What changed in this filing

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Item 1A. Risk Factors

2022-03-08 compared with 2021-03-23 · 726 added, 870 removed, 102 unchanged (94% of the section changed)

We have a limited operating history

and a history of operating losses, and we may not be able to sustain profitability.

In addition, we may be unable to continue as

a going concern.

We were incorporated on December 4, 2012,

and as of December 31, 2020, we had an accumulated deficit of $9,704,575.

We have a limited operating history upon which an evaluation

of our future success or failure can be made.

Additionally, if we are not successful in growing revenues and controlling costs,

we will not maintain profitable operations or positive cash flow, and even if we achieve profitability in the future, we may not

be able to sustain profitability in subsequent periods.

Absent a significant increase in revenue or additional equity or debt financing,

we may not be able to sustain our ability to continue as a going concern.

Because we have a limiting operating

history with positive revenues, you may not be able to accurately evaluate our operations.

Risks Related to our Business and Industry

We have a history of operating losses,

and we may not be able to sustain profitability.

We were incorporated on December 4, 2012;

and have had limited operations to date.

Therefore, we have a limited operating history upon which to evaluate the merits of investing

in our company.

The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and

delays encountered in connection with the operations that we plan to undertake.

as of December 31, 2021, we had an accumulated deficit of $12,937,091.

If we are not successful in growing revenues and controlling costs,

we will not maintain profitable operations or positive cash flow, and even if we achieve profitability in the future, we may not be able

to sustain profitability in subsequent periods.

Because we have a limiting operating history

with positive revenues, you may not be able to accurately evaluate our operations.

We were incorporated on December 4, 2012 and have

had limited profitable operations to date.

Therefore, we have a limited profitable operating history upon which to evaluate the merits

of investing in our company.

The likelihood of success must be considered in light of the problems, expenses, difficulties, complications

and delays encountered in connection with the operations that we plan to undertake.

These potential problems include, but are not limited

to, unanticipated problems relating to the ability to generate sufficient cash flow to operate our business, and additional costs

and expenses that may exceed current estimates.

to, unanticipated problems relating to the ability to generate sufficient cash flow to operate our business, and additional costs and

expenses that may exceed current estimates.

However, we expect to continue generating revenues.

Additionally, we recognize

that if the effectiveness of our business plan is not forthcoming, we will not be able to continue business operations.

unsuccessful in addressing these risks, our business will most likely fail.

We require significant funding to develop, manufacture

and market our Ubiquitor wireless sensor.

We may ultimately require up to $20 million

to fund the development, manufacturing, assembly and marketing strategy for our product.

Once we achieve this fund-raising goal,

we intend to position ourselves in the small device market, establishing the price at below a few hundred dollars.

Due to superior

functionality and low price, we expect to capture this section of the market fairly easily.

Once our product and service matures,

and the Company becomes better known, we believe we could gain market share in the high-end market.

None of this will be possible

if we fail to obtain the funding we require.

There is no guarantee that additional funding can be obtained on favorable terms,

Additionally, we recognize that if the

effectiveness of our business plan is not forthcoming, we will not be able to continue business operations.

If we are unsuccessful in

addressing these risks, our business will most likely fail.

We require significant funding to develop, manufacture and market

our Ubiquitor wireless sensor.

We may ultimately require up to $20 million to

fund the development, manufacturing, assembly and marketing strategy for the Ubiquitor.

Once we achieve this fund-raising goal, we intend

to position ourselves in the small device market, establishing the price at below a few hundred dollars.

Due to superior functionality

and low price, we expect to capture this section of the market fairly easily.

Once our product and service matures, and the Company becomes

better known, we believe we could gain market share in the high-end market.

None of this will be possible if we fail to obtain the funding

There is no guarantee that additional funding can be obtained on favorable terms, if at all.

We depend on key personnel.

Our future success will depend in part

on the continued service of key personnel, particularly, Desheng Wang, our Chief Executive Officer, and the Chairman of our Board,

If any of our directors and officers choose

to leave the company, we will face significant difficulties in attracting potential candidates for replacement of our key personnel

due to our limited financial resources and operating history.

In addition, the loss of any key employees or the inability to attract

or retain qualified personnel could delay our plan of operations and harm our ability to provide services to our current customer,

Hydrofarm, and harm the market’s perception of us.

Regulatory actions could limit our

ability to market and sell our products.

Many of our products and the industries

in which they are used are subject to U.S.

Our future success will depend in part on the

continued service of key personnel, particularly, Desheng Wang, our Chief Executive Officer, and Edward Lee, the Chairman of our Board.

If any of our directors and officers choose to

leave the company, we will face significant difficulties in attracting potential candidates for replacement of our key personnel due to

our limited financial resources and operating history.

In addition, the loss of any key employees or the inability to attract or retain

qualified personnel could delay our plan of operations and harm our ability to provide services to our current customer, Hydrofarm, and

harm the market’s perception of us.

Regulatory actions could limit our ability

to market and sell our products.

Many of our products and the industries in which

they are used are subject to U.S.

and foreign regulation.

Government regulatory action could greatly reduce the market

for our Ubiquitor device and for smart home installation.

For example, the power line medium, which is the communications medium

that could be used by some of our products, is subject to special regulations in North America, Europe and Japan.

In general, these

regulations limit the ability of companies such as ours to use power lines as a communication medium.

In addition, some of our

competitors have attempted or may attempt to use regulatory actions to reduce the market opportunity for our products or to increase

the market opportunity for their own products.

We outsource our product manufacturing

and are susceptible to problems in connection with procurement, decreasing quality, reliability and protectability.

We assemble our

Ubiquitor devices by using fully manufactured parts, the manufacturing of which has been fully outsourced.

We have no direct control

over the manufacturing processes of our products.

This lack of control may increase quality or reliability risks and could limit

our ability to quickly increase or decrease production rates.

operations and financial performance may be affected by the coronavirus pandemic.

The coronavirus pandemic has adversely

affected economies throughout the world.

With the continued spread of the coronavirus in the United States and other countries,

it is unclear how economic activity and workflows might be impacted on a worldwide basis.

Many employers in the United States

are requiring their employees to work from home or not come into their office.

If the pandemic continues and conditions worsen,

we may experience a disruption in our supply chain as well as a decline in sales activities and customer orders.

The impact of

the coronavirus on our operations is uncertain at this time.

Given the rapidly changing situation related to this pandemic, we

believe it could have a material adverse effect on our business, financial conditions and results of operations.

We outsource the manufacturing of

key elements of our quantum light meters and air filters to a single manufacturing partner, with whom we do not have a formal contractual

relationship.

We outsource the

manufacture of our quantum light meter and air filtration devices to a single contract manufacturer, Tianjin Guanglee Technologies

(“Tianjin Guanglee”).

If Tianjin Guanglee’s operations are interrupted or if Tianjin Guanglee is unable

to meet our delivery requirements due to capacity limitations or other constraints, we may be limited in our ability to fulfill

new customer orders, and we may be required to seek new manufacturing partners in the future.

Tianjin Guanglee has limited manufacturing

capacity, is itself dependent upon third-party suppliers and is dependent on trained technical labor to effectively create components

making up our devices or to repair special tooling.

In addition, as of the date of this prospectus, we do not have a formal development

and manufacturing agreement that regulates our business relationship with Tianjin Guanglee.

Although we continue to operate under

the terms of an oral agreement, and we believe there are a multitude of manufacturers that could quickly replace Tianjin Guanglee,

our manufacturing operations could be adversely impacted if we are unable to enforce Tianjin Guanglee’s performance.

Our potential inability to adequately

protect our intellectual property during the outsource manufacturing of our filtration products in China could negatively impact

our performance.

Government regulatory action could greatly reduce the market for our Ubiquitor

device and for smart home installation.

For example, the power line grid, which is the communications grid that could be used by some

of our products, is subject to special regulations in North America, Europe and Japan.

In general, these regulations limit the ability

of companies such as ours to use power lines as a communication medium.

In addition, some of our competitors have attempted or may attempt

to use regulatory actions to reduce the market opportunity for our products or to increase the market opportunity for their own products.

We outsource our product manufacturing and

are susceptible to problems in connection with procurement, decreasing quality, reliability and protectability.

We assemble our Ubiquitor devices by using fully

manufactured parts, the manufacturing of which has been fully outsourced.

We have no direct control over the manufacturing processes of

our products.

This lack of control may increase quality or reliability risks and could limit our ability to quickly increase or decrease

production rates.

Our business operations and financial performance

may be affected by the coronavirus pandemic.

The coronavirus pandemic has adversely affected

economies throughout the world.

With the continued spread of the coronavirus in the United States and other countries, it is unclear how

economic activity and workflow might be impacted on a worldwide basis generally or for our Company specifically.

If the pandemic continues

and/or conditions worsen, we may experience a disruption in our supply chain as well as a decline in sales activities and customer orders.

The impact of the coronavirus on our operations is uncertain at this time.

Given the rapidly changing situation related to this pandemic,

we believe it could have a material adverse effect on our business, financial conditions and results of operations.

During 2020, our subsidiary

AVX was negatively impacted by the COVID-19 pandemic.

AVX encountered delays in certain projects due to the government-imposed restrictions

affecting access to job sites as well as clients contracting the coronavirus.

We also had employees contract the virus, which negatively

impacted our research and development.

In 2021, we had delays in receiving the inventory necessary for Perfecular to fulfill sales orders

due to a shortage of shipment containers caused by the pandemic, which resulted in delays in completing our sales cycles.

We outsource the manufacturing of key elements

of our quantum light meters and air filters to a single manufacturing partner, with whom we do not have a formal contractual relationship.

We outsource the manufacture of our quantum light

meter and air filtration devices to a single contract manufacturer, Tianjin Guanglee Technologies Ltd.

(“Tianjin Guanglee”).

If Tianjin Guanglee’s operations are interrupted or if Tianjin Guanglee is unable to meet our delivery requirements due to capacity

limitations or other constraints, we may be limited in our ability to fulfill new customer orders, and we may be required to seek new

manufacturing partners in the future.

Tianjin Guanglee has limited manufacturing capacity, is itself dependent upon third-party suppliers

and is dependent on trained technical labor to effectively create components making up our devices or to repair special tooling.

as of the date of this report, we do not have a formal development and manufacturing agreement that regulates our business relationship

with Tianjin Guanglee.

Although we continue to operate under the terms of an oral agreement, and we believe there are a multitude of manufacturers

that could quickly replace Tianjin Guanglee, our manufacturing operations could be adversely impacted if we are unable to enforce Tianjin

Guanglee’s performance.

Our potential inability to adequately protect

our intellectual property during the outsource manufacturing of our quantum light meters and filtration products in China could negatively

impact our performance.

In connection with our manufacturing outsourcing

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agreements with employees, to protect our proprietary information and technologies during the manufacturing process.

However, these

safeguards may not effectively prevent unauthorized use of such information and technical knowhow or prevent the manufacturers

from retaining them.

We face risks that our proprietary information may not be afforded the same protection in China as it is in

countries with more comprehensive intellectual property laws, and local laws may not provide an adequate remedy in the event of

unauthorized disclosure of confidential information.

Costly and time-consuming litigation could be necessary to enforce and determine

the scope of our proprietary rights in China, and failure to obtain or maintain intellectual property or trade secret protection

could adversely affect our competitive business position.

In the event that the third-party manufacturers of our proprietary products

misappropriate our intellectual property, our business, prospects and financial condition could be materially and adversely affected.

The size and future growth in the

market for our Ubiquitor device or our PLC technology under development has not been established with precision and may be smaller

than we estimate, possibly materially.

If our estimates and projections overestimate the size of this market, our sales growth

may be adversely affected.

Our estimates of the size and future growth

in the market for our Ubiquitor device or our PLC technology under development is based on a number of internal studies, reports

and estimates.

In addition, our internal estimates are based in large part on current feedback from clients using current generation

technology and our belief is that the use and implementation in the United States and worldwide will be extensive.

While we believe

we are using effective tools in estimating the total market for Ubiquitor device or our PLC technology, these estimates may not

be correct and the conditions supporting our estimates may change at any time, thereby reducing the predictive accuracy of these

underlying factors.

The actual demand for our products or competitive products, could differ materially from our projections if

our assumptions are incorrect.

As a result, our estimates of the size and future growth in the market for Ubiquitor device or our

power line communication technology may prove to be incorrect.

If the demand is smaller than we have estimated, it may impair our

projected sales growth and have an adverse impact on our business.

If we are unable to properly forecast

future demand of our products, our production levels may not meet demands, which could negatively impact our operating results.

Our ability to manage our inventory levels

to meet our customer's demand for our products is important for our business.

Our production levels and inventory management are

based on demand estimates six to twelve months forward taking into account supply lead times, production capacity, timing of shipments,

and dealer inventory levels.

If we overestimate or underestimate demand for any of our products during a given season, we may not

maintain appropriate inventory levels, which could negatively impact our net sales or working capital, hinder our ability to meet

customer demand, or cause us to incur excess and obsolete inventory charges.

Demand for our Ubiquitor product

may be affected by new entrants who copy our products and/or infringe on our intellectual property.

However, these safeguards

may not effectively prevent unauthorized use of such information and technical knowhow or prevent the manufacturers from retaining them.

We face risks that our proprietary information may not be afforded the same protection in China as it is in countries with more comprehensive

intellectual property laws, and local laws may not provide an adequate remedy in the event of unauthorized disclosure of confidential

Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights in China,

and failure to obtain or maintain intellectual property or trade secret protection could adversely affect our competitive business position.

In the event that the third-party manufacturers of our proprietary products misappropriate our intellectual property, our business, prospects

and financial condition could be materially and adversely affected.

Our business operations in China may negatively

affect the ability to protect our intellectual property and our financial position.

On December 31, 2021, we set up a branch office

in mainland China.

Historically, China has not protected intellectual property rights to the same extent as the United States, and infringement

of intellectual property rights continues to pose a serious risk of doing business in China.

and preventing unauthorized use is difficult.

The measures we take to protect our intellectual property rights may not be adequate.

unauthorized use of our intellectual property rights could harm our competitive advantages and business.

Furthermore, the application

of laws governing intellectual property rights in China is uncertain and evolving and could involve substantial risks to us.

unable to adequately protect our intellectual property rights, we may lose these rights and our business may suffer materially.

the complexities that arise from operating in a different tax jurisdiction inevitably lead to an increased exposure to international taxation.

Should review of our tax filings result in unfavorable adjustments, our operating results, cash flows, and financial position could be

materially and adversely affected.

The size and future growth in the market

for our Ubiquitor device or our PLC technology has not been established with precision and may be smaller than we estimate, possibly materially.

If our estimates and projections overestimate the size of this market, our sales growth may be adversely affected.

Our estimates of the size and future growth in

the market for our Ubiquitor device or our PLC technology is based on a number of internal studies, reports and estimates.

our internal estimates are based in large part on current feedback from clients using current generation technology and our belief is

that the use and implementation of our technologies in the United States and worldwide will be extensive.

While we believe we are using

effective tools in estimating the total market for Ubiquitor device or our PLC technology, these estimates may not be correct and the

conditions supporting our estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors.

actual demand for our products or competitive products, could differ materially from our projections if our assumptions are incorrect.

As a result, our estimates of the size and future growth in the market for the Ubiquitor device or our PLC technology may prove to be

If the demand is smaller than we have estimated, it may impair our projected sales growth and have an adverse impact on our

If we are unable to properly forecast future

demand of our products, our production levels may not meet demands, which could negatively impact our operating results.

Our ability to manage our inventory levels to

meet our customer’s demand for our products is important for our business.

Our production levels and inventory management are based

on demand estimates six to twelve months forward taking into account supply lead times, production capacity, timing of shipments, and

dealer inventory levels.

If we overestimate or underestimate demand for any of our products during a given season, we may not maintain

appropriate inventory levels, which could negatively impact our net sales or working capital, hinder our ability to meet customer demand,

or cause us to incur excess and obsolete inventory charges.

Demand for our Ubiquitor product may be

affected by new entrants who copy our products and/or infringe on our intellectual property.

The ability to protect and enforce intellectual

property rights varies across jurisdictions.

An inability to preserve our intellectual property rights may adversely affect our

financial performance.

Competitors and others may also initiate litigation to challenge the validity of our intellectual property

or allege that we infringe their intellectual property.

We may be required to pay substantial damages if it is determined our products

infringe on their intellectual property.

We may also be required to develop an alternative, non-infringing product that could be

costly and time-consuming, or acquire a license on terms that are not favorable to us.

Protecting or defending against such claims

could significantly increase our costs, divert management’s time and attention away from other business matters, and otherwise

adversely affect our results of operations and financial condition.

Internal system or service failures,

including as a result of cyber or other security incidents, could disrupt business operations, result in the loss of critical and

confidential information, and adversely impact our reputation, our business, financial condition, results of operations and cash

Our connected products potentially expose our business to cybersecurity threats.

The Ubiquitor is a connected product and

potentially exposes our business to cybersecurity threats.

As a result, we could be subject to systems, service or product failures,

natural disasters, power shortages or terrorist attacks, but also from exposure to cyber or other security threats.

Global cybersecurity

threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to our systems to sophisticated

and targeted measures known as advanced persistent threats directed at our products, our customers and/or our third-party service

providers, including cloud providers.

There has been an increase in the frequency and sophistication of cyber and other security

threats we face, and our customers are increasingly requiring cyber and other security protections and standards in our products,

and we may incur additional costs to comply with such demands.

The potential consequences of a material

cyber or other security incident include financial loss, reputational damage, negative media coverage, litigation with third parties,

which in turn could adversely affect our competitiveness, business, financial condition, results of operations and cash flows.

Our sensor segment is subject to

risks associated with operations that have a concentration of customers.

We only have one customer, Hydrofarm, who

resells our digital light meters and sensors.

There is no guarantee that this customer will remain solvent, and/or continue with

the Company as it has in the past.

Consequently, if we were to lose this customer, a material portion of our revenues in our sensor

and digital light meter segment would be lost.

Our air filtration business segment could experience price

fluctuations in raw materials, availability problems, and volatile demand.

The principal raw materials that we use

are filter media, activated carbon, perforated metal sheet, and certain other petroleum-based products, like plastics, rubber,

and adhesives.

Our cost of filter media can experience price fluctuations.

Larger competitors can enter into selective supply arrangements

with major suppliers that reduce medium-to-long-term volatility in costs.

We cannot guarantee purchases in the volume that justifies

such selective supply arrangements.

An inability to preserve our intellectual property rights may adversely affect our financial

Competitors and others may also initiate litigation to challenge the validity of our intellectual property or allege that

we infringe their intellectual property.

We may be required to pay substantial damages if it is determined our products infringe on their

intellectual property.

We may also be required to develop an alternative, non-infringing product that could be costly and time-consuming,

or acquire a license on terms that are not favorable to us.

Protecting or defending against such claims could significantly increase our

costs, divert management’s time and attention away from other business matters, and otherwise adversely affect our results of operations

and financial condition.

Internal system or service failures, including

as a result of cyber or other security incidents, could disrupt business operations, result in the loss of critical and confidential information,

and adversely impact our reputation, our business, financial condition, results of operations and cash flows.

Our connected products potentially

expose our business to cybersecurity threats.

Some of our products connect to the internet and

potentially expose our business to cybersecurity threats.

Global cybersecurity threats and incidents can range from uncoordinated individual

attempts to gain unauthorized access to our systems to sophisticated and targeted measures known as advanced persistent threats directed

at our products, our customers and/or our third-party service providers, including cloud providers.

There has been an increase in the

frequency and sophistication of cyber and other security threats we face, and our customers are increasingly requiring cyber and other

security protections and standards in our products, and we may incur additional costs to comply with such demands.

The potential consequences of a material cyber

or other security incident include financial loss, reputational damage, negative media coverage, litigation with third parties, which

in turn could adversely affect our competitiveness, business, financial condition, results of operations and cash flows.

Our sensor segment is subject to risks associated

with operations that have a concentration of customers.

We only have one customer, Hydrofarm, who resells

our digital light meters and sensors.

There is no guarantee that this customer will remain solvent, and/or continue with the Company as

it has in the past.

Consequently, if we were to lose this customer, a material portion of our revenues in our sensor and digital light

meter segment would be lost.

Our air filtration business segment could

experience price fluctuations in raw materials, availability problems, and volatile demand.

The principal raw materials that we use are filter

media, activated charcoal, perforated metal sheet, and certain other petroleum-based products, like plastics, rubber, and adhesives.

cost of filter media can experience price fluctuations.

Larger competitors can enter into selective supply arrangements with major suppliers

that reduce medium-to-long-term volatility in costs.

We cannot guarantee purchases in the volume that justifies such selective supply

arrangements.

Thus, we could be subject to price volatility.

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parts and plastics we need to assemble the Ubiquitor could fluctuate.

The principal raw materials that we use

for our Ubiquitor device are standard industrial electronics parts and plastics that are generally easily available through a variety

The principal raw materials that we use for our

Ubiquitor device are standard industrial electronics parts and plastics that are generally easily available through a variety of U.S.

domestic and foreign manufacturers.

Such raw materials can experience price fluctuations due to a variety of factors, such

as tariffs, import/export fees and delays, and availability.

If there is scarcity, then larger competitors could be given purchasing

priority with major suppliers that could make it so smaller companies like us experience volatility in costs and/or availability

Also, since we have not yet manufactured in large numbers, our management team might not have the expertise to mitigate

such price fluctuations or availability concerns.

Such raw materials can experience price fluctuations due to a variety of factors, such as tariffs,

import/export fees and delays, and availability.

If there is scarcity, then larger competitors could be given purchasing priority with

major suppliers that could make it so smaller companies like us experience volatility in costs and/or availability issues.

we have not yet manufactured in large numbers, our management team might not have the expertise to mitigate such price fluctuations or

availability concerns.

Thus, suppliers could stop selling to us because of demand.

Even though it is

possible to find alternative suppliers, changing to new suppliers could delay production and affect the quality of certain products.

Changes in tariffs, import or export

restrictions, Chinese regulations or other trade barriers may reduce gross margins.

Even though it is possible to find alternative suppliers,

changing to new suppliers could delay production and affect the quality of certain products.

Changes in tariffs, import or export restrictions,

Chinese regulations or other trade barriers may reduce gross margins.

We currently source products from manufacturers

in China, including digital, analog, and quantum light meters, filtration products and certain components for our Ubiquitor device.

Currently, the prices we offer to Hydrofarm are FOB (Free on Board) China.

Only the cost of delivering the goods to the nearest

port is included and Hydrofarm is responsible for the shipping from China and responsible for all other fees, including tariffs,

associated with delivering the goods to the ultimate destination.

If Hydrofarm changes the term to CIF (Cost, Insurance, and Freight)

United States, then we would be responsible for the shipping costs and the tariff costs, which may reduce our gross margin.

we may incur increases in costs due to changes in tariffs, import or export restrictions, other trade barriers, or unexpected changes

in regulatory requirements, any of which could reduce our gross margins.

Moreover, volatile economic conditions may impact the

ability of our suppliers to make timely deliveries;

and in the event that a supplier fails to make a delivery, there is no guarantee

that we will be able to timely locate an alternative supplier of comparable quality at an acceptable price.

Since the beginning of 2018, there has

been increasing rhetoric, in some cases coupled with legislative or executive action, from several U.S.

and foreign leaders regarding

tariffs against foreign imports of certain materials.

It is difficult to anticipate the impact on our business caused by the proposed

tariffs or whether the proposed changes in tariffs will materialize in the future.

Given the relatively fluid regulatory environment

in China and the United States, there could be additional tax, tariffs or other regulatory changes in the future.

Any such changes

could directly and materially adversely impact our business, financial condition, and operating results.

Our failure to respond to rapid change

in the technology markets could cause us to lose revenue and harm our competitive position.

Our future success will depend significantly

on our ability to develop and market new products that keep pace with technological developments and evolving industry standards

for technology.

We are currently developing products, including our Ubiquitor device, universal smart monitors and controllers,

distributed shared universal smart home products, and smart products for the gardening industry, for MacOS, PC, as well as mobile

operating systems such as Android and iOS, that transmit data over Wi-Fi signals, cellular signals, Bluetooth, certain power line

systems, traditional wired systems, and other radio frequency systems that enable data transmission.

Our delay or failure to develop

or acquire technological improvements, adapt our products to technological changes or provide technology that appeals to our customers

may cause us to lose customers and may prevent us from generating revenue which could ultimately cause us to cease operations.

Our business depends on our ability

to keep manufacturing costs low;

and we may lack the expertise necessary to negotiate and maintain favorable pricing, supply, business

and credit terms with our potential vendors.

It may be difficult to negotiate or maintain

favorable pricing, supply, business or credit terms with our potential vendors, suppliers and service providers.

In addition, product

manufacturing costs may increase if we fail to achieve anticipated volumes.

There can be no assurance that we will be able to successfully

manage these risks.

In summary, we can offer no assurance that we will be able to obtain a sufficient (but not excess) supply of

products on a timely and cost-effective basis.

the prices we offer to Hydrofarm are FOB (Free on Board) China.

Only the cost of delivering the goods to the nearest port is included

and Hydrofarm is responsible for the shipping from China and responsible for all other fees, including tariffs, associated with delivering

the goods to the ultimate destination.

If Hydrofarm changes the term to CIF (Cost, Insurance, and Freight) United States, then we would

be responsible for the shipping costs and the tariff costs, which may reduce our gross margin.

Thus, we may incur increases in costs due

to changes in tariffs, import or export restrictions, other trade barriers, or unexpected changes in regulatory requirements, any of which

could reduce our gross margins.

Moreover, volatile economic conditions may impact the ability of our suppliers to make timely deliveries;

and in the event that a supplier fails to make a delivery, there is no guarantee that we will be able to timely locate an alternative

supplier of comparable quality at an acceptable price.

Since the beginning of 2018, there has been increasing

rhetoric, in some cases coupled with legislative or executive action, from several U.S.

and foreign leaders regarding tariffs against

foreign imports of certain materials.

It is difficult to anticipate the impact on our business caused by the proposed tariffs or whether

the proposed changes in tariffs will materialize in the future.

Given the relatively fluid regulatory environment in China and the United

States, there could be additional tax, tariffs or other regulatory changes in the future.

Any such changes could directly and materially

adversely impact our business, financial condition, and operating results.

Our failure to respond to rapid change in

the technology markets could cause us to lose revenue and harm our competitive position.

Our future success will depend significantly on

our ability to develop and market new products that keep pace with technological developments and evolving industry standards for technology.

We are currently developing products, including our Ubiquitor device, universal smart monitors and controllers, distributed shared universal

smart home products, and smart products for the gardening industry, for MacOS, PC, as well as mobile operating systems such as Android

and iOS, that transmit data over Wi-Fi signals, cellular signals, Bluetooth, certain power line systems, traditional wired systems, and

other radio frequency systems that enable data transmission.

Our delay or failure to develop or acquire technological improvements, adapt

our products to technological changes or provide technology that appeals to our customers may cause us to lose customers and may prevent

us from generating revenue which could ultimately cause us to cease operations.

Our business depends on our ability to keep

manufacturing costs low;

and we may lack the expertise necessary to negotiate and maintain favorable pricing, supply, business and credit

terms with our potential vendors.

It may be difficult to negotiate or maintain favorable

pricing, supply, business or credit terms with our potential vendors, suppliers and service providers.

In addition, product manufacturing

costs may increase if we fail to achieve anticipated volumes.

There can be no assurance that we will be able to successfully manage these

In summary, we can offer no assurance that we will be able to obtain a sufficient (but not excess) supply of products on a timely

and cost-effective basis.

Our failure to do so would lead to a material adverse impact on our business.

Since wireless

networks are susceptible to interference and other limitations, and one advantage of our Ubiquitor device is that it can connect

to wireless networks as one way to transmit data, wireless network limitations may reduce the competitive advantage of the Ubiquitor

Since wireless networks are susceptible

to interference and other limitations, and one advantage of our Ubiquitor device and our USIP platform is that it can connect to wireless

networks as one way to transmit data, wireless network limitations may reduce the competitive advantage of the Ubiquitor and USIP platform

in the marketplace.

Our Ubiquitor relies on both wired and

wireless networks to transmit data, which is a major advantage of the Ubiquitor device.

Wireless networks allow multiple users

to access large amounts of information without the hassle of running wires to and from each IoT device.

However, wireless networks

have technological limitations and there are a number of disadvantages that our Ubiquitor device may face when using a wireless

Our Ubiquitor and USIP platform relies on both

wired and wireless networks to transmit data, which is a major advantage of the Ubiquitor device and the USIP platform.

Wireless networks

allow multiple users to access large amounts of information without the hassle of running wires to and from each IoT device.

wireless networks have technological limitations and there are a number of disadvantages that our Ubiquitor device may face when using

a wireless network.

Wireless networks are typically expensive;

it can cost up to four times more to set up a wireless network than to set

up a wired network.

it can cost up to four times more to set up a wireless network than to

set up a wired network.

The range of a wireless network is limited, and a typical wireless router will only allow individuals located

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Such interference may cause a wireless network to malfunction.

Wireless networks can be

accessed by any IoT device within range of the network’s signal so information transmitted through the network (including

encrypted information) may be intercepted by unauthorized users.

Wireless networks are typically slower than wired networks, sometimes

even up to 10 times slower.

Wireless networks can be accessed

by any IoT device within range of the network’s signal so information transmitted through the network (including encrypted information)

may be intercepted by unauthorized users.

Wireless networks are typically slower than wired networks, sometimes even up to 10 times slower.

Walls and floors can seriously limit the range of your wireless network.

Since wireless networks have

severe limitations, these limitations may reduce the competitive advantage that the Ubiquitor provides in the marketplace which

might prevent widespread adoption.

Demand for our products is uncertain

and depends on our currently unproven ability to create and maintain superior performance.

Our future operating results will depend

upon our ability to provide our products or services and to operate profitably in an industry characterized by intense competition,

rapid technological advances and low margins.

Since wireless networks have severe limitations, these limitations

may reduce the competitive advantage that the Ubiquitor provides in the marketplace which might prevent widespread adoption.

Demand for our products is uncertain and

depends on our currently unproven ability to create and maintain superior performance.

Our future operating results will depend upon

our ability to provide our products or services and to operate profitably in an industry characterized by intense competition, rapid technological

advances and low margins.

This, in turn, will depend on a number of factors, including:

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Our ability to successfully manage litigation, including enforcing our rights, protecting our interests and defending claims made against us.

These factors

are difficult to manage, satisfy and influence and we cannot provide any assurance that we will be able to generate significant

demand for and sales of our products.

The Ubiquitor

device could fail to gain traction in the marketplace for a number of reasons that would adversely impact our financial results

and cause our investors to lose money.

Future rollout of the Ubiquitor entail

numerous risks such as:

These factors are difficult to manage, satisfy

and influence and we cannot provide any assurance that we will be able to generate significant demand for and sales of our products.

The Ubiquitor device could fail to gain

traction in the marketplace for a number of reasons that would adversely impact our financial results and cause our investors to lose

Future rollout of the Ubiquitor entail numerous risks such as:

Any lack of market acceptance of the Ubiquitor;

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Risks that third parties may assert intellectual property claims against our products.

In order to compete

successfully, we must accurately forecast demand, closely monitor inventory levels, secure quality products, continuously drive

down costs, meet aggressive product price and performance targets, create market demand for our brand and hold sufficient, but

not excess, inventory.

Our Ubiquitor device greatly depends

on the growth and adoption of the IoT market, and other next-generation internet and smartphone-based applications.

The Internet may ultimately prove not to be a viable commercial

marketplace for IoT applications for a number of reasons, including:

In order to compete successfully, we must accurately

forecast demand, closely monitor inventory levels, secure quality products, continuously drive down costs, meet aggressive product price

and performance targets, create market demand for our brand and hold sufficient, but not excess, inventory.

Our Ubiquitor device greatly depends on

the growth and adoption of the IoT market, and other next-generation internet and smartphone-based applications.

The Internet may ultimately prove not to be a viable commercial marketplace

for IoT applications for a number of reasons, including:

unwillingness of consumers to shift to and use other such next-generation Internet-based, smartphone-assisted applications;

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increased government regulations in a relatively unregulated marketplace.

There is a risk that the market will

not adapt to using the smartphone readout as a substitute platform for sensor devices, causing our products to fail in the marketplace.

There is a risk that the market will not

receive the smartphone technology, which we currently as our sole platform.

The vast majority of products on the small sensor device

market do not currently use smartphones to collect and analyze sensor data.

adapt to using the smartphone readout as a substitute platform for sensor devices, causing our products to fail in the marketplace.

The vast majority of products on the small sensor

device market do not currently use smartphones to collect and analyze sensor data.

There is no guarantee that using smartphone technology

will cut production costs and be well received.

If our platform using smartphone technology is not well received, there is a risk

that device manufacturers will develop new monitoring and operating components that are incompatible with our current platform

instead of developing the traditional sensors that are compatible with our technology.

Updating our platform to stay compatible

with new components could increase our costs unexpectedly.

If our USIP using smartphone technology is not well received, there is a risk that device

manufacturers will develop new monitoring and operating components that are incompatible with our current platform instead of developing

the traditional sensors that are compatible with our technology.

Updating our platform to stay compatible with new components could increase

our costs unexpectedly.

Using wireless transmission technologies

such as Wi-Fi and Bluetooth may create security risks.

There is also a risk of failure based on

the wireless transmission of data used by our smartphone platform.

If there is instability in a wireless network, Bluetooth sensor,

or other network problems that are out of our control, our new platform may not be well received.

Our smartphone platform relies

on the wireless transmission of data through Wi-Fi networks and Bluetooth sensors.

These networks are often deemed less secure

than a hard-wired network.

The security of a wireless network is often out of our control.

However, any breach of security could

result in the market and sensor device manufacturers to fail to embrace our platform.

There is also a risk of failure based on the wireless

transmission of data used by our smartphone platform.

If there is instability in a wireless network, Bluetooth sensor, or other network

problems that are out of our control, our new platform may not be well received.

Our smartphone platform relies on the wireless transmission

of data through Wi-Fi networks and Bluetooth sensors.

These networks are often deemed less secure than a hard-wired network.

of a wireless network is often out of our control.

However, any breach of security could result in the market and sensor device manufacturers

to fail to embrace our platform.

Our business involves the use, transmission

and storage of confidential information, and the failure to properly safeguard such information could result in significant reputational

We may at times collect, store and transmit

information of, or on behalf of, our clients that may include certain types of confidential information that may be considered

personal or sensitive, and that are subject to laws that apply to data breaches.

We believe that we take reasonable steps to protect

the security, integrity and confidentiality of the information we collect and store, but there is no guarantee that inadvertent

or unauthorized disclosure will not occur or that third parties will not gain unauthorized access to this information despite our

efforts to protect this information, including through a cyber-attack that circumvents existing security measures and compromises

the data that we store.

If such unauthorized disclosure or access does occur, we may be required to notify persons whose information

was disclosed or accessed.

Most states have enacted data breach notification laws and, in addition to federal laws that apply to

certain types of information, such as financial information, federal legislation has been proposed that would establish broader

federal obligations with respect to data breaches.

We may also be subject to claims of breach of contract for such unauthorized

disclosure or access, investigation and penalties by regulatory authorities and potential claims by persons whose information was

The unauthorized disclosure of information, or a cyber-security incident involving data that we store, may result in

the termination of one or more of our commercial relationships or a reduction in client confidence and usage of our services.

may also be subject to litigation alleging the improper use, transmission or storage of confidential information, which could damage

our reputation among our current and potential clients and cause us to lose business and revenue.

Product liability associated with

the production, marketing and sale of our products, and/or the expense of defending against claims of product liability, could

materially deplete our assets and generate negative publicity which could impair our reputation.

We may at times collect, store and transmit information

of, or on behalf of, our clients that may include certain types of confidential information that may be considered personal or sensitive,

and that are subject to laws that apply to data breaches.

We believe that we take reasonable steps to protect the security, integrity

and confidentiality of the information we collect and store, but there is no guarantee that inadvertent or unauthorized disclosure will

not occur or that third parties will not gain unauthorized access to this information despite our efforts to protect this information,

including through a cyber-attack that circumvents existing security measures and compromises the data that we store.

If such unauthorized

disclosure or access does occur, we may be required to notify persons whose information was disclosed or accessed.

Most states have enacted

data breach notification laws and, in addition to federal laws that apply to certain types of information, such as financial information,

federal legislation has been proposed that would establish broader federal obligations with respect to data breaches.

We may also be subject

to claims of breach of contract for such unauthorized disclosure or access, investigation and penalties by regulatory authorities and

potential claims by persons whose information was disclosed.

The unauthorized disclosure of information, or a cyber-security incident

involving data that we store, may result in the termination of one or more of our commercial relationships or a reduction in client confidence

and usage of our services.

We may also be subject to litigation alleging the improper use, transmission or storage of confidential information,

which could damage our reputation among our current and potential clients and cause us to lose business and revenue.

Product liability associated with the production,

marketing and sale of our products, and/or the expense of defending against claims of product liability, could materially deplete our

assets and generate negative publicity which could impair our reputation.

The production, marketing and sale of digital

products have inherent risks of liability in the event of product failure or claim of harm caused by product operation.

even meritless claims of product liability may be costly to defend against.

We do not currently have product liability insurance

for our products.

Furthermore, even

meritless claims of product liability may be costly to defend against.

We do not currently have product liability insurance for our products.

We may not be able to obtain this insurance on acceptable terms or at all.

Because we may not be able to obtain

insurance that provides us with adequate protection against all or even some potential product liability claims, a successful claim

against us could materially deplete our assets.

Moreover, even if we are able to obtain adequate insurance, any claim against us

could generate negative publicity, which could impair our reputation and adversely affect the demand for our products, our ability

to generate sales and our profitability.

Because we may not be able to obtain insurance that provides

us with adequate protection against all or even some potential product liability claims, a successful claim against us could materially

deplete our assets.

Moreover, even if we are able to obtain adequate insurance, any claim against us could generate negative publicity,

which could impair our reputation and adversely affect the demand for our products, our ability to generate sales and our profitability.

For the products we sell through Hydrofarm, we also do not carry product liability insurance.

It is our management’s position that these handheld battery-operated products do not carry substantial product liability

risk and to the extent there are any product liability risks, such risks are born by Hydrofarm, who does carry product liability

insurance coverage for the products we provide to them and they sell to their customers.

However, it is possible that we could

face liability in a products liability lawsuit for manufacturing defects or defective design since we design or manufacture the

products sold by Hydrofarm.

Some of the agreements that we may enter

into with manufacturers or distributors of our products and components of our products may require us:

It is our management’s position that

these handheld battery-operated products do not carry substantial product liability risk and to the extent there are any product liability

risks, such risks are born by Hydrofarm, who does carry product liability insurance coverage for the products we provide to them and they

sell to their customers.

However, it is possible that we could face liability in a products liability lawsuit for manufacturing defects

or defective design since we design or manufacture the products sold by Hydrofarm.

Some of the agreements that we may enter into

with manufacturers or distributors of our products and components of our products may require us:

to obtain product liability insurance;

to indemnify manufacturers against liabilities resulting from the sale of our products.

If we are not able to obtain and maintain

adequate product liability insurance, then we could be in breach of these agreements, which could materially adversely affect our

ability to produce our products and generate revenues.

Even if we are able to obtain and maintain product liability insurance,

if a successful claim in excess of our insurance coverage is made, then we may have to indemnify some or all of our manufacturers

or distributors for their losses, which could materially deplete our assets.

If we are not able to obtain and maintain adequate

product liability insurance, then we could be in breach of these agreements, which could materially adversely affect our ability to produce

our products and generate revenues.

Even if we are able to obtain and maintain product liability insurance, if a successful claim in excess

of our insurance coverage is made, then we may have to indemnify some or all of our manufacturers or distributors for their losses, which

could materially deplete our assets.

We may not be able to identify suitable

acquisition targets or otherwise successfully implement a growth strategy reliant on mergers and acquisitions.

In order to expand our business, we hope

to pursue mergers and acquisitions to acquire new or complementary businesses, services or technologies.

We expect to continue

evaluating potential strategic acquisitions of businesses, services and technologies.

However, we may not be able to identify suitable

candidates, negotiate appropriate or favorable acquisition terms, obtain financing that may be needed to consummate such transactions

or complete proposed acquisitions.

Any such future mergers and acquisitions would be accompanied by the risks commonly encountered

in acquisitions of companies, including, among other things, the difficulty of integrating the operations and personnel of the

acquired companies;

the potential disruption of the Company’s ongoing business;

the inability of management to incorporate

successfully acquired technology and rights into the Company’s services and product offerings;

additional expense associated

with amortization of acquired intangible assets;

the maintenance of uniform standards, controls, procedures and policies;

potential impairment of relationships with employees, customers and strategic partners.

Our growth strategy includes licensing our intellectual

property, and we run the risk that a licensee could become a competitor.

In order to expand our business, we hope to pursue

mergers and acquisitions to acquire new or complementary businesses, services or technologies.

We expect to continue evaluating potential

strategic acquisitions of businesses, services and technologies.

However, we may not be able to identify suitable candidates, negotiate

appropriate or favorable acquisition terms, obtain financing that may be needed to consummate such transactions or complete proposed acquisitions.

Any such future mergers and acquisitions would be accompanied by the risks commonly encountered in acquisitions of companies, including,

among other things, the difficulty of integrating the operations and personnel of the acquired companies;

the potential disruption of

the Company’s ongoing business;

the inability of management to incorporate successfully acquired technology and rights into the

Company’s services and product offerings;

additional expense associated with amortization of acquired intangible assets;

the maintenance

of uniform standards, controls, procedures and policies;

and the potential impairment of relationships with employees, customers and strategic

Our growth strategy includes licensing our intellectual property,

and we run the risk that a licensee could become a competitor.

As part of our growth strategy, we anticipate

licensing our intellectual property.

Licensing our intellectual property could potentially damage our business if a licensee becomes

a competitor, especially once the statutory rights to our intellectual property have expired or the licensing arrangement with

a licensee has terminated.

A licensee could develop modifications of our intellectual property and choose to compete with us in

the marketplace.

Licensing our intellectual property could potentially damage our business if a licensee becomes a

competitor, especially once the statutory rights to our intellectual property have expired or the licensing arrangement with a licensee

has terminated.

A licensee could develop modifications of our intellectual property and choose to compete with us in the marketplace.

Litigation may be necessary to protect our rights to our intellectual property.

Even if we are successful, litigation

could result in substantial costs and be a distraction to our management team.

If we are not successful, we could lose valuable

intellectual property rights.

Product defects could result in costly

fixes, litigation and damages.

Our business exposes us to potential product

liability risks that are inherent in the design, manufacture and sale of our products.

If there are claims related to defective

products (under warranty or otherwise), particularly in a product recall situation, we could be faced with significant expenses

in replacing or repairing the product.

For example, our filtration products or Ubiquitor devices obtain raw materials, machined

parts and other product components from suppliers who provide certifications of quality which we rely on.

Should these product

components be defective and pass undetected into finished products, or should a finished product contain a defect, we could incur

significant costs for repairs, re-work and/or removal and replacement of the defective product.

In addition, if a dispute over

product claims cannot be settled, arbitration or litigation may result, requiring us to incur attorneys’

fees and exposing

us to the potential of damage awards against us.

Only two officers have public company

experience on our management team which could adversely impact our ability to comply with the reporting requirements of U.S.

Even if we are successful, litigation could result in

substantial costs and be a distraction to our management team.

If we are not successful, we could lose valuable intellectual property

Product defects could result in costly fixes,

litigation and damages.

Our business exposes us to potential product liability

risks that are inherent in the design, manufacture and sale of our products.

If there are claims related to defective products (under

warranty or otherwise), particularly in a product recall situation, we could be faced with significant expenses in replacing or repairing

For example, our filtration products or Ubiquitor devices obtain raw materials, machined parts and other product components

from suppliers who provide certifications of quality which we rely on.

Should these product components be defective and pass undetected

into finished products, or should a finished product contain a defect, we could incur significant costs for repairs, re-work and/or removal

and replacement of the defective product.

In addition, if a dispute over product claims cannot be settled, arbitration or litigation may

result, requiring us to incur attorneys’ fees and exposing us to the potential of damage awards against us.

Only two officers have public company experience

on our management team which could adversely impact our ability to comply with the reporting requirements of U.S.

securities laws.

Amongst our officers, only Dr.

Desheng Wang, our

CEO, and Duncan Lee, our CFO, have public company experience.

Our CEO and CFO are ultimately responsible for complying with federal

securities laws and making required disclosures on a timely basis.

Any such deficiencies, weaknesses or lack of compliance could

have a materially adverse effect on our ability to comply with the reporting requirements of the Securities Exchange Act of 1934,

as amended, which is necessary to maintain our public company status.

If we were to fail to fulfill those obligations, our ability

to continue as a U.S.

public company would be in jeopardy in which event you could lose your entire investment in our Company.

Some of our officers, directors,

consultants and advisors are involved in other businesses and not obligated to commit their time and attention exclusively to our

business and therefore they may encounter conflicts of interest with respect to the allocation of time and business opportunities

between our operations and those of other businesses.

Another example of a conflict of interest

is so called “self-dealing”

transactions.

If a conflict-of-interest transaction is negotiated and approved, in a manner

that approximates arms-length negotiations, the transaction is accepted unless a shareholder proves in court that the transaction

is not entirely fair to the company or its shareholders.

Our CEO and CFO are ultimately responsible for complying with federal securities

laws and making required disclosures on a timely basis.

Any such deficiencies, weaknesses or lack of compliance could have a materially

adverse effect on our ability to comply with the reporting requirements of the Securities Exchange Act of 1934, as amended, which is necessary

to maintain our public company status.

If we were to fail to fulfill those obligations, our ability to continue as a U.S.

public company

would be in jeopardy in which event you could lose your entire investment in our Company.

Some of our officers, directors, consultants

and advisors are involved in other businesses and not obligated to commit their time and attention exclusively to our business and therefore

they may encounter conflicts of interest with respect to the allocation of time and business opportunities between our operations and

those of other businesses.

Another example of a conflict of interest are

so called “self-dealing” transactions.

If a conflict-of-interest transaction is negotiated and approved, in a manner that

approximates arms-length negotiations, the transaction is accepted unless a shareholder proves in court that the transaction is not entirely

fair to the company or its shareholders.

The burden is on the shareholder to show lack of entire fairness.

A self-dealing

transaction is considered invalid if challenged, unless the interested director proves in court that the transaction is entirely

fair to the company.

A self-dealing transaction

is considered invalid if challenged, unless the interested director proves in court that the transaction is entirely fair to the Company.

The burden is on the director to show entire fairness.

If, as a result of before mentioned conflicts,

we are deprived of business opportunities or information, the execution of our business plan and our ability to effectively compete

in the marketplace may be adversely affected.

If our audit committee becomes aware of such conflict of interests, we will take

an immediate action to resolve it.

Each conflict of interest will be handled by the Company based on the nature of the conflict

and the individual involved in it.

If, as a result of these conflicts, we may be

deprived of business opportunities or information, the execution of our business plan and our ability to effectively compete in the marketplace

may be adversely affected.

If our audit committee becomes aware of such conflict of interests, we will take an immediate action to resolve

Each conflict of interest will be handled by the Company based on the nature of the conflict and the individual involved in it.

We are not aware of any current or potential conflict of interests

with our consultants or advisors.

concluded that we have not maintained effective internal control over financial reporting through the years ended December 31,

2020 and December 31, 2019.

Significant deficiencies and material weaknesses in our internal control could have material adverse

effects on us.

It is important

for us to maintain effective internal control over financial reporting, which is a process designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance

with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may

not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the

risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or

procedures may deteriorate.

A material weakness

is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable

possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or

detected on a timely basis.

A material weakness

in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information.

If we are unsuccessful in implementing or following our remediation plan, we may not be able to timely or accurately report our

financial condition, results of operations or cash flows or maintain effective disclosure controls and procedures.

If we are unable

to report financial information timely and accurately or to maintain effective disclosure controls and procedures, we could be

subject to, among other things, regulatory or enforcement actions by the SEC, any one of which could adversely affect our business

We have concluded that we have not maintained

effective internal control over financial reporting through the years ended December 31, 2021 and December 31, 2020.

Significant deficiencies

and material weaknesses in our internal control could have material adverse effects on us.

It is important for us to maintain effective internal

control over financial reporting, which is a process designed to provide reasonable assurance regarding the reliability of financial reporting

and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any

evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,

or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination

of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement

of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

A material weakness in our internal control over

financial reporting could adversely impact our ability to provide timely and accurate financial information.

If we are unsuccessful in

implementing or following our remediation plan, we may not be able to timely or accurately report our financial condition, results of

operations or cash flows or maintain effective disclosure controls and procedures.

If we are unable to report financial information timely

and accurately or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or

enforcement actions by the SEC, any one of which could adversely affect our business prospects.

We currently have identified significant

deficiencies in our internal control over financial reporting that, if not corrected, could result in material misstatements of

our financial statements.

In connection

with the audit of our financial statements as of and for the years ended December 31, 2020 and 2019, we identified significant

deficiencies in our internal control over financial reporting and a general understanding of U.S.

As such, there is a reasonable

possibility that a misstatement of our financial statements will not be prevented or detected on a timely basis.

As we have thus

far not needed to comply with Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes Oxley Act”

“SOX”), neither we nor our independent registered public accounting firm has performed an evaluation of our internal

control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.

In light of the deficiency, we believe

that it is possible that certain control deficiencies may have been identified if such an evaluation had been performed.

We are working

to remediate the deficiencies or material weaknesses.

We have taken steps to enhance our internal control environment and plan

to take additional steps to remediate the material weaknesses.

Specifically:

We have hired additional outside consultants and will hire qualified personnel in our accounting department, especially to add an experienced accountant in a controller capacity.

We will continue to evaluate the structure of the finance organization and add resources as needed;

we are implementing additional internal reporting procedures, including those designed to add depth to our review processes and improve our segregation of duties;

we are updating our systems so that we may collect the necessary information to enable us to more effectively monitor and comply with applicable filing requirements on a timely basis;

we are in the process of documenting, assessing and testing our internal control over financial reporting as part of our efforts to comply with Section 404 of the Sarbanes-Oxley Act.

Although we plan

to complete this remediation process as quickly as possible, we are unable, at this time to estimate how long it will take, and

our efforts may not be successful in remediating the deficiencies or material weaknesses.

Our executive officers and directors

collectively have the power to control our management and operations and have a significant majority in voting power on all matters

submitted to the stockholders of the Company.

deficiencies in our internal control over financial reporting that, if not corrected, could result in material misstatements of our financial

In connection with the audit of our financial

statements as of and for the years ended December 31, 2021 and 2020, we identified significant deficiencies in our internal control over

financial reporting and a general understanding of U.S.

As such, there is a reasonable possibility that a misstatement of our financial

statements will not be prevented or detected on a timely basis.

As we have thus far not needed to comply with

Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act” or “SOX”), neither we nor

our independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance

with Section 404 of the Sarbanes-Oxley Act.

In light of the deficiency, we believe that it is possible that certain control deficiencies

may have been identified if such an evaluation had been performed.

We are working to remediate the deficiencies or

material weaknesses.

We have taken steps to enhance our internal control environment and plan to take additional steps to remediate the

material weaknesses.

For a discussion of our remediation plan, see “Management’s Report on Internal Control over Financial

Although we plan to complete this remediation

process as quickly as possible, we are unable, at this time to estimate how long it will take;

and our efforts may not be successful in

remediating the deficiencies or material weaknesses.

Our executive officers and directors collectively

have the power to control our management and operations and have a significant majority in voting power on all matters submitted to the

stockholders of the Company.

Our CEO and one of our directors, Dr.

Wang, owns 35.14% of the outstanding shares of our common stock as of the date of this prospectus and after a fully subscribed

offering will own 33.27%.

Two of our directors together own over 50% of the outstanding shares of our common stock and after a

fully subscribed offering will still own over 50% of the outstanding shares of our common stock.

Accordingly, Directors have a

significant influence in determining the outcome of all corporate transactions or other matters, including mergers, consolidations

and the sale of all or substantially all of our assets.

Wang, owns 33.273% of the outstanding shares of our common stock as of the date of this report.

Two of our directors together own over

50% of the outstanding shares of our common stock.

Accordingly, our directors have a significant influence in determining the outcome

of all corporate transactions or other matters, including mergers, consolidations and the sale of all or substantially all of our assets.

They also have the power to prevent or cause a change in control.

The interests

of our directors may differ from the interests of the other stockholders and thus result in corporate decisions that are disadvantageous

to other shareholders.

Management currently beneficially owns

a majority of our outstanding common stock.

Consequently, management has the ability to influence control of the operations of

the Company and, acting together, will have the ability to influence or control substantially all matters submitted to stockholders

for approval, including:

The interests of our directors may differ from the interests of the

other stockholders and thus result in corporate decisions that are disadvantageous to other shareholders.

Management currently beneficially owns a majority

of our outstanding common stock.

Consequently, management has the ability to influence control of the operations of the Company and, acting

together, will have the ability to influence or control substantially all matters submitted to stockholders for approval, including:

Election of our board of directors;

Removal of directors;

Amendment to the Company’s Articles of Incorporation or Bylaws;

Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination.

These stockholders have complete control

over our affairs.

Accordingly, this concentration of ownership by itself may have the effect of impeding a merger, consolidation,

takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for the common stock.

If we fail to maintain an effective

system of internal control over financial reporting, we may not be able to accurately report our financial results.

current and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading

price of our stock.

These stockholders have complete control over

Accordingly, this concentration of ownership by itself may have the effect of impeding a merger, consolidation, takeover

or other business consolidation, or discouraging a potential acquirer from making a tender offer for the common stock.

If we fail to maintain an effective system

of internal control over financial reporting, we may not be able to accurately report our financial results.

As a result, current and

potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.

Members of our Board of Directors are inexperienced

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public companies.

Management has determined that our

internal audit function is also significantly deficient due to insufficient qualified resources to perform internal audit functions.

We are a smaller reporting company with

limited resources.

Therefore, we cannot assure investors that we will be able to maintain effective internal controls over financial

reporting based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)

in Internal Control-Integrated Framework.

A material weakness is a deficiency, or a combination of deficiencies, in internal control

over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual

or interim financial statements will not be prevented or detected on a timely basis.

The Company has deficiencies over financial

statements recording in areas of recording revenue and expenses in proper cut off as well as proper classification of accounts.

For these reasons, we are considering the costs and benefits associated with improving and documenting our disclosure controls

and procedures and internal controls and procedures, which includes (i) hiring additional personnel with sufficient U.S.

GAAP experience

and (ii) implementing ongoing training in U.S.

GAAP requirements for our CFO and accounting and other finance personnel.

result of these efforts are not successful, or if material weaknesses are identified in our internal control over financial reporting,

our management will be unable to report favorably as to the effectiveness of our internal control over financial reporting and/or

our disclosure controls and procedures, and we could be required to further implement expensive and time-consuming remedial measures

and potentially lose investor confidence in the accuracy and completeness of our financial reports which could have an adverse

effect on our stock price and potentially subject us to litigation.

The requirements of being a public

company may strain our resources and distract our management.

We are required to comply with various

regulatory and reporting requirements, including those required by the Securities and Exchange Commission.

Complying with these

reporting and other regulatory requirements is time-consuming and may result in increased costs to us and could have a negative

effect on our business, results of operations and financial condition.

As a public company, we are subject to

the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and requirements of the Sarbanes-Oxley

Act of 2002, as amended, or SOX.

Management has determined that our internal

audit function is also significantly deficient due to insufficient qualified resources to perform internal audit functions.

We are a smaller reporting company with limited

Therefore, we cannot assure investors that we will be able to maintain effective internal controls over financial reporting

based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that

there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not

be prevented or detected on a timely basis.

The Company has deficiencies over financial statements in areas of recording revenue and expenses

in proper cut off as well as proper classification of accounts.

For these reasons, we are considering the costs and benefits associated

with improving and documenting our disclosure controls and procedures and internal controls and procedures, which includes (i) hiring

additional personnel with sufficient U.S.

GAAP experience and (ii) implementing ongoing training in U.S.

GAAP requirements for our CFO

and accounting and other finance personnel.

If the result of these efforts are not successful, or if material weaknesses are identified

in our internal control over financial reporting, our management will be unable to report favorably as to the effectiveness of our internal

control over financial reporting and/or our disclosure controls and procedures, and we could be required to further implement expensive

and time-consuming remedial measures and potentially lose investor confidence in the accuracy and completeness of our financial reports

which could have an adverse effect on our stock price and potentially subject us to litigation.

The requirements of being a public company

may strain our resources and distract our management.

We are required to comply with various regulatory

and reporting requirements, including those required by the Securities and Exchange Commission.

Complying with these reporting and other

regulatory requirements is time-consuming and may result in increased costs to us and could have a negative effect on our business, results

of operations and financial condition.

As a public company, we are subject to the reporting

requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and requirements of the Sarbanes-Oxley Act of 2002,

as amended, or SOX.

These requirements may place a strain on our systems and resources.

The Exchange Act requires

that we file annual, quarterly and current reports with respect to our business and financial condition.

The SOX requires that

we maintain effective disclosure controls and procedures and internal controls over financial reporting.

Compliance with these

rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming

or costly and increase demand on our systems and resources.

These activities may divert management’s

The Exchange Act requires that we file annual,

quarterly and current reports with respect to our business and financial condition.

SOX requires that we maintain effective disclosure

controls and procedures and internal controls over financial reporting.

Compliance with these rules and regulations will increase our

legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems

and resources.

These activities may divert management’s

attention from other business concerns, which could have a material adverse effect on our business and results of operations.

In addition, changing laws, regulations

and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing

legal and financial compliance costs and making some activities more time consuming.

These laws, regulations and standards are

subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice

may evolve over time as new guidance is provided by regulatory and governing bodies.

This could result in continuing uncertainty

regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general

and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance

If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory

or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and

our business may be harmed.

We also expect that being a public company

and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and

we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.

These factors could also

make it more difficult for us to attract and retain qualified members of our Board of Directors, particularly to serve on our audit

committee and compensation committee, and qualified executive officers.

Risks Related to the Ownership of our

There is a very limited public (trading)

market for our common stock and;

therefore, our investors may not be able to sell their shares and the price of our common stock

may fluctuate substantially.

Our common stock is listed on the over-the-counter

exchange, and is thinly traded.

As a result, stockholders may be unable to liquidate their investments, or may encounter considerable

delay in selling shares of our common stock.

If an active trading market does develop, the market price of our common stock is

likely to be highly volatile due to, among other things, the nature of our business and because we are a thinly-traded public company.

Further, a few individual stockholders dominate our shares.

The limited trading volume subjects the price of our common stock to

manipulation by one or more stockholders and will significantly limit the number of shares that one can purchase or sell in a short

period of time.

The market price of our common stock may also fluctuate significantly in response to the following factors, most

of which are beyond our control:

variations in our quarterly and annual operating results;

changes in general economic conditions;

changes in technologies favored by consumers;

price competition or pricing changes by us or our competitors;

the addition or loss of key managerial and collaborative personnel.

The equity markets have, on occasion, experienced

significant price and volume fluctuations that have affected the market prices for many companies’

securities and that have

often been unrelated to the operating performance of these companies.

Any such fluctuations may adversely affect the market price

of our common stock, regardless of our actual operating performance.

As a result, stockholders may be unable to sell their shares,

or may be forced to sell them at a loss.

To date, there has been a limited public

market for shares of our common stock, with limited trading.

An active public trading market may not develop or, if developed,

may not be sustained.

The current market price of our common stock and any possible subsequent listing on another larger securities

exchange, if and when we are successful in doing so, will be affected by a number of factors, including those discussed above.

An increase of free trading shares

of our common stock could result in substantial sales of common stock on the open market which could cause our stock price to fall

substantially.

In 2018, we registered 19,904,706 shares

of our common stock for more than 300 shareholders, which is substantially more than the 15,718,309 shares of common stock that

are currently free trading.

Any increase in freely trading shares, or the perception that such shares will or could come onto the

market could have an adverse effect on the trading price of the stock.

No prediction can be made as to the effect, if any, that

sales of these shares, or the availability of such shares for sale, will have on the market prices prevailing from time to time.

Nevertheless, the possibility that substantial amounts of common stock may be sold in the public market may adversely affect prevailing

market prices for our common stock and could impair our ability to raise capital through the sale of our equity securities or impair

our shareholders’

ability to sell on the open market.

You could be diluted from our future

issuance of capital stock and derivative securities.

As of February 12, 2021, we had 40,959,741

shares of common stock outstanding and no shares of preferred stock outstanding.

We are authorized to issue up to 75,000,000 shares

of common stock and no shares of preferred stock.

To the extent of such authorization, our Board of Directors will have the ability,

without seeking stockholder approval, to issue additional shares of common stock or preferred stock in the future for such consideration

as the Board of Directors may consider sufficient.

The issuance of additional common stock or preferred stock in the future may

reduce an investor’s or potential investor’s proportionate ownership and voting power.

In addition, changing laws, regulations and standards

relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance

costs and making some activities more time consuming.

These laws, regulations and standards are subject to varying interpretations, in

many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided

by regulatory and governing bodies.

This could result in continuing uncertainty regarding compliance matters and higher costs necessitated

by ongoing revisions to disclosure and governance practices.

We intend to invest resources to comply with evolving laws, regulations and

standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time

and attention from revenue-generating activities to compliance activities.

If our efforts to comply with new laws, regulations and standards

differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may

initiate legal proceedings against us and our business may be harmed.

We also expect that being a public company and

these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required

to accept reduced coverage or incur substantially higher costs to obtain coverage.

These factors could also make it more difficult for

us to attract and retain qualified members of our Board of Directors, particularly to serve on our audit committee and compensation committee,

and qualified executive officers.

Risks Related to the Ownership of our Common

An increase of free trading shares of our

common stock could result in substantial sales of common stock on the open market which could cause our stock price to fall substantially.

In 2018, we registered 19,904,706 shares of our

common stock for more than 300 shareholders, which is substantially more than the 18,018,039 shares of common stock that are currently

free trading.

Any increase in freely trading shares, or the perception that such shares will or could come onto the market could have

an adverse effect on the trading price of the stock.

No prediction can be made as to the effect, if any, that sales of these shares, or

the availability of such shares for sale, will have on the market prices prevailing from time to time.

Nevertheless, the possibility that

substantial amounts of common stock may be sold in the public market may adversely affect prevailing market prices for our common stock

and could impair our ability to raise capital through the sale of our equity securities or impair our shareholders’ ability to sell

on the open market.

You could be diluted from our future issuance

of capital stock and derivative securities.

As of December 31, 2021, we had 43,259,741 shares

of common stock outstanding and no shares of preferred stock outstanding.

We are authorized to issue up to 75,000,000 shares of common

stock and no shares of preferred stock.

To the extent of such authorization, our Board of Directors will have the ability, without seeking

stockholder approval, to issue additional shares of common stock or preferred stock in the future for such consideration as the Board

of Directors may consider sufficient.

The issuance of additional common stock or preferred stock in the future may reduce a shareholder’s

proportionate ownership and voting power.

Substantial future sales of our common stock, or the perception

in the public markets that these sales may occur, may depress our stock price.

Sales of substantial shares of our common

stock in the public market, or the perception that these sales could occur, could adversely affect the price of our common stock

and could impair our ability to raise capital through the sale of additional shares.

In the future, we may issue our securities

if we need to raise capital in connection with a capital raise or acquisitions.

The number of shares of our common stock issued

in connection with a capital raise or acquisition could constitute a material portion of our then-outstanding shares of our common

stock and have a dilutive effect on our shareholders which could have a material negative effect on our stock price.

Future sales of our common stock

by existing stockholders could cause our stock price to decline.

Sales of substantial shares of our common stock

in the public market, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair

our ability to raise capital through the sale of additional shares.

In the future, we may issue our securities if

we need to raise capital in connection with a capital raise or acquisitions.

The number of shares of our common stock issued in connection

with a capital raise or acquisition could constitute a material portion of our then-outstanding shares of our common stock and have a

dilutive effect on our shareholders which could have a material negative effect on our stock price.

Future sales of our common stock by existing

stockholders could cause our stock price to decline.

If our existing stockholders sell substantial

1 unchanged sentence

The perception

in the public market that our stockholders might sell shares of common stock also could depress the market price of our common

There are approximately 40,959,741 shares of our common stock outstanding, of which approximately 15,718,309 shares are

currently freely tradable.

Certain existing holders of a majority

of our common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares

or to include their shares in registration statements that we may file for ourselves or other shareholders.

If the sale of these

shares are registered, they will be freely tradable without restriction under the Securities Act.

In the event such registration

rights are exercised and a large number of shares of common stock are sold in the public market, such sales could reduce the trading

price of our common stock.

A decline in the price of shares of our

common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity

We do not intend to pay dividends and there will be less

ways in which you can make a gain on any investment in Focus Universal Inc.

We have never paid any cash dividends and

currently do not intend to pay any dividends for the foreseeable future.

To the extent that we require additional funding currently

not provided for in our financing plan, our funding sources may likely prohibit the payment of a dividend.

Because we do not intend

to declare dividends, any gain on an investment in Focus Universal Inc.

will need to come through appreciation of the stock’s

There has been a limited trading

market for our common stock to date and it may continue to be the case even once our common stock is listed on NASDAQ.

There has been limited trading volume in

our common stock, which is currently quoted on the OTCQB and traded under the symbol “FCUV.”

Once our shares of common

stock are listed on NASDAQ, there may still be a limited trading market for our common stock.

A lack of an active market may impair

the ability of our stockholders to sell shares at the time they wish to sell or at a price that they consider favorable.

of an active market may also reduce the fair market value of our common stock, impair our ability to raise capital by selling shares

of capital stock and may impair our ability to use common stock as consideration to attract and retain talent or engage in business

transactions (including mergers and acquisitions).

Once our shares of common stock are

listed on NASDAQ, we may not be able to maintain the continued listing standards.

in the public market that our stockholders might sell shares of common stock also could depress the market price of our common stock.

There are approximately 43,259,741 shares of our common stock outstanding, of which approximately 18,018,309 shares are currently freely

Certain existing holders of a majority of our

common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include

their shares in registration statements that we may file for ourselves or other shareholders.

If the sale of these shares are registered,

they will be freely tradable without restriction under the Securities Act.

In the event such registration rights are exercised and a large

number of shares of common stock are sold in the public market, such sales could reduce the trading price of our common stock.

A decline in the price of shares of our common

stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.

We do not intend to pay dividends and there will be less ways

in which you can make a gain on any investment in Focus Universal Inc.

We have never paid any cash dividends and currently

do not intend to pay any dividends for the foreseeable future.

To the extent that we require additional funding currently not provided

for in our financing plan, our funding sources may likely prohibit the payment of a dividend.

Because we do not intend to declare dividends,

any gain on an investment in Focus Universal Inc.

will need to come through appreciation of the stock’s price.

Sales of a substantial number of shares

of our common stock in the public market by certain of our shareholders could cause our stock price to fall.

Sales of a substantial number of shares of our

common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock

and could impair our ability to raise capital through the sale of additional equity securities.

We are unable to predict the effect that

sales may have on the prevailing market price of shares of our common stock.

An active trading market for our common

stock may not be maintained.

Our common stock is currently listed on the Nasdaq

Global Market under the symbol “FCUV,” but we can provide no assurance that we will be able to maintain an active trading

market on this or any other exchange in the future.

A lack of an active market may impair the ability of our stockholders to sell shares

at the time they wish to sell or at a price that they consider favorable.

The lack of an active market may also reduce the fair market

value of our common stock, impair our ability to raise capital by selling shares of capital stock and may impair our ability to use common

stock as consideration to attract and retain talent or engage in business transactions (including mergers and acquisitions).

our common stock was listed on the Nasdaq Capital Market.

Our stock was uplisted onto the Nasdaq Global Market on January 28, 2022.

Our shares of common stock are only recently

listed on NASDAQ, and we may not be able to maintain the continued listing standards.

NASDAQ requires companies to fulfill specific

requirements in order for their shares to continue to be listed.

There is no guarantee that our common stock will maintain NASDAQ

continued listing standards and we may be delisted.

If our common stock is delisted from NASDAQ, our shareholders could find it

difficult to sell their common stock.

In the event that the shares of our common

stock were to be delisted from NASDAQ, we expect that it would be traded on the OTCQB or OTCQX, which are unorganized, inter-dealer,

There is no guarantee that our common stock will maintain NASDAQ continued

listing standards and we may be delisted.

If our common stock is delisted from NASDAQ, our shareholders could find it difficult to sell

their common stock.

In the event that the shares of our common stock

were to be delisted from NASDAQ, we expect that it would be traded on the OTCQB or OTCQX marketplaces, which are unorganized, inter-dealer,

over-the-counter markets that provide significantly less liquidity than NASDAQ or other national securities exchanges.

delisting from NASDAQ may have a material adverse effect on the trading and price of our common stock.

Thus, a delisting

from NASDAQ may have a material adverse effect on the trading and price of our common stock.

If we are unable to maintain compliance

with NASDAQ continued listing standards, including maintenance of at least $2.5 million of stockholders’

equity and maintenance

with NASDAQ continued listing standards, including maintenance of at least $2.5 million of stockholders’ equity and maintenance

of a $1.00 minimum bid price, our common stock may be delisted from NASDAQ.

There can be no assurances that we will

be able to maintain our NASDAQ listing in the future.

In the event we are unable to maintain compliance with NASDAQ continued listing

standards and our common stock is delisted from NASDAQ, it could likely lead to a number of negative implications, including an

adverse effect on the price of our common stock, reduced liquidity in our common stock, the loss of federal preemption of state

securities laws and greater difficulty in obtaining financing.

In the event of a delisting, we would take actions to restore our

compliance with NASDAQ’s continued listing standards, but we can provide no assurance that any such action taken by us would

allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent

our common stock from dropping below the NASDAQ minimum bid price requirement or prevent future non-compliance with NASDAQ’s

continued listing requirements.

Focus Universal is an “emerging

growth company”

under the Jumpstart Our Business Startups Act.

We cannot be certain if the reduced reporting requirements

applicable to emerging growth companies will make our shares of common stock less attractive to investors.

Focus Universal is and will remain an “emerging

growth company”

until the earliest to occur of (a) the last day of the fiscal year during which its total annual revenues

equal or exceed $1 billion (subject to adjustment for inflation), (b) the last day of the fiscal year following the fifth anniversary

of its initial public offering, (c) the date on which Focus Universal has, during the previous three-year period, issued more than

$1 billion in non-convertible debt securities, or (d) the date on which Focus Universal is deemed a “large accelerated filer”

(with at least $700 million in public float) under the Exchange Act.”).

For so long as Focus Universal remains

an “emerging growth company”

as defined in the JOBS Act, it may take advantage of certain exemptions from various reporting

requirements that are applicable to other public companies that are not “emerging growth companies”

as described in

further detail in the risk factors below.

Focus Universal cannot predict if investors will find its shares of common stock less

attractive because Focus Universal will rely on some or all of these exemptions.

If some investors find Focus Universal’s

shares of common stock less attractive as a result, there may be a less active trading market for its shares of common stock and

its stock price may be more volatile.

If Focus Universal avails itself of certain

exemptions from various reporting requirements, its reduced disclosure may make it more difficult for investors and securities

analysts to evaluate Focus Universal and may result in less investor confidence.

The JOBS Act is intended to reduce the

regulatory burden on “emerging growth companies”.

Focus Universal meets the definition of an “emerging growth

company”

and so long as it qualifies as an “emerging growth company,”

it will not be required to:

have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay”

and “say-on-frequency;”

disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act

also provides that an “emerging growth company”

can take advantage of the extended transition period provided in Section

7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

In other words, an “emerging growth

company”

can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

However, Focus Universal is choosing to “opt out”

of such extended transition period, and as a result, Focus Universal

will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for

non-emerging growth companies.

Section 107 of the JOBS Act provides that its decision to opt out of the extended transition period

for complying with new or revised accounting standards is irrevocable.

Notwithstanding the above, we are also

currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer, or

a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $250

million or annual revenues of less than $100 million during the most recently completed fiscal year.

However, similar to “emerging growth

companies,”

“smaller reporting companies”

are able to provide simplified executive compensation disclosures in

their filings;

are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered

public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting;

required to conduct say-on-pay and frequency votes until annual meetings occurring on or after January 21, 2013;

and have certain

other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two

years of audited financial statements in annual reports.

Decreased disclosures in our SEC filings due to our status as an “emerging

growth company”

or “smaller reporting company”

may make it harder for investors to analyze the Company’s

results of operations and financial prospects.

Our management will have broad discretion as to the use

of proceeds from this offering, and we may not use the proceeds effectively.

Our management will have broad discretion

in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results

of operations or enhance the value of our common stock.

You will not have the opportunity, as part of your investment decision,

to assess whether these proceeds are being used appropriately.

Our failure to apply these funds effectively could have a material

adverse effect on our business and cause the price of our common stock to decline.

Risks Related to Our Acquisition of

There can be no assurances that we will be able

to maintain our NASDAQ listing in the future.

In the event we are unable to maintain compliance with NASDAQ continued listing standards

and our common stock is delisted from NASDAQ, it could likely lead to a number of negative implications, including an adverse effect on

the price of our common stock, reduced liquidity in our common stock, the loss of federal preemption of state securities laws and greater

difficulty in obtaining financing.

In the event of a delisting, we would take actions to restore our compliance with NASDAQ’s continued

listing standards, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again,

stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the NASDAQ minimum

bid price requirement or prevent future non-compliance with NASDAQ’s continued listing requirements.

Risks Related to Our Acquisition of AVX

If we are unable to manage our anticipated

1 unchanged sentence

We anticipate that as a result of the significant

expansion of our operations and addition of operating subsidiaries, new personnel may be required in all areas of our operations

in order to continue to implement our post-acquisition business plan.

Our future operating results depend to a large extent on

our ability to manage this expansion and growth successfully.

For us to continue to manage such growth, we must put in place legal

and accounting systems and implement human resource management and other tools.

We have taken preliminary steps to put this structure

However, there is no assurance that we will be able to successfully manage this anticipated rapid growth.

manage our growth effectively could materially and adversely affect our profitability.

Increasing competition within our

industry could have an impact on our business prospects.

The IoT market is a growing industry where

new competitors are entering the market frequently.

These competing companies may have significantly greater financial and other

resources than we have and may have been developing their products and services longer than we have been developing ours.

our portfolio of products and related revenue stream sources are broad, increasing competition may have a negative impact on our

profit margins.

expansion of our operations and addition of operating subsidiaries, new personnel may be required in all areas of our operations in order

to continue to implement our post-acquisition business plan.

Our future operating results depend to a large extent on our ability to manage

this expansion and growth successfully.

For us to continue to manage such growth, we must put in place legal and accounting systems and

implement human resource management and other tools.

We have taken preliminary steps to put this structure in place.

However, there is

no assurance that we will be able to successfully manage this anticipated rapid growth.

A failure to manage our growth effectively could

materially and adversely affect our profitability.

Increasing competition within our industry

could have an impact on our business prospects.

The IoT market is a growing industry where new

competitors are entering the market frequently.

These competing companies may have significantly greater financial and other resources

than we have and may have been developing their products and services longer than we have been developing ours.

Although our portfolio

of products and related revenue stream sources are broad, increasing competition may have a negative impact on our profit margins.

The success of our smart home installation

business will depend upon the efforts of management of our subsidiary AVX.

Although key personnel have remained with

AVX following the business combination, we can offer no assurance that we will be able to retain them or effectively recruit new

Only one key member of management has remained

with AVX following the business combination, we can offer no assurance that we will be able to retain them or effectively recruit new

additional personnel.

The departure of any key members of AVX’s management team could make it more difficult to operate AVX.

Moreover, to the extent that we will rely upon their management team to operate AVX, we will be subject to risks regarding their

managerial competence.

Accordingly, we cannot assure you that our assessment of these individuals will prove to be correct and

that they will have the skills, abilities and qualifications we expect.

If we are unable to integrate the

Ubiquitor device into the smart home installation business, we may not be able to distinguish ourselves in the segment and it could

negatively affect our ability to operate in the competitive smart home installation industry.

The smart home installation business is

a highly competitive market, and we have numerous competitors who are already well-established in the market.

We expect our competitors

to continue improving the design and performance of their products and to introduce new products that could be competitive in both

price and performance.

The reason we believe that we could become competitive in this market segment is because we anticipate integrating

the Ubiquitor device into AVX’s smart home installations.

However, there is no guarantee that we can integrate the Ubiquitor

device into AVX’s smart home installations.

If we are unable to integrate the Ubiquitor device into smart home installations,

we will not be able to achieve the competitive price and performance we anticipate to achieve success in AVX’s future smart

home installations.

Alternatively, we may not be able to achieve a smart home installation at a cost-effective price that is sufficient

to distinguish us from amongst the competition in this market segment.

The departure of any key members of AVX’s management team could make it more difficult to operate AVX.

to the extent that we will rely upon their management team to operate AVX, we will be subject to risks regarding their managerial competence.

Accordingly, we cannot assure you that our assessment of these individuals will prove to be correct and that they will have the skills,

abilities and qualifications we expect.

If we are unable to integrate the Ubiquitor

device into the smart home installation business, we may not be able to distinguish ourselves in the segment and that could negatively

affect our ability to operate in the competitive smart home installation industry.

The smart home installation business is a highly

competitive market, and we have numerous competitors who are already well-established in the market.

We expect our competitors to continue

improving the design and performance of their products and to introduce new products that could be competitive in both price and performance.

The reason we believe that we could become competitive in this market segment is because we anticipate integrating the Ubiquitor device

into AVX’s smart home installations.

However, there is no guarantee that we can integrate the Ubiquitor device into AVX’s

smart home installations.

If we are unable to integrate the Ubiquitor device into smart home installations, we will not be able to achieve

the competitive price and performance we anticipate to achieve success in AVX’s future smart home installations.

Alternatively,

we may not be able to achieve a smart home installation at a cost-effective price that is sufficient to distinguish us from amongst the

competition in this market segment.

Risks Related to the COVID-19 Pandemic

COVID-19 pandemic may adversely affect our business, results of operations, financial condition, liquidity, and cash flow.

The outbreak of COVID-19 originating in

Wuhan, China, sometime around December 2019, has since rapidly increased its exposure globally.

On March 11, 2020, the World Health

Organization declared the outbreak a pandemic.

The pandemic has impacted and may further impact the United States and the broader

economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital

markets, foreign currency exchange rates and interest rates.

Due to the speed with which the situation is developing, the global

breadth of its spread and the range of governmental and community reactions thereto, there is uncertainty around its duration,

ultimate impact and the timing of recovery.

Therefore, the pandemic could lead to an extended disruption of economic activity and

the impact on our consolidated results of operations, financial position, and cash flows could be material.

As a result of the adverse impact that

the COVID-19 pandemic is having on our economy and the economies of the countries in which we plan to do business, the pandemic

may affect our operations, including our supply chain distribution systems, production levels and research and development activities.

In addition, any preventive or protective actions that governments implement or that we adopt in response to the COVID-19 pandemic,

such as travel restrictions, quarantines, and limited operations of governmental agencies, may interfere with the ability of our

employees, vendors, and suppliers to perform their respective responsibilities and obligations relative to the conduct of our business.

Additionally, government regulations that have been imposed in response to the COVID-19 pandemic may cause delays our freight processes,

which would result in higher shipping costs.

In addition, social distancing guidelines could have an adverse impact on our research

and development activities as our laboratories are not operating at full capacity.

The impact of the COVID-19 pandemic on

the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term

Further, the resulting global economic downturn has negatively impacted the ability of certain of our customers to make

payments on a timely basis, adversely impacting our cash flows from operations.

We do not yet know the full extent of the impact

of the COVID-19 pandemic or its resulting economic impact, which could have a material adverse effect on our liquidity, capital

resources, operations, and business.

The recent COVID-19 pandemic may adversely

affect our business, results of operations, financial condition, liquidity, and cash flow.

On March 11, 2020, the World Health Organization

declared COVID-19 a pandemic.

The pandemic has impacted and may further impact the United States and the broader economies of affected

countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange

rates and interest rates.

Due to the speed with which the situation is developing, the global breadth of its spread and the range of governmental

and community reactions thereto, there is uncertainty around its duration, ultimate impact and the timing of recovery.

Therefore, the

pandemic could lead to an extended disruption of economic activity and the impact on our consolidated results of operations, financial

position, and cash flows could be material.

As a result of the adverse impact that the COVID-19

pandemic is having on our economy and the economies of the countries in which we plan to do business, the pandemic has affected and may

continue to affect our operations, including our supply chain distribution systems, production levels and research and development activities.

In addition, any preventive or protective actions that governments implement or that we adopt in response to the COVID-19 pandemic, such

as travel restrictions, quarantines, and limited operations of governmental agencies, may interfere with the ability of our employees,

vendors, and suppliers to perform their respective responsibilities and obligations relative to the conduct of our business.

Additionally,

government regulations that have been imposed in response to the COVID-19 pandemic may cause delays in our freight processes, which would

result in higher shipping costs.

In addition, social distancing guidelines could have an adverse impact on our research and development

activities as our laboratories are not operating at full capacity.

The impact of the COVID-19 pandemic on the global

financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity.

the resulting global economic downturn has negatively impacted the ability of certain of our customers to make payments on a timely basis,

adversely impacting our cash flows from operations.

We do not yet know the full extent of the impact of the COVID-19 pandemic or its resulting

economic impact, which could have a material adverse effect on our liquidity, capital resources, operations, and business.

We are also monitoring the impact of COVID-19

on our talent recruitment and retention efforts.

If members of our management and other key personnel in critical functions across

our organization are unable to perform their duties or have limited availability due to COVID-19, we may not be able to execute

on our business strategy and/or our operations may be negatively impacted.

The loss or limited availability of the services of

one or more of our executive officers or other key personnel, or our inability to recruit and retain qualified executive officers

or other key personnel in the future could, at least temporarily, have a material adverse effect on our business, financial condition,

and results of operations.

Qualified individuals are in high demand, and we may incur significant costs to attract them, particularly

at the executive level.

We may face difficulty in attracting and retaining key talent for a number of reasons, including delays

in the recruiting and hiring process as a result of the COVID-19 pandemic.

Our business, financial condition, and

results of operations could be materially adversely affected by unfavorable results in future employment litigation matters as

a result of COVID-19.

If members of our management and other key personnel in critical functions across our

organization are unable to perform their duties or have limited availability due to COVID-19, we may not be able to execute on our business

strategy and/or our operations may be negatively impacted.

The loss or limited availability of the services of one or more of our executive

officers or other key personnel, or our inability to recruit and retain qualified executive officers or other key personnel in the future

could, at least temporarily, have a material adverse effect on our business, financial condition, and results of operations.

individuals are in high demand, and we may incur significant costs to attract them, particularly at the executive level.

We may face difficulty

in attracting and retaining key talent for a number of reasons, including delays in the recruiting and hiring process as a result of the

COVID-19 pandemic.

Our business, financial condition, and results

of operations could be materially adversely affected by unfavorable results in future employment litigation matters as a result of COVID-19.

Our employees may sue us due to possible exposure to COVID-19 while working at one of our facilities or sites.

In addition, employees may challenge decisions to implement protective measures such as contact tracing on the basis of local privacy

laws due to the increased collection of employee medical information.

Litigation matters, regardless of their merits or their ultimate

outcomes, are costly, divert management’s attention and may materially adversely affect our reputation and demand for our

We cannot predict with certainty the eventual outcome of litigation matters.

An adverse outcome of litigation or legal

matters could result in us being responsible for paying significant damages.

Any of these negative effects resulting

from litigation matters could materially adversely affect our business, financial condition or results of operations.

To the extent

the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of

the other risks described in this Annual Report on Form 10-K.

The extent to

which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including

new information which may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact.

In addition, employees

may challenge decisions to implement protective measures such as contact tracing on the basis of local privacy laws due to the increased

collection of employee medical information.

Litigation matters, regardless of their merits or their ultimate outcomes, are costly, divert

management’s attention and may materially adversely affect our reputation and demand for our products.

We cannot predict with certainty

the eventual outcome of litigation matters.

An adverse outcome of litigation or legal matters could result in us being responsible for

paying significant damages.

Any of these negative effects resulting from litigation

matters could materially adversely affect our business, financial condition or results of operations.

To the extent the COVID-19 pandemic

adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in

The extent to which COVID-19 impacts our results

will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning

the severity of COVID-19 and the actions taken to contain it or treat its impact.

UNRESOLVED STAFF COMMENTS

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 1A. Risk Factors