What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-15 compared with 2022-08-12 · 367 added, 309 removed, 248 unchanged (73% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN

MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF

The following discussion of our financial condition

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Focus Universal Inc.

(the “Company,”

“we,” “us,” or “our”) is a Nevada corporation.

We have developed five proprietary technologies utilizing

(the “Company,” “we,”

“us,” or “our”) is a Nevada corporation.

We believe we have developed five proprietary technologies utilizing

our patent portfolio which we believe solve the most fundamental problems plaguing the internet of things (“IoT”) industry

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

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

(3) leveraging ultra-narrowband power line communication

(“PLC”) technology;

(2) creating a

faster 5G cellular technology by using ultra-narrowband technology;

(3) leveraging ultra-narrowband power line communication (“PLC”)

(4) proprietary User Interface Machine auto generation technology;

and (5) incorporating all our core

technologies into a single chip.

and (5) incorporating all our core technologies into a

Our Universal Smart Technology is designed to overcome instrumentation interoperability and interchangeability.

The electronic design starts from a 90% completed common foundation we call our universal smart instrumentation platform (“USIP”),

instead of the current method of building each stand-alone instrument from scratch.

Our method eliminates redundant hardware and software

and results in significant cost savings and production efficiency.

We have developed software machine auto generation technology to replace

the manual software designs which are currently in use and cannot satisfy the exponential growth of future IoT industry demand.

Our ultra-narrowband

PLC enables our users to send data over existing electricity power cables and immediately establish a ubiquitous data network without

substantial new investment for a dedicated wiring infrastructure.

Our ultra-narrow band technology is capable of overcoming the noise

problems communicating through power lines that have hindered our competitors for over a century.

Our wireless communication technology

allows for longer-range coverage, is more energy effective and has much faster data sending speeds than the current 5G technology speeds

We also provide sensor devices and are a wholesaler of various air filters and digital, analog, and quantum light meter systems.

For the three and six months ended June 30, 2022

and 2021, we generated significant amount of our revenue from sales of a broad selection of agricultural sensors and measurement equipment

which is currently our primary business.

The electronic

design starts from a 90% completed common foundation we call our universal smart instrumentation platform (“USIP”), instead

of the current method of building each stand-alone instrument from scratch.

Our method eliminates redundant hardware and software and

results in significant cost savings and production efficiency.

We believe we have developed software machine auto generation technology

to replace the manual software designs which are currently in use and cannot satisfy the exponential growth of future IoT industry demand.

We believe our ultra-narrowband PLC enables our users to send data over existing electrical power cables and immediately establish a

ubiquitous data network without substantial new investment for a dedicated wiring infrastructure.

We believe our ultra-narrow band technology

is capable of overcoming the noise problems communicating through power lines that have hindered our competitors for over a century.

believe our wireless communication technology allows for longer-range coverage, is more energy effective and has much faster data sending

speeds than the current 5G technology speeds being used.

We also provide sensor devices and are a wholesaler of various air filters and

digital, analog, and quantum light meter systems.

For the three and nine months ended September 30,

2022 and 2021, we generated significant amount of our revenue from sales of a broad selection of agricultural sensors and measurement

equipment which is our primary business.

Our Current Products Include:

We are a wholesaler of various digital, analog,

and quantum light meters and filtration products, including fan speed adjusters, carbon filters and HEPA filtration systems.

these products from various manufacturers in China and then sell them to a major U.S.

distributor, Hydrofarm, who resells our products

directly to consumers through retail distribution channels and in some cases, places its own branding on our products.

We are a wholesaler of various digital, analog, and

quantum light meters and filtration products, including fan speed adjusters, carbon filters and HEPA filtration systems.

We source these

products from various manufacturers in China and then sell them to a major U.S.

distributor, Hydrofarm, who resells our products directly

to consumers through retail distribution channels and in some cases, places its own branding on our products.

During the development phase,

the company uses generic electronic device casings to house the prototype equipment before the final design and manufacturing process.

As an update to our product line development:

to phase out the traditional, lower-margin products and are preparing to launch a new line of products that have been in development for

several years.

These newer technology products will be released in phases, and we intend that increasing amounts of technology will be

layered upon these products.

Additionally, we plan to continue to increase our efforts in protecting more intellectual property and have

continued to develop technologies for long-term growth.

We have developed products in both the controlled agriculture industry and home

automation industries.

We have existing relationships in both sectors.

We are building a U.S.

The team has already

begun marketing our current AVX branded surveillance camera system (cameras and NVRs) and indoor and outdoor LED screens.

In our hydroponics segment, our honeycomb activated

carbon filter product has been issued a patent in October 2022, and the production of the products in several different formats has been

completed and are ready to ship to the USA for nationwide marketing.

Our products on the home automation front are also

beginning production.

Of note, (1) smart wall touch light switches, (2) digital control smart wall touch light switches, (3) smart timers,

and finally (4) smart controllers are ready for production.

Currently, our Shenzhen subsidiary unit mainly focuses

on product development and commercialization.

An important electrode with a “Total Dissolved Solids” (“TDS”) meter

design, which applications in all solubility measurements, was completed and approved by our US management team.

Furthermore, our devices and sensors with applications

within hydroponics again, including (1) pH meter, (2) CO2 meter, (3) dissolved oxygen meter, (4) digital light meter, (5) new (and vastly

improved) quantum par meter are under intensive testing and we expect to send our new versions to our US headquarters for management approval

in November 2022.

In summary, our entire smart home and hydroponic IoT

are expected to be completed by the end of 2022.

Beyond IoT products, as an NIPL (our software platform for interoperability within IoT)

derivative product, a complementary office automation software was developed, and we believe the remaining major technical difficulties

have been overcome.

This specific software was designated to assist in completing financial reports faster, more accurately, and allow

ease of update, eliminating the need for increased staffing especially in time sensitive projects.

It is designed to save CPAs, auditors,

accounting, or legal significant of time in preparation of SEC financial reports and other internal financial reporting.

Eighty percent

(80%) of this software development has been completed and we hope to launch beta versions by the end of 2022.

While we will continue to sell the following products

through Hydrofarm, we expect to have upgraded versions of certain products to re-introduce new versions after the older version are discontinued:

Specifically, we sell the following products through

Fan speed adjuster device .

fan speed adjuster device to our client Hydrofarm.

Designed specifically for centrifugal fans with brushless motors, our adjuster device

helps ensure longer life by preventing damage to fan motors by adjusting the speed of centrifugal fans without causing the motor to hum.

These devices are rated for 350 watts max, have 120VAC voltage capacity and feature an internal, electronic auto-resetting circuit breaker.

We provide a fan

speed adjuster device to our client Hydrofarm.

Designed specifically for centrifugal fans with brushless motors, our adjuster device helps

ensure longer life by preventing damage to fan motors by adjusting the speed of centrifugal fans without causing the motor to hum.

devices are rated for 350 watts max, have 120VAC voltage capacity and feature an internal, electronic auto-resetting circuit breaker.

Carbon filter devices.

We sell two types

of carbon filter devices to our client Hydrofarm.

These carbon filter devices are professional grade filters specifically designed and

used to filter air in greenhouses that might be polluted by fermenting organics.

One of these filters can be attached to a centrifugal

fan to scrub the air in a constant circle or can be attached to an exhaust line as a single pass filter, which moves air out of the growing

We sell two types of

carbon filter devices to our client Hydrofarm.

These carbon filter devices are professional grade filters specifically designed and used

to filter air in greenhouses that might be polluted by fermenting organics.

One of these filters can be attached to a centrifugal fan

to scrub the air in a constant circle or can be attached to an exhaust line as a single pass filter, which moves air out of the growing

area and filters unwanted odors and removes pollens, dust, and other debris in the air.

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Quantum par meter .

We provide a handheld

quantum par meter used to measure photosynthetically active radiation (“PAR”).

We provide a handheld quantum

par meter used to measure photosynthetically active radiation (“PAR”).

This fully portable handheld PAR meter is designed

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and faster circuit system design than those currently offered in the instrumentation market.

Our USIP technology that will make the Ubiquitor

possible is an advanced software and hardware integrated instrumentation platform that uses a large-scale modular design approach.

large-scale modular design approach subdivides instruments into a foundation component (a USIP) and architecture-specific components (sensor

nodes), which together replaces the functions of traditional instruments at a fraction of their cost.

The USIP has an open architecture,

incorporating a variety of individual instrument functions, sensors, and probes from different industries and vendors.

The platform features

the ability to connect potentially thousands of different sensors or probes, addressing major limitations present in traditional instrumentation

The USIP, which is compatible with a significant

percentage of the instruments currently manufactured, consists of universal and reusable hardware and software.

The universal hardware

in the USIP is (i) a smartphone, computer, or any mobile device capable of running our software that includes a display and either hardware

controls or software control surfaces, and (ii) our Ubiquitor, which is designed to be the universal data logger that acts as a bridge

between the computer or mobile device and the sensor nodes.

We call our flagship USIP device the “Ubiquitor” due to its ability

to measure and test a variety of electrical and physical phenomena such as voltage, current, temperature, pressure, sound, light, and

humidity—both wired and wirelessly.

We have created and assembled prototype models

of the Ubiquitor in limited quantities and plan to expand our assembly in 2023.

Our USIP technology that will make the Ubiquitor possible

is an advanced software and hardware integrated instrumentation platform that uses a large-scale modular design approach.

The large-scale

modular design approach subdivides instruments into a foundation component (a USIP) and architecture-specific components (sensor nodes),

which together replaces the functions of traditional instruments at a fraction of their cost.

The USIP has an open architecture, incorporating

a variety of individual instrument functions, sensors, and probes from different industries and vendors.

The platform features the ability

to connect potentially thousands of different sensors or probes, addressing major limitations present in traditional instrumentation systems.

The USIP, which is compatible with a significant percentage

of the instruments currently manufactured, consists of universal and reusable hardware and software.

The universal hardware in the USIP

is (i) a smartphone, computer, or any mobile device capable of running our software that includes a display and either hardware controls

or software control surfaces, and (ii) our Ubiquitor, which is designed to be the universal data logger that acts as a bridge between

the computer or mobile device and the sensor nodes.

We call our flagship USIP device the “Ubiquitor” due to its ability to

measure and test a variety of electrical and physical phenomena such as voltage, current, temperature, pressure, sound, light, and humidity—both

wired and wirelessly.

We have created and assembled prototype models of

the Ubiquitor in limited quantities and plan to expand our assembly in 2023.

Our prototype Ubiquitor is compatible with standard desktop

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instrument control and operation.

Recently, the Company has devoted a substantial

number of resources to research and development in both the US and China to bring the Ubiquitor and its App to full production and distribution.

Recently, we have devoted a substantial number of

resources to research and development in both the US and China to bring the Ubiquitor and its App to full production and distribution.

We anticipate that the sales and marketing involved with bringing the Ubiquitor to market will require us to hire a number of new sales

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to create optimal growing conditions.

Our universal smart development protocol focuses

not only on the design of the hardware and software modules but also on the design of the overall universal smart instruments system,

guided by the principles of structure, universality and modularity.

As mentioned, we believe we address the core and fundamental issues

facing the IoT marketplace.

Our Ubiquitor device is a fully modular system

with a universal sensor node and gateway system that uses a computer or mobile device as the output display module responsible for displaying

Our universal smart development protocol focuses not

only on the design of the hardware and software modules but also on the design of the overall universal smart instruments system, guided

by the principles of structure, universality and modularity.

As mentioned, we believe we address the core and fundamental issues facing

the IoT marketplace.

Our Ubiquitor device is a fully modular system with

a universal sensor node and gateway system that uses a computer or mobile device as the output display module responsible for displaying

the readings of various sensor nodes.

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into full-scale production.

The Ubiquitor’s sensor analytics system integrates event-monitoring, storage and analytics software

in a cohesive package that provides a holistic view of the sensor data it is reading.

We intend to design the Ubiquitor’s sensor analytics system to integrate event-monitoring, storage and

analytics software in a cohesive package that provides a holistic view of the sensor data it is reading.

During the development phase,

the company uses generic electronic device casings to house the prototype equipment before final design and manufacturing process.

The physical hardware of the Ubiquitor will consist

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The Ubiquitor instrument as the main hardware gateway, which is a small cell phone-sized device with integrated circuits.

We believe the Ubiquitor device can connect up

to thousands of potential sensor nodes, and integrate data using embedded software to display the data and all analytics onto a digital

screen (desktop, smartphone or mobile device displays) using a Wi-Fi connection.

As disclosed in our patent application, we have already

tested up to 256 sensor instrument readouts.

We believe the Ubiquitor device can connect up to

thousands of potential sensor nodes, and integrate data using embedded software to display the data and all analytics onto a digital screen

(desktop, smartphone or mobile device displays) using a Wi-Fi connection.

As disclosed in our patent application, we have already tested

up to 256 sensor instrument readouts.

Most types of nodes and probes can connect to the hardware.

If the sensor size is bigger

than the standard probe size, it is possible to simply use a USB cable to connect the probe and the hub.

All data and analytics are displayed

on a single screen, with tools that record and keep track of all measurements, and sort and display analytic information in easy-to-read

The Ubiquitor will be a general platform that

collects data in real time, up to 100 Hz per second;

If the sensor size is bigger than the

standard probe size, it is possible to simply use a USB cable to connect the probe and the hub.

All data and analytics are displayed on

a single screen, with tools that record and keep track of all measurements, and sort and display analytic information in easy-to-read

The Ubiquitor will be a general platform that collects

data in real time, up to 100 Hz per second;

and thus, is intended to be adapted to many industrial uses.

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It is anticipated that the Ubiquitor could dispense with some of the hassle of connecting cables, since the Ubiquitor allows wireless transmission of sensor data and may allow wireless access to networks, such as a PLC network.

We have not yet started research and development

of a second generation Ubiquitor device, but once we demonstrate the market for this product, we intend to begin such research and development.

We have not yet started research and development of

a second generation Ubiquitor device, but once we demonstrate the market for this product, we intend to begin such research and development.

Currently our research and development is focused on concepts we can implement in the current first generation Ubiquitor device.

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Communication

Power Line Communication (“PLC”) is

a communication technology that enables sending data over existing power cables.

One advantage of this technology is that PLC does not

require substantial new investment for its communications infrastructure.

Rather, PLC utilizes existing power lines, thereby forming a

distribution network that already penetrates all residential, commercial and industrial premises.

Accordingly, connectivity via PLC is

potentially the most cost-effective, scalable interconnectivity approach for the IoT.

Power Line Communication (“PLC”) is a

communication technology that enables sending data over existing power cables.

One advantage of this technology is that PLC does not require

substantial new investment for its communications infrastructure.

Rather, PLC utilizes existing power lines, thereby forming a distribution

network that already penetrates all residential, commercial and industrial premises.

Accordingly, connectivity via PLC is potentially

the most cost-effective, scalable interconnectivity approach for the IoT.

We believe PLC can be an integral part of our communication

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be interconnected by transmitting data through the same wires that provide electrical energy.

Our patented PLC is an innovative communication

technology that enables sending data over existing power cables in the electric grid.

Because PLC uses the existing power lines, it does

not require substantial new investment for a dedicated wiring infrastructure.

Existing power lines already form a distribution network

that penetrates most residential, commercial, and industrial properties.

Given that the power grid is, for the most part, an established

ubiquitous network, we believe that PLC is potentially the most cost-effective, scalable interconnectivity approach for the backbone communication

infrastructure required for the IoT.

PLC allows IoT devices to be plugged into power outlets to establish a connection using the existing

electrical wiring, permitting data sharing without the inconvenience of running dedicated network cables.

Our patented PLC is an innovative communication technology

that enables sending data over existing power cables in the electric grid.

Because PLC uses the existing power lines, it does not require

substantial new investment for a dedicated wiring infrastructure.

Existing power lines already form a distribution network that penetrates

most residential, commercial, and industrial properties.

Given that the power grid is, for the most part, an established ubiquitous network,

we believe that PLC is potentially the most cost-effective, scalable interconnectivity approach for the backbone communication infrastructure

required for the IoT.

PLC allows IoT devices to be plugged into power outlets to establish a connection using the existing electrical

wiring, permitting data sharing without the inconvenience of running dedicated network cables.

Historically, the primary design goal of the power

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companies and internet service providers deciding that the technology is not a viable means of delivering data or broadband internet access.

We have successfully developed ultra-narrowband

PLC technology that we believe can transfer readable data through the power grid.

We have successfully developed ultra-narrowband PLC

technology that we believe can transfer readable data through the power grid.

According to our internal testing, our ultra-narrowband

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achieving speeds of 4 Mbps at a bandwidth of less than 1000 Hz.

To test noise interference and disturbance we utilized six industrial

fans simultaneously, and no significant interference was found.

We utilized six industrial fans simultaneously to test noise interference

and disturbance, and no significant interference was found.

By comparison, a single hair dryer will render legacy PLC technology completely

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IoT systems involving over 1,000 sensors.

Penetrating physical barriers like walls within

a single floor or reaching out to different floors in a single building is a challenge for the wireless technology that current IoT systems

Penetrating physical barriers like walls within a

single floor or reaching out to different floors in a single building is a challenge for the wireless technology that current IoT systems

Moreover, wireless networks often face performance issues due to radio-frequency interference caused by microwave ovens, cordless

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However, our PLC technology can reach every node connected via the power lines.

Our technology

converts virtually every standard wall socket into an access point, making it a more consistent and reliable system for crucial and sensitive

Our ultra-narrowband PLC technology’s ability to reach long distances via power lines becomes especially useful in commercial

networks that require the ability to avoid physical barriers like walls, underground structures, and hills.

We believe that our PLC technology

can be an integral part of any smart city, community, or campus.

The 5G cellular network, for example, promises

exciting advances for telecommunication service providers, but the implementation of the 5G network will be challenging.

The implementation

will require building out dense, low-latency edge networks in ways that are affordable, secure and easily maintainable.

5G antennas will

be able to handle more users and to transmit more data, but they will have a shorter transmission range.

5G networks will also require

frequencies of up to 300 GHz.

This requirement means wireless carriers will need to bid for the costly higher spectrum bands to roll out

their respective 5G networks.

Generally speaking, wireless networks are typically slower and more expensive than existing wired networks

and extremely susceptible to interference from radio signals, radiation, walls and other forms of interference.

Additionally, wireless

networks may be accessed by any device within range of the network’s signal, making the information transmitted on a wireless network

susceptible to access by unauthorized recipients.

We are currently developing a wired alternative to wireless networks that utilizes installed

power lines to transmit information.

our technology will convert virtually every standard wall socket into an access point, making it a more consistent and reliable system

for crucial and sensitive operations.

Our ultra-narrowband PLC technology’s ability to reach long distances via power lines will

become especially useful in commercial networks that require the ability to avoid physical barriers like walls, underground structures,

We believe that our PLC technology can be integral to any smart city, community, or campus.

For example, the 5G cellular network promises exciting

advances for telecommunication service providers, but implementing the 5G network will be challenging.

The implementation will require

building out dense, low-latency edge networks in ways that are affordable, secure and easily maintainable ways.

5G antennas will be able

to handle more users and to transmit more data, but they will have a shorter transmission range.

5G networks will also require frequencies

of up to 300 GHz.

This requirement means wireless carriers must bid for the costly higher spectrum bands to roll out their respective

Generally speaking, wireless networks are typically slower and more expensive than existing wired networks and extremely

susceptible to interference from radio signals, radiation, walls and other forms of interference.

Additionally, wireless networks may

be accessed by any device within range of the network’s signal, making the information transmitted on a wireless network susceptible

to access by unauthorized recipients.

We are currently developing a wired alternative to wireless networks that utilize installed power

lines to transmit information.

Our PLC technology uses an ultra-narrow band spectrum channel of less than 1 KHz to establish a long-distance

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We believe that because residential and commercial

structures already include multiple power outlets, the power line infrastructure represents an excellent network to share data among

intelligent devices, particularly in the smart home installations that we are currently performing through AVX.

Using PLC technology

would mean that the requirement for costly ethernet cable networks to carry network information could be eliminated, as the same signals

may be carried on the existing power lines.

structures already include multiple power outlets, the power line infrastructure represents an excellent network to share data among intelligent

devices, particularly in the smart home installations that we are currently performing through AVX.

Using PLC technology would mean that

the requirement for costly ethernet cable networks to carry network information could be eliminated, as the same signals may be carried

on the existing power lines.

We plan to leverage the communications technology

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We intend to apply the same concept to commercial and industrial applications.

Also, we plan to design a full line of products

for the gardening industry by integrating the Ubiquitor device into a gardening system.

The system would include a light control node,

temperature sensor, humidity sensor, digital light sensor, quantum PAR sensor, pH sensor, total dissolved solids (“TDS”) sensor

and carbon dioxide sensor design.

We believe the combination of these sensors would offer the same features as a combination of dozens

or even hundreds of different instruments in the gardening industry.

The Ubiquitor would be used to replace these devices and could offer

another case study of the effectiveness of the application of universal smart technology to such systems.

The development of universal smart instruments

and the IoT have a considerable amount of overlap, with the only difference being the number of sensor nodes involved.

We plan to take

advantage of this overlap and unify universal smart instruments and the IoT into a single system, building the IoT infrastructure for

both residential and commercial uses and charging monthly subscription fees.

End users will be able to plug any peripheral devices into

the power outlet and enjoy the IoT connectivity throughout their home.

Eventually, we hope to establish five divisions

to bring our technology together:

Also, we plan to design a full line of products for

the gardening industry by integrating the Ubiquitor device into a gardening system.

The system would include a light control node, temperature

sensor, humidity sensor, digital light sensor, quantum PAR sensor, pH sensor, total dissolved solids (“TDS”) sensor and carbon

dioxide sensor design.

We believe combining these sensors would offer the same features as combining dozens or even hundreds of different

instruments in the gardening industry.

The Ubiquitor would be used to replace these devices and could offer another case study of the

effectiveness of the application of universal smart technology to such systems.

The development of universal smart instruments and

the IoT have a considerable amount of overlap, with the only difference being the number of sensor nodes involved.

We plan to take advantage

of this overlap and unify universal smart instruments and the IoT into a single system, building the IoT infrastructure for both residential

and commercial uses and charging monthly subscription fees.

End users will be able to plug any peripheral devices into the power outlet

and enjoy the IoT connectivity throughout their home.

Eventually, we hope to establish five divisions to

bring our technology together:

1) AVX with new shared distributed smart home products powered by the Ubiquitor;

2) an IT division in

software machine design;

2) an IT division in software

machine design;

3) Universal Smart Instrumentation;

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to implement strong protections on the PLC technology worldwide.

In the fourth quarter of 2021, we hired the law

firm of Knobbe Martens, Olson & Bear, LLP to serve as outside intellectual property counsel for the Company.

The firm is working on

further transferring the Company’s provisional patent applications to formal patent applications which should number 13 according

if all proceed according to plan.

In addition, Knobbe Martens is also working on further filing four previously unfiled patents during

the same timeframe and extending an existing patent application into Europe and Australia.

In addition, in May 2022, the Company also

engaged Chang & Hale, LLP law firm as suggested by our counsel at Knobbe, Martens, Olsen & Bear, LLP to assist with two new patents,

however Knobbe Martens still remains our main IP counsel.

In all, the company now has 24 total patents and patent applications in various

phases with the US Patent and Trademark Office.

There are several competitors we have identified,

specifically in the wireless sensor node industry, including traditional instruments or devices manufacturers such as Hanna Instruments

In the fourth quarter of 2021, we hired the law firm

of Knobbe Martens, Olson & Bear, LLP to serve as outside intellectual property counsel for the Company.

The firm is working on further

transferring the Company’s provisional patent applications to formal patent applications which should number 13 according if all

proceed according to plan.

In addition, Knobbe Martens is also working on further filing four previously unfiled patents during the same

timeframe and extending an existing patent application into Europe and Australia.

In addition, in May 2022, the Company also engaged Chang

& Hale, LLP law firm as suggested by our counsel at Knobbe, Martens, Olsen & Bear, LLP to assist with two new patents, however

Knobbe Martens still remains our main IP counsel.

The company now has 24 total patents and patent applications in various phases with

the US Patent and Trademark Office, with two more provisional patents filed this quarter.

As a note, Focus Universal’s patent number 11,488,468

was allowed and subsequently issued on November 1, 2022.

The patent is titled “Sensor for Detecting the Proximity of an IEEE 802.11

Protocol Connectable Device.”

We have identified several competitors we have identified,

specifically in the wireless sensor node industry, including traditional instruments or device manufacturers such as Hanna Instruments

and Extech Instruments.

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and remote sensors.

Many of Monnit’s products are web-based wireless sensors that usually are not portable because of their power

Many of Monnit’s products are web-based wireless sensors that usually are not portable because of their

power consumption.

Also, the sensors’ real-time updates are slow;

and we believe security of the web-based sensor data acquisition also

may be a concern.

In addition to purchasing the device, consumers usually have to pay monthly fees for using web-based services.

We are not trying to compete with traditional

instruments or device manufacturers because we utilize our Ubiquitor device in conjunction with our smartphone application, which we believe

will be a completely different product category.

and we believe security of the web-based sensor data

acquisition may also be a concern.

In addition to purchasing the device, consumers usually have to pay monthly fees for using

web-based services.

We are not trying to compete with traditional instruments

or device manufacturers because we utilize our Ubiquitor device in conjunction with our smartphone application, which we believe will

be a completely different product category.

Market Potential

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We also hope to play a role in academic laboratories, particularly

with smaller academic laboratories who are sensitive to price.

with smaller academic laboratories that are sensitive to price.

Results of Operations

For the three months ended June 30, 2022 compared to the three

months ended June 30, 2021

For the three months ended September 30, 2022 compared to the three

months ended September 30, 2021

Revenue, cost of revenue and gross profit

Our consolidated gross revenue for the three months

ended June 30, 2022 and 2021 was $64,642 and $261,680, respectively, which included revenue from related parties of $2,278 and $4,950,

ended September 30, 2022 and 2021 was $60,654 and $634,777, respectively, which included revenue from related parties of $5,968 and $0,

respectively.

Revenue for the three months ended June 30, 2022 decreased $197,038 due to sales decrease from major customer of Perfecular

Revenue for the three months ended September 30, 2022 decreased $574,123 due to sales decrease from major customer of Perfecular

and AVX Design & Integration Inc.

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away from more generalized hydroponic equipment of which remain in higher inventory levels within the industry.

Cost and Operating Expenses

The major components of our cost and operating

expenses for the three months ended June 30, 2022 and 2021 are outlined in the table below:

For the three months ended June 30, 2022

For the three months ended June 30, 2021

Cost of revenue, excluding depreciation & amortization

Cost of revenue for the three months ended September

30, 2022 was $42,441, compared to $521,334 for the three months ended September 30, 2021.

This decrease in cost of revenue was related

to the decrease in revenues.

In addition to the decrease in revenue, gross profit decrease to $18,213 compared to $113,443 three months

ended September 30, 2022 and 2021, respectively.

Operating Expenses

The major components of our cost and operating expenses

for the three months ended September 30, 2022 and 2021 are outlined in the table below:

For the three months ended September 30, 2022

For the three months ended September 30, 2021

Selling expense

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General and administrative

Total costs and operating expenses

Cost of revenue, excluding depreciation and amortization

for the three months ended June 30, 2022 was $57,472, compared to $208,583 for the three months ended June 30, 2021.

This decrease in

cost of revenue was related to the decrease in revenues.

Selling expense for the three months ended June

30, 2022 was $17,548, compared to $446 for the three months ended June 30, 2021.

Selling expense incurred was mainly from third party

advertising fees.

The increase of selling expense was due to an increase in advertising fees.

Total operating expenses

Selling expenses for the three months ended September

30, 2022 was $76,984, compared to $14,776 for the three months ended September 30, 2021.

Selling expense incurred was mainly from marketing

fees, including expenses related to the Company’s management ringing the closing bell for Nasdaq, and a one-time sales return for

The increase of selling expenses was due to an increase in marketing fees.

Compensation – officers and directors were $34,000

$34,000 and $34,000 for the three months ended June 30, 2022 and 2021, respectively.

and $34,600 for the three months ended September 30, 2022 and 2021, respectively.

Research and development costs were $133,109 and $55,525

$47,222 for the three months ended June 30, 2022 and 2021, respectively.

The increase was due to an increase research and development

employee compensation and China research and development costs.

Professional fees were $174,341during the three

months ended June 30, 2022, compared to $186,765 during the three months ended June 30, 2021.

The decrease in third party consulting fee

compared to the prior period.

General and administrative expenses of $819,268

incurred during the three months ended June 30, 2022 primarily consisted of stock-based compensation of $228,375, salaries of $178,530,

rent of $161,448, insurance expense of $81,579, and depreciation expense of $41,899.

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

The increase was due to an increase in research and development

employee compensation and China based operations’ research and development costs.

Professional fees were $150,943 during the three months

ended September 30, 2022, compared to $343,787 during the three months ended September 30, 2021.

The decrease in these fees compared to

the prior period was due to the fact that in the prior period we were uplisting to Nasdaq by pursuing an underwritten offering.

General and administrative expenses of $597,143 incurred

during the three months ended June 30, 2021 primarily consisted of stock-based compensation of $106,838, salaries of $75,845, insurance

during the three months ended September 30, 2022 primarily consisted of stock-based compensation of $195,750, salaries of $110,024, rent

of $43,266, insurance expense of $72,274, and depreciation expense of $41,115.

General and administrative expenses of $422,309 incurred

during the three months ended September 30, 2021 primarily consisted of stock-based compensation of $106,837, salaries of $82,382, insurance

expense of $116,546 and depreciation expense of $41,062.

Other Income (expense)

Other income of $31,946 incurred during the three

months ended June 30, 2022 primarily consisted of SBA PPP forgiveness loan of $158,547, unrealized loss on marketable equity securities

of $74,626 and cancellation of debt of $20,000.

Other income of $183,390 incurred during the three months ended June 30, 2021 primarily

consisted of SBA PPP forgiveness loan of $151,500.

During the three months ended June 30, 2022 and

months ended September 30, 2022 primarily consisted of interest income of $2,635, unrealized gain on marketable equity securities of $42,101,

realized loss on marketable equity securities of $31,486 and other income of $18,696.

Other expenses of $580,200 incurred during the three

months ended September 30, 2021 primarily consisted of interest expense of $14,069, gain on extinguishment of debt $107,460, change in

fair value of warrant liability of $1,284,780, gain on settlement of derivative liability of $550,406 and other income of $60,783.

During the three months ended September 30, 2022 and

2021, we incurred net losses of $942,020 and $1,337,754 respectively, due to the factors discussed above.

For the six months ended June 30, 2022 compared to the six months

ended June 30, 2021

Our consolidated gross revenue for the six months

ended June 30, 2022 and 2021 was $221,809 and $625,143, respectively, which included revenue from related parties of $33,820 and $15,141,

For the nine months ended September 30, 2022 compared to the nine

months ended September 30, 2021

Our consolidated gross revenue for the nine months

ended September 30, 2022 and 2021 was $282,463 and $1,259,920, respectively, which included revenue from related parties of $39,788 and

$15,141, respectively.

Revenue for the six months ended June 30, 2022 decreased $403,334 due to sales decrease from Hydrofarm to Perfecular and

AVX Design & Integration Inc.

being unable to generate more service work or develop a big project in the highly competitive environment

of the Los Angeles area.

As mentioned, the company is midstream in shifting toward more higher technology products and revenues and diversifying

away from generalized hydroponic equipment.

Cost and Operating Expenses

The major components of our cost and operating

expenses for the six months ended June 30, 2022 and 2021 are outlined in the table below:

For the six months ended June 30, 2022

For the six months ended June 30, 2021

Cost of revenue, excluding depreciation & amortization

Revenue for the nine months ended September 30, 2022 decreased $977,457 due to sales decrease from Hydrofarm to

Perfecular and AVX Design & Integration Inc.

being unable to generate more service work or develop a big project in the highly competitive

environment of the Los Angeles area.

As mentioned, the company is midstream in shifting toward more higher technology products and revenues

and diversifying away from generalized hydroponic equipment.

Cost of revenue for the nine months ended September

30, 2022 was $243,004, compared to $1,022,666 for the nine months ended September 30, 2021.

This decrease in cost of revenue was related

to the decrease in revenues.

In addition to the decrease in revenue, gross profit decrease to $39,459 compared to $237,254 nine months

ended September 30,2022 and 2021, respectively.

Operating Expenses

The major components of our cost and operating expenses

for the nine months ended September 30, 2022 and 2021 are outlined in the table below:

For the nine months ended September 30, 2022

For the nine months ended September 30, 2021

Selling expense

3 unchanged sentences

General and administrative

Total costs and operating expenses

Cost of revenue, excluding depreciation &

amortization for the six months ended June 30, 2022 was $200,563, compared to $500,846 for the six months ended June 30, 2021.

This decrease

in cost of revenue was related to the decrease in revenues.

Selling expense for the six months ended June

30, 2022 was $55,887, compared to $958 for the six months ended June 30, 2021.

Selling expense incurred was mainly from third party advertising

The increase of selling expense was due to an increase in advertising fees.

Total operating expenses

Selling expense for the nine months ended September

30, 2022 was $132,871, compared to $15,734 for the nine months ended September 30, 2021.

Selling expense incurred was mainly from marketing

The increase of selling expense was due to an increase in marketing fees.

Compensation – officers and directors were $144,040

$110,040 and $73,100 for the six months ended June 30, 2022 and 2021, respectively.

and $107,700 for the nine months ended September 30, 2022 and 2021, respectively.

The increase was due to granting equity compensation.

Research and development costs were $862,214 and $165,897

$110,372 for the six months ended June 30, 2022 and 2021, respectively.

The increase was due to an increase in research and development

employee compensation;

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

The increase was due to an increase in research and development employee

compensation;

and on research and development costs incurred by our Chinese subsidiary.

Professional fees were $535,207 during the six

months ended June 30, 2022 compared to $457,475 during the six months ended June 30, 2021.

The increase in professional fees mainly resulted

from the pending litigation compared to the prior period.

Professional fees were $686,150 during the nine

months ended September 30, 2022 compared to $801,262 during the nine months ended September 30, 2021.

The decrease in professional fees

compared to the prior period was due to the fact that in 2021 the Company was uplisting to Nasdaq and conducted an underwritten offering.

General and administrative expenses of $2,317,359

incurred during the six months ended June 30, 2022 primarily consisted of stock-based compensation of $456,750, salaries of $469,934,

incurred during the nine months ended September 30, 2022 primarily consisted of stock-based compensation of $652,500, salaries of $579,958,

rent of $280,311, insurance expense of $330,768, and depreciation expense of $123,177.

General and administrative expenses of $1,286,943

incurred during the six months ended June 30, 2021 primarily consisted of stock-based compensation of $213,675, salaries of $261,751,

insurance expense of $135,144, depreciation expense of $80,872, and rent of $32,590.

During the six months ended June 30, 2022 and

2021, we incurred total other income of $198,982 and $220,067, respectively.

The decrease in other income was due to SBA PPP forgiveness

loan and cancellation of debt in the current period.

The majority of the other income was incurred from lease payments from tenants at

our facility in Ontario, California.

Also of note, the market value of our facility has increased substantially due to the general rise

in Southern California industrial real estate market conditions over the past 5 years.

During the six months ended June 30, 2022 and

incurred during the nine months ended September 30, 2021 primarily consisted of stock-based compensation of $320,512, salaries of $344,133,

depreciation expense of $121,933, and insurance expense of $251,690.

The major portion of increase these expenses were related to increase

director’s stock-based compensation.

Other Income (expense)

Other income of $230,928 incurred during the nine

months ended September 30, 2022 primarily consisted of interest income of $2,885, unrealized loss on marketable equity securities of $32,525,

realized loss on marketable equity securities of $21,205 and other income of $281,773.

Other expense of $360,133 incurred during the nine

months ended September 30, 2021 primarily consisted of interest expense of $36,825, gain on extinguishment of debt for SBA PPP forgiveness

loan amount of $260,450, change in fair value of warrant liability amount of $1,284,780, gain on settlement of derivative liability amount

of $550,406 and other income of $150,616.

During the nine months ended September 30, 2022 and

2021, we incurred net losses of $3,872,247 and $2,500,415 respectively, due to the factors discussed above.

1 unchanged sentence

Working Capital

September 30,

Current Assets

3 unchanged sentences

selected cash flow information:

For the six months ended June 30, 2022

For the six months ended June 30, 2021

For the nine months ended September 30, 2022

For the nine months ended September 30, 2021

Net cash used in operating activities

$ (2,435,157 )

$ (1,496,812 )

Net cash used in investing activities

5 unchanged sentences

Our net cash outflows from operating activities

of $1,749,492 for the six months ended June 30, 2022 was primarily the result of our net loss of $2,930,227 and changes in our operating

of $2,435,157 for the nine months ended September 30, 2022 was primarily the result of our net loss of $3,872,247 and changes in our operating

assets and liabilities offset by the add-back of non-cash expenses.

1 unchanged sentence

in accounts receivable of $32,257, an increase in accounts receivable – related party of $45,413, an increase in inventories of

$7,752, a decrease in other receivable of $13,057, a decrease in prepaid expense of $103,083, an increase in deposit of $4,008, a decrease

in operating lease right-of-use asset of $190,790, an decrease in accounts payable and accrued liabilities of $106,104, a decrease in

other current liabilities of $17,135, an increase in customer deposit of $6,131, a decrease in lease liabilities of $60,576, an increase

in other liabilities of $14,736.

Non-cash expense included add-backs of $57,147 in bad debt expense, $25,617 in reduction of inventory

fair value adjustments, $82,065 in depreciation expense, $74,626 in unrealized loss on marketable equity securities, $10,281 in realized

gain on marketable securities, $158,547 in gain on forgiveness of debt, $692,920 in stock-based compensation - shares, and $456,750 in

stock option compensation.

$5,087, a decrease in prepaid expense of $116,648, an decrease in deposit of $1,998, a decrease in operating lease right-of-use asset

of $226,468, an decrease in accounts payable and accrued liabilities of $120,121, a decrease in other current liabilities of $17,135,

an decrease in customer deposit of $271, a decrease in lease liabilities of $94,542, an increase in other liabilities of $12,335.

expense included add-backs of $72,108 in bad debt expense, $21,133 in reduction of inventory fair value adjustments, $123,908 in depreciation

expense, $32,525 in unrealized loss on marketable equity securities, $21,205 in realized loss on marketable securities, $158,547 in gain

on forgiveness of debt, $671,901 in stock-based compensation - shares, and $652,500 in stock option compensation.

Our net cash outflows from operating activities

of $964,297 for the six months ended June 30, 2021, was primarily the result of our net loss of $1,162,661 and changes in our operating

assets and liabilities offset by the add-back of non-cash expenses.

The change in operating assets and liabilities includes a decrease

in accounts receivable of $40,219, an increase of accounts receivable – related party of $5,016, a decrease in inventory of $32,248,

an increase in other receivables of $2,400, an increase in prepaid expenses of $98,821, a decrease in deposits of $100,000, a decrease

in operating lease right-of-use asset of $23,553, an increase in accounts payable and accrued liabilities of $32,400, a decrease in accounts

payable – related party of $17,471, an increase in other current liabilities of $164, a decrease in customer deposits of $52,751,

and a decrease lease liabilities of $25,228.

Non-cash expense includes add-backs of $5,749 in bad debt expense, $1,329 in inventory reserve

reductions, $80,872 in depreciation expense, $151,500 in gain on forgiveness of debt, $24,000 in stock-based compensation, and $213,675

in stock option compensation.

of $1,496,812 for the nine months ended September 30, 2021, was primarily the result of our net loss of $2,500,415 and changes in our

operating assets and liabilities offset by the add-back of non-cash expenses.

The change in operating assets and liabilities includes

an increase in accounts receivable of $120,503, a decrease in inventory of $20,969, an increase in prepaid expenses of $55,280, a decrease

in deposits of $100,000, a decrease in operating lease right-of-use asset of $36,059, an increase in accounts payable and accrued liabilities

of $172,474, a decrease in accounts payable – related party of $17,471, an increase in other current liabilities of $17,299, a decrease

in customer deposits of $57,106, a decrease in lease liabilities of $39,044, and a decrease in other liabilities of $17,135.

expense includes add-backs of $7,794 in bad debt expense, $1,689 in inventory reserve reductions, $121,932 in depreciation expense, $258,960

in gain on extinguishment of debt, $1,284,780 in change in fair value of warrant liability, $550,406 in gain on settlement of derivative

liability, $36,000 in stock-based compensation, and $320,512 in stock option compensation.

We expect that cash flows from operating activities

3 unchanged sentences

Cash Flows from Investing Activities

For the six months ended June 30, 2022 we had

cash outflow from investing activities of $267,537.

For the nine months ended September 30, 2022 we

had cash outflow from investing activities of $177,738.

That was primarily the result from the purchase of property and equipment of $39,193,

purchase of marketable securities of $768,949, and proceeds from sales of marketable securities of $630,404.

There were no investing activities

for the six months ended June 30, 2021

For the nine months ended

September 30, 2021 we had cash outflow from investing activities of $6,875 from the purchase of property and equipment.

Cash Flows from Financing Activities

There were no financing activities for the six

months ended June 30, 2022.

For the six months ended June 30, 2021, cash inflows of $1,762,407 were due to proceeds of SBA loans of $267,297,

payment of an SBA loan of $227, proceeds from bank loan of $1,500,000, and repayment of the bank loan of $4,663.

There were no financing activities for the nine

months ended September 30, 2022.

For the nine months ended September 30, 2021, cash inflows of $10,455,528 were due to proceeds of SBA

loans of $267,297, payment of an SBA loan of $137,900, proceeds from bank loan of $1,500,000, payment on bank loan of $1,500,000, and

net proceeds of $10,326,131 from an underwritten public offering.

Going Concern

2 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 a 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 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.

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.

a 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 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.

Off-Balance Sheet Arrangements

As of June 30, 2022, we did not have any off-balance-sheet arrangements,

As of September 30, 2022, we did not have any off-balance-sheet arrangements,

as defined in Item 303(a)(4)(ii) of Regulation SK.

QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined

by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule

12b-2 of the Exchange Act and are not required to provide the information required under this item.

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 2. Management’s Discussion and Analysis