What changed in this filing

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Item 1. Financial Statements

2021-11-15 compared with 2021-08-13 · 281 added, 212 removed, 712 unchanged (41% of the section changed)

3 unchanged sentences

Index to the Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020

Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2021 and 2020

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, 2021 and 2020

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2021 and 2020

Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020

Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2021 and 2020

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the Three and Nine Months Ended September 30, 2021 and 2020

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2021 and 2020

Notes to the Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Accounts receivable, net

Accounts receivable - related party

Inventories, net

Other receivables

Prepaid expenses

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

40,959,741 shares issued and

outstanding as of June 30, 2021 and December 31, 2020, respectively

43,259,741 and 40,959,741

shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

5 unchanged sentences

Total Liabilities and Stockholders' Equity

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements

FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Revenue - related party

1 unchanged sentence

Cost of Revenue

Gross Profit (Loss)

Operating Expenses:

11 unchanged sentences

Interest (expense) - related party

Total other income

Gain on extinguishment of debt

Change in fair value of warrant liability

Gain on settlement of derivative liability

Total other income (expense)

Loss before income taxes

1 unchanged sentence

( 2,500,415 )

( 1,988,333 )

Income tax expense

7 unchanged sentences

Basic and Diluted

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements

FOCUS UNIVERSAL INC.

1 unchanged sentence

IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30,

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER

30, 2021 AND 2020

Shares to be issued

Total Stockholders'

Balance - March 31, 2021

Stockholders'

Balance- June 30, 2021

$ ( 10,878,775 )

Issuance of common stock

Stock based compensation - options

Common stock to be issued for services

Balance - June 30, 2021

( 1,337,754 )

Balance - March 31, 2020

( 1,337,754 )

Balance - September 30, 2021

$ ( 12,216,529 )

Balance - June 30, 2020

$ ( 8,728,974 )

Stock based compensation - options

Common stock to be issued for services

Balance - June 30, 2020

Balance - September 30, 2020

$ ( 9,167,334 )

Shares to be issued

Total Stockholders'

Shares to be issued Common

Stockholders'

Balance December 31, 2020

$ ( 9,716,114 )

Issuance of common stock

Stock based compensation - options

2 unchanged sentences

( 2,500,415 )

Balance - June 30, 2021

Balance September 30, 2021

( 12,216,529 )

5 unchanged sentences

( 1,988,333 )

Balance, June 30, 2020

Balance September 30, 2020

$ ( 9,167,334 )

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Six Months Ended June 30,

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

Nine Months Ended September 30,

Cash flows from operating activities:

5 unchanged sentences

Depreciation expense

SBA loan forgiveness

Gain on extinguishment of debt

Change in fair value of warrant liability

Gain on settlement of derivative liability

Amortization of right-of-use assets

11 unchanged sentences

Customer deposit

Other liabilities

Net cash flows used in operating activities

( 1,496,812 )

( 1,725,512 )

Cash flows from investing activities:

Purchase of property and equipment

Net cash flows used in investing activities

Cash flows from financing activities:

Proceeds from SBA loan

Payment on SBA loan

Payment on promissory note

Repayment on SBA loan

Repayment on promissory note

Proceeds from bank loan

Prepayment on bank loan

Repayment on bank loan

( 1,500,000 )

Proceeds from IPO, net

Net cash flows provided by financing activities

Net change in cash

( 1,370,966 )

Cash beginning of period

3 unchanged sentences

Cash paid for interest

Supplemental disclosure of non-cash financing activities

Cashless warrant

The accompanying notes are an integral part

54 unchanged sentences

Going Concern

In the long term, 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

For the six months ended June 30, 2021, the Company had a net loss of $ 1,162,661

In the long term, 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.

For the nine months

ended September 30, 2021, the Company had a net loss of $ 2,500,415

and negative cash flow from operating activities of $ 1,496,812 .

In Q1, 2021 the Company had obtained a $ 1,500,000

In February, 2021 the Company had obtained a $ 1,500,000

loan from a financial institution and a $ 1,500,000

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The related party loan will accrue interest at 10 %

15, 2022 , or six months from the date the loan is funded, whichever is later (the “Initial Interest Accrual

Interest on any unpaid principal after Initial Interest Accrual Date shall accrue at a fixed rate of 12% per annum

The Company reserves the right to prepay this loan agreement (in whole or in part) after 6 months of the first day with

no prepayment penalty.

The Company may make, in its sole discretion, payments of interest only, or interest and principal, provided

that the principal is not paid in full prior to six months from the date the loan is funded.

The Company also plans to raise $10

million through an underwritten public offering in 2021.

With the January 1, 2021 beginning cash amount

of $583,325 and the loan of $1,500,000, the Company will have enough cash to cover its projected annual cash burn rate of $1,967,074.

With the additional $1,500,000 related party loan, the Company will have adequate reserves to continue operations in 2021 and 2022.

related party which provided the loan to the Company is owned by a director of the Company, which we have evaluated to be a reliable

source of cashflow.

The $10 million planned public offering will contribute to a projected December 31, 2021 cash balance of $11,000,000.

Historically, the Company has been successful in reaching its planned fund-raising targets.

In 2020 the Company had negative operating cashflow

of approximately $1.96 million, mainly resulting from net loss.

The Company is currently developing its products and licenses and expects

to generate profit once the products and licenses are available for the market, which will begin to alleviate the negative cashflow.

the Company is testing 4 Mbps ultra-narrowband power line communication printed circuit boards, the testing is completed in Q2 2021.

ultra-narrowband power line communication products will launch in Q4, 2021.

The portable universal smart device is also in the final printed

circuit board layout stage, the Company is planning to launch this product in Q4 2021.

Initially, new products would require cash to manufacture

The Company expects to begin generating positive cashflow with the launch of above-mentioned products from Q2 of 2022.

Overall, we expect that with the loan we obtained,

along with the committed related-party loan, and planned capital raising will provide adequate cash for the Company to continue operation

as a going concern throughout 2021 and 2022.

The Company expects the loans and offering will generate cash for 2021’s operation

and be able to pay off the loans obtained through the offering with sufficient cashflow for 2021 and 2022.

Thus, the previous factors

raising substantial doubt to continue as a going concern have been alleviated.

15, 2022 , or six months from the date the loan is funded, whichever is later (the “Initial Interest Accrual Date”).

Interest on any unpaid principal after Initial Interest Accrual Date shall accrue at a fixed rate of 12% per annum until paid.

reserves the right to prepay this loan agreement (in whole or in part) after 6 months of the first day with no prepayment penalty.

Company may make, in its sole discretion, payments of interest only, or interest and principal, provided that the principal is not paid

in full prior to six months from the date the loan is funded.

The Company raised $11.5 million through an underwritten

public offering in September 2021.

With the January 1, 2021 beginning cash amount of $583,325 and the loan of $1,500,000, the Company

will have enough cash to cover its projected annual cash burn rate of $1,967,074.

With an underwritten public offering $11.5 million in

September 2021, the Company will have adequate reserves to continue operations in 2021 and 2022.

In 2020 the Company had negative operating cashflow of approximately $1.96

million, mainly resulting from net loss.

The Company is currently developing its products and licenses and expects to generate profit

once the products and licenses are available for the market, which will begin to alleviate the negative cashflow.

Currently, the Company

is testing 4 Mbps ultra-narrowband power line communication printed circuit boards, the testing was completed in second quarter of 2021.

The ultra-narrowband power line communication products will launch in fourth quarter of 2021.

The portable universal smart device is

also in the final printed circuit board layout stage, the Company is planning to launch this product in fourth quarter of 2021.

new products would require cash to manufacture and promote.

The Company expects to begin generating positive cashflow with the launch

of above-mentioned products from second quarter of 2022.

Overall, we have adequate cash for the Company

to continue operation as a going concern throughout 2021 and 2022 with capital raising.

Thus, the previous factors raising substantial

doubt to continue as a going concern have been alleviated.

Principles of Consolidation

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readily apparent from other sources.

The actual results experienced by the Company may

differ materially and adversely from the Company’s estimates.

The actual results experienced by the Company

may differ materially and adversely from the Company’s estimates.

To the extent there are material differences between the estimates

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(FDIC) insurance limit.

There were no cash equivalents held by the Company at June 30, 2021 and December 31, 2020.

There were no cash equivalents held by the Company at September 30, 2021 and December 31, 2020.

Accounts Receivable

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that the Company's estimate of the allowance for doubtful accounts will change.

As of June 30, 2021 and December 31, 2020, allowance for

doubtful accounts amounted to $ 50,268 and $ 44,519 , respectively.

As of September 30, 2021 and December 31, 2020, allowance

for doubtful accounts amounted to $ 52,313 and $ 44,519 , respectively.

Concentrations of Credit Risk

14 unchanged sentences

market value.

As of June 30, 2021 and December 31, 2020, inventory reserve amounted to $ 69,233 and $ 70,562 , respectively.

As of September 30, 2021 and December 31, 2020, inventory reserve amounted to $ 72,251 and $ 70,562 , respectively.

Property and Equipment

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periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

review at June 30, 2021 and December 31, 2020, the Company believes there was no impairment of its long-lived assets.

review at September 30, 2021 and December 31, 2020, the Company believes there was no impairment of its long-lived assets.

Share-based Compensation

13 unchanged sentences

for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service period of the award.

The Company accounts for warrants as either equity-classified

or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance

in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability

pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether

the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net

cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly

period end date while the warrants are outstanding.

For issued or modified warrants that meet all

of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the

time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required

to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.

Changes in the estimated

fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.

The fair value of the warrants

was estimated using a Black-Scholes pricing model (see Note 11).

Fair Value of Financial Instruments

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enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized.

There was no material deferred tax asset or liabilities as of June 30, 2021 and December 31, 2020.

As of June 30, 2021 and December 31, 2020, the

Company did no t identify any material uncertain tax positions.

There was no material deferred tax asset or liabilities as of September 30, 2021 and December 31, 2020.

As of September 30, 2021 and December 31, 2020,

the Company did no t identify any material uncertain tax positions.

Basic and Diluted Net Income (Loss) Per Share

6 unchanged sentences

potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

Due to the net loss incurred by the Company, potentially

dilutive instruments would be anti-dilutive.

Accordingly, diluted loss per share is the same as basic loss for all 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.

Schedule of antidilutive shares

Six months ended June 30,

Due to the net loss incurred by the Company,

potentially dilutive instruments would be anti-dilutive.

Accordingly, diluted loss per share is the same as basic loss for all periods

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

inclusion would be anti-dilutive.

Schedule of anti dilutive shares

Nine months ended September 30,

Stock options

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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.

Under the 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 condensed consolidated financial statements.

In June 2016, FASB issued ASU 2016-13, Financial

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

Under the 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.

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

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

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 condensed

consolidated financial statements.

Management does not believe that any recently

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Note 4 – Inventory, net

At June 30, 2021 and December 31, 2020, inventory

consisted of the following:

At September 30, 2021 and December 31, 2020,

inventory consisted of the following:

Schedule of Inventory

September 30,

Finished goods

2 unchanged sentences

Note 5 – Deposit

Deposit balance as of June 30, 2021 amounted

for lease agreement deposit.

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 for purchasing a target company.

On March 26, 2021, the management of target company decided to

terminate the LOI.

Deposit balance as of September 30, 2021 amounted

to $ 6,630 for lease agreement and utility deposit.

Deposit balance as of December 31, 2020 amounted to $106,630, including $ 6,630 for

lease agreement and utility deposit and $ 100,000 for payment made into an escrow account for purchasing a target company.

2021, the management of target company decided to terminate the LOI.

The LOI was terminated effective as of March 29, 2021 and $ 100,000

1 unchanged sentence

Note 6 – Property and Equipment

At June 30, 2021 and December 31, 2020, property and equipment consisted

of the following:

At September 30, 2021 and December 31, 2020, property and equipment

consisted of the following:

Schedule of property and equipment

September 30,

Building Improvement

2 unchanged sentences

Property and equipment, net

Depreciation expense for the six months ended

June 30, 2021 and 2020 amounted to $ 80,872 and $ 81,125 , respectively.

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 a security deposit, shown as other

liability in non-current liabilities.

Depreciation expense for the nine months ended

September 30, 2021 and 2020 amounted to $ 121,932 and $ 121,684 , respectively.

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 a security deposit, included in other liability in other current liabilities as of September 30, 2021 and non-current

liabilities as of December 31, 2020.

Note 7 – Related Party Transactions

Revenue generated from Vitashower Corp., a

company owned by the CEO’s wife, amounted to $ 15,141

for the six months ended June 30, 2021 and 2020, respectively.

Account receivable balance due from Vitashower Corp.

as of June 30, 2021 and December 31, 2020, respectively.

Purchases generated from Vitashower Corp.

amounted to $ 3,379

for the six months ended June 30, 2021 and 2021, respectively.

There were accounts payable balances of $ 0

and $ 17,471 due to Vitashower Corp.

as of June 30, 2021 and December 31, 2020, respectively.

Revenue generated from Vitashower Corp., a company

owned by the CEO’s wife, amounted to $ 15,141 and $ 21,267 for the nine months ended September 30, 2021 and 2020, respectively.

receivable balance due from Vitashower Corp.

amounted to $ 0 and $ 0 as of September 30, 2021 and December 31, 2020, respectively.

generated from Vitashower Corp.

amounted to $ 3,379 and $ 0 for the nine months ended September 30, 2021 and 2021, respectively.

accounts payable balances of $ 0 and $ 17,371 due to Vitashower Corp.

as of September 30, 2021 and December 31, 2020, respectively.

Compensation for services provided by the President

and Chief Executive Officer for the six months ended June 30, 2021 and 2020 amounted to $ 60,000 and $ 60,000 , respectively.

and Chief Executive Officer for the nine months ended September 30, 2021 and 2020 amounted to $ 90,000 and $ 90,000 , respectively.

Note 8 – Business Concentration and Risks

Major customers

One customer accounted for 0 % and 17 % of the total

accounts receivable as of June 30, 2021 and December 31, 2020, respectively.

This customer accounted for 78 % and 42 % of the total revenue

for the period ended June 30, 2021 and 2020, respectively.

One customer accounted for 39 % and 0 % of the

total accounts receivable as of September 30, 2021 and December 31, 2020, respectively.

This customer accounted for 81 % and 50 % of the

total revenue for the period ended September 30, 2021 and 2020, respectively.

Major vendors

One vendor accounted for 0 % and 0 % of total accounts

payable at June 30, 2021 and December 31, 2020, respectively.

This vendor accounted for 77 % and 47 % of the total purchases for the period

ended June 30, 2021 and 2020, respectively.

One vendor accounted for 100 % and 0 % of total

accounts payable at September 30, 2021 and December 31, 2020, respectively.

This vendor accounted for 83 % and 61 % of the total purchases

for the period ended September 30, 2021 and 2020, respectively.

Note 9 – Operating Lease Right-of-use

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 date.

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 six months ended June 30, 2021 and 2020, the Company recorded $ 32,590 and $ 32,590 ,

respectively as operating lease expense.

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 nine months ended September 30, 2021 and 2020, the Company recorded $48,885

and $48,885, respectively as operating lease expense.

The Company currently has a lease agreement for

15 unchanged sentences

Schedule of operating Right-of-use asset and liability

June 30, 2021

September 30, 2021

December 31, 2020

2 unchanged sentences

Operating Lease liability is summarized below:

June 30, 2021

September 30, 2021

December 31, 2020

10 unchanged sentences

Paycheck Protection Program

On April 24, 2020, AVX Design &

Integration, Inc.

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 Bank, N.A.

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 2 years from the date the loan was issued.

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

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 the loan was issued.

On July 8, 2021, SBA authorized full forgiveness

of this loan and the Company recognized principal amount of $ 107,460 and $ 1,267 interest to other income.

On May 4, 2020, Perfecular Inc.

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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 2

years from the date loan was issued.

On April 28, 2021, SBA authorized full forgiveness of this loan and the Company recognized

principal amount of $ 151,500

and $1,490 interest to other income.

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 April 28, 2021, SBA authorized full forgiveness of

this loan and the Company recognized principal amount of $ 151,500

and $ 1,490 interest

to other income.

On March 2, 2021, Perfecular Inc.

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 2 years from the date loan was issued.

On March 10, 2021, AVX Design &

Integration, Inc.

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.

The balance of principal and interest were $ 158,547 and $ 927 ,

respectively, due as of September 30, 2021.

There were no principal and interest due as of December 31, 2020.

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 .

1 unchanged sentence

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

The balance of principal and interest were $ 108,750

respectively, due as of September 30, 2021.

There were no principal and interest due as of December 31, 2020

Economic Injury Disaster Loan

5 unchanged sentences

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

On June 5, 2020, AVX Design &

Integration, Inc.

On September 13, 2021, the Company paid this loan off with loan principal

amount of $ 81,100 and $ 3,624 interest.

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 Bank, N.A.

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 30 years from the date loan was issued.

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

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.

On September 22, 2021, the Company paid this

loan off with loan principal amount of $ 56,800 and $ 2,743 interest.

On January 8, 2021, Focus Universal Inc.

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above Wall Street Journal Prime Rate.

The note requires monthly payments with the final payment of $ 1,357,178 due on January 22, 2026 .

Borrower will use all of the proceeds from this

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

The note requires monthly payments with the final payment of $ 1,357,178

due on January

On September 22, 2021, the Company paid this loan off with loan principal amount of $ 1,500,000

Economic Injury Disaster Loan

September 30,

current portion

1 unchanged sentence

Interest expense incurred from the loans amounted

to $ 22,827 and $ 868 for the six months ended June 30, 2021 and 2020, respectively.

to $ 37,238 and $ 2,290 for the nine months ended September 30, 2021 and 2020, respectively.

Note 11 – Stockholders’ Equity

2 unchanged sentences

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

As of June 30, 2021 the Company had 40,959,741

shares of common stock issued and outstanding.

During the six months ended June 30, 2021, the

Company did not issue common stock.

During the nine months ended September 30, 2021,

the Company issued 2,300,000 shares of common stock.

On September 2, 2021, the Company closed its initial

public offering (“IPO”) under a registration statement effective August 30, 2021, in which it issued and sold 2,000,000 shares

of its Common Stock at a purchase price of $ 5.00 per share.

On September 2, 2021, the Company closed on the IPO’s overallotment

option, selling an additional 300,000 shares of Common Stock to the IPO’s underwriters at the public offering price of $ 5.00 per

The Company received net proceeds of approximately $ 10.3 million from the IPO after deducting underwriting fee and offering expenses.

As of September 30, 2021 and December 31, 2020,

the Company had 43,259,741 and 40,959,741 shares of common stock issued and outstanding, respectively.

Shares to be issued for compensation

The Company entered into agreements with

third party consultants for financing and management consultation.

The Company has incurred consulting service fees not paid in cash

amounting to $ 24,000

for the six months ended June 30, 2021, which the Company intends to issue stock as compensation for services rendered.

incurred but not yet paid in shares as of June 30, 2021 and December 31, 2020 amounted to $ 122,709

and $ 98,709 ,

respectively.

The Company entered into agreements with third

party consultants for financing and management consulting.

The Company has incurred consulting service fees not paid in cash amounting

to $ 36,000 for the nine months ended September 30, 2021, which the Company intends to issue stock as compensation for services rendered.

Expenses incurred but not yet paid in shares as of September 30, 2021 and December 31, 2020 amounted to $ 134,709 and $ 98,709 , respectively.

On August 30, 2021, the Company entered Representative

Common Stock Purchase Warrant agreement (“Warrant Agreement”) with its placement agent, Boustead Securities LLC.

for 161,000 shares and the exercise price is $6.25.

Boustead exercised the warrants on September 7, 2021.

The fair value of the warrants

was $1,041,670 and $2,326,450 as of August 30 and September 7, 2021, respectively.

For the nine months ended September 30, 2021, the

Company change the fair value of warrant liability which amounted to a

difference of

These warrants were valued using a Black-Scholes

pricing model with the following assumptions:

2021 (Initial

Risk-free interest rate

Expected term

Expected volatility

Expected dividend yield

Fair value of units (using Black-Scholes)

This Warrant Agreement allowed for cashless exercise

option, which is calculated by the percentage difference between exercise and trading price, which resulted in a reduced number of warrants

being exercisable.

On September 7, 2021, Boustead exercised 121,149 shares with fair value of $1,776,044 upon cashless exercise option

of warrants related to completion of the Company’s public offering.

The shares will be issued six months after these warrants have

been exercised.

For the nine months ended September 30, 2021, the Company has a gain on settlement of derivative liability which amounted

Shares to be issued as of September 30, 2021 and December 31, 2020 amounted to $1,776,044 and $0, respectively.

Stock options

3 unchanged sentences

granted 30,000 options to purchase shares at $ 5.70 per share.

As of June 30, 2021, there were 315,000 options

As of September 30, 2021, there were 315,000 options

granted, 288,750 options vested, 26,250 options unvested, and 315,000 outstanding stock options.

For the six months ended June 30, 2021 and 2020,

For the nine months ended September 30, 2021 and

2020, the Company’s stock option compensation expenses amounted to $ 320,512 and $ 605,150 , respectively.

The fair value of the warrants listed above was determined using the

Black-Scholes option pricing model with the following assumptions:

The fair value of the stock options listed above was

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

Schedule of assumptions

September 30,

Risk-free interest rate

3 unchanged sentences

The following is a summary of options activity

from December 31, 2020 to June 30, 2021:

from December 31, 2020 to September 30, 2021:

Schedule of option activity

4 unchanged sentences

Forfeited or expired

Outstanding at June 30, 2021

Vested as of June 30, 2021

Exercisable at June 30, 2021

Outstanding at September 30, 2021

Vested as of September 30, 2021

Exercisable at September 30, 2021

The exercise price for options outstanding and

exercisable at June 30, 2021:

exercisable at September 30, 2021:

Schedule of options by exercise price

11 unchanged sentences

Segment information table

Six months ended June 30, 2021

Nine months ended September 30, 2021

Revenue - related party

2 unchanged sentences

Operating Expenses:

Selling expense

Compensation - officers

8 unchanged sentences

Interest income (expense), net

Gain on extinguishment of debt

Change in fair value of warrant liability

Gain on settlement of derivative liability

Other income (expense), net

5 unchanged sentences

$ ( 2,500,415 )

$ ( 1,162,661 )

Note 13 – Commitments and Contingencies

2 unchanged sentences

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.

liability has been incurred and the amount can be reasonably estimated.

When only a range of possible loss can be established, the most

3 unchanged sentences

There were no recorded litigation loss contingencies

as of June 30, 2021 and December 31, 2020.

as of September 30, 2021 and December 31, 2020.

Note 14 – Subsequent Events

On July 8, 2021, SBA authorized full forgiveness of AVX Design &

Integration, Inc.

PPP loan principal amount of $107,460 and $1,267 interest.

The Company has evaluated all other subsequent

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

or transactions that require recognition or disclosures in the condensed consolidated financial statements.

On October 22, 2021, SBA authorized full forgiveness

of AVX Design & Integration, Inc.

PP loan principal amount of $108,750 and $651 interest

The Company has evaluated other subsequent events

through the date these condensed consolidated financial statements were issued and determined that there were no subsequent events or

transactions that require recognition or disclosures in the condensed consolidated financial statements.

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 1. Financial Statements