According to the Company’s Form 10-QSB for the quarterly period ended September 30, 2002, on or about December 7, 2001 the parties reached an agreement in principle to settle this case and on or about May 23, 2002 the case was settled and a final judgment was entered by the United States District Court. The settlement was funded entirely by proceeds from defendants' insurance carrier. The case is now closed.

The lawsuit was brought for violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The action charges that Focus improperly reported its financial results including revenues and income in its public filings with the Securities and Exchange Commission and in its press releases for each quarter in the fiscal year 1999. On March 1, 2000, Focus disclosed that its independent auditors had brought to the Board of Directors' attention financial controls issues relating to the fiscal year ending December 31, 1999 and prior quarters. The Board has designated a committee to investigate the matter. The Company’s President and CFO have agreed to a leave of absence from the Company during the committee's review.