What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-08 compared with 2021-03-23 · 870 added, 780 removed, 247 unchanged (87% of the section changed)

2 unchanged sentences

AND SUBSIDIARY

FOR THE YEARS ENDED DECEMBER 31, 2020,

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

Index to the Financial Statements

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Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020

Consolidated Statements of Changes in Stockholders’

Equity for the Years ended December 31, 2020 and 2019

Consolidated Statements of Changes in Stockholders’ Equity for the Years ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020

Notes to the Consolidated Financial Statements

Report of Independent Registered Public

Accounting Firm

Report of Independent Registered Public Accounting

To the shareholders and the board of directors

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balance sheets of Focus Universal, Inc.

(the “Company”) as of December 31, 2020 and 2019, the related statement of

operations, stockholders’

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

to as the “financial statements”).

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

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

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

(the “Company”) as of December 31, 2021 and 2020, the related statement of operations,

stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial

statements”).

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

as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting

principles generally accepted in the United States.

Substantial Doubt about the Company’s

Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that

the Company will continue as a going concern.

As discussed in Note 2 to the financial statements, the Company’s significant operating

losses raise substantial doubt about its ability to continue as a going concern.

The financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based

on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

1 unchanged sentence

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable

basis for our opinion.

Substantial Doubt about the Company’s

Ability to Continue as a Going Concern

The accompanying financial statements have

been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the financial statements, the

Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern.

The financial

statements do not include any adjustments that might result from the outcome of this uncertainty.

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter

communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to

be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter

in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,

providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition — identification

of contractual terms in certain customer arrangements

As described in Note

2 to the consolidated financial statements, management applies FASB Topic 606, Revenue from Contacts with Customers (“ASC

606”) to recognize revenue.

Management recognizes revenue upon transfer of control of promised goods or services to customers in

an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.

The Company’s

revenue is divided into two sources, with one source being from project construction which is recognized over time using the percentage-of-completion

method under the cost approach.

Management is required to estimate the percentage of completion when determining the amount and timing

of revenue recognition.

The principal considerations

for our determination that performing procedures over the percentage-of-completion method of recognition of revenue contracts and subsequent

payment collections is a critical audit matter as there are more significant risks associated with the percentage-of completion recognition

of this revenue.

This in turn led to significant effort in performing our audit procedures which were designed to evaluate whether the

contractual terms, the timing of revenue recognition were appropriately identified and determined by management and to evaluate the reasonableness

of management’s estimates.

Our audit procedures included, among others, understanding

of controls relating to management’s revenue recognition process, examining transaction related documents, confirming revenues and

outstanding receivables at the balance sheet date with a sample of the project construction customers, and testing collections subsequent

to the balance sheet date.

/s/ BF Borgers CPA PC

BF Borgers CPA PC

We have served as the Company’s auditor

March 8, 2022

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Accounts receivable, net

Accounts receivable – related party

Inventories, net

Other receivables

Prepaid expenses

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Other current liabilities

Interest payable - related party

Customer deposit

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Lease liability, current portion

Promissory note short term - related party

Total Current Liabilities

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

40,959,741 shares

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

43,259,741 and 40,959,741 shares issued and outstanding as of December 31, 2021 and 2020, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

( 12,937,091 )

( 9,716,114 )

Accumulated other comprehensive loss

Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

The accompanying notes are an integral

part of these consolidated financial statements.

The accompanying notes are an integral part

of these consolidated financial statements.

FOCUS UNIVERSAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS

OF OPERATIONS

Years ended December 31,

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Total Revenue

Cost of Revenue

Operating Expenses:

Costs and Operating Expenses

Cost of revenue, excluding depreciation & amortization

Selling expense

Compensation - officers

Compensation - officers and directors

Research and development

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General and administrative

Goodwill impairment

Intangible assets impairment

Total Operating Expenses

Total Cost and Operating Expense

Loss from Operations

( 3,016,587 )

( 2,703,913 )

Other Income (Expense):

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Interest (expense) - related party

Gain on extinguishment of debt

Change in fair value of warrant liability

( 1,284,780 )

Gain on settlement of derivative liability

Total other income (expense)

Loss before income taxes

( 3,220,977 )

( 2,537,113 )

Income tax expense

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$ ( 2,537,113 )

Other comprehensive items

Foreign currency translation loss

Total comprehensive loss

$ ( 3,220,981 )

$ ( 2,537,113 )

Weight Average Number of Common Shares Outstanding:

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Basic and Diluted

The accompanying notes are an integral

part of these consolidated financial statements.

The accompanying notes are an integral part

of these consolidated financial statements.

FOCUS UNIVERSAL INC.

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’

FOR THE YEARS ENDED DECEMBER 31, 2020

CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2021 and 2020

Common Shares

Comprehensive Loss

Stockholders’

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$ ( 7,179,001 )

Common stock issued for prior period service

Common stock issued for service

Common stock issued for acquisition

Stock based compensation - options

Common stock to be issued for services

Stock options issued for services

( 2,537,113 )

Balance - December 31, 2020

Stock options issued for services

( 9,716,114 )

Issuance of common stock

Stock based compensation - options

Common stock to be issued for services

Other comprehensive loss

( 3,220,977 )

Balance - December 31, 2021

The accompanying notes are an integral

part of these consolidated financial statements

( 12,937,091 )

The accompanying notes are an integral part

of these consolidated financial statements

FOCUS UNIVERSAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31,

CONSOLIDATED STATEMENTS

OF CASH FLOWS

For the Years Ended

Cash flows from operating activities:

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Depreciation expense

Amortization of intangible assets

Impairment of intangible assets

Impairment of goodwill

Gain on extinguishment of debt

Change in fair value of warrant liability

Gain on settlement of derivative liability

Amortization of right-of-use assets

Stock-based compensation

Stock option compensation

Stock based compensation - options

Changes in operating assets and liabilities:

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Accounts receivable - related party

Other receivable

Prepaid expenses

Deposit - Current portion

Operating lease right-of-use asset

Accounts payable and accrued liabilities

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Customer deposit

Lease liabilities

Other liabilities

Net cash flows used in operating activities

( 2,228,405 )

( 1,955,091 )

Cash flows from investing activities:

Cash from acquisition

Purchase of property and equipment

Cash paid for building improvement

Cash paid for acquisition

Net cash flows used in investing activities

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Proceeds from SBA loan

Payment on promissory note

Repayment on SBA loan

Repayment on promissory note

Proceeds from bank loan

Repayment on bank loan

( 1,500,000 )

Proceeds from IPO, net

Net cash flows provided by financing activities

Effect of exchange rate

Net change in cash

Cash beginning of period

Cash end of period

( 1,609,545 )

Cash beginning of year

Cash end of year

Supplemental cash flow disclosure:

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Cash paid for interest

Supplemental disclosures of non-cash investing and financing activities:

Promissory note issued for acquisition

Shares issued for acquisition

The accompanying notes are an integral

part of these consolidated financial statements.

FOCUS UNIVERSAL INC.

Supplemental disclosure of non-cash financing activities:

Cashless warrant

The accompanying notes are an integral part

of these consolidated financial statements.

UNIVERSAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

Note 1 –

Organization and Operations

Note 1 – Organization and Operations

Focus Universal Inc.

(“Focus”)

was incorporated under the laws of the State of Nevada on December 4, 2012 (“Inception”).

It is a universal smart

instrument developer and manufacturer, headquartered in the Los Angeles, California metropolitan area, specializing in the development

and commercialization of novel and proprietary universal smart technologies and instruments.

Universal smart technology is an off-the-shelf

technology utilizing an innovative hardware integrated platform.

The Focus platform provides a unique and universal combined wired

and wireless solution for embedded design, industrial control, functionality test, and parameter measurement instruments and functions.

Our smart technology software utilizes a smartphone, computer, or a mobile device as an interface platform and display that communicates

and works in tandem with a group of external sensors or probes, or both.

The external sensors and probes may be manufactured by

different vendors, but the universal smart technology functions in a manner that does not require the user to have extensive knowledge

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

The universal smart instrument Focus developed

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

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

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

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

voltage, and a wide variety of applications.

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

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

The smartphone or other

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

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

(“Focus”) was

incorporated under the laws of the State of Nevada on December 4, 2012 (“Inception”).

It is a universal smart instrument developer

and manufacturer, headquartered in the Ontario, California, specializing in the development and commercialization of novel and proprietary

universal smart technologies and instruments.

Universal smart technology is an off-the-shelf technology utilizing an innovative hardware

integrated platform.

The Focus platform provides a unique and universal combined wired and wireless solution for embedded design, industrial

control, functionality test, and parameter measurement instruments and functions.

The Company’s smart technology software utilizes

a smartphone, computer, or a mobile device as an interface platform and display that communicates and works in tandem with a group of

external sensors or probes, or both.

The external sensors and probes may be manufactured by different vendors, but the universal smart

technology functions in a manner that does not require the user to have extensive knowledge of the unique characteristics of the function

of each of the sensors and probes.

The universal smart instrument Focus developed (the “Ubiquitor”) consists of a reusable

foundation component which includes a wireless gateway (which allows the instrument to connect to the smartphone via Bluetooth and WiFi

technology), universal smart application software (“Application”) which is installed on the user’s smartphone or other

mobile device and allows monitoring of the sensor readouts on the smartphone screen.

The Ubiquitor also connects to a variety of individual

scientific sensors that collect data, from moisture, light, airflow, voltage, and a wide variety of applications.

The data then sent through

a wired or wireless connection, or a combination thereof to the smartphone or other mobile device and the data is organized and displayed

on the smartphone screen.

The smartphone or other mobile device, foundation, and sensor readouts together perform the functions of many

traditional scientific and engineering instruments and are intended to replace the traditional, wired stand-alone instruments at a fraction

of their cost.

Perfecular Inc.

(“Perfecular”)

was founded in September 2009 and is headquartered in Ontario, California, and is engaged in designing certain digital sensor products

and sells a broad selection of horticultural sensors and filters in North America and Europe.

(“Perfecular”), a

wholly-owned subsidiary of Focus, was founded in September 2009 and is headquartered in Ontario, California, and is engaged in designing

certain digital sensor products and sells a broad selection of horticultural sensors and filters in North America and Europe.

AVX Design & Integration, Inc.

(“AVX”)

was incorporated on June 16, 2000 in the state of California.

AVX is an internet of things (“IoT”) installation and

management company specializing in high performance and easy to use Audio/Video, Home Theater, Lighting Control, Automation and

Services provided by AVX include full integration of houses, apartment, commercial complex, office spaces with audio,

visual and control systems to fully integrate devices in the low voltage field.

AVX’s services also include partial equipment

upgrade and installation.

Note 2 –

Summary of Significant Accounting Policies

AVX is an internet of things (“IoT”) installation and management

company specializing in high performance and easy to use Audio/Video, Home Theater, Lighting Control, Automation and Integration.

provided by AVX include full integration of houses, apartment, commercial complex, office spaces with audio, visual and control systems

to fully integrate devices in the low voltage field.

AVX’s services also include partial equipment upgrade and installation.

On December 23, 2021, Focus set up a branch in

Shenzhen China, Focus Universal (Shenzhen) Technology Company LTD.

The subsidiary was registered to be engaged in IoT research and development,

equipment sales, and application services, software development and sales, software outsourcing, intelligent agricultural management,

intelligent instrumentation sales, and information consulting services.

This excludes any projects subject to approval or that require

a separate business license in accordance with the local laws.

China allows foreign entities to setup wholly owned limited liability companies

in China, also known as Wholly Foreign Owned Enterprises (WFOEs), in non “restricted” or “prohibited” industries

and business activities.

The subsidiary’s business operation has been approved by the local government in Shenzhen to be qualified

as a WFOE entity in China.

The entity is 100% owned by Focus Universal, Inc.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial

statements include the accounts of Focus and its wholly-owned subsidiaries, Perfecular Inc.

The accompanying consolidated financial statements

include the accounts of Focus and its wholly-owned subsidiaries, Perfecular Inc.

and AVX Design & Integration, Inc.

(collectively, the “Company”, “we”, “our”, or “us”).

All intercompany balances

and transactions have been eliminated upon consolidation.

The Company’s consolidated financial statements have been prepared

in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”).

(collectively,

the “Company”, “we”, “our”, or “us”).

All intercompany balances and transactions have

been eliminated upon consolidation.

The Company’s consolidated financial statements have been prepared in accordance with accounting

principles generally accepted in the United States of America (“U.S.

Going Concern

The accompanying consolidated financial

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

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

The continuation of the Company

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

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

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

mobile application to full production and distribution.

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

In the long term, the continuation of the Company

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

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

For the year ended

December 31, 2021, the Company had a net loss of $ 3,220,977

and negative cash flow from operating activities of $ 2,228,405 .

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

deficit of $9,716,114.

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

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

development and commercialization of its Ubiquitor product.

The Company raised $ 10.3 million through an underwritten public offering in September 2021.

With the January 1, 2021 beginning cash amount

of $583,325 and underwritten public offering of $10.3 million, the Company will have enough cash to cover its projected annual cash burn

rate of $ 1,967,074 , which is a decrease from the previous year.

This is a result of coming off of a year where the company completed

an uplisting transaction causing a greater than normal amount of expenditure, especially within professional service fees.

Company has adequate cash for the Company to continue operation as a going concern throughout 2022 without any additional capital raise.

As a result, the previous factors raising substantial doubt to continue as a going concern have been alleviated for the following year.

Principles of Consolidation

The accompanying consolidated financial

statements include the accounts of the Company and its wholly-owned subsidiaries, Perfecular Inc.

and AVX Design & Integration.

Focus and Perfecular, collectively “the entities”

were under common control;

therefore, in accordance with Financial

Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805-50-45, the acquisition

of Perfecular was accounted for as a business combination between entities under common control and treated similar to a pooling

of interest transaction.

The accompanying consolidated financial statements

include the accounts of the Company and its wholly-owned subsidiaries, Perfecular Inc., AVX Design & Integration, and Focus Universal

(Shenzhen) Technology Co.

Focus and Perfecular, collectively “the entities,” were under common control;

therefore, in

accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805-50-45,

the acquisition of Perfecular was accounted for as a business combination between entities under common control and treated similar to

a pooling of interest transaction.

On March 15, 2019, Focus entered into a stock purchase agreement with AVX whereby Focus purchased 100%

of the outstanding stock of AVX.

On December 23, 2021, Focus established Focus Universal (Shenzhen) Technology Co.

LTD as a wholly owned

All significant intercompany transactions and balances have been eliminated.

Segment Reporting

The Company currently has two operating

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

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

by Management in deciding how to allocate resources and to assess performance.

Management reviews financial information presented

on a consolidated basis for purposes of allocating resources and evaluating financial performance.

Accordingly, the Company has

determined that it has two operating and reportable segments.

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

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

financial statements.

The Company currently has two operating segments.

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

of the Company’s business for which separate financial information is available and evaluated regularly by Management in deciding

how to allocate resources and to assess performance.

Management reviews financial information presented on a consolidated basis for purposes

of allocating resources and evaluating financial performance.

Accordingly, the Company has determined that it has two operating and reportable

Asset information by operating segment is not

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

The reporting segments follow the same accounting

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

Use of Estimates

The preparation of consolidated financial

statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts

of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the accompanying consolidated

financial statements, and the reported amounts of revenues and expenses during the reporting period.

The Company bases its estimates

and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances,

the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of

costs and expenses that are not readily apparent from other sources.

The preparation of consolidated financial statements

in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and the disclosure of contingent assets and liabilities as of the date of the accompanying consolidated financial statements, and the

reported amounts of revenues and expenses during the reporting period.

The Company bases its estimates and assumptions on current facts,

historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the

basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily

apparent from other sources.

The actual results experienced by the Company

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

To the extent there are material differences between the

estimates and the actual results, future results of operations will be affected.

Significant estimates in the accompanying financial

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

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

the valuation allowance on deferred tax assets.

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

To the extent there are material differences between the estimates

and the actual results, future results of operations will be affected.

Significant estimates in the accompanying financial statements

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

assets, allowance for doubtful accounts, inventory reserves, debt discounts, valuation of derivatives, and the valuation allowance on

deferred tax assets.

The Company regularly evaluates its estimates and assumptions.

The Company considers all highly liquid

investments with a maturity of three months or less to be cash.

At times, such investments may be in excess of Federal Deposit

Insurance Corporation (FDIC) insurance limit.

The Company considers all highly liquid investments

with a maturity of three months or less to be cash.

At times, such investments may be in excess of Federal Deposit Insurance Corporation

(FDIC) insurance limit.

As of December 31, 2021 and 2020, approximately $ 7,464,846 and $ 0 of the Company’s cash was not insured

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

Accounts Receivable

The Company grants credit to clients that

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

and do not require collateral to support customer receivables.

The accounts receivable balances are generally collected within

30 to 90 days of the product sale.

The Company grants credit to clients that sell

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

not require collateral to support customer receivables.

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

of the product sale.

Allowance for doubtful accounts

The Company estimates an allowance for

doubtful accounts based on historical collection trends and review of the current status of trade accounts receivable.

It is reasonably

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

As of December 31, 2020 and 2019, allowance

for doubtful accounts amounted to $44,519 and $22,612, respectively.

The Company estimates an allowance for doubtful

accounts based on historical collection trends and review of the current status of trade accounts receivable.

It is reasonably possible

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

As of December 31, 2021 and 2020, allowance for doubtful

accounts amounted to $ 86,635 and $ 44,519 , respectively.

Concentrations of Credit Risk

Financial instruments that potentially

subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents.

The Company limits its exposure

to credit loss by investing its cash with high credit quality financial institutions.

Inventory consists primarily of parts and

finished goods and is valued at the lower of the inventory’s cost or net realizable value under the first-in-first-out method.

Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value,

Inventory allowances are recorded for obsolete or slow-moving inventory based on assumptions about future demand and

marketability of products, the impact of new product introductions and specific identification of items, such as discontinued products.

These estimates could vary significantly from actual requirements, for example, if future economic conditions, customer inventory

levels or competitive conditions differ from expectations.

The Company regularly reviews the value of inventory based on historical

usage and estimated future usage.

If estimated realized value of our inventory is less than cost, we make provisions in order

to reduce its carrying value to its estimated market value.

As of December 31, 2020 and 2019, inventory reserve amounted to

$ 70,562 and $71,414, respectively.

Financial instruments that potentially subject

the Company to concentrations of credit risk consist primarily of cash and cash equivalents.

The Company limits its exposure to credit

loss by investing its cash with high credit quality financial institutions.

Inventory consists primarily of parts and finished

goods and is valued at the lower of the inventory’s cost or net realizable value under the first-in-first-out method.

compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower.

allowances are recorded for obsolete or slow-moving inventory based on assumptions about future demand and marketability of products,

the impact of new product introductions and specific identification of items, such as discontinued products.

These estimates could vary

significantly from actual requirements, for example, if future economic conditions, customer inventory levels or competitive conditions

differ from expectations.

The Company regularly reviews the value of inventory based on historical usage and estimated future usage.

estimated realized value of our inventory is less than cost, we make provisions in order to reduce its carrying value to its estimated

market value.

As of December 31, 2021 and 2020, inventory reserve amounted to $ 68,940 and $ 70,562 , respectively.

Property and Equipment

Property and equipment are stated at cost.

The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts and any gain or loss is

included in earnings.

cost and accumulated depreciation of assets sold or retired are removed from the respective accounts and any gain or loss is included

Maintenance and repairs are expensed currently.

Major renewals and betterments are capitalized.

is computed using the straight-line method.

Depreciation is computed

using the straight-line method.

Estimated useful lives are as follows:

Construction in progress

Schedule of estimated useful lives of property, plant and equipment

Long-Lived Assets

The Company applies the provisions of FASB

ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal

of long-lived assets.

ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators

of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’

carrying amounts.

In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of

the long-lived assets.

Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are

reduced for the cost of disposal.

Long-term assets of the Company are reviewed when circumstances warrant as to whether their carrying

value has become impaired.

The Company considers assets to be impaired if the carrying value exceeds the future projected cash

flows from related operations.

The Company also re-evaluates the periods of amortization to determine whether subsequent events

and circumstances warrant revised estimates of useful lives.

Based on its review at December 31, 2020 and 2019, the Company believes

there was no impairment of its long-lived assets.

Intangible Assets

The Company’s intangible assets were

acquired from AVX.

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

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

was fully impaired.

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

Estimated useful

lives of intangible assets are as follows:

Intangible assets

Market related intangible assets

Goodwill represents the excess of the purchase

price over the fair value of net assets acquired in a business combination.

Goodwill with indefinite useful lives are tested for

impairment at least annually at December 31 and whenever triggering events or changes in circumstances indicate its carrying value

may not be recoverable.

Assessment of the potential impairment of goodwill is an integral part of the Company’s normal ongoing

review of operations.

Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects

management’s best estimates at a particular point in time.

The dynamic economic environments in which the Company’s

businesses operate and key economic and business assumptions related to projected selling prices, market growth, inflation rates

and operating expense ratios, can significantly affect the outcome of impairment tests.

Estimates based on these assumptions may

differ significantly from actual results.

Changes in factors and assumptions used in assessing potential impairments can have a

significant impact on the existence and magnitude of impairments, as well as the time in which such impairments are recognized.

The management tests for impairment annually at year end.

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

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

The Company applies the provisions of FASB ASC

Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived

ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present

and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts.

In that event,

a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived assets.

Loss on long-lived

assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal.

Long-term assets

of the Company are reviewed when circumstances warrant as to whether their carrying value has become impaired.

The Company considers assets

to be impaired if the carrying value exceeds the future projected cash flows from related operations.

The Company also re-evaluates the

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

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

Share-based Compensation

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

Stock-based compensation

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

their fair values at the date of grant.

The measurement of stock-based compensation

is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period which

Stock-based compensation to employees consist

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

The measurement of stock-based compensation is

subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period during which

services are received.

The Company calculates the fair value of

option grants utilizing the Black-Scholes pricing model and estimates the fair value of the stock based upon the estimated fair

value of the common stock.

The amount of stock-based compensation recognized during a period is based on the value of the portion

of the awards that are ultimately expected to vest.

The resulting stock-based compensation

expense for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service

period of the award.

The Company calculates the fair value of option

grants utilizing the Black-Scholes pricing model and estimates the fair value of the stock based upon the estimated fair value of the

common stock.

The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that

are ultimately expected to vest.

The resulting stock-based compensation expense

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

The Company accounts for warrants as either equity-classified

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

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

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

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

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

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

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

period end date while the warrants are outstanding.

For issued or modified warrants that meet all

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

time of issuance.

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

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

Changes in the estimated fair

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

The fair value of the warrants was estimated

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

Fair Value of Financial Instruments

The Company follows paragraph ASC 825-10-50-10

for disclosures about fair value of its financial instruments and paragraph ASC 820-10-35-37 (“Paragraph 820-10-35-37”)

to measure the fair value of its financial instruments.

Paragraph 820-10-35-37 establishes a framework for measuring fair value

in accounting principles generally accepted in the United States of America (U.S.

GAAP), and expands disclosures about fair value

measurements.

To increase consistency and comparability

in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes

the inputs to valuation techniques used to measure fair value into three (3) broad levels.

The fair value hierarchy gives the highest

priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable

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

for disclosures about fair value of its financial instruments and paragraph ASC 820-10-35-37 (“Paragraph 820-10-35-37”) to

measure the fair value of its financial instruments.

Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting

principles generally accepted in the United States of America (U.S.

GAAP), and expands disclosures about fair value measurements.

To increase consistency and comparability in fair

value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to

valuation techniques used to measure fair value into three (3) broad levels.

The fair value hierarchy gives the highest priority to quoted

prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The three (3)

levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

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

1 unchanged sentence

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

Financial assets are considered Level 2

when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least

one significant model assumption or input is unobservable.

The carrying amount of the Company’s

financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued expenses, approximate their fair

value because of the short maturity of those instruments.

Transactions involving related parties

cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings

may not exist.

Representations about transactions with related parties, if made, shall not imply that the related party transactions

were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

However, it is not practical to determine

the fair value of advances from stockholders, if any, due to their related party nature.

Financial assets are considered Level 2 when their

fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant

model assumption or input is unobservable, such as Boustead warrant (Note 11).

The carrying amount of the Company’s financial

assets and liabilities, such as cash, accounts receivable, inventories, other receivable, prepaid expenses, deposit, accounts payable

and accrued expenses, other current liabilities, customer deposit, approximate their fair value because of the short maturity of those

Transactions involving related parties cannot

be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist.

Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated

on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

However, it is not practical to determine the

fair value of advances from stockholders, if any, due to their related party nature.

Comprehensive Income (Loss)

Other comprehensive income (loss) refers to revenues,

expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but are excluded

from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity.

The Company other comprehensive

loss for the years ended December 31, 2021 and 2020 was comprised of foreign currency translation adjustments.

Revenue Recognition

On September 1, 2018, the Company adopted

ASC 606 –

On September 1, 2018, the Company adopted ASC

606 – Revenue from Contracts with Customers using the modified retrospective transition approach.

The core principle

of ASC 606 is that revenue should be recognized in a manner that depicts the transfer of promised goods or services to customers

in an amount that reflects the consideration to which the entity expects to be entitled for exchange of those goods or services.

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

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

Revenue from the Company is recognized

under Topic 606 in a manner that reasonably reflects the delivery of its services and products to customers in return for expected

consideration and includes the following elements:

executed contracts with the Company’s customers that it believes are legally enforceable;

The core principle of ASC 606

is that revenue should be recognized in a manner that depicts the transfer of promised goods or services to customers in an amount that

reflects the consideration to which the entity expects to be entitled for exchange of those goods or services.

The Company’s updated

accounting policies and related disclosures are set forth below, including the disclosure for disaggregated revenue.

The impact of adopting

ASC 606 was not material to the Consolidated Financial Statements.

Revenue from the Company is recognized under Topic

606 in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and

includes the following elements:

executed contracts with the Company’s customers that it believes are legally enforceable;

identification of performance obligations in the respective contract;

determination of the transaction price for each performance obligation in the respective contract;

allocation the transaction price to each performance obligation;

Allocation of the transaction price to each performance obligation;

recognition of revenue only when the Company satisfies each performance obligation.

These five elements, as applied to each

of the Company’s revenue category, is summarized below:

Product sales –

revenue is recognized at the time of sale of equipment to the customer.

Service sales –

revenue is recognized based on the service been provided to the customer.

Revenue from our project construction is

recognized over time using the percentage-of-completion method under the cost approach.

The percentage of completion is determined

by estimating stage of work completed.

Under this approach, recognized contract revenue equals the total estimated contract revenue

multiplied by the percentage of completion.

Our construction contracts are unit priced, and an account receivable is recorded for

amounts invoiced based on actual units produced.

Cost of Revenue

These five elements, as applied to each of the

Company’s revenue category, is summarized below:

Product sales – revenue is recognized at the time of sale of equipment to the customer.

Service sales – revenue is recognized based on the service been provided to the customer.

Revenue from our project construction is recognized

over time using the percentage-of-completion method under the cost approach.

The percentage of completion is determined by estimating

stage of work completed.

Under this approach, recognized contract revenue equals the total estimated contract revenue multiplied by the

percentage of completion.

Our construction contracts are unit priced, and an account receivable is recorded for amounts invoiced based

on actual units produced.

Cost of Revenue, excluding depreciation & amortization

Cost of revenue includes the cost of services,

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Research and development

Research and development costs are expensed

Research and development costs primarily consist of efforts to refine existing product models and develop new product

Research and development costs are expensed as

Research and development costs primarily consist of efforts to refine existing product models and develop new product models.

Related Parties

The Company follows ASC 850-10 for the

identification of related parties and disclosure of related party transactions.

The Company follows ASC 850-10 for the identification

of related parties and disclosure of related party transactions.

Pursuant to ASC 850-10-20 the related parties include:

a) affiliates of the Company;

b) entities for which investments in their equity securities would be required, absent the election

of the fair value option under the Fair Value Option Subsection of ASC 825–10–15, to be accounted for by the equity

method by the investing entity;

c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed

by or under the trusteeship of management;

a) affiliates

of the Company;

b) entities for which investments in their equity securities would be required, absent the election of the fair value

option under the Fair Value Option Subsection of ASC 825–10–15, to be accounted for by the equity method by the investing

c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship

of management;

d) principal owners of the Company;

e) management of the Company;

f) other parties with

which the Company may deal if one party controls or can significantly influence the management or operating policies of the other

to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests;

parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership

interest in one of the transacting parties and can significantly Influence the other to an extent that one or more of the transacting

f) other parties with which the Company may deal if one

party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting

parties might be prevented from fully pursuing its own separate interests;

The consolidated financial statements shall

include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other

similar items in the ordinary course of business.

However, disclosure of transactions that are eliminated in the preparation of

consolidated financial statements is not required in those statements.

and g) other parties that can significantly influence the management

or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly

Influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The consolidated financial statements shall include

disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items

in the ordinary course of business.

However, disclosure of transactions that are eliminated in the preparation of consolidated financial

statements is not required in those statements.

The disclosures shall include:

(a) the nature of the relationship(s)

(b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for

each of the periods for which income statements are presented, and such other information deemed necessary to an understanding

of the effects of the transactions on the consolidated financial statements;

the periods for which income statements are presented and the effects of any change in the method of establishing the terms from

that used in the preceding period;

and (d) amounts due from or to related parties as of the date of each balance sheet presented

and, if not otherwise apparent, the terms and manner of settlement.

(a) the nature of the relationship(s) involved;

(b) a description

of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income

statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the consolidated

financial statements;

effects of any change in the method of establishing the terms from that used in the preceding period;

and (d) amounts due from or to related

parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitments and Contingencies

The Company follows ASC 450-20 to report

accounting for contingencies.

Certain conditions may exist as of the date the consolidated financial statements are issued, which

may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.

Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss

contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings,

the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the

amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates

that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated

liability would be accrued in the Company’s consolidated financial statements.

If the assessment indicates that a potential

material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of

the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are

generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Management does not believe,

based upon information available at this time that these matters will have a material adverse effect on the Company’s financial

position, results of operations or cash flows.

However, there is no assurance that such matters will not materially and adversely

affect the Company’s business, financial position, and results of operations or cash flows.

The Company follows ASC 450-20 to report accounting

for contingencies.

Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a

loss to the Company but which will only be resolved when one or more future events occur or fail to occur.

The Company assesses such contingent

liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings

that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits

of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought

If the assessment of a contingency indicates that

it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would

be accrued in the Company’s consolidated financial statements.

If the assessment indicates that a potential material loss contingency

is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an

estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally

not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Management does not believe, based upon

information available at this time that these matters will have a material adverse effect on the Company’s financial position, results

of operations or cash flows.

However, there is no assurance that such matters will not materially and adversely affect the Company’s

business, financial position, and results of operations or cash flows.

Income Tax Provision

The Company accounts for income taxes in

accordance with ASC Topic 740, Income Taxes.

ASC 740 requires a company to use the asset and liability method of accounting for

income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are

recognized for taxable temporary differences.

Temporary differences are the differences between the reported amounts of assets

and liabilities and their tax bases.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,

the Company does not foresee generating taxable income in the near future and utilizing its deferred tax asset, therefore, it is

more likely than not that some portion, or all of, the deferred tax assets will not be realized.

Deferred tax assets and liabilities

are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Under ASC 740, a tax position is recognized

as a benefit only if it is “more likely than not”

that the tax position would be sustained in a tax examination, with

a tax examination being presumed to occur.

The amount recognized is the largest amount of tax benefit that is greater than 50%

likely of being realized on examination.

For tax positions not meeting the “more likely than not”

test, no tax benefit

The Company has no material uncertain tax positions for any of the reporting periods presented.

Income taxes are accounted for using the

asset and liability method.

Deferred income taxes are provided for temporary differences in recognizing certain income, expense

and credit items for financial reporting purposes and tax reporting purposes.

Such deferred income taxes primarily relate to the

difference between the tax basis of assets and liabilities and their financial reporting amounts.

Deferred tax assets and liabilities

are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities

are expected to be settled or realized.

The Company accounts for income taxes in accordance

with ASC Topic 740, Income Taxes.

ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby

deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary

Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.

tax assets are reduced by a valuation allowance when, in the opinion of management, the Company does not foresee generating taxable income

in the near future and utilizing its deferred tax asset, therefore, it is more likely than not that some portion, or all of, the deferred

tax assets will not be realized.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on

the date of enactment.

Under ASC 740, a tax position is recognized as

a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination

being presumed to occur.

The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized

on examination.

For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company has

no material uncertain tax positions for any of the reporting periods presented.

Income taxes are accounted for using the asset

and liability method.

Deferred income taxes are provided for temporary differences in recognizing certain income, expense and credit items

for financial reporting purposes and tax reporting purposes.

Such deferred income taxes primarily relate to the difference between the

tax basis of assets and liabilities and their financial reporting amounts.

Deferred tax assets and liabilities are measured by applying

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

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

As of December 31, 2021 and 2020, the Company

did not identify any material uncertain tax positions.

did no t identify any material uncertain tax positions.

Basic and Diluted Net Income (Loss) Per Share

Net income (loss) per share is computed

pursuant to ASC 260-10-45.

Basic net income (loss) per share (“EPS”) is computed by dividing net income (loss) by the

weighted average number of shares outstanding during the period.

Diluted EPS is computed by dividing net

income (loss) by the weighted average number of shares of stock and potentially outstanding shares of stock during the period to

reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock

options or warrants.

Net income (loss) per share is computed pursuant

to ASC 260-10-45.

Basic net income (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted average

number of shares outstanding during the period.

Diluted EPS is computed by dividing net income

(loss) by the weighted average number of shares of stock and potentially outstanding shares of stock during the period to reflect the

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

Due to the net loss incurred by the Company,

potentially dilutive instruments would be anti-dilutive.

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

periods presented.

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

share as their inclusion would be anti-dilutive.

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

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

inclusion would be anti-dilutive.

Schedule of anti dilutive shares

Year ended December 31,

1 unchanged sentence

Subsequent Events

The Company follows the guidance in ASC

855-10-50 for the disclosure of subsequent events.

The Company will evaluate subsequent events through the date when the financial

statements were issued.

Pursuant to ASU 2010-09, the Company as an SEC filer considers its financial statements issued when they

are widely distributed to users, such as through filing them on EDGAR.

Based upon the review, other than described in Note 17 –

Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment

or disclosure in the consolidated financial statements.

The Company follows the guidance in ASC 855-10-50 for the disclosure

of subsequent events.

The Company will evaluate subsequent events through the date when the financial statements were issued.

to ASU 2010-09, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such

as through filing them on EDGAR.

As of January 5, 2022, the Company founded a wholly owned subsidiary named Lusher Bioscientific, Inc.

Lusher Bioscientific was founded to market to the hydroponic and controlled agriculture market and to assist in the product development

of product within this sector.

As of the date of this filing, the Company has only founded the subsidiary and activities are in the introductory

Reclassification

Certain reclassifications have been made

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

Such reclassifications have

no effect on net income as previously reported.

Note 3 –

Recent Accounting Pronouncement

Certain reclassifications have been made to the

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

Such reclassifications have no effect on net

income as previously reported.

Foreign Currency Translation and Transactions

The reporting

and functional currency of Focus is the USD.

The functional currency of Focus Universal (Shenzhen) Technology Co.

LTD, a wholly owned

subsidiary of Focus located in China, is the Renminbi (“RMB”).

For financial

reporting purposes, the financial statements of the Company’s Chinese subsidiary, which are prepared using the RMB, are translated

into the Company’s reporting currency, USD.

Assets and liabilities are translated using the exchange rate on the balance sheet

Revenue and expenses are translated using average exchange rates prevailing during each reporting period.

Stockholders’

equity is translated at historical exchange rates.

Adjustments resulting from the translation are recorded as a separate component of

accumulated other comprehensive loss in stockholders’ equity.

denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing

at the dates of the transactions.

The resulting exchange difference, presented as foreign currency transaction loss, is included in the

accompanying consolidated statements of operations.

Note 3 – Recent Accounting Pronouncement

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting

Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842) (“Topic

842”), which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements.

Topic 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842;

Codification Improvements to Topic 842, Leases;

ASU 2018-11, Targeted Improvements;

and ASU 2019-01, Codification Improvements.

The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease

liability on the balance sheet for all leases with a term longer than 12 months.

Leases are classified as finance or operating,

with classification affecting the pattern and classification of expense recognition in the statement of income.

The new standard was effective for the

Company on January 1, 2019.

A modified retrospective transition approach is required, applying the new standard to all leases existing

at the date of initial application.

An entity may choose to use either (1) its effective date or (2) the beginning of the earliest

comparative period presented in the financial statements as its date of initial application.

The Company adopted the new standard

on January 1, 2019 and used the effective date as its date of initial application.

Consequently, prior period financial information

has not been recast and the disclosures required under the new standard have not been provided for dates and periods before January

The new standard provides a number of optional

practical expedients in transition.

The Company elected the “package of practical expedients”, which permits it not

to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs.

The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable

to the Company.

The new standard also provides practical expedients for an entity’s ongoing accounting.

The Company elected

the short-term lease recognition exemption for all leases that qualify.

This means, for those leases that qualify, it has not recognized

ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases

of those assets in transition.

The Company also elected the practical expedient to not separate lease and non-lease components

for all of its leases.

The Company believes the most significant

effects of the adoption of this standard relate to (1) the recognition of new ROU assets and lease liabilities on its consolidated

balance sheet for its office operating leases and (2) providing new disclosures about its leasing activities.

There was no change

in its leasing activities as a result of adoption.

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

Stock Compensation (Topic 718):

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

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

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

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

Early adoption

is permitted.

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

In June 2020, the FASB issued ASU 2020-05

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

ASU 2020-05, Revenue from Contracts with

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

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

during the pandemic.

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

within fiscal years beginning after December 15, 2020.

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

not anticipate any effect on its financial statements.

In December 2019, Financial Accounting Standards

Board (“FASB”) issued ASU 2019-12, Income Taxes, which provides for certain updates to reduce complexity in the accounting

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

The amendments

in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

of this ASU did not have a material effect on its condensed consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01,

Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic

815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.

The guidance provides clarification of the interaction of

rules for equity securities, the equity method of accounting and forward contracts and purchase options on certain types of securities.

ASU 2020-01 is effective for the Company in the first quarter of 2021.

The adoption did not have any significant impact on the Company’s

condensed consolidated financial statements.

In June 2020, the FASB issued ASU 2020-05 in response

to the ongoing impacts to U.S.

businesses in response to the COVID-19 pandemic.

ASU 2020-05, Revenue from Contracts with Customers (Topic

606) and Leases (Topic 842) Effective Dates for Certain Entities provide a limited deferral of the effective dates for implementing previously

issued ASU 606 and ASU 842 to give some relief to businesses considering the difficulties they are facing during the pandemic.

These entities

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

As the Company has already adopted ASU 606 and ASU 842, the Company does not anticipate any effect on its financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In June 2016, FASB issued ASU 2016-13,

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

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

The new guidance

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

since their origination.

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

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

119 and Update to SEC Section on Effective

Date Related to Accounting Standards Update No.

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

for smaller reporting companies.

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

in fiscal years beginning after December 15, 2022.

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

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

The Company is in the process of determining

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

In December 2019, FASB issued ASU 2019-12

"Income Taxes,"

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

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

The amendments in ASU 2019-12 are effective

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

The Company does not expect

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

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

financial statement s.

As new accounting pronouncements are

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

Note 4 –

Inventory, net

At December 31, 2020 and 2019, inventory

consisted of the following:

In June 2016, the FASB issued ASU No.

(Topic 326), Financial Instruments – Credit Losses:

Measurement of Credit Losses on Financial Instruments which amends the current

accounting guidance and requires the use of the new forward-looking “expected loss” model, rather than the “incurred

loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable

and supportable forecasts.

This guidance amends the accounting for credit losses for most financial assets and certain other instruments

including trade and other receivables, held-to-maturity debt securities, loans and other instruments.

In November 2019, the FASB issued

2019-10 to postpone the effective date of ASU No.

2016-13 for public business entities eligible to be smaller reporting companies

defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

believes the adoption of ASU No.

2016-13 will not have a material impact on its financial position and results of operations.

In August 2020, the FASB issued ASU 2020-06, Debt

– Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to improve financial reporting associated

with accounting for convertible instruments and contracts in an entity’s own equity.

ASU 2020-06 will be effective for the Company

in the first quarter of 2022.

The Company is currently evaluating the amended guidance and the impact on its consolidated financial statements

and related disclosures.

Management does not believe that any recently

issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements.

As new accounting

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

Note 4 – Inventory, net

At December 31, 2021 and 2020, inventory consisted

of the following:

Schedule of Inventory

December 31, 2021

December 31, 2020

Finished goods

1 unchanged sentence

Inventory, net

Note 5 –

Deposit balance as of December 31, 2020

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

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

On August 31, 2020, the Company executed

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

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

($5,000,000).

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

The purchase price structure

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

This $100,000

is now nonrefundable.

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

Note 6 –

On March 15, 2019, the Company entered

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

(“AVX”) as stated in Note 1.

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

Purchase price

29,286 shares of common stock (1)

Secured promissory note

Total purchase price

Allocation of purchase price

Accounts receivable

Property and equipment

Operating lease right-of-use assets

Intangible assets

Accounts payable and accrued liabilities

Operating lease liability

Purchase price

the fair value of the common

stock was calculated based on the closing market price of the Company’s common stock at the date of acquisition.

Note 7 –

Property and Equipment

At December 31, 2020 and 2019, property and equipment consisted

of the following:

Note 5 – Deposits

Deposit balance as of December 31, 2021 amounted

to $ 39,901 for lease agreement and utility deposit.

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

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

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

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

was returned on March 29, 2021.

Note 6 – Property and Equipment

At December 31, 2021 and 2020, property and equipment consisted of

the following:

Schedule of property and equipment

December 31, 2021

December 31, 2020

Building improvement

2 unchanged sentences

Property and equipment, net

Depreciation expense for the years ended

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

Depreciation expense for the years ended December

31, 2021 and 2020 amounted to $ 162,160 and $ 162,242 , respectively.

The Company purchased a warehouse in Ontario,

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

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

as other liability in non-current liability.

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

The Company subleased

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

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

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

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

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

Note 8 –

Promissory Note - Related Party

On March 15, 2019, when the Company purchased

AVX Design & Integration, Inc.

the Company agreed to pay the predecessor owner with promissory note as one of the forms of

consideration.

The note was $50,000 with a fixed interest rate of 6% per annum payable in 12 equal monthly payments commencing

on June 1 st , 2019 with interest calculated from the initial payment date through the date in which all amount due under

the note is paid off.

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

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

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

Note 9 –

Related Party Transactions

Revenue generated from Vitashower Corp.,

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

respectively.

There were no accounts receivable balance due from Vitashower Corp.

as of December 31, 2020 and 2019, respectively.

Purchases generated from Vitashower Corp.

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

liability in other current liability as of December 31, 2021 and non-current liabilities as of December 31, 2020.

Note 7 – Related Party Transactions

Revenue generated from Vitashower Corp., a company

owned by the CEO’s wife, amounted to $ 29,084 and $ 26,449 for the year ended December 31, 2021 and 2020, respectively.

Account receivable

balance due from Vitashower Corp.

amounted to $ 15,176 and $ 0 as of December 31, 2021 and 2020, respectively.

Purchases generated from

Vitashower Corp.

amounted to $ 3,379 and $ 0 for the years ended December 31, 2021 and 2020, respectively.

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

There were accounts payable balances

of $ 0 and $ 17,471 due to Vitashower Corp.

as of December 31, 2021 and 2020, respectively.

Compensation payable to Chief Financial

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

Compensation for services provided by the

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

Compensation for services provided by the

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

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

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

Note 10 –

Business Concentration and Risks

Compensation for services provided by the President

and Chief Executive Officer for the years ended December 31, 2021 and 2020 amounted to $ 124,615 and $ 120,000 , respectively.

Note 8 – Business Concentration and Risks

Major customers

1 unchanged sentence

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

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

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

This customer accounted for 77 % and 53 % of total revenue for the years

ended December 31, 2021 and 2020, respectively.

Major vendors

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

This vendor accounted

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

Note 11 –

Commitments and

Contingencies

In the normal course of business or otherwise,

the Company may become involved in legal proceedings.

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

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

When only a range of possible loss can be established,

the most probable amount in the range is accrued.

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

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

Note 12 –

Operating Lease Right-of-use

Asset and Operating Lease Liability

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

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

rate implicit in our lease is not readily determinable.

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

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

The Company currently has a lease agreement

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

The lease commenced July 1, 2015

and expires on August 31, 2022.

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

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

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

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

the latter is not

applicable to the Company.

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

months or less.

On March 15, 2019 when AVX was acquired,

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

Right-of-use asset is summarized below:

One vendor, Tianjin Guanglee, accounted for 0 %

of total accounts payable at December 31, 2021 and 2020, respectively.

This same vendor, Tianjin Guanglee, accounted for 81 %

of the total purchases for the years ended December 31, 2021 and 2020, respectively.

Note 9 – Lease

The Company recorded its operating lease cost

of $ 67,664 and $ 65,180 for the years ended December 31, 2021 and 2020, respectively.

April 8, 2015, AVX Design & Integration Inc.

entered an eighty-six month commercial lease with a third party for an approximately

2,592 square foot office space.

The lease commenced on July 1, 2015 and will end on August 31, 2022.

The monthly rent is $4,536 with approximately

a 3% increase rate in each additional year.

The incremental borrowing rate for a lease is the rate of interest the Company would have

to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term, which is 15%.

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

On December 7, 2021, Focus Universal (Shenzhen)

Technology Co.

LTD entered a thirty-eight month commercial lease with a third party for an approximately 5,895 square foot office space.

The lease commenced on December 25, 2021 and will end on February 28, 2025.

The monthly rent is RMB70,097 (approximately $11,014) with

approximately an 11.1% to 12.5% increase rate in each additional year.

The incremental borrowing rate for a lease is the rate of interest

the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term,

which is 10%.

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

Operating lease right-of-use assets represent

the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation

to make lease payments arising from the lease.

As of December 31, 2021 and 2020, operating lease right-of use assets and lease liabilities

were as follows:

Schedule of operating Right-of-use asset and liability

December 31, 2021

December 31, 2020

accumulated amortization

Right-of-use asset, net

Operating Lease liability is summarized

Operating lease right-of-use assets

Lease liabilities, current portion

Lease liabilities, less current portion

Lease term and discount rate:

Schedule Lease term and discount rate

December 31, 2021

December 31, 2020

current portion

Long term portion

Maturity of lease liability is as follows:

Weighted average remaining lease term

Operating lease

0.67 to 3.17 years

Weighted average discount rate

Operating lease

The minimum future lease payments are as follows:

Schedule of maturity of lease liabilities

Year ending December 31, 2022

Year ending December 31, 2023

Total future minimum lease payment

Year ending December 31, 2024

Year ending December 31, 2025

Total minimum lease payment

imputed interest

Lease Obligation, net

Note 13 –

Present value of future minimum lease payments

Note 10 – Loans

Paycheck Protection Program

1 unchanged sentence

entered into an agreement to receive a U.S.

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

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

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

The SBA Loan has a fixed

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

The SBA Loan has a fixed interest rate

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

There were no principal and interest due as

of December 31, 2020.

On July 8, 2021, SBA authorized full forgiveness of this loan and the Company recognized principal amount of $ 107,460

and $ 1,267 interest to other income.

On May 4, 2020, Perfecular Inc.

entered into an agreement to receive a U.S.

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

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

The SBA Loan has a fixed

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

entered into an

agreement to receive a U.S.

Small Business Administration Loan (“SBA Loan”) from Bank of America related to the COVID-19 pandemic

in the amount of $ 151,500 , which we received on May 4, 2020.

The SBA Loan has a fixed interest rate of 1 percent per annum and a maturity

date two years from the date loan was issued.

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

On April 28, 2021, SBA

authorized full forgiveness of this loan and the Company recognized principal amount of $ 151,500 and $ 1,490 interest to other income.

On March 2, 2021, Perfecular Inc.

an agreement to receive a U.S.

Small Business Administration Loan (“SBA Loan”) from Wells Fargo related to the COVID-19 pandemic

in the amount of $ 158,547 , which we received on March 3, 2021.

The SBA Loan has a fixed interest rate of 1 percent per annum and a maturity

date two years from the date loan was issued.

The balance of principal and interest were $ 158,547 and $ 1,282 , respectively, due as of

December 31, 2021.

There were no principal and interest due as of December 31, 2021.

On March 10, 2021, AVX Design & Integration,

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

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

22, 2021, SBA authorized full forgiveness of this loan and the Company recognized principal amount of $ 108,750 and $ 651 interest to other

There were no principal and interest due as of December 31, 2021.

Economic Injury Disaster Loan

On June 4, 2020, Perfecular Inc.

into an agreement to receive a U.S.

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

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

The SBA Loan has a fixed interest rate of 3.75

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

an agreement to receive a U.S.

Small Business Administration Loan (“SBA Loan”) from Bank of America related to the COVID-19

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

The SBA Loan has a fixed interest rate of 3.75 percent per annum

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

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

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

On June 5, 2020, AVX Design & Integration,

entered into an agreement to receive a U.S.

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

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

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

The SBA Loan has a fixed

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

Borrower will use all the proceeds of this

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

The SBA Loan has a fixed interest rate

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

On September 22, 2021, the Company paid this

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

On January 8, 2021, Focus Universal Inc.

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

The note has a variable interest rate of 0.25 %

above Wall Street Journal Prime Rate.

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

due on January 22, 2026.

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

Schedule of debt

December 31, 2021

December 31, 2020

current portion

Long term portion

Interest expense incurred from the loans

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

Economic Injury Disaster Loan advance

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

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

The amount of the EIDL

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

The EIDL Advance does not have to be repaid.

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

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

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

Note 14 –

Stockholders’

Interest expense incurred from the loans amounted

to $ 38,355 and $ 4,746 for the years ended December 31, 2021 and 2020, respectively.

Note 11 – Stockholders’ Equity

Shares authorized

Upon formation, the total number of shares

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

value $0.001 per share.

Upon formation, the total number of shares of

all classes of stock that the Company is authorized to issue is seventy-five million ( 75,000,000 ) shares of common stock, par value $ 0.001

During the year ended December 31, 2021, the Company

issued 2,300,000 shares of common stock.

On September 2, 2021, the Company closed its initial

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

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

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

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

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

As of December 31, 2021 and 2020, the Company

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

During the year ended December 31, 2020,

the Company did not issue common stock.

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

Shares to be issued for compensation

The Company entered into agreements with

third party consultants for financing and management consultation.

The Company has incurred consulting service fees not paid in

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

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

During the year ended December 31, 2019, the

Company had the following transactions in its common stock:

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

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

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

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

The Company entered into agreements with third

party consultants for financing and management consulting.

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

to $ 48,000 for the year ended December 31, 2021, which the Company intends to issue stock as compensation for services rendered.

incurred but not yet paid in shares as of December 31, 2021 and 2020 amounted to $ 146,709 and $ 98,709 , respectively.

On August 30, 2021, the Company entered into a

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

(“Boustead”) for 161,000 shares and the exercise price is $6.25.

Boustead exercised the warrants on September 7, 2021.

The fair value of the warrants was $ 1,041,670 and $ 2,326,450 as of August 30 and September 7, 2021, respectively.

For the year ended December

31, 2021, the Company recorded a loss from change in the fair value of warrant liability which amounted to a difference of $ 1,284,780 .

These warrants were valued using a Black-Scholes

pricing model with the following assumptions:

Schedule of assumptions

August 30, 2021 (Initial

Risk-free interest rate

Expected term

Expected volatility

Expected dividend yield

Fair value of units (using Black-Scholes)

This Warrant Agreement allowed for cashless exercise

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

being exercisable.

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

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

The shares will be issued six months after these warrants have

been exercised.

For the year ended December 31, 2021, the Company has a gain on settlement of derivative liability which amounted to $550,406.

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

Stock options

On August 6, 2019, each member

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

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

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

The fair value of the warrants listed above was determined using

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

On August 6, 2019, each member of the Board was

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

On January 4, 2021, each member of the Board was

granted 15,000 options to purchase shares at $ 3.00 per share.

On December 31, 2021, each member of the Board

was granted 15,000 options to purchase shares at $ 8.86 per share.

As of December 31, 2021, there were 420,000 options

granted, 315,288 options vested, 104,713 options unvested, and 420,000 outstanding stock options.

For the years ended December 31, 2021 and 2020,

the Company’s stock option compensation expenses amounted to $ 429,856 and $ 605,150 , respectively.

The fair value of the stock options listed above

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

Schedule of option activity

December 31, 2021

December 31, 2020

Risk-free interest rate

0.93 – 1.52 %

Expected life of the options

Expected volatility

122.93 – 148.18 %

Expected dividend yield

1 unchanged sentence

from December 31, 2020 to December 31, 2021:

Schedule of options by exercise price

Weighted average exercise price

6 unchanged sentences

Exercisable at December 31, 2021

The exercise price for options outstanding

and exercisable at December 31, 2020:

Note 15 –

Our effective tax rate differs from the

statutory federal income tax rate, primarily as a result of the changes in valuation allowance, nondeductible permanent differences,

credits, and state income taxes.

A reconciliation of the federal statutory

income tax to our effective income tax is as follows:

Federal statutory rates

State income taxes

Permanent differences

Valuation allowance against net deferred tax assets

Effective rate

The tax effect of temporary differences

that give rise to a significant portion of the deferred tax assets and liabilities at December 31, 2020 and 2019 is presented

Deferred income tax asset

Net operating loss carryforwards

Total deferred income tax asset

valuation allowance

Total deferred income tax asset

The Company recognizes valuation allowances

to reduce deferred tax assets to the amount that is more likely than not to be realized.

The Company’s net deferred income

tax asset is not more likely than not to be realized due to the lack of sufficient sources of future taxable income and cumulative

losses that have resulted over the years.

During the year ended December 31, 2020 the valuation allowance increased by $757,018.

As of December 31, 2020, we had cumulative

net operating loss carryforwards for federal and state income tax purposes of $9,062,776, and available tax credit carryforwards

of approximately $1,903,183 for federal income tax purposes, which can be carried forward to offset future taxable income.

federal net operating loss carryforwards consists of $6,527,307 of losses incurred prior to January 1, 2020 and which can be used

to offset 100% of future taxable income and, $2,535,469 of losses incurred after January 1, 2020, which can be used to offset up

to 80% of taxable income in subsequent years.

Note 16 –

Segment reporting

As of December 31, 2021, there were 210,000

options with an exercise price of $ 5.70 ,

options with an exercise price of $ 3.00 ,

options with an exercise price of $ 8.86

As of December 31, 2021, there were 210,000 options with an exercise price of $5.70, 105,000 options with an exercise

price of $3.00, and 288 options with an exercise price of $8.86 exercisable.

Note 12 – Segment reporting

The Company consists of two types of operations.

1 unchanged sentence

and Perfecular Inc.

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

instrument and farming devices.

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

and farming devices.

AVX Design & Integration, Inc.

(“AVX”) is an IoT installation and management company,

specializes in high performance and easy to use Audio/Video, Home Theater, Lighting Control, Automation and Integration.

below discloses income statement information by segment.

(“AVX”) is an IoT installation and management company specializing

in high performance and easy to use audio/video, home theater, lighting control, automation, and integration.

The table below discloses

income statement information by segment.

Segment information table

Year ended December 31, 2021

1 unchanged sentence

Total revenue

Cost of Revenue

Operating Expenses:

Compensation - officers

Cost and Operating Expenses

Cost of Revenue, excluding depreciation & amortization

Selling expense

Compensation - officers and directors

Research and development

1 unchanged sentence

General and administrative

Total Operating Expenses

Total Cost and Operating Expenses

Loss from Operations

( 2,761,010 )

( 3,016,587 )

Other Income (Expense):

Interest income (expense), net

Interest (expense) –

related party

Gain on extinguishment of debt

Change in fair value of warrant liability

( 1,284,780 )

Gain on settlement of derivative liability

Other income (expense), net

Total other income (expense)

Loss before income taxes

Note 17 –

Subsequent Events

On January 8, 2021, Focus Universal Inc.

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

The note has a variable interest

rate of 0.25% above Wall Street Journal Prime Rate.

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

On March 2, 2021, Perfecular Inc.

entered into an agreement to receive a U.S.

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

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

The SBA Loan has a fixed interest rate

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

On March 10, 2021, AVX Design & Integration,

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

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

On March 15, 2021, Focus Universal Inc.

entered into a secured

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

The note has an interest rate of 10%

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

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

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

( 3,176,913 )

( 3,220,977 )

$ ( 3,176,913 )

$ ( 3,220,977 )

Note 13 – Commitments and Contingencies

Pending Litigation

In the normal course of business or otherwise,

the Company may become involved in legal proceedings.

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

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

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

probable amount in the range is accrued.

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

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

Employment Agreements

In November 2021, the Company entered into a one-year

employment agreement with VP of Finance and Head of Investor Relations of the Company, pursuant to which the Company rewards 10,000 bonus

management shares will be granted in 2,500 blocks every quarter if any of the below three performances metrics are met during the employment

90 Day Volume Weighted Average Stock Price:

Increase 20% over previous quarter

Avg 90 trading volume:

Increase 15% over previous quarter

Number of Stocktwits watchers:

Increase 100% per quarter

During the year ended December 31, 2021 and 2020,

The Company recognized employee compensation amount of $ 5,791 and $ 0 , respectively.

Note 14 – Income taxes

The United States of America

The Company is subject to taxation in the United

States and certain state jurisdictions.

The provision for income taxes differs from the amounts which would be provided by applying the

statutory federal income tax rate of 21 % to the net loss before provision for income taxes.

Accordingly, the Company reevaluated its deferred

tax assets on net operating loss carryforward in the U.S.

As of December 31, 2021, due to uncertainties surrounding future utilization,

the Company recorded a full valuation allowance against the deferred tax assets based upon management’s assessment as to their realization.

People’s Republic of China

Effective January 1, 2008, the New Taxation Law

of PRC stipulates that domestic enterprises and foreign invested enterprises (the “FIEs”) are subject to a uniform tax rate

Under the PRC tax law, companies are required to make quarterly estimate payments based on 25% tax rate;

companies that received

preferential tax rates are also required to use a 25% tax rate for their installment tax payments.

The overpayment, however, will not

be refunded and can only be used to offset future tax liabilities.

Our effective tax rate differs from the statutory

federal income tax rate, primarily as a result of the changes in valuation allowance, nondeductible permanent differences, credits, and

state income taxes.

A reconciliation of the federal statutory income

tax to our effective income tax is as follows:

Schedule of effective tax rate

Federal statutory rates

$ ( 673,266 )

$ ( 532,794 )

State income taxes

Foreign income taxes

Permanent differences

Valuation allowance against net deferred tax assets

Effective rate

The tax effect of temporary differences that

give rise to a significant portion of the deferred tax assets and liabilities at December 31, 2021 and 2020 is presented below:

Schedule of deferred tax assets and liabilities

Deferred income tax asset

Net operating loss carryforwards

Total deferred income tax asset

valuation allowance

( 3,705,568 )

( 2,744,593 )

Total deferred income tax asset

The Company recognizes valuation allowances to

reduce deferred tax assets to the amount that is more likely than not to be realized.

The Company’s net deferred income tax asset

is not more likely than not to be realized due to the lack of sufficient sources of future taxable income and cumulative losses that have

resulted over the years.

During the year ended December 31, 2021 the valuation allowance increased by $ 961,140 .

As of December 31, 2021, we had cumulative net

operating loss carryforwards for federal and state income tax purposes of $ 12,272,231 ,

and available tax credit carryforwards of approximately $ 2,576,449

for federal income tax purposes, which can be carried forward to offset future taxable income.

The federal net operating loss

carryforwards consists of $ 9,062,776 of losses incurred

prior to January 1, 2021 and which can be used to offset 100% of future taxable income and, $ 3,206,028

of losses incurred after January 1, 2021, which can be used to offset up to 80% of taxable income in subsequent years.

Note 15 – Subsequent Events

As of January 5, 2022, the Company founded a wholly

owned subsidiary named Lusher Bioscientific, Inc.

Lusher Bioscientific was founded to market to the hydroponic and controlled agriculture

market and to assist in the product development of product within this sector.

As of the date of this filing, the Company has only founded

the subsidiary and activities are in the introductory phase.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data