What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-15 compared with 2022-08-12 · 477 added, 443 removed, 545 unchanged (63% of the section changed)

3 unchanged sentences

Index to the Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021 (unaudited)

Condensed Consolidated Statement of Changes in Stockholder’s Equity for the Three and Six Months Ended June 30, 2022 and 2021 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (unaudited)

Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

Condensed Consolidated Statement of Changes in Stockholder’s Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)

Notes to the Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

12 unchanged sentences

Other current liabilities

Treasury stock payable

Loan, current portion

10 unchanged sentences

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

43,413,517 shares issued and outstanding as of June 30, 2022 and 43,259,741 shares issued and outstanding as of December 31, 2021

43,528,915 shares issued and outstanding as of September 30, 2022 and 43,259,741 shares issued and outstanding as of December 31, 2021

Treasury stock, 400,000 shares at par value $0.001

Additional paid-in capital

6 unchanged sentences

Total Liabilities and Stockholders' Equity

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements

FOCUS UNIVERSAL INC.

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Revenue - related party

Total Revenue

Cost and Operating Expenses:

Cost of revenue, excluding depreciation & amortization

Cost of Revenue

Operating Expenses:

Selling expense

7 unchanged sentences

( 2,140,282 )

( 1,382,728 )

Other Income (Expense):

Interest income (expense), net

Unrealized loss on marketable equity securities

Realized gain on marketable equity securities

Gain on extinguishment of debt

Change in fair value of warrant liability

( 1,284,780 )

Gain on settlement of derivative liability

Unrealized gain and (loss) on marketable equity securities

Realized loss on marketable equity securities

Other income (expense), net

20 unchanged sentences

Basic and Diluted

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements

FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

FOR THE THREE AND SIX MONTHS ENDED JUNE

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,

2022 AND 2021

1 unchanged sentence

Accumulated Other

Common Shares

Comprehensive Income (Loss)

Comprehensive

Stockholders'

Balance - March 31, 2022

Balance - June 30, 2022

$ ( 15,867,318 )

1 unchanged sentence

Stock based compensation - shares

Common stock to be issued for services

Purchase of treasury stock

( 1,999,600 )

Other comprehensive loss

( 2,000,000 )

Other comprehensive loss

Balance - September 30, 2022

$ ( 16,809,338 )

1 unchanged sentence

$ ( 10,878,775 )

Balance - March 31, 2021

$ ( 10,398,630 )

Issuance of common stock

Stock based compensation - options

Common stock to be issued for services

Balance – June 30, 2021

Common stock issued for service

( 1,337,754 )

Balance - September 30, 2021

$ ( 12,216,529 )

Shares to be issued

Accumulated Other

Common Shares

Comprehensive Income (Loss)

Comprehensive

Stockholders'

3 unchanged sentences

Stock based compensation - shares

Common stock to be issued for services

Purchase of treasury stock

( 1,999,600 )

( 2,000,000 )

Common stock issued for current services

Common stock issued for prior

Shares issued for cashless exercise

( 1,776,044 )

Other comprehensive loss

1 unchanged sentence

( 3,872,247 )

Balance – June 30, 2022

Balance - September 30, 2022

$ ( 16,809,338 )

1 unchanged sentence

$ ( 9,716,114 )

Issuance of common stock

Stock based compensation - options

2 unchanged sentences

( 2,500,415 )

Balance – June 30, 2021

Balance - September 30, 2021

$ ( 12,216,529 )

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements

FOCUS UNIVERSAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

6 unchanged sentences

Unrealized loss on marketable equity securities

Realized gain on marketable equity securities

Realized loss on marketable equity securities

Gain on forgiveness of debt

Change in fair value of warrant liability

Gain on settlement of derivative liability

Stock-based compensation – shares

4 unchanged sentences

Accounts receivable - related party

Other receivable

Prepaid expenses

8 unchanged sentences

( 2,435,157 )

( 1,496,812 )

Cash flows from investing activities:

7 unchanged sentences

Proceeds from bank loan

Prepayment on bank loan

Repayment on bank loan

( 1,500,000 )

Proceeds from IPO, net

Net cash flows provided by financing activities

7 unchanged sentences

Cash paid for interest

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements

Supplemental disclosure of non-cash financing activities:

Treasury stock payable

Cashless warrant

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements

FOCUS UNIVERSAL INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL

FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND

Note 1 – Organization and Operations

Focus Universal Inc.

(“Focus”) was

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

(“Focus”) was incorporated

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

Focus Universal Inc.

is a universal

smart instrument developer and manufacturer focused on the internet of things (“IoT”) industry, headquartered in Ontario,

California, specializing in the development and commercialization of novel and proprietary universal smart technologies and instruments

that solve problems plaguing the internet of things (“IoT”) industry by:

(1) increasing overall chip integration by shifting

it to the device level;

is a universal smart instrument

developer and manufacturer focused on the internet of things (“IoT”) industry, headquartered in Ontario, California, specializing

in the development and commercialization of novel and proprietary universal smart technologies and instruments that solve problems plaguing

the internet of things (“IoT”) industry by:

(1) increasing overall chip integration by shifting it to the device level;

creating a faster 5G cellular technology by using Ultra-narrowband technology;

(3) leveraging ultra-narrowband

power line communication (“PLC”) technology;

(3) leveraging ultra-narrowband power line communication

(“PLC”) technology;

and (4) User Interface Machine auto generation technology.

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

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 is 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 is also developing ultra-narrow band technology

that is hopefully capable of overcoming the noise problems communicating through power lines that have hindered the industry for over

Focus Universal’s wireless communication technology may allow for longer-range coverage, might be more energy effective

and management believes has much faster data sending speeds than the current 5G technology speeds being used.

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”)

will consist of a reusable foundation component which will include 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 is 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 is also developing ultra-narrow band technology that is hopefully capable of

overcoming the noise problems communicating through power lines that have hindered the industry for over a century.

Focus Universal’s

wireless communication technology may allow for longer-range coverage, might be more energy effective and management believes has much

faster data sending speeds than the current 5G technology speeds being used.

Perfecular Inc.

(“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.

(“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.

5 unchanged sentences

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.

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,

9 unchanged sentences

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.

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,

Lusher’s activities are in the introductory phase.

In addition, the Company’s patent number 11,488,468

was allowed and subsequently issued on November 1, 2022.

The patent, titled Sensor for Detecting the Proximity of an IEEE 802.11 Protocol

Connectable Device.

Note 2 – Summary of Significant Accounting Policies

11 unchanged sentences

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

For the six months

ended June 30, 2022, the Company had a net loss of $ 2,930,227 and negative cash flow from operating activities of $ 1,749,492 .

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 in professional 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.

For the nine months

ended September 30, 2022, the Company had a net loss of $ 3,872,247 and negative cash flow from operating activities of $ 2,435,157 .

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 in professional 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

7 unchanged sentences

operating and reportable segments.

Asset information by operating segment is not

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

The reporting segments follow the same accounting

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

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 unaudited condensed consolidated financial statements.

Use of Estimates

8 unchanged sentences

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.

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

9 unchanged sentences

(FDIC) insurance limit.

As of June 30, 2022 and December 31, 2021, approximately $ 5,719,087 and $ 7,464,846 of the Company’s

As of September 30, 2022 and December 31, 2021, approximately $ 5,032,437 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 June 30, 2022 and December 31, 2021.

There were no cash equivalents held by the Company as of September 30, 2022 and December 31, 2021.

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 June 30, 2022 and December 31, 2021, allowance

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 September 30, 2022 and December 31, 2021, allowance

for doubtful accounts amounted to $ 158,743 and $ 86,635 , 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.

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

1 unchanged sentence

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.

Inventory fair value adjustments 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

4 unchanged sentences

estimated market value.

As of June 30, 2022 and December 31, 2021, inventory fair value adjustments amounted to $ 43,323 and $ 68,940 , respectively.

Once established, these adjustments are considered permanent and are not revised until the related inventory is

sold or disposed of.

As of September 30, 2022 and December 31, 2021, inventory fair value adjustments amounted to $ 47,807 and $ 68,940 ,

respectively.

Marketable Securities

The Company invests part of its excess treasury

cash in equity securities and money market funds according to company treasury and investment policies.

Marketable securities represent

trading securities bought and held primarily for sale in the near-term to generate income on short-term price differences and are stated

at fair value.

The Company invests part of its excess treasury cash

in equity securities and money market funds according to company treasury and investment policies.

Marketable securities represent trading

securities bought and held primarily for sale in the near-term to generate income on short-term price differences and are stated at fair

Realized and unrealized gains and losses are recorded in other income (expense), net.

1 unchanged sentence

Property and equipment are stated at cost.

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

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

Maintenance and repairs are expensed currently.

Major renewals and betterments are capitalized.

Depreciation is computed

using the straight-line method.

Depreciation is computed using the straight-line

Estimated useful lives are as follows:

1 unchanged sentence

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

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.

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,

7 unchanged sentences

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

on its review at June 30, 2022 and December 31, 2021, the Company believes there was no impairment of its long-lived assets.

on its review at September 30, 2022 and December 31, 2021, the Company believes there was no impairment of its long-lived assets.

Treasury stock

Purchases and sales of treasury stock are accounted

for using the cost method.

Under this method, shares acquired are record at the acquisition price directly to the treasury stock account.

Upon sale, the treasury stock account is reduced by the original acquisition price of the shares and any difference is recorded in additional

paid in capital, on a first-in first-out basis.

The Company does not recognize a gain or loss to income from the purchase and sale of

treasury stock.

Share-based Compensation

3 unchanged sentences

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 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

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

7 unchanged sentences

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).

The Company does not have any outstanding warrants as of June 30, 2022

and December 31, 2021, respectively.

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

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).

The Company does not have any outstanding warrants as of September 30, 2022 and December

31, 2021, respectively.

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.

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.

9 unchanged sentences

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

The following table summarize financial assets

and liabilities measured at fair value on a recurring basis as of June 30, 2022:

Schedule of Fair Value Assets And Liabilities

Measured On Recurring Basis

June 30, 2022 (unaudited)

The following table summarize financial assets and

liabilities measured at fair value on a recurring basis as of September 30, 2022:

Schedule of Fair Value Assets And Liabilities Measured On Recurring Basis

September 30, 2022 (unaudited)

Marketable securities:

Total assets measured at fair value

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

The carrying amount of the Company’s financial

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

treasury stock 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

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

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.

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)

3 unchanged sentences

The Company’s other comprehensive

loss for the six months ended June 30, 2022 and for the years ended December 31, 2021 was comprised of foreign currency translation adjustments.

loss for the nine months ended September 30, 2022 and for the years ended December 31, 2021 was comprised of foreign currency translation

Revenue Recognition

1 unchanged sentence

– 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 revenue.

The impact of adopting

ASC 606 was not material to the Consolidated Financial Statements.

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

1 unchanged sentence

includes the following elements:

· executed contracts with the Company’s customers that it believes are

legally enforceable;

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

identification of performance obligations in the respective contract;

2 unchanged sentences

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:

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.

9 unchanged sentences

Cost of Revenue, excluding depreciation & amortization

Cost of revenue includes the cost of services,

labor and product incurred to provide product sales, service sales and project sales.

Cost of revenue includes the cost of services, labor

and product incurred to provide product sales, service sales and project sales.

Research and development

Research and development costs are expensed as

Research and development costs are expensed as incurred.

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

17 unchanged sentences

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 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 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 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.

(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;

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

32 unchanged sentences

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

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.

4 unchanged sentences

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

Income taxes are accounted for using the asset

and liability method.

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

4 unchanged sentences

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

There was no material deferred tax asset or liabilities as of June 30, 2022 and December 31, 2021.

As of June 30, 2022 and December 31, 2021, the

There was no material deferred tax asset or liabilities as of September 30, 2022 and December 31, 2021.

As of September 30, 2022 and December 31, 2021, the

Company 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.

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.

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

4 unchanged sentences

Schedule of anti dilutive shares

Six Months Ended June 30,

Nine Months Ended September 30,

Stock options

Reclassification

Certain reclassifications have been made to the

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.

Certain reclassifications have been made to the 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 reporting and functional currency of Focus is

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

1 unchanged sentence

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.

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,

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.

Revenue and expenses are translated

using average exchange rates prevailing during each reporting period.

Stockholders’ equity is translated at historical exchange

Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive loss in stockholders’

Transactions denominated in currencies other than

3 unchanged sentences

The exchange rates used for unaudited condensed consolidated financial statements are as follows:

Of Intercompany Foreign Currency Balances

Average Rate for the Six Months Ended

Schedule Of Intercompany Foreign Currency Balances

Average Rate for the Nine Months Ended

September 30,

China Yuan (RMB)

1 unchanged sentence

Exchange Rate at

June 30, 2022

September 30, 2022

December 31, 2021

3 unchanged sentences

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

2016-13, (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

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 ASU No.

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 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.

The Company believes the adoption

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

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.

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

At June 30, 2022 and December 31, 2021, inventory

At September 30, 2022 and December 31, 2021, inventory

consisted of the following:

Schedule of Inventory

June 30, 2022

September 30, 2022

December 31, 2021

1 unchanged sentence

Note 5 – Deposits

Deposit balance as of June 30, 2022 amounted to

$ 42,203 for lease agreement and utility deposit and third-party payroll service deposit.

Deposit balance as of September 30, 2022 amounted

to $ 34,296 for lease agreement and utility deposit and third-party payroll service deposit.

Deposit balance as of December 31, 2021 amounted

1 unchanged sentence

Note 6 – Property and Equipment

At June 30, 2022 and December 31, 2021, property and equipment consisted

At September 30, 2022 and December 31, 2021, property and equipment consisted

of the following:

Schedule of property and equipment

June 30, 2022

September 30, 2022

December 31, 2021

3 unchanged sentences

Property and equipment, net

Depreciation expense for the six months ended

June 30, 2022 and 2021 amounted to $ 82,063 and $ 80,872 , 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 June 30, 2022 and other liability in other current liability as of December 31, 2021.

Depreciation expense for the nine months ended September

30, 2022 and 2021 amounted to $ 123,908 and $ 121,932 , respectively.

Note 7 – Related Party Transactions

Revenue generated from Vitashower Corp., a company

owned by the Chief Executive Officer’s wife, amounted to $ 31,542 and $ 15,141 for the six months ended June 30, 2022 and 2021, respectively.

Revenue generated from Vitashower Corp., a

company owned by the Chief Executive Officer’s wife, amounted to $ 31,542

for the nine months ended September 30, 2022 and 2021, respectively.

Account receivable balance due from Vitashower Corp.

amounted to $ 85,992 and $ 15,176 as of June 30, 2022 and December 31, 2021, respectively.

as of September 30, 2022 and December 31, 2021, respectively.

Purchases generated from Vitashower Corp.

amounted to $ 0 and $ 0 for the six months ended June 30, 2022 and 2021, respectively.

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

as of June 30, 2022 and December 31, 2021, respectively.

Service revenue generated from one of the Company’s

directors, amounted to $ 2,278 and $ 0 for the six months ended June 30, 2022 and 2021, respectively.

Account receivable balance due from

this director amounted to $ 2,278 and $ 0 as of June 30, 2022 and December 31, 2021, respectively.

Compensation for services provided by the President

and Chief Executive Officer for the six months ended June 30, 2022 and 2021 amounted to $ 60,000 and $ 60,000 , 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.

then, during 2018, the entity was transferred to another individual and was not considered a related party transaction per guidelines,

and further subsequent changes to the vendor are noted in Note 8 found below.

amounted to $ 0

for the nine months ended September 30, 2022 and 2021, respectively.

There were accounts payable balances of $ 0

due to Vitashower Corp.

as of September 30, 2022 and December 31, 2021, respectively.

Service revenue generated from the installation

of home security equipment by AVX for one of the Company’s directors, amounted to $ 8,246

for the nine months ended September 30, 2022 and 2021, respectively.

Account receivable balance due from this director amounted to

as of September 30, 2022 and December 31, 2021, respectively.

Compensation for services provided by the

President and Chief Executive Officer for the nine months ended September 30, 2022 and 2021 amounted to $ 111,020

and $ 90,000 ,

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.

Since then, during 2018, the entity was transferred to another

individual and was not considered a related party transaction per guidelines, and further subsequent changes to the vendor are noted in

Note 8 found below.

Note 8 – Business Concentration and Risks

Major customers

Three customers accounted for 34 % of the total

accounts receivable as of June 30, 2022 and one customer accounted for 48 % of the total accounts receivable as of December 31, 2021, respectively.

These three customers accounted for 54 % of the total revenue for the six months ended June 30, 2022 and one customer accounted for 78 %

of total revenue for the six months ended June 30, 2021, respectively.

Three customers accounted for 16 %

of the total accounts receivable as of September 30, 2022 and one customer accounted for 9 %

of the total accounts receivable as of December 31, 2021, respectively.

These three customers accounted for 43 %

of the total revenue for the nine months ended September 30, 2022 and one customer accounted for 81 %

of total revenue for the nine months ended September 30, 2021, respectively.

Major vendors

One vendor, Tianjin Guanglee, accounted for 0 %

and 0 % of total accounts payable at June 30, 2022 and December 31, 2021, respectively.

This same vendor, Tianjin Guanglee, accounted for

24 % and 77 % of the total purchases for the six months ended June 30, 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.

Wang transferred

the ownership of the entity to an unrelated third party in a transaction not considered a related party transaction per the guidelines.

of total accounts payable at September 30, 2022 and December 31, 2021, respectively.

This same vendor, Tianjin Guanglee, accounted

of the total purchases for the nine months ended September 30, 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.

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 $ 237,045 and $ 32,590 for the six months ended June 30, 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 Company recorded its operating lease expense of

$ 280,311 and $ 48,885 for the nine months ended September 30, 2022 and 2021, respectively.

On April 8, 2015, AVX Design & Integration Inc.

entered into 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

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%.

on July 1, 2015, and ended 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.

As of August, the company has not entered into any new commercial lease for AVX Design & Integration Inc.

On December 7, 2021, Focus Universal (Shenzhen)

Technology Co.

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

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%.

As of the date of this Quarterly Report, the company has not entered into any new commercial lease for AVX

Design & Integration Inc.

On December 7, 2021, Focus Universal (Shenzhen) Technology

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

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

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 June 30, 2022 and December 31, 2021, operating lease right-of use assets and lease

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 September 30, 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

June 30, 2022

September 30, 2022

December 31, 2021

4 unchanged sentences

Schedule Lease term and discount rate

June 30, 2022

September 30, 2022

December 31, 2021

2 unchanged sentences

0.67 to 3.17 years

Weighted average discount rate

11 unchanged sentences

Paycheck Protection Program

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.

On April 4, 2022, the SBA authorized full forgiveness of this loan principal amount of $ 158,547

and $ 1,570 interest.

On March 2, 2021, our subsidiary Perfecular Inc.

into an agreement to receive a U.S.

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

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

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

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

On April 4, 2022, the SBA authorized full forgiveness of this loan principal

amount of $ 158,547 and $ 1,570 interest.

Schedule of debt

June 30, 2022

September 30, 2022

December 31, 2021

2 unchanged sentences

Interest expense incurred from the loans amounted

to $ 288 and $ 22,827 for the six months ended June 30, 2022 and 2021, respectively.

to $ 288 and $ 22,827 for the nine months ended September 30, 2022 and 2021, 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

During the six months ended June 30, 2022, the

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 nine months ended September 30, 2022, the

Company issued 269,174 shares of common stock.

On April 4, 2022, the Company issued 121,149 shares

of its Common Stock to Boustead Securities LLC.

(“Boustead”), which is the warrants exercised by Boustead on September 7,

2021 with the exercise price $ 6.25 and the shares were valued at $ 1,776,044 upon cashless exercise option of warrants related to completion

of the Company’s public offering.

On May 2, 2022, the Company issued 32,627 shares

to consultants in exchange for professional services rendered.

On April 4, 2022, the Company issued 121,149

shares of its Common Stock to Boustead Securities LLC.

(“Boustead”), issued pursuant to the cashless warrant exercise,

exercised by Boustead on September 7, 2021 with an exercise price of $ 6.25

with the shares were valued at $ 1,776,044

upon the cashless exercise option of the warrants related to the completion of the Company’s August 30, 2021 public offering

in connection with its listing on Nasdaq.

On May 2, 2022, the Company issued 32,627 shares to

consultants in exchange for professional services rendered.

The shares were valued at $ 154,709 based on the closing price of the Company’s

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

On August 17, 2022, the Company issued 54,898 shares

to two of the board members who exercised their options.

The combined 107,500 options were exercised and the shares were valued at $ 306,325

based on the cashless exercise calculation.

On August 22, 2022, the Company issued 60,500 shares

to employee based on the Restricted Stock Award Agreements (see Employee compensation )

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 share.

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

and offering expenses.

As of June 30, 2022 and December 31, 2021 and

2020, the Company had 43,413,517 shares and 43,259,741 shares of common stock issued and outstanding, respectively.

issued a total of 2,300,000 shares of common stock.

On September 2, 2021, the Company closed its underwritten

initial public offering (“IPO”) under a registration statement that was declared effective on August 30, 2021, pursuant to

which it issued and sold 2,000,000 shares of 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 fees and

offering expenses.

As of September 30, 2022 and December 31, 2021, the Company had 43,528,915

shares and 43,259,741

shares of common stock issued and outstanding, respectively.

Treasury stock

On August 10, 2022, the Company entered a stock purchase

agreement with a private shareholder to repurchase 400,000 shares of its common stock for $ 2,000,000 and placed it in treasury.

shareholder transferred the shares on October 4, 2022, forming a binding agreement, and on October 6, 2022, the Company wired the first

$1,000,000 of the purchase price.

The remaining $1,000,000 is due on or before February 6, 2023.

Shares to be issued for compensation

1 unchanged sentence

party consultants for financing and management consulting.

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

to $ 8,000 for the three months ended June 30, 2022, which the Company intends to issue stock as compensation for services

Expenses incurred and paid in shares as of June 30, 2022 amounted to $ 154,709 .

On August 30, 2021, the Company entered into a

Representative Common Stock Purchase Warrant agreement (“Warrant Agreement”) with its placement agent, Boustead for 161,000

shares and the exercise price is $6.25.

The Company has incurred consulting service fees not paid in cash

amounting to $ 8,000

for the nine months ended September 30, 2022, which the Company intends to issue stock as compensation for services rendered.

and current expenses incurred and paid in shares as of September 30, 2022 amounted to $ 154,709 .

On August 30, 2021, the Company entered into a Representative

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

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

5 unchanged sentences

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.

121,149 shares were issued to Boustead which amounted to $17,776,044 as of June 30, 2022.

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 were 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.

121,149 shares were issued to Boustead which amounted to $1,776,044 as

of September 30, 2022.

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.

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 June 30, 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 rewards 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 six months ended June 30, 2022, the

Company recognized VP of Finance and Head of Investor Relations of the Company employee compensation amount of $ 75,340 .

During the six

months ended June 30, 2022 and 2021, the Company total employee compensation amount were $ 684,920 and $ 0 , respectively.

On February 11, 2022 (“Vesting

Date”), the Company entered into a Restricted Stock Award Agreement (“Award Agreement”) with eight employees for 280,000

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

Company’s equity incentive plan.

The first 20% of the restricted shares was granted and vested on February 11, 2022 (the

“Vesting Date”).

Twenty percent of the restricted shares will vest on each anniversary of the Vesting Date until fourth

anniversary of the Vesting Date.

There were 56,000

shares granted as of March 31, 2022.

The fair value of above employee compensation was $ 588,560

as of September 30, 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

rewards 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 nine months ended September 30, 2022

and 2021, the total employee compensation amount for all employees in the company, was $663,900 and $0, respectively.

issued 60,500 shares for employee compensation as of the nine months’ ended September 30, 2022.

During the nine months ended

September 30, 2022 and 2021, the Company recognized employee compensation in amount of $75,340 for the fixed salary of the VP of

Finance and $21,020 for the Chief Financial Officer.

Stock options

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

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.

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 six months ended June 31, 2022 and 2021,

For the nine months ended September 31, 2022 and 2021,

the Company’s stock option compensation expenses amounted to $ 652,500 and $ 320,512 , respectively.

The fair value of the stock options listed above

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

The fair value of the stock options listed above was

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

Schedule of option activity

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

Risk-free interest rate

5 unchanged sentences

The following is a summary of the option activity

from December 31, 2021 to June 30, 2022:

Schedule of options by exercise price

from December 31, 2021 to September 30, 2022:

Schedule of options activity

Weighted average exercise price

3 unchanged sentences

Forfeited or expired

Outstanding at June 30, 2022

Vested as of June 30, 2022

Exercisable at June 30, 2022

Outstanding at September 30, 2022

Vested as of September 30, 2022

Exercisable at September 30, 2022

Note 12 – Segment reporting

The Company consists of two types of operations.

The Company consists of three types of operations.

(1) Focus Universal, Inc.

3 unchanged sentences

(2) Perfecular Inc.

(“Perfecular”) involve wholesale, marketing, and production

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

AVX Design & Integration, Inc.

is an IoT installation and management company specializing in high performance and easy to use audio/video, home theater, lighting control,

automation, and integration.

(“Perfecular”) involves wholesale, marketing, and

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

(3) 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.

Segment Reporting

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Revenue - related party

Total revenue

Cost and Operating Expenses

Cost of Revenue, excluding depreciation & amortization

Cost of revenue

Operating Expenses

Selling expense

11 unchanged sentences

Unrealized loss on marketable equity securities

Realized gain on marketable equity securities

Realized loss on marketable equity securities

Other income (expense), net

8 unchanged sentences

$ ( 3,872,247 )

Note 13 – 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 reasonably 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.

There were no recorded litigation loss contingencies

as of June 30, 2022 and December 31, 2021.

Note 13 – 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 reasonably 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.

There were no recorded litigation loss contingencies as

of September 30, 2022 and December 31, 2021.

Note 14 – Subsequent Events

Regarding election of directors, on August 10,

2022, the Board of Directors appointed Sean Warren to serve on the Board of Directors as an independent director.

The appointment of Mr.

Warren fills a board seat previously vacated by Mr.

Greg Butterfield.

As a director, Mr.

Warren’s term begins August 10, 2022, and

expires at the annual meeting of the stockholders to be held in 2023.

It has been determined and accepted that Mr.

Warren will serve as

a member on the audit and compensation committees of the Board of Directors.

Warren will have the same compensation arrangement for

his service as the other independent directors.

That compensation currently consists of cash compensation and an option grant.

Sean Warren is a seasoned executive with over

25 years of experience in technology and enterprise technology systems and has previously served on Focus Universal’s board of directors

beginning on June 8, 2018.

His areas of expertise include software development, cloud management, enterprise infrastructure development

and full spectrum of IT compliance.

Warren currently serves as the Vice President of OPSA Change Delivery for Wells Fargo and has

From 2016 to 2018, he served as Director of IT Operations at Domo, Inc.

Warren has also previous served as the CIO of

Mountain Medical, Veyo Medical and Vice President of IT at Larry Miller.

He has also worked for technology companies including Omniture,

Warren graduated from Florida State University with a degree in accounting.

He is qualified to serve as a director because

of his accounting experience, his experience serving on public company boards and experience with the financial industry and information

On August 10, 2022, the Company entered a stock

purchase agreement with a private shareholder to repurchase 400,000 shares of its common stock for $2,000,000 and placed it in treasury.

On October 6, 2022, the Company paid an amount of $1,000,000 to repurchase 400,000 shares of its common stock from one shareholder.

remaining $1,000,000 payment for the shares will be due within six months of August 10, 2022.

The Company has evaluated other subsequent events

3 unchanged sentences

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