What changed in this filing

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Item 1. Financial Statements

2022-05-16 compared with 2021-11-15 · 460 added, 546 removed, 447 unchanged (69% of the section changed)

3 unchanged sentences

Index to the Financial Statements

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

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

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

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

Notes to the Unaudited Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (unaudited)

Condensed Consolidated Statement of Changes in Stockholder’s Equity for the Three Months Ended March 31, 2022 and 2021 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (unaudited)

Notes to the Condensed Consolidated Financial Statements (unaudited)

FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Accounts receivable, net

Inventories, net

Accounts receivable – related party

Other receivables

Prepaid expenses

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Accounts payable and accrued liabilities

Accounts payable - related party

Other current liabilities

Customer deposit

Loan, current portion

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

43,259,741 and 40,959,741

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

43,259,741 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

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( 12,937,091 )

Accumulated other comprehensive income (loss)

Total Stockholders' Equity

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Revenue - related party

Total Revenue

Cost of Revenue

Operating Expenses:

Cost of revenue, excluding depreciation & amortization

Selling expense

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General and administrative

Total Operating Expenses

Total Cost and Operating Expenses

Loss from Operations

( 1,923,861 )

( 2,105,862 )

Other Income (Expense):

Interest income (expense), net

Interest (expense) - related party

Gain on extinguishment of debt

Change in fair value of warrant liability

Gain on settlement of derivative liability

Total other income (expense)

1 unchanged sentence

( 1,868,930 )

( 2,500,415 )

( 1,988,333 )

Income tax expense

1 unchanged sentence

$ ( 682,516 )

Other comprehensive items

Foreign currency translation gain (loss)

Total comprehensive loss

$ ( 1,868,378 )

$ ( 682,516 )

Weight Average Number of Common Shares Outstanding:

Basic and Diluted

Weighted Average Number of Common Shares Outstanding:

Net Loss per common share:

Basic and Diluted

Net Loss per common share:

The accompanying notes are an integral part

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FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER

30, 2021 AND 2020

Shares to be issued

Stockholders'

Balance- June 30, 2021

$ ( 10,878,775 )

Issuance of common stock

Stock based compensation - options

Common stock to be issued for services

( 1,337,754 )

Balance - September 30, 2021

$ ( 12,216,529 )

Balance - June 30, 2020

$ ( 8,728,974 )

Stock based compensation - options

Common stock to be issued for services

Balance - September 30, 2020

$ ( 9,167,334 )

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Additional Paid-In

Shares to be issued Common

Stockholders'

Accumulated Other Comprehensive

Total Stockholders’

Balance - December 31, 2021

$ ( 12,937,091 )

Issuance of common stock

Stock based compensation - options

Stock-based compensation - shares

Common stock to be issued for services

Other comprehensive loss

( 1,868,930 )

Balance September 30, 2021

Balance - March 31, 2022

$ ( 14,806,021 )

Additional Paid-In

Shares to be issued Common

Accumulated Other Comprehensive

Total Stockholders’

Balance - December 31, 2020

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Common stock to be issued for services

( 1,988,333 )

Balance September 30, 2020

Balance - March 31, 2021

$ ( 10,398,630 )

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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Bad debt expense

Inventories reserve

Inventory fair value adjustments

Depreciation expense

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 - shares

Stock-based compensation

Stock based compensation - options

Stock option compensation - options

Changes in operating assets and liabilities:

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Prepaid expenses

Operating lease right-of-use asset

Accounts payable and accrued liabilities

1 unchanged sentence

Other current liabilities

Interest payable - related party

Customer deposit

Lease liabilities

Other liabilities

Net cash flows used in operating activities

( 1,496,812 )

( 1,725,512 )

Cash flows from investing activities:

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Proceeds from SBA loan

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

Prepayment on bank loan

Net cash flows used in financing activities

Effect of exchange rate

Net change in cash

( 1,370,966 )

Cash beginning of period

3 unchanged sentences

Cash paid for interest

Supplemental disclosure of non-cash financing activities

Cashless warrant

The accompanying notes are an integral part

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FOCUS UNIVERSAL INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND

Note 1 – Organization and Operations

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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 testing, 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 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.

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 Universal Inc.

is a universal

smart instrument developer and manufacturer focused on the IoT industry, headquartered in 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.

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.

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

Note 2 – Summary of Significant Accounting

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.

On January 5, 2022, the Company founded a wholly

owned subsidiary named Lusher Bioscientific, Inc.

(“Lusher”) Lusher Bioscientific was founded to market to the hydroponic

and controlled agriculture market and to assist in the product development of IoT technology products within this sector.

As of the date

of this filing, the Company has only founded the subsidiary and activities are in the introductory phase.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated

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

and AVX Design & Integration,

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

All intercompany balances and

transactions have been eliminated upon consolidation.

The Company’s condensed consolidated financial statements have been prepared

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

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

Focus Universal (Shenzhen) Technology Co., LTD and Lusher Bioscientific (collectively, the “Company”, “we”, “our”,

All intercompany balances and transactions have been eliminated upon consolidation.

The Company’s unaudited

condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United

States of America (“U.S.

Going Concern

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

For the nine months

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

For the three

months ended March 31, 2022, the Company had a net loss of $ 1,868,930

and negative cash flow from operating activities of $ 902,283 .

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

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

loan commitment from a private related party.

The loan from the financial institution requires monthly payments starting February

2021 and with the final payment due in 2026.

The related party loan will accrue interest at 10 %

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

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

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

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

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

The Company raised $11.5 million through an underwritten

public offering in September 2021.

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

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

With an underwritten public offering $11.5 million in

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

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

million, mainly resulting from net loss.

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

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

Currently, the Company

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

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

The portable universal smart device is

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

new products would require cash to manufacture and promote.

The Company expects to begin generating positive cashflow with the launch

of above-mentioned products from second quarter of 2022.

Overall, we have adequate cash for the Company

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

Thus, the previous factors raising substantial

doubt to continue as a going concern have been alleviated.

Principles of Consolidation

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.

2019, Focus entered into a stock purchase agreement with AVX whereby Focus purchased 100% of the outstanding stock of AVX.

All significant

intercompany transactions and balances have been eliminated.

With the January 1, 2022 beginning cash amount of $8,678,665, the Company will have enough cash to cover its projected annual cash burn

rate of $3,152,618 which is an increase

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.

Overall, the 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.

Segment Reporting

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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

Management reviews financial information presented on an unaudited condensed consolidated

basis for purposes of allocating resources and evaluating financial performance.

Accordingly, the Company has determined that it has two

operating and reportable segments.

Asset information by operating segment is not

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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 unaudited condensed 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 unaudited condensed

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

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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, allowance for doubtful

accounts, inventory reserves, and the valuation allowance on deferred tax assets.

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.

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(FDIC) insurance limit.

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

As of March 31, 2022 and December 31, 2021, approximately $ 5,950,016 and $ 7,464,846 of the Company’s

cash was not insured by the FDIC.

There were no cash equivalents held by the Company as of March 31, 2022 and December 31, 2021.

Accounts Receivable

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

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

As of March 31, 2022 and December 31, 2021, allowance

for doubtful accounts amounted to $ 128,715 and $ 86,635 , respectively.

4 unchanged sentences

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

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 a fair value adjustment is made to write down inventory to

market value, if lower.

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 March 31, 2022 and December 31, 2021,

inventory fair value adjustments amounted to $ 43,934

and $ 68,940 ,

respectively.

Property and Equipment

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Schedule of estimated useful lives of property, plant and equipment

Construction in progress

Long-Lived Assets

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

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

review at March 31, 2022 and December 31, 2021, the Company believes there was no impairment of its long-lived assets.

Share-based Compensation

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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).

Changes in the estimated fair

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

The fair value of the warrants was estimated

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

Fair Value of Financial Instruments

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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.

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 instruments.

Transactions involving related parties cannot

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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 three months ended March 31, 2022 and for the years ended December 31, 2021 was comprised of foreign currency translation

Revenue Recognition

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The impact of adopting

ASC 606 was not material to the Condensed Consolidated Financial Statements.

ASC 606 was not material to the

Consolidated Financial Statements.

Revenue from the Company is recognized under Topic

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These five elements, as applied to each of the

Company’s revenue categories, is summarized below:

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 construction projects is recognized

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

Revenue from our project construction is recognized

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

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on actual units produced.

Cost of Revenue

Cost of Revenue, excluding depreciation & amortization

Cost of revenue includes the cost of services,

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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 condensed 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 unaudited condensed 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 unaudited condensed consolidated financial statements is not required in those statements.

The disclosures shall include:

(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;

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

(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 unaudited condensed consolidated financial statements;

for each of 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.

Commitments and Contingencies

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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 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.

Certain conditions may exist as of the date the unaudited condensed 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.

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.

be accrued in the Company’s unaudited condensed 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

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The Company accounts for income taxes in accordance

with ASC Topic 740, Income Taxes (ASC 740).

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

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.

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

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being presumed to occur.

The amount recognized is the largest amount of tax benefit that is more than 50% likely to be realized on examination.

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.

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 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 September 30, 2021 and December 31, 2020.

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

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

There was no material deferred tax asset or liabilities as of March 31, 2022 and December 31, 2021.

As of March 31, 2022 and December 31, 2021, the

Company did no t identify any material uncertain tax positions.

Basic and Diluted Net Income (Loss) Per Share

12 unchanged sentences

Schedule of anti dilutive shares

Nine months ended September 30,

Three Months Ended March 31,

Stock options

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

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 14 – Subsequent Events, the

Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed

consolidated financial statements.

Reclassification

Certain reclassifications have been made to the

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

Such reclassifications have no effect

on net income as previously reported.

unaudited condensed 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

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 date.

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.

Transactions 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 unaudited condensed

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;

ASU 2018-10, 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 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 1, 2019.

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.

of this ASU did not have a material impact on the Company’s condensed 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 adoption of this ASU did not have a material effect on its condensed

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

unaudited condensed consolidated financial statements.

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 815-40):

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

Under the new guidance, credit

losses for certain types of financial instruments will be estimated based on expected losses.

The new guidance also modifies the impairment

models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination.

February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC

Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

119 and Update to SEC Section on Effective Date Related to Accounting Standards

2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies.

ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December

The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate

a material impact on results of operations.

The Company is in the process of determining the effects the adoption will have on its condensed

consolidated financial statements.

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.

Management does not believe that any recently

2 unchanged sentences

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

Note 4 – Inventory, net

At September 30, 2021 and December 31, 2020,

inventory consisted of the following:

Note 4 – Inventory

At March 31, 2022 and December 31, 2021, inventory

consisted of the following:

Schedule of Inventory

September 30,

March 31, 2022

December 31, 2021

Finished goods

Less inventory reserve

Less inventory fair value adjustments

Inventory, net

Note 5 – Deposit

Deposit balance as of September 30, 2021 amounted

Note 5 – Deposits

Deposit balance as of March 31, 2022 amounted

to $ 75,177 for lease agreement and utility deposit and third-party payroll service deposit.

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

consisted of the following:

At March 31, 2022 and December 31, 2021, property and equipment consisted

of the following:

Schedule of property and equipment

September 30,

March 31, 2022

December 31, 2021

Building improvement

2 unchanged sentences

Property and equipment, net

Depreciation expense for the nine months ended

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

The Company purchased a warehouse in

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

The tenant paid $ 12,335

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

liabilities as of December 31, 2020.

Depreciation expense for the three months ended

March 31, 2022 and 2021 amounted to $ 40,165 and $ 40,537 , 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 non-current

liabilities as of March 31, 2022 and other liability in other current liability as of December 31, 2021.

Note 7 – Related Party Transactions

Revenue generated from Vitashower Corp., a company

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

owned by the CEO’s wife, amounted to $ 31,542 and $ 10,191 for the three months ended March 31, 2022 and 2021, respectively.

receivable balance due from Vitashower Corp.

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

generated from Vitashower Corp.

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

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

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

amounted to $ 85,992 and $ 15,176 as of March 31, 2022 and December 31, 2021, respectively.

Purchases generated from Vitashower Corp.

amounted to $ 0 and $ 0 for the three months ended March 31, 2022 and 2021, respectively.

were accounts payable balances of $ 0 and $ 0 due to Vitashower Corp.

as of March 31, 2022 and December 31, 2021, respectively.

Compensation for services provided by the President

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

and Chief Executive Officer for the three months ended March 31, 2022 and 2021 amounted to $ 30,000 and $ 30,000 , respectively.

Vendor Tianjin

Guanglee was once owned by the Chief Executive Officer Desheng Wang, as fully disclosed in the annual report in 2017 and in previous filings.

In 2018, the entity was sold to an unrelated party who has since passed away causing, and further ownership changes as noted in Note 8

Note 8 – Business Concentration and Risks

Major customers

One customer accounted for 39 % and 0 % of the

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

This customer accounted for 81 % and 50 % of the

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

Four customers accounted for 56 % of the total

accounts receivable as of March 31, 2022 and one customer accounted for 48 % of the total accounts receivable as of December 31, 2021,

respectively.

These four customers accounted for 67 % of the total revenue for the three months ended March 31, 2022 and one customer accounted

for 80 % of total revenue for the three months ended March 31, 2021, respectively.

Major vendors

One vendor accounted for 100 % and 0 % of total

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

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

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

Note 9 – Operating Lease Right-of-use

Asset and Operating Lease Liability

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

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

implicit in our lease is not readily determinable.

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

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

The Company currently has a lease agreement for

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.

In adopting ASC Topic 842, Leases (Topic 842),

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

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

The Company did not elect the use-of-hindsight

or the practical expedient pertaining to land easements;

the latter is not applicable to the Company.

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 %

and 0 % of total accounts payable at March 31, 2022 and December 31, 2021, respectively.

This same vendor, Tianjin Guanglee, accounted

for 30 % and 84 % of the total purchases for the three months ended March 31, 2022 and 2021, respectively.

Of subsequent note, Tianjin Guanglee

was once owned by the Chief Executive Officer Desheng Wang, as fully disclosed in the annual report in 2017 and prior annual reports.

Wang transferred the ownership of the entity to an unrelated third party in a transaction not considered a related

party transaction per the guidelines.

Note 9 – Lease

The Company recorded its operating lease expense

of $ 75,597 and $ 16,295 for the three months ended March 31, 2022 and 2021, respectively.

On April 8, 2015, AVX Design & Integration

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%.

Lease 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 $11,053) 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 March 31, 2022 and December 31, 2021, operating lease right-of use assets and lease

liabilities were as follows:

Schedule of operating Right-of-use asset and liability

September 30, 2021

March 31, 2022

December 31, 2021

accumulated amortization

Right-of-use asset, net

Operating Lease liability is summarized below:

September 30, 2021

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

March 31, 2022

December 31, 2021

current portion

Long-term portion

Maturity of lease liability is as follows:

Weighted average remaining lease term

Operating lease

0.42 to 2.92 years

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

1 unchanged sentence

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

Present value of future minimum lease payments

Note 10 – Loans

Paycheck Protection Program

On April 24, 2020, AVX Design & Integration,

entered into an agreement to receive a U.S.

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

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

The SBA Loan has a fixed interest rate

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

On July 8, 2021, SBA authorized full forgiveness

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

On May 4, 2020, Perfecular Inc.

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.

On April 28, 2021, SBA authorized full forgiveness of

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

and $ 1,490 interest

to other income.

On March 2, 2021, Perfecular Inc.

into an agreement to receive a U.S.

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

COVID-19 pandemic in the amount of $ 158,547 ,

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 $ 927 ,

respectively, due as of September 30, 2021.

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

On March 10, 2021, AVX Design & Integration,

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

The SBA Loan has a fixed interest rate of 1

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

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

The balance of principal and interest were $ 158,547

respectively, due as of September 30, 2021.

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

Economic Injury Disaster Loan

On June 4, 2020, Perfecular Inc.

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 Bank,

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

The SBA Loan has a fixed interest rate

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

On September 22, 2021, the Company paid this

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

On January 8, 2021, Focus Universal Inc.

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

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

Economic Injury Disaster Loan

September 30,

and $ 1,570 ,

respectively, due as of March 31, 2022.

There were no principal and interest due as of March 31, 2022.

Schedule of debt

March 31, 2022

December 31, 2021

current portion

1 unchanged sentence

Interest expense incurred from the loans amounted

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

to $288 and $132 for the three months ended March 31, 2022 and 2021, respectively.

Note 11 – Stockholders’ Equity

2 unchanged sentences

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

During the nine months ended September 30, 2021,

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

On September 2, 2021, the Company closed its initial

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

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

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

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

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

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

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

During the three months ended March 31, 2022,

the Company did not issued any shares of common stock.

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 Nasdaq

uplisting 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 share.

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

and offering expenses.

As of March 31, 2022 and December 31, 2021 and

2020, the Company had 43,259,741 shares of common stock issued and outstanding, respectively.

Shares to be issued for compensation

2 unchanged sentences

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

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

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

On August 30, 2021, the Company entered Representative

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

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

to $ 8,000 for the three months ended March 31, 2022, which the Company intends to issue stock as compensation for services rendered.

Expenses incurred but not yet paid in shares as of March 31, 2022 and 2021 amounted to $ 154,709 and $ 110,709 , 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 nine months ended September 30, 2021, the

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

difference of

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:

2021 (Initial

Schedule of assumptions

August 30, 2021 (Initial

Risk-free interest rate

6 unchanged sentences

being exercisable.

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

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.

1 unchanged sentence

been exercised.

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

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

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.

Employee compensation

On February 11, 2022 (“Vesting Date”),

the Company entered into a Restricted Stock Award Agreement (“Award Agreement”) with nine employees for 290,000 shares of

the $0.001 par value voting common stock subject to the terms and to the fulfillment of the conditions set in the plan.

The first 20%

of the restricted shares was granted and vested on February 11, 2022.

The rest 20% of the restricted shares will vest on each anniversary

of the Vesting Date until fourth anniversary of the Vesting Date.

There were 58,000 shares granted as of March 31, 2022.

The fair value

of above employee compensation was $ 609,580 as of March 31, 2022.

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

granted a 10,000-share bonus consisting of shares of $0.001 par value voting common stock, which will be granted in 2,500 blocks

every quarter based on certain performance metrics.

During the three months ended March 31, 2022,

the Company recognized VP of Finance and Head of Investor Relations of the Company employee compensation amount of $ 46,790 .

three months ended March 31, 2022 and 2021, the Company total employee compensation amount were $ 656,370 and $ 0 , respectively.

Stock options

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

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

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

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

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

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 nine months ended September 30, 2021 and

For the three months ended March 31, 2022 and

2021, the Company’s stock option compensation expenses amounted to $ 228,375 and $ 106,838 , 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 assumptions

September 30,

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

March 31, 2022

March 31, 2021

Risk-free interest rate

0.93 – 1.52 %

Expected life of the options

Expected volatility

122.93 – 148.18 %

Expected dividend yield

The following is a summary of options activity

from December 31, 2020 to September 30, 2021:

Schedule of option activity

from December 31, 2021 to March 31, 2022:

Schedule of options by exercise price

Weighted average exercise price

3 unchanged sentences

Forfeited or expired

Outstanding at September 30, 2021

Vested as of September 30, 2021

Exercisable at September 30, 2021

The exercise price for options outstanding and

exercisable at September 30, 2021:

Schedule of options by exercise price

Outstanding at March 31, 2022

Vested as of March 31, 2022

Exercisable at March 31, 2022

As of March 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 ,

options with an exercise price of $ 3.00 ,

options with an exercise price of $ 8.86

Note 12 – Segment reporting

The Company consists of two types of operations.

The Company consists of three types of operations.

Focus Universal, Inc.

and Perfecular Inc.

(“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 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

Nine months ended September 30, 2021

(“Corporate”) involves operations related to research and development of technology products, non-specific

financing, executive expense, operations and investor relations of the public entity, and general shared management and costs across

subsidiary units which spread across all functional categories.

Perfecular Inc.

(“Perfecular”) involve wholesale, marketing,

and production of universal smart instrument and devices in the hydroponic and controlled agricultural segments.

AVX Design & Integration,

(“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.

Three Months Ended March 31, 2022

Revenue - related party

Total revenue

Cost of Revenue

Operating Expenses:

Cost and Operating Expenses

Cost of Revenue, excluding depreciation & amortization

Selling expense

Compensation - officers

Compensation - officers and directors

Research and development

1 unchanged sentence

General and administrative

Total Operating Expenses

Total Cost and Operating Expenses

Loss from Operations

3 unchanged sentences

Interest income (expense), net

Gain on extinguishment of debt

Change in fair value of warrant liability

Gain on settlement of derivative liability

Other income (expense), net

5 unchanged sentences

$ ( 605,188 )

$ ( 1,868,930 )

Note 13 – Commitments and Contingencies

8 unchanged sentences

There were no recorded litigation loss contingencies

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

as of March 31, 2022 and December 31, 2021.

Note 14 – Subsequent Events

On October 22, 2021, SBA authorized full forgiveness

of AVX Design & Integration, Inc.

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

On April 4, 2022, the SBA authorized full forgiveness

of Perfecular Inc.’s PPP loan principal amount of $158,547 and $1,570 interest.

On April 28, 2022, Oakshore Consulting agreed

to cancel the outstanding AVX finder's fee amount of $22,000.

As a result, the Company recognized $22,000 as other income.

The Company issued 32,627 shares to full fill

prior period share compensation to third party consultants for financing and management consulting service at the end of April.

The Company has evaluated other subsequent events

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

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

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

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

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

What changed 10-Q

Item 1. Financial Statements