended September

30, 2023 was $62,266, compared to $31,946 for the three months ended September 30, 2022.

The increase was due to $30,000 consulting advisory

service income provided to an independent third party.

During the three months ended September 30, 2023

and 2022, we incurred net losses of $968,033 and $942,020, respectively, due to the factors discussed above.

For the nine months ended September 30, 2023 compared to the

nine months ended September 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

For the nine months ended September 30, 2023

For the nine months ended September 30, 2022

Revenue – related party

1 unchanged sentence

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.

Our consolidated gross revenue for the nine months

ended September 30, 2023 and 2022 was $769,856 and $282,463 respectively, which included revenue from related parties of $0 and $39,788,

respectively.

Revenue for the nine months ended September 30, 2023 increased $487,393 due to a sales increase from our acquisition of

AT Tech Systems and sales increase in AVX sales due to ramping up marketing efforts.

This increase of revenue was mainly a result of the

increase of IoT Installation Services being bolstered by additional resources such as increased headcount.

Cost of revenue for the nine months ended September

30, 2023 was $531,397, compared to $243,004 for the nine months ended September 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.

to the increase in revenue, gross profit increased to $238,459 for the nine months ended September 30, 2023, compared to $39,459 for the

nine months ended September 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

The major components of our operating

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

For the nine months ended September 30, 2023

For the nine months ended September 30, 2022

Selling expense

4 unchanged sentences

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.

Selling expense for the nine months ended September

30, 2023 was $108,570, compared to $132,871 for the nine months ended September 30, 2022.

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 and trade

show expenses.

Compensation – officers and directors was

$827,939 and $874,739 for the nine months ended September 30, 2023 and 2022, respectively.

The decrease was due to a decrease in the number

of members of the board of directors in 2023.

Research and development costs were $925,345 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

$862,214 for the nine months ended September 30, 2023 and 2022, respectively.

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

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

Professional fees were $506,878 during the nine

months ended September 30, 2023, compared to $686,150 during the nine months ended September 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 nine months ended September

30, 2023 was $1,212,486, compared to $1,586,660 for the nine months ended September 30, 2022.

The primary reason for the decrease was

due to decreases in general and administrative salaries from $579,958 to $223,957 in 2023, lease expense from $280,311 to $104,156 in

1 unchanged sentence

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

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 expense;

c) Obtained better insurance deal from another insurance company.

Other Income (expense)

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.

Other income for the nine months ended September

30, 2023 was $242,317 compared to $230,928 for the nine months ended September 30, 2022.

The increase was due to $61,747 gain on bargain

purchase and $30,000 consulting advisory services income provided to an independent third party.

During the nine months ended September 30, 2023

and 2022, we incurred net losses of $3,100,442 and $3,872,247, respectively, due to the factors discussed above.

Liquidity and Capital Resources

Working Capital

September 30,

Current Assets

3 unchanged sentences

selected cash flow information:

For the six months ended June 30, 2023

For the six months ended June 30, 2022

For the nine months ended September 30, 2023

For the nine months ended September 30, 2022

Net cash used in operating activities

9 unchanged sentences

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

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.

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,

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.

Non-cash expense included add-backs of $4,675 in bad debt expense, $84,616 in depreciation expense, $28,741 in

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

$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.

in accounts receivable of $101,461, a decrease in accounts receivable – related party of $34,507, an increase in inventories of

$196,201, an increase in other receivables of $10,000, a decrease in prepaid expense of $31,811 a decrease in deposit of $8,388, a decrease

in operating lease right-of-use asset of $25,585, an increase in accounts payable and accrued liabilities of $53,709, an increase in other

current liabilities of $33,759, and a decrease in lease liabilities of $58,987.

Non-cash expense included add-backs of $6,871 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.

expense, $127,171 in depreciation expense, $28,741 in amortization of intangible assets, $2,002 in realized loss on marketable securities,

$183,004 in stock-based compensation - shares, and $400,208 in stock option compensation, reductions of $10,463 in unrealized gain on

marketable equity securities, and $61,747 in gain on bargain purchase.

Our net cash outflows from operating

activities of $2,435,157 for the nine months ended September 30, 2022 was primarily the result of our net loss of $3,872,247 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 $32,257, an increase in accounts receivable – related party of

$45,413, an increase in inventories of $5,087, a decrease in prepaid expense of $116,648, an decrease in deposit of $1,998, a

decrease in operating lease right-of-use asset of $226,468, an decrease in accounts payable and accrued liabilities of $120,121, a

decrease in other current liabilities of $17,135, an decrease in customer deposit of $271, a decrease in lease liabilities of

$94,542, and an increase in other liabilities of $12,335.

Non-cash expense included add-backs of $72,108 in bad debt expense,

$21,133 in reduction of inventory fair value adjustments, $123,908 in depreciation expense, $32,525 in unrealized loss on marketable

equity securities, $21,205 in realized loss on marketable securities, $158,547 in gain on forgiveness of debt, $671,901 in

stock-based compensation - shares, and $652,500 in stock option compensation.

We expect that cash flows from operating activities

3 unchanged sentences

Cash Flows from Investing Activities

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 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

For the nine months ended September 30, 2023,

we had cash inflow from investing activities of $54,472.

That inflow 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.

months ended September 30, 2022, we had cash outflow from investing activities of $177,738.

That outflow was primarily the result of

the purchase of property and equipment of $39,193, purchase of marketable securities of $768,949, and proceeds from sales of marketable

securities of $630,404.

Cash Flows from Financing Activities

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.

For the nine months ended September 30, 2023,

we had cash outflows of $385,686 due to purchase of treasury stock of $1,385,686 and proceeds from related party loan of $1,000,000.

were no financing activities for the nine months ended September 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

15 unchanged sentences

The Company has a net loss of $3,100,442 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.

$3,872,247 for the nine months ended September 30, 2023 and 2022, respectively.

In addition, the Company had an accumulated deficit

of $20,964,470 and $17,864,028 as of September 30, 2023 and December 31, 2022, respectively, and negative cash flow from operating

activities of $2,603,545 and $2,435,157 for the nine months ended September 30, 2023 and 2022, respectively.

As noted above, 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

Off-Balance Sheet Arrangements

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

As of September 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