What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-23 compared with 2020-03-30 · 342 added, 277 removed, 685 unchanged (47% of the section changed)

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operations, stockholders’

equity (deficit), and cash flows for the years then ended, and the related notes (collectively

referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material

respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash

flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

equity, and cash flows for the years then ended, and the related notes (collectively referred

to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for

the years then ended, in conformity with accounting principles generally accepted in the United States.

Basis for Opinion

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Current Assets:

Accounts receivable

Account receivable - related party

Inventory, net

Accounts receivable, net

Inventories, net

Prepaid expenses

Deposit - current portion

Total Current Assets

Property and equipment, net

Operating lease right-of-use assets

LIABILITIES AND STOCKHOLDERS’

Operating lease right-of-use asset

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

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Other current liabilities

Interest payable –

related party

Interest payable - related party

Customer deposit

Loan, current portion

Lease liability, current portion

Promissory note short term –

related party

Promissory note short term - related party

Total Current Liabilities

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Lease liability, less current portion

Loan, less current portion

Other liability

1 unchanged sentence

Total Liabilities

Commitments and Contingencies (Note 12)

Stockholders’

Common stock, par value $0.001 per share, 75,000,000 shares authorized; 40,959,741 and 40,907,010 shares issued and outstanding as of December 31, 2019 and 2018, respectively

Contingencies (Note 11)

Stockholders' Equity:

Common stock, par value $0.001 per share, 75,000,000 shares authorized;

40,959,741 shares

issued and outstanding as of December 31, 2020 and 2019, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

Total Stockholders’

Total Liabilities and Stockholders’

Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

The accompanying notes are an integral

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FOCUS UNIVERSAL INC.

CONSOLIDATED STATEMENTS

OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31,

Revenue –

related party

Revenue - related party

Total Revenue

Cost of Revenue

Operation Expenses:

Operating Expenses:

Selling expense

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Interest income (expense), net

Interest (expense) –

related party

Interest (expense) - related party

Total other income (expense)

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Income tax expense

Weighted Average Number of Common Shares Outstanding - Basic and Diluted

Net Loss per Common Share Basic and Diluted

$ (2,537,113 )

$ (3,175,543 )

Weight Average Number of Common Shares Outstanding:

Basic and Diluted

Net Loss per common share:

Basic and Diluted

The accompanying notes are an integral

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STOCKHOLDERS’

EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2020

Shares to be issued

Total Stockholders' Equity

Balance - December 31, 2017

Common stock issued for conversion of convertible debt and accrued interest

Common stock issued for cash

Common stock issued for services

Common stock to be issued for services

Stockholders'

Balance - December 31, 2018

Common stock issued for prior period services

Common stock issued for services

$ (4,003,458 )

Common stock issued for prior period service

Common stock issued for service

Common stock issued for acquisition

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Balance - December 31, 2019

Stock options issued for services

Common stock to be issued for services

Balance - December 31, 2020

The accompanying notes are an integral

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Cash flows from operating activities:

$ (2,537,113 )

$ (3,175,543 )

Adjustments to reconcile net loss to net cash from operating activities:

Bad debt expense

Inventory reserve

Inventories reserve

Depreciation expense

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Amortization of right-of-use assets

Amortization of debt discount

Stock-based compensation

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Prepaid expenses

Deposit - Current portion

Accounts payable and accrued liabilities

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Other current liabilities

Interest payable –

related party

Interest payable - related party

Customer deposit

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Cash flows from financing activities:

Repayment of convertible notes

Shares issued for convertible notes

Proceeds from sale of common stock

Proceeds from SBA loan

Payment on promissory note

Net cash flows provided by financing activities

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Shares issued for acquisition

Share issued to reduce notes payable

The accompanying notes are an integral

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of the unique characteristics of the function of each of the sensors and probes.

The universal smart instrument (the “Ubiquitor”)

consists of a reusable foundation component which includes a wireless gateway (which allows the instrument to connect to the smartphone

via Bluetooth and WiFi technology), universal smart application software (“Application”) which is installed on the

user’s smartphone or other mobile device and allows monitoring of the sensor readouts on the smartphone screen.

The Ubiquitor

also connects to a variety of individual scientific sensors that collect data, from moisture, light, airflow, voltage, and a wide

variety of applications.

The data then sent through a wired or wireless connection, or a combination thereof to the smartphone

or other mobile device and the data is organized and displayed on the smartphone screen.

The smartphone or other mobile device,

foundation, and sensor readouts together perform the functions of many traditional scientific and engineering instruments and are

intended to replace the traditional, wired stand-alone instruments at a fraction of their cost.

The universal smart instrument Focus developed

(the “Ubiquitor”) consists of a reusable foundation component which includes a wireless gateway (which allows the instrument

to connect to the smartphone via Bluetooth and WiFi technology), universal smart application software (“Application”)

which is installed on the user’s smartphone or other mobile device and allows monitoring of the sensor readouts on the smartphone

The Ubiquitor also connects to a variety of individual scientific sensors that collect data, from moisture, light, airflow,

voltage, and a wide variety of applications.

The data then sent through a wired or wireless connection, or a combination thereof

to the smartphone or other mobile device and the data is organized and displayed on the smartphone screen.

The smartphone or other

mobile device, foundation, and sensor readouts together perform the functions of many traditional scientific and engineering instruments

and are intended to replace the traditional, wired stand-alone instruments at a fraction of their cost.

Perfecular Inc.

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GAAP”).

Going Concern

The accompanying consolidated financial

statements have been prepared assuming that the Company will continue as a going concern basis, which assumes the Company will

continue to realize its assets and discharge its liabilities in the normal course of business.

The continuation of the Company

as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to repay

its debt obligations, to obtain necessary equity financing to continue operations, and the attainment of profitable operations.

Recently, the Company has devoted a substantial amount of resources to research and development to bring the Ubiquitor and its

mobile application to full production and distribution.

For the year ended December 31, 2020, the Company had a net loss of $2,537,113

and negative cash flow from operating activities of $1,955,091.

As of December 31, 2020, the Company also had an accumulated

deficit of $9,716,114.

These factors raise certain doubts regarding the Company’s ability to continue as a going concern.

There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing for the long-term

development and commercialization of its Ubiquitor product.

Principles of Consolidation

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The Company currently has two operating

In accordance with ASC 280, Segment Reporting (“ASC 280’), the Company considers operating segments

In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company considers operating segments

to be components of the Company’s business for which separate financial information is available and evaluated regularly

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determined that it has two operating and reportable segments.

Asset information by operating segment is not presented as the

chief operating decision maker does not review this information by segment.

The reporting segments follow the same accounting policies

used in the preparation of the Company’s consolidated financial statements.

information by operating segment is not presented as the chief operating decision maker does not review this information by segment.

The reporting segments follow the same accounting policies used in the preparation of the Company’s consolidated

financial statements.

Use of Estimates

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Significant estimates in the accompanying financial

statements include useful lives of property and equipment, useful lives of intangible assets, allowance for doubtful accounts,

inventory reserves, debt discounts, valuation of derivatives, and the valuation allowance on deferred tax assets.

The Company regularly

evaluates its estimates and assumptions.

statements include the lease term impacting right-of use asset and lease liability, useful lives of property and equipment, useful

lives of intangible assets, allowance for doubtful accounts, inventory reserves, debt discounts, valuation of derivatives, and

the valuation allowance on deferred tax assets.

The Company regularly evaluates its estimates and assumptions.

The Company considers all highly liquid

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Accounts Receivable

The Company grants credit to clients that sell the Company’s

products or engage in construction service under credit terms that it believes are customary in the industry and do not require

collateral to support customer receivables.

The accounts receivable balances are generally collected within 30 to 90 days of the

product sale.

The Company grants credit to clients that

sell the Company’s products or engage in construction service under credit terms that it believes are customary in the industry

and do not require collateral to support customer receivables.

The accounts receivable balances are generally collected within

30 to 90 days of the product sale.

Allowance for doubtful accounts

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is computed using the straight-line method.

Estimated useful lives as follows:

Estimated useful lives are as follows:

Construction in progress

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Intangible Assets

The Company’s intangible assets

were acquired from AVX.

The Company’s intangible assets were

acquired from AVX.

Amortization is computed using the straight-line method, and the Company evaluates for impairments annually.

As of December 31, 2019, impairment for intangible assets amounted to $47,975.

Estimated useful lives of intangible assets

During the year ended December 31, 2019, the Company determined that the intangible assets associated with the acquisition of AVX

was fully impaired.

During the year ended December 31, 2019, impairment for intangible assets amounted to $47,975.

Estimated useful

lives of intangible assets are as follows:

Intangible assets

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The management tests for impairment annually at year end.

As of December 31, 2019, impairment for goodwill amounted to $458,490.

During the year ended December 31, 2019, the Company determined that

the goodwill associated with the acquisition of certain AVX assets was impaired and took a charge to earnings of $458,490.

Share-based Compensation

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to employees in conformity with the provisions of ASC Topic 718, Stock-Based Compensation .

Stock-based compensation to employees

consist of stock options grants and restricted shares that are recognized in the statement of operations based on their fair values

at the date of grant.

Stock-based compensation

to employees consist of stock options grants and restricted shares that are recognized in the statement of operations based on

their fair values at the date of grant.

The measurement of stock-based compensation

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The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

quoted market prices available in active markets for identical assets or liabilities as

of the reporting date.

pricing inputs other than quoted prices in active markets included in Level 1, which are

either directly or indirectly observable as of the reporting date.

Pricing inputs that are generally observable inputs and not corroborated by market data.

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Pricing inputs that are generally unobservable inputs and not corroborated by market data.

Financial assets are considered Level 2

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The Company’s updated accounting policies and related disclosures are set forth below, including the disclosure for disaggregated

The impact of adopting ASC 606 was not material to the Condensed Consolidated Financial Statements.

The impact of adopting ASC 606 was not material to the Consolidated Financial Statements.

Revenue from the Company is recognized

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There was no material deferred tax asset or liabilities as of December 31, 2020 and 2019.

As of December 31, 2019, and 2018, the

Company did not identify any material uncertain tax positions.

As of December 31, 2020 and 2019, the Company

did not identify any material uncertain tax positions.

Basic and Diluted Net Income (Loss) Per Share

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periods presented.

The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings

per share as their inclusion would be anti-dilutive.

Years ended December 31,

The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per

share as their inclusion would be anti-dilutive.

Year ended December 31,

Stock options

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Reclassification

Certain reclassifications have been made to the consolidated

financial statements for prior years to the current year’s presentation.

Such reclassifications have no effect on net income

as previously reported.

Certain reclassifications have been made

to the consolidated financial statements for prior years to the current year’s presentation.

Such reclassifications have

no effect on net income as previously reported.

Note 3 –

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Recently Adopted Accounting Standards

In June 2018, the FASB issued ASU 2018-07,

Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for

share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees

with the requirements for share-based payments granted to employees.

ASU 2018-07 is effective on January 1, 2019.

Early adoption

is permitted.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the Financial Accounting

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in its leasing activities as a result of adoption.

Management has considered all recent accounting

pronouncements issued since the last audit of the Company’s financial statements.

The Company’s management believes

that these recent pronouncements will not have a material effect on the Company’s financial statements.

Note 4 –

Going Concern

In August 2014, the FASB issued ACU 2014-15,

Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.

The new standard requires management

to assess the company’s ability to continue as a going concern.

Disclosures are required if there is substantial doubt as

to the company’s continuation as a going concern within one year after the issue date of financial statements.

provides guidance for making the assessment, including consideration of management’s plans which may alleviate doubt regarding

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

ASU 2014-15 is effective for years ending after December 15, 2016.

The Company has adopted this standard for the years ended December 31, 2019 and 2018.

These financial statements have been prepared

on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal

course of business.

The continuation of the Company as a going concern is dependent upon the continued financial support from its

shareholders, the ability of the Company to repay its debt obligations, to obtain necessary equity financing to continue operations,

and the attainment of profitable operations.

Recently, the Company has devoted a substantial amount of resources to research and

development to bring the Ubiquitor and its mobile application to full production and distribution.

For the year ended December

31, 2019, the Company had net loss of $3,175,543 and negative cash flow from operating activities of $1,697,771.

As of December

31, 2019, the Company also had an accumulated deficit of $7,179,001.

These factors raise certain doubts regarding the Company’s

ability to continue as a going concern.

There are no assurances, however, that the Company will be successful in obtaining an adequate

level of financing for the long-term development and commercialization of its Ubiquitor product.

In June 2018, the FASB issued ASU 2018-07,

Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for

share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees

with the requirements for share-based payments granted to employees.

ASU 2018-07 is effective on January 1, 2019.

Early adoption

is permitted.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In June 2020, the FASB issued ASU 2020-05

in response to the ongoing impacts to US businesses in response to the COVID-19 pandemic.

ASU 2020-05, Revenue from Contracts with

Customers (Topic 606) and Leases (Topic 842) Effective Dates for Certain Entities provides a limited deferral of the effective

dates for implementing previously issued ASU 606 and ASU 842 to give some relief to businesses and the difficulties they are facing

during the pandemic.

These entities may defer application to fiscal years beginning after December 15, 2019, and interim periods

within fiscal years beginning after December 15, 2020.

As the Company has already adopted ASU 606 and ASU 842, the Company does

not anticipate any effect on its financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In June 2016, FASB issued ASU 2016-13,

Financial Instruments - Credit Losses, which changes the accounting for recognizing impairments of financial assets.

new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses.

The new guidance

also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration

since their origination.

In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases

(Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

119 and Update to SEC Section on Effective

Date Related to Accounting Standards Update No.

2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement

for smaller reporting companies.

ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods

in fiscal years beginning after December 15, 2022.

The Company believes the adoption will modify the way the Company analyzes financial

instruments, but it does not anticipate a material impact on results of operations.

The Company is in the process of determining

the effects the adoption will have on its consolidated financial statements.

In December 2019, FASB issued ASU 2019-12

"Income Taxes,"

which provides for certain updates to reduce complexity in the accounting for income taxes, including

the utilization of the incremental approach for intra-period tax allocation, among others.

The amendments in ASU 2019-12 are effective

for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

The Company does not expect

the implementation of ASU 2019-12 to have a material effect on its consolidated financial statements.

does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying

financial statement s.

As new accounting pronouncements are

issued, we will adopt those that are applicable under the circumstances.

Note 4 –

Inventory, net

At December 31, 2019 and 2018,

inventory consisted of the following:

At December 31, 2020 and 2019, inventory

consisted of the following:

Finished goods

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Note 5 –

On March 15, 2019, the Company entered into and closed an asset

purchase agreement with AVX Design & Integration, Inc.

Deposit balance as of December 31, 2020

amounted to $106,630, including $6,630 for lease agreement deposit and $100,000 for payment made into an escrow account.

as of December 31, 2019 amounted to $6,630 for lease agreement deposit.

On August 31, 2020, the Company executed

a binding letter of intent with Communication Wiring Specialists, Inc., a California S-Corporation (“CWS”) whereby

the Company will purchase one hundred percent (100%) of the issued and outstanding common stock of CWS for five million dollars

($5,000,000).

When the transaction closes, CWS will be capitalized with one million dollars ($1,000,000).

The purchase price structure

includes a refundable deposit amount of $100,000 to be held in an escrow account upon execution of the letter of intent.

This $100,000

is now nonrefundable.

The Company is still currently negotiating the transaction and is expected to close before March 31, 2021.

Note 6 –

On March 15, 2019, the Company entered

into and closed an asset purchase agreement with AVX Design & Integration, Inc.

(“AVX”) as stated in Note 1.

A summary of the purchase price

and the purchase price allocations at fair value is below.

summary of the purchase price and the purchase price allocations at fair value is below.

Purchase price

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Building Improvement

Construction in progress

Furniture and fixture

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December 31, 2020 and 2019 amounted to $162,242 and $151,670, respectively.

Note 8 –

Intangible Assets, Net

The following table presents intangible

asset balances at December 31, 2019 and 2018:

Market related intangible assets

Less accumulated amortization

Intangible assets, net of amortization

Impairment loss

Intangible assets, net

Amortization expense for the years ended December 31, 2019

and 2018 was $9,025 and $0, respectively.

At December 31, 2019, the Company determined that the intangible assets associated

with the acquisition of certain AVX assets was impaired and took a charge to earnings of $47,975.

The Company purchased a warehouse in Ontario,

California in September 2018 and leased an unused portion to a third party.

The tenant paid $12,335 as security deposit, shown

as other liability in non-current liability.

January 22, 2019, the Company subleased a portion of the unused warehouse and office space to a third party.

The Company subleased

16,000 square feet of warehouse and 446 square feet of office space with base rent at $12,335 per month and $12,335 security deposit.

The lease is for three years commencing February 15, 2019 and monthly rent to increase $0.02 per square foot each year.

October 19, 2020, the Company subleased 3,000 feet of the warehouse and one office space for eight months commencing December

1, 2020 with option to extend the lease to twelve months.

The monthly lease payment is $2,400 with a $4,800 security deposit .

Note 8 –

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the note is paid off.

As of December 31, 2019, the balance of the promissory note was $50,000 and $1,750 interest incurred

As of December 31, 2019, the balance of the promissory note was $50,000 and $1,750 accrued interest incurred

for the nine months and 15 days ended December 31, 2019.

The note was paid off on January 10, 2020.

The note and interest amount of $50,000 and $1,831 were paid off on January

Note 9 –

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Revenue generated from Vitashower Corp.,

a company owned by the CEO, amounted to $14,184 and $22,200 for the years ended December 31, 2019 and 2018, respectively.

receivable balance due from Vitashower Corp.

amounted to $0 and $39,625 as of December 31, 2019 and 2018, respectively.

a company owned by the CEO’s wife, amounted to $26,449 and $14,184 for the years ended December 31, 2020 and 2019,

respectively.

There were no accounts receivable balance due from Vitashower Corp.

as of December 31, 2020 and 2019, respectively.

Purchases generated from Vitashower Corp.

amounted to $11,371 and $0 for the years ended December 31, 2020 and 2019, respectively.

There were accounts payable balance $11,371 and $0 to Vitashower Corp.

as of December 31, 2020 and 2019, respectively.

Compensation payable to Chief Financial

Officer amounted to $6,100 and $0 as of December 31, 2020 and 2019, respectively.

Compensation for services provided by the

Chief Financial Officer for the years ended December 31, 2020 and 2019 amounted to $22,100 and $29,000, respectively.

Compensation for services provided by the

President and Chief Executive Officer for the years ended December 31, 2020 and 2019 amounted to $120,000 and $121,154, respectively.

Promissory note and interest accrued and payable

to the previous owner of AVX amounted to $50,000 and $1,750, respectively, as of December 31, 2019.

note and interest accrued and payable to the previous owner of AVX amounted to $50,000 and $1,750, respectively, as of December

The note and interest amount of $50,000 and $1,831 were paid off on January 10, 2020.

Note 10 –

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Major customers

One customer accounted for 18% and 22% of the total accounts

receivable as of December 31, 2019 and 2018, respectively.

One customer accounted for 0% and 18% of the total

accounts receivable as of December 31, 2020 and 2019, respectively.

This customer accounted for 53% and 43% of total revenue for

the years ended December 31, 2020 and 2019, respectively.

Major vendors

One vendor accounted for 21% and 95% of total accounts payable

at December 31, 2019 and 2018, respectively.

vendor accounted for 0% and 21% of total accounts payable at December 31, 2020 and 2019, respectively.

This vendor accounted

for 65% and 46% of the total purchases for the years ended December 31, 2020 and 2019, respectively.

Note 11 –

Commitments and Contingencies

On April 24, 2017, we entered into

a two-year industrial/commercial lease within a larger multi-tenant industrial complex with Walnut Park Business Center, LLC.

leased a 2,800-square foot warehouse with a 1,400-square foot office space inside which will allow us to assemble our products

as well as efficiently run our administrative operations in the same building.

The lease commenced on May 1, 2017 and will end

on April 30, 2019.

We will pay $3,500 per month until May 1, 2018 when the rent will increase to $3,605 per month.

The warehouse

is located at 820511 East Walnut Drive North, Walnut, California.

The Company purchased a warehouse in Ontario, California in September

and subleased the Walnut location to a third party.

The Company is no longer obligated to pay for Walnut’s lease.

tenant paid $7,210 as security deposit, shown as other payable in current liability.

Total rent expense was $13,433 for the

year ended December 31, 2018.

Commitments and

Contingencies

In the normal course of business or otherwise,

the Company may become involved in legal proceedings.

The Company will accrue a liability for such matters when it is probable

that a liability has been incurred and the amount can be reasonable estimated.

When only a range of possible loss can be established,

the most probable amount in the range is accrued.

The accrual for a litigation loss contingency might include, for example, estimates

of potential damages, outside legal fees, and other directly related costs expected to be incurred.

Note 12 –

Operating Lease Right-of-use

Assets and Operating Lease Liability

In adopting ASC Topic 842, Leases (Topic

842), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new

standard its prior conclusions about lease identification, lease classification and initial direct costs.

The Company did not elect

the use-of-hindsight or the practical expedient pertaining to land easements;

the latter is not applicable to the Company.

the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less.

On January 1, 2019, upon adoption

of ASC Topic 842, the Company recorded a right-of-use asset.

The Company has one lease agreement and

the lease is classified as operating at inception of the lease.

The lease results in the recognition of ROU asset and lease liabilities

on the balance sheet.

ROU asset and operating lease liabilities are recognized based on the present value of lease payments over

the lease term as of the commencement date.

Because the leases do not provide an explicit or implicit rate of return, the Company

determines incremental borrowing rate based on the information available at the commencement date in determining the present value

of lease payments on an individual lease basis.

We estimate our incremental borrowing rate to discount the lease payments based

on information available at lease commencement.

Lease expense for the lease is recognized on a straight-line basis over the lease

The Company’s leases do not contain

any residual value guarantees or material restrictive covenants.

Leases with a lease term of 12 months or less are not recorded

on the balance sheet and lease expense is recognized on a straight-line basis over the lease term.

The remaining term as of December

31, 2019 is 32 months ending August of 2022.

The Company currently has no finance leases.

During the year ended December 31, 2019,

cash paid for amounts included in the measurement of lease liabilities- operating cash flows from operating lease was $47,306.

As of December 31, 2019, right-of-use (“ROU”) assets amounted to $128,399 with lease liabilities amounted to $138,940.

Right-of-use assets are summarized below:

Asset and Operating Lease Liability

lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement

The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 15%, as the interest

rate implicit in our lease is not readily determinable.

During the years ended December 31, 2020 and 2019, the Company recorded

$65,180 and $62,322, respectively as operating lease expense.

The Company currently has a lease agreement

for AVX’s operation for a monthly payment of $5,258 and shall increase by 3% every year.

The lease commenced July 1, 2015

and expires on August 31, 2022.

A security deposit of $5,968 was also held for the duration of the lease term.

adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’, which permit

it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct

The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements;

the latter is not

applicable to the Company.

In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12

months or less.

On March 15, 2019 when AVX was acquired,

upon adoption of ASC Topic 842, the Company recorded a right-of-use asset.

Right-of-use asset is summarized below:

December 31, 2020

Less accumulated amortization

Right-of-use assets, net

Operating Lease liabilities are summarized

December 31, 2019

accumulated amortization

Right-of-use asset, net

Operating Lease liability is summarized

December 31, 2020

December 31, 2019

current portion

Long term portion

Maturity of lease liabilities are as follows:

Year ending December 31, 2020

Maturity of lease liability is as follows:

Year ending December 31, 2021

Year ending December 31, 2022

Total payment

Amount representing interest

Total future minimum lease payment

Imputed interest

Lease Obligation, net

Note 13 –

Paycheck protection program

On April 24, 2020, AVX Design & Integration,

entered into an agreement to receive a U.S.

Small Business Administration Loan (“SBA Loan”) from JPMorgan Chase

related to the COVID-19 pandemic in the amount of $107,460, which we received on May 1, 2020.

The SBA Loan has a fixed

interest rate of 0.98 percent per annum and a maturity date two years from the date loan was issued.

On May 4, 2020, Perfecular Inc.

entered into an agreement to receive a U.S.

Small Business Administration Loan (“SBA Loan”) from Bank of America

related to the COVID-19 pandemic in the amount of $151,500, which we received on May 4, 2020.

The SBA Loan has a fixed

interest rate of 1 percent per annum and a maturity date two years from the date loan was issued.

Economic Injury Disaster Loan

On June 4, 2020, Perfecular Inc.

into an agreement to receive a U.S.

Small Business Administration Loan (“SBA Loan”) from Bank of America related to

the COVID-19 pandemic in the amount of $81,100, which we received on June 4, 2020.

The SBA Loan has a fixed interest rate of 3.75

percent per annum and a maturity date thirty years from the date loan was issued.

On June 5, 2020, AVX Design & Integration,

entered into an agreement to receive a U.S.

Small Business Administration Loan (“SBA Loan”) from JPMorgan Chase

related to the COVID-19 pandemic in the amount of $56,800, which we received on June 5, 2020.

The SBA Loan has a fixed

interest rate of 3.75 percent per annum and a maturity date thirty years from the date loan was issued.

Borrower will use all the proceeds of this

Loan solely as working capital to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing

December 31, 2020

current portion

Long term portion

Interest expense incurred from the loans

amounted to $4,746 for the year ended December 31, 2020.

Economic Injury Disaster Loan advance

response to the Coronavirus (COVID-19) pandemic, small businesses, including agricultural businesses, and non-profit organizations

states, Washington D.C., and territories can apply for an Economic Injury Disaster Loan (EIDL).

The amount of the EIDL

Advance was determined by the number of employees indicated on the EIDL application at $1,000 per employee, up to a maximum of

The EIDL Advance does not have to be repaid.

Recipients did not have to be approved for an EIDL loan in order to receive

On April 21, 2020 and June 16, 2020, the

Company received $9,000 and $10,000 EIDL advance and recorded the receipt as other income.

Note 14 –

Stockholders’

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Upon formation, the total number of shares

of all classes of stock which the Company is authorized to issue is seventy-five million (75,000,000) shares of common stock, par

of all classes of stock that the Company is authorized to issue is seventy-five million (75,000,000) shares of common stock, par

value $0.001 per share.

As of December 31, 2019 the Company had

40,959,741 shares of common stock issued and outstanding.

As of December 31, 2019 and 2020 the Company

had 40,959,741 shares of common stock issued and outstanding.

During the year ended December 31, 2020,

the Company had the following transactions in its common stock:

Issued 10,133 shares to consultants in exchange for professional services rendered in 2018.

shares were valued at $75,000 based on the closing price of the Company’s common stock on the dates that the shares

were deemed earned, according to the agreements;

Issued 13,445 shares to consultants in

exchange for professional services rendered.

The shares were valued at $96,518 based on the closing price of the Company’s

common stock on the dates that the shares were deemed earned, according to the agreements;

Issued 39,286 shares as consideration for the AVX acquisition valued at $290,716.

the common stock was determined based on the market price on the day of the closing of the acquisition.

the Company did not issue common stock.

Shares to be Issued for Compensation

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third party consultants for financing and management consultation.

The Company has incurred consulting service fees paid in cash

amount to $50,709 for the year ended December 31, 2019, which the Company will issue stock as compensation for services rendered.

The Company has incurred consulting service fees not paid in

cash amounting to $48,000 for the year ended December 31, 2020, which the Company intends to issue stock as compensation for services

Expenses incurred but not yet paid in shares as of December 31, 2020 and 2019 amounted to $98,709 and $50,709, respectively.

During the year ended December 31, 2018,

the Company had the following transactions in its common stock:

Issued 5,755,927 shares of common stock to investors for cash proceeds of $10,072,872.

During the year ended December 31, 2019, the

Company had the following transactions in its common stock:

Issued 13,445 shares to consultants in exchange for professional services rendered.

were valued at $469,377 based on the closing price of the Company’s common stock on the dates that the shares were deemed

earned, according to the agreements;

Issued 313,686 shares of common stocks to convertible note conversion for $548,951 of convertible

note and interest.

The shares were valued at $96,509 based on the closing price of the Company’s common stock on the dates that the shares were deemed earned, according to the agreements;

Issued 39,286 shares as consideration for the AVX acquisition valued at $290,716.

The value of the common stock was determined based on the market price on the day of the closing of the acquisition.

Stock options

On August 6, 2019, each member of the Board was granted 30,000

options to purchase shares at $5.70 per share.

As of December 31, 2019, there were 210,000 options granted, 87,500 options vested,

122,500 options unvested, and 210,000 outstanding stock options.

There were no outstanding stock options as of December 31, 2018.

For the years ended December 31, 2019 and 2018, the Company

had stock option compensation expense amounted to $432,250 and $0, respectively.

On August 6, 2019, each member

of the Board was granted 30,000 options to purchase shares at $5.70 per share.

As of December 31, 2020, there were 210,000

options granted, 210,000 options vested, 0 options unvested, and 210,000 outstanding stock options.

The fair value of the warrants listed above was determined using

the Black-Scholes option pricing model with the following assumptions:

Risk-free interest rate

Expected life of the options

Expected volatility

Expected dividend yield

The following is a summary of options activity

from January 1, 2019 to December 31, 2019:

from December 31, 2019 to December 31, 2020:

Weighted average exercise price

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Aggregate Intrinsic Value

Outstanding at January 1, 2019

Outstanding at December 31, 2019

Forfeited or expired

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and exercisable at December 31, 2020:

The fair value of the warrants listed above was determined using

the Black-Scholes option pricing model with the following assumptions:

Risk-free interest rate

Expected life of the options

Expected volatility

Expected dividend yield

Note 15 –

Our effective tax rate differs from the

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and Perfecular Inc.

(“Focus”) involves wholesale, research and development of universal smart

(“Focus”) involve wholesale, research and development of universal smart

instrument and farming devices.

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Cost of Revenue

Operation Expenses:

Operating Expenses:

Compensation - officers

2 unchanged sentences

General and administrative

Goodwill impairment

Intangible assets impairment

Total Operating Expenses

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Loss before income taxes

$ (2,805,045 )

$ (3,175,543 )

Note 17 –

Subsequent Events

The Company has evaluated all other subsequent

events through the date these consolidated financial statements were issued and determine that there were no subsequent events

or transactions that require recognition or disclosures in the consolidated financial statements except for the follows:

On January 9, 2020, the Company entered

into a consulting service agreement with The Blueshirt Group, LLC pursuant to which Blueshirt would provide an investor relation

consulting service to the Company from January 9, 2020 to July 9, 2020 with monthly fee amount of $10,000.

On February 11, 2020, the Company entered

into a consulting service agreement with Equisolve to provide website service for investor relations’

information for one

year with initial setup fee of $2,500 and monthly fee of $599.

On January 8, 2021, Focus Universal Inc.

entered into a secured promissory note agreement with East West Bank in the amount of $1,500,000.

The note has a variable interest

rate of 0.25% above Wall Street Journal Prime Rate.

The final payment will be due on January 22, 2026.

On March 2, 2021, Perfecular Inc.

entered into an agreement to receive a U.S.

Small Business Administration Loan (“SBA Loan”) from Wells Fargo related

to the COVID-19 pandemic in the amount of $158,547, which we received on March 3, 2021.

The SBA Loan has a fixed interest rate

of 1 percent per annum and a maturity date two years from the date loan was issued.

On March 10, 2021, AVX Design & Integration,

entered into an agreement to receive an SBA Loan from Chase Bank related to the COVID-19 pandemic in the amount of $108,750.

The SBA Loan has a fixed interest rate of 0.98 percent per annum and a maturity date five years from the date loan was issued.

On March 15, 2021, Focus Universal Inc.

entered into a secured

promissory note agreement with Golden Sunrise Investment LLC in the amount of $1,500,000.

The note has an interest rate of 10%

per year and has a due date of March 14, 2022.

The note is subordinate in priority to the East West Bank loan entered into on January

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

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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-K

Item 8. Financial Statements and Supplementary Data