What changed in this filing

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Item 1. Financial Statements

2023-05-16 compared with 2022-11-15 · 489 added, 557 removed, 465 unchanged (69% of the section changed)

3 unchanged sentences

Index to the Financial Statements

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)

Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (unaudited)

Condensed Consolidated Statements of Changes in Stockholder’s Equity for the Three Months Ended March 31, 2023 and 2022 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (unaudited)

Notes to the Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

1 unchanged sentence

Accounts receivable – related party

Other receivables

Prepaid expenses

Marketable equity securities

Deposit - current portion

Total Current Assets

4 unchanged sentences

Accounts payable and accrued liabilities

Other current liabilities

Treasury stock payable

Loan, current portion

Other current liabilities

Lease liability, current portion

2 unchanged sentences

Lease liability, less current portion

Loan, less current portion

Other liability

4 unchanged sentences

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

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

64,769,490 shares issued and outstanding as of March 31, 2023 and 43,530,915 shares issued and outstanding as of December 31, 2022

Treasury stock at cost ( 0 shares and 400,000 shares held at March 31, 2023 and December 31, 2022, respectively)

( 2,000,000 )

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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Revenue - related party

13 unchanged sentences

Interest income (expense), net

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

Gain on bargain purchase

Unrealized gain (loss) on marketable equity securities

Realized loss on marketable equity securities

Rental income

Other income (expense), net

3 unchanged sentences

( 1,868,930 )

( 2,500,415 )

Income tax expense

1 unchanged sentence

$ ( 1,868,930 )

$ ( 3,872,247 )

$ ( 2,500,415 )

Other comprehensive items

3 unchanged sentences

$ ( 1,868,378 )

$ ( 3,867,530 )

$ ( 2,500,415 )

Weight Average Number of Common Shares Outstanding:

2 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 NINE MONTHS ENDED SEPTEMBER 30,

2022 AND 2021

Shares to be issued

Accumulated Other

Comprehensive

Stockholders'

Balance - June 30, 2022

$ ( 15,867,318 )

Stock based compensation - options

Stock based compensation - shares

Purchase of treasury stock

( 1,999,600 )

( 2,000,000 )

Other comprehensive loss

Balance - September 30, 2022

$ ( 16,809,338 )

Balance - June 30, 2021

$ ( 10,878,775 )

Issuance of common stock

Stock based compensation - options

Common stock issued for service

( 1,337,754 )

Balance - September 30, 2021

$ ( 12,216,529 )

Shares to be issued

Accumulated Other

Comprehensive

Stockholders'

FOR THE THREE MONTHS ENDED March 31, 2023 AND

Treasury Stock

Additional Paid-In

Shares to be issued Common

Accumulated Other Comprehensive

Total Stockholders’

Balance – December 31, 2022

$ ( 2,000,000 )

$ ( 17,864,028 )

Stock based compensation - options

Stock based compensation – cashless exercise options

Stock based compensation - shares

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

Retirement of treasury stock

( 1,999,600 )

Other comprehensive loss

Issued stock dividend

Other comprehensive income

( 1,114,243 )

Balance - September 30, 2022

Balance – March 31, 2023

$ ( 18,978,271 )

Additional Paid-In

Shares to be issued Common

Accumulated Other Comprehensive Income

Total Stockholders’

Balance - December

$ ( 12,937,091 )

Issuance of common stock

Stock based compensation - options

Employee compensation

Common stock to be issued for services

Other comprehensive loss

( 1,868,930 )

Balance - September 30, 2021

Balance - March 31, 2022

$ ( 14,806,021 )

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

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Bad debt expense

Inventory fair value adjustments

Inventory fair value net realizable

Depreciation expense

Unrealized loss on marketable equity securities

Amortization of intangible assets

Unrealized 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

Gain on bargain purchase

Stock-based compensation – shares

4 unchanged sentences

Accounts receivable - related party

Other receivable

Prepaid expenses

1 unchanged sentence

Accounts payable and accrued liabilities

Accounts payable - related party

Other current liabilities

3 unchanged sentences

Net cash flows used in operating activities

( 2,435,157 )

( 1,496,812 )

Cash flows from investing activities:

2 unchanged sentences

Proceeds from sale of marketable securities

Net cash flows used in investing activities

Net cash flows provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from SBA loan

Repayment on SBA loan

Proceeds from bank loan

Repayment on bank loan

Purchase of treasury stock

( 1,000,000 )

Proceeds from IPO, net

Net cash flows provided by financing activities

Net cash flows used in financing activities

( 1,000,000 )

Effect of exchange rate

6 unchanged sentences

Cash paid for interest

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

Supplemental disclosure for noncash financing activities:

Right-of-use assets obtained in exchange for operating lease liabilities

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements

FOCUS UNIVERSAL INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL

FOR THE THREE MONTHS ENDED MARCH 31, 2023 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”).

(“the Company”)

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

It is a universal smart instrument

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

universal smart technologies and instruments.

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;

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

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.

is also a provider of patented hardware and software design technologies

for Internet of Things (IoT) and 5G.

The Company has developed what it believes are five disruptive patented technology platforms with

26 patents and patents pending in various phases and 8 trademarks pending in various phases to solve what it believes are the major problems

facing hardware and software design and production within the industry today.

These technologies combined have the potential to reduce

costs, product development timelines and energy usage while increasing range, speed, efficiency, and security of the IoT and 5G networks.

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.

The company has multiple subsidiary units, including

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”), AVX Design and Integration Inc.

(“AVX”), Focus Universal (Shenzhen) Technology

Company LTD (“Focus Shenzhen”), Lusher Bioscientific, Inc.

(“Lusher”), and AT Tech Systems LLC (“AT Tech

Perfecular Inc.

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.

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

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.

Services provided by AVX include full integration

of houses, apartment, commercial complex, office spaces with audio, visual and control systems to fully integrate devices in the low voltage

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

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

China, Focus Universal (Shenzhen) Technology Company LTD.

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

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

intelligent instrumentation sales, and information consulting services.

This excludes any projects subject to approval or that require

a separate business license in accordance with the local laws.

China allows foreign entities to setup wholly owned limited liability companies

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

and business activities.

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

as a WFOE entity in China.

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

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.

AVX is an internet

of things (“IoT”) installation and management company specializing in high performance and easy to use Audio/Video, Home Theater,

Lighting Control, Automation and Integration.

Services provided by AVX include full integration of houses, apartment, commercial complex,

office spaces with audio, visual and control systems to fully integrate devices in the low voltage field.

AVX’s services also include

partial equipment upgrade and installation.

Focus set up a branch in Shenzhen China, Focus Universal (Shenzhen) Technology Company LTD

to be engaged in IoT research and development, equipment sales, and application services, software development and sales, amongst other

On January 5, 2022, the Company founded a wholly

owned subsidiary named Lusher Bioscientific, Inc.

Lusher Bioscientific was founded to promote the Company’s horticultural sensors

and filters with 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.

As of January 6, 2023, the Company completed

the business combination of AT Tech Systems.

The transaction included AT Tech Systems’ business, including its cash and cash

equivalents, accounts receivable, professional licenses, customer lists and corresponding client relationships, trademarks, trade

names, brand names, goodwill and related intangible assets, inventory, and all other assigned contracts.

While the agreement was

signed on December 19, 2022, in order to complete control, a new entity AT Tech Systems LLC needed to be formed, which was completed

on January 6, 2023.

The Company also hired certain employees of AT Tech Systems’ business, assuming employment obligations as

of December 30, 2023, despite the control of the entity being completed thereafter.

AT Tech Systems LLC is now a subsidiary of Focus

Universal, as defined in ASC 805, Business Combinations .

The Company has integrated the acquired assets and employees

throughout its existing business, including key employees serving dual roles with AVX Design and Integration.

For example, Mr.

Anthony Tejeda will serve as the Company’s director of installation services, as the vice president of operations of AVX, and

as chief operating officer of AT Tech Systems LLC.

In addition to the provision of services in the positions mentioned above, Mr.

Tejeda shall assist with AVX’s management and train certain of its personnel in performing installations.

The employment

agreement of Mr.

Tejeda is for a term of 5 years.

The onboarding of Mr.

Tejeda, who has extensive experience and expertise in

commercial smart installations, will complement the smart installation services and allow Focus and AVX to enter the commercial

smart installation market.

AT Tech Systems has several clients from medical/dental facilities, commercial, and industrial projects,

including notable manufacturers and wholesalers, and provides clients with integrated network, security, and multimedia design

solutions and technology systems.

Note 2 – Summary of Significant Accounting Policies

2 unchanged sentences

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

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

Focus Universal (Shenzhen) Technology Co., LTD, Lusher Bioscientific and AT Tech Systems LLC (collectively, the “Company”,

“we”, “our”, or “us”).

All intercompany balances and transactions have been eliminated upon consolidation.

The Company’s unaudited

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

States of America (“U.S.

Going Concern

In the long term, the continuation of the Company

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

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

For the 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.

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

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

Segment Reporting

The Company currently has two operating segments.

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

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

how to allocate resources and to assess performance.

Management reviews financial information presented on an unaudited condensed consolidated

basis for purposes of allocating resources and evaluating financial performance.

Accordingly, the Company has determined that it has two

operating and reportable segments.

Asset information by operating segment is not 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.

The Company currently has three operating segments.

(1) Focus and Focus Shenzhen (“Corporate and R&D”) involve non-specific financing, executive expense, operations and investor

relations of the public entity, and general shared management and costs across subsidiary units which spread across all functional categories

and research and development of technology products.

(2) Perfecular and Lusher (“IoT Products”) involve wholesale, marketing,

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

(3) AVX and AT Tech

(“IoT Installation Services”) is an IoT installation and management company specializing in high performance and easy to use

audio/video, home theater, lighting control, automation, and integration.

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 September 30, 2022 and December 31, 2021, approximately $ 5,032,437 and $ 7,464,846 of the Company’s

As of March 31, 2023 and December 31, 2022, approximately $ 2,651,309 and $ 3,120,763 of the Company’s

cash was not insured by the FDIC.

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

There were no cash equivalents held by the Company as of March 31, 2023 and December 31, 2022.

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 180 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 September 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 March 31, 2023 and December 31, 2022, allowance

for doubtful accounts amounted to $ 228,086 and $ 222,972 , 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

9 unchanged sentences

estimated market value.

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

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

Equity 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.

Realized gains and losses are recognized the fair value differences when the trading securities been sold.

Unrealized gains

and losses are recognized the fair value differences of unsold trading securities for the period end.

Both realized and unrealized gains

and losses are recorded in other income (expense).

Property and Equipment

Property and equipment are stated at cost.

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

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

Maintenance and repairs are expensed currently.

Major renewals and betterments are capitalized.

Depreciation is computed using the straight-line

Depreciation is computed

using the straight-line method.

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 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.

The Company applies the provisions of FASB ASC

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

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

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

In that event,

7 unchanged sentences

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

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

on its review at March 31, 2023 and December 31, 2022, the Company believes there was no impairment of its long-lived assets.

Intangible Assets

The Company’s intangible assets were acquired

from AT Tech due to customer relationship using multi-period excess earnings method.

These intangible assets were valued based on the

AT Tech business acquisition.

The value based on the assessed income expected to be generated from the existing customer list, namely

the carry-over of the existing contracts after a careful evaluation of the customer list.

Amortization on the intangible assets was computed

by the percentage completed for these existing assets and fully amortized this quarter.

Treasury stock

1 unchanged sentence

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.

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

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

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 stock.

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

are ultimately expected to vest.

The resulting stock-based compensation expense

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

The Company accounts for warrants as either equity-classified

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

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.

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

2 unchanged sentences

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

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

The Company does no t have any outstanding warrants as of March 31, 2023 and December

31, 2022, 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 September 30, 2022:

The following table summarize financial assets

and liabilities measured at fair value on a recurring basis as of March 31, 2023:

Schedule of Fair Value Assets And Liabilities Measured On Recurring Basis

September 30, 2022 (unaudited)

March 31, 2023 (unaudited)

Marketable securities:

4 unchanged sentences

short maturity of those instruments.

Transactions involving related parties cannot be presumed

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

Representations

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

to those that prevail in arm’s-length transactions unless such representations can be substantiated.

However, it is not practical to determine the fair

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

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.

Comprehensive Income (Loss)

3 unchanged sentences

The Company’s other comprehensive

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

loss for the three months ended March 31, 2023 and for the year ended December 31, 2022 was comprised of foreign

currency translation adjustments.

Revenue Recognition

1 unchanged sentence

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

The core principle of ASC 606 is that

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

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

The Company’s updated accounting

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

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

These five elements, as applied to each of the Company’s

revenue category, is summarized below:

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

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

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 upon the delivery of equipment

to the customer.

Service sales – revenue is recognized based on the service

having been provided and the agreed upon performance obligation has been completed to the customer.

Revenue from our project construction is recognized

7 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 incurred.

Research and development costs are expensed as

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

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;

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;

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

from that used in the preceding period;

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

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

Commitments and Contingencies

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

Gain on Bargain Purchase

A bargain purchase gain is recognized when the

net assets acquired in a business combination have a higher fair value than the consideration paid.

Income Tax Provision

9 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 September 30, 2022 and December 31, 2021.

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

There was no material deferred tax asset or liabilities as of March 31, 2023 and December 31, 2022.

As of March 31, 2023 and December 31, 2022, 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

Nine Months Ended September 30,

Three Months Ended March 31,

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 period to the current year’s presentation.

Such reclassifications

have no effect on net income as previously reported.

Foreign Currency Translation and Transactions

The reporting and functional currency of Focus is

The reporting and functional currency of Focus

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,

For financial reporting purposes, the financial

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

currency, USD.

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

9 unchanged sentences

Schedule Of Intercompany Foreign Currency Balances

Average Rate for the Nine Months Ended

September 30,

Average Rate for the Three Months Ended

China Yuan (RMB)

1 unchanged sentence

Exchange Rate at

September 30, 2022

March 31, 2023

December 31, 2022

3 unchanged sentences

In June 2016, the FASB issued ASU No.

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.

(Topic 326), Financial Instruments – Credit Losses:

Measurement of Credit Losses on Financial Instruments which amends the current

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

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

and supportable forecasts.

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

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

In November 2019, the FASB issued

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

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

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

The Company believes the adoption

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

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

believes the adoption of ASU No.

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

Management does not believe that any recently 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 September 30, 2022 and December 31, 2021, inventory

At March 31, 2023 and December 31, 2022, inventory

consisted of the following:

Schedule of Inventory

September 30, 2022

March 31, 2023

December 31, 2022

1 unchanged sentence

Note 5 – Deposits

Deposit balance as of September 30, 2022 amounted

Deposit balance as of March 31, 2023 amounted

to $ 24,823 for lease agreement and utility deposit and third-party payroll service deposit.

2 unchanged sentences

Note 6 – Property and Equipment

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

At March 31, 2023 and December 31, 2022, property and equipment consisted

of the following:

Schedule of property and equipment

September 30, 2022

March 31, 2023

December 31, 2022

3 unchanged sentences

Property and equipment, net

Depreciation expense for the nine months ended September

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

Depreciation expense for the three months

ended March 31, 2023 and 2022 amounted to $ 42,041 and $ 40,165 , respectively.

Note 7 – Intangible Assets, net

The following table presents intangible assets balance at March 31,

2023 and December 31, 2022:

Schedule of intangible assets

March 31, 2023

December 31, 2022

Customer Relationship

Less accumulated amortization

Intangible assets, net of amortization

Impairment loss

Intangible assets, net

Note 8 – Related Party Transactions

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.

Revenue generated from Vitashower Corp., a company

owned by the Chief Executive Officer’s wife, amounted to $ 0 and $ 31,542 for the three months ended March 31, 2023 and 2022, respectively.

Account receivable balance due from Vitashower Corp.

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

Purchases generated from Vitashower Corp.

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.

amounted to $ 0 and $ 34,507 as of March 31, 2023 and December 31, 2022, respectively.

Note 9 – Business Concentration and Risks

Major customers

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.

Four customers accounted for 15 % of the total

accounts receivable as of March 31, 2023 and four customers accounted for 11 % of the total accounts receivable as of December

These four customers accounted for 59 % of the total revenue for the three months ended March 31, 2023 and four customers accounted

for 67 % of total revenue for the three months ended March 31, 2022.

Major vendors

One vendor, Tianjin Guanglee, accounted for 0 %

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.

No major vendor accounted more than 10 % of total

purchase during three months ended March 31, 2023.

One vendor, Tianjin Guanglee, accounted for 0 % of total accounts payable at March

31, 2022 and this vendor accounted 30 % of total purchases during the three months ended March 31, 2022.

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 10 – Lease

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 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 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 Company recorded its operating lease

expense of $ 46,080 and $ 75,597 for

the three months ended March 31, 2023 and 2022, respectively.

This is included in general and administrative expenses.

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%.

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

This lease was terminated

on February 22, 2023.

On January 16, 2023, Focus Universal (Shenzhen)

Technology Co.

LTD entered into a thirty-six month commercial lease with a third party for an approximately 2,017 square foot office space.

The lease commenced on February 1, 2023 and will end on January 31, 2026.

The monthly rent is RMB29,974 (approximately $4,365) with approximately

3 unchanged sentences

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

On February 22, 2023, Focus Universal (Shenzhen)

Technology Co.

LTD entered into a thirty-six month commercial lease with a third party for an approximately 3,449 square foot office space.

The lease commenced on March 31, 2023 and will end on February 28, 2026.

The monthly rent is RMB35,246 (approximately $5,133) 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 March 31, 2023 and December 31, 2022, operating lease right-of use assets and lease

liabilities were as follows:

Schedule of operating Right-of-use asset and liability

September 30, 2022

March 31, 2023

December 31, 2022

4 unchanged sentences

Schedule Lease term and discount rate

September 30, 2022

March 31, 2023

December 31, 2022

13 unchanged sentences

Present value of future minimum lease payments

Note 10 – Loans

Paycheck Protection Program

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

September 30, 2022

December 31, 2021

current portion

Long term portion

Interest expense incurred from the loans amounted

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 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”), 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 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.

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 three months ended March 31, 2023,

the Company issued 21,589,837

shares of common stock in a one-for-two dividend to its shareholders.

On January 17, 2023, the Company retired 400,000

shares from prior stock repurchase agreement as announced in a current report on October 7, 2022.

On February 13, 2023, the Company issued 41,500

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

On February 21, 2023, the Company issued 7,238

shares to one of the prior board members who exercised his options with cashless exercise.

On March 23, 2023, the Company issued 21,589,837

stock dividends to its shareholders for a stock dividend of one share of common stock for every two shares of common stock issued

and outstanding.

During the three months’ ended March 31, 2022,

the Company did no t

issue any shares of common stock.

As of March 31, 2023 and December 31, 2022, the

Company had 64,769,490 shares and 43,530,915 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

The Company entered into agreements with third

party consultants for financing and management consulting.

The Company has incurred consulting service fees not paid in cash

amounting to $ 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:

Schedule of assumptions

August 30, 2021 (Initial

Risk-free interest rate

Expected term

Expected volatility

Expected dividend yield

Fair value of units (using Black-Scholes)

This Warrant Agreement allowed for cashless

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

number of warrants being exercisable.

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

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

The shares 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.

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.

The private 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 was paid on March 31, 2023.

The Company terminated those 400,000

shares on January 17, 2023.

As of March 31, 2023 and December 31, 2022, the Company has 0 and 400,000 shares of Treasury

stock outstanding, respectively.

Employee compensation

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.

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 were granted and vested on February 11, 2022.

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

were 41,500 shares granted as of February 13, 2023.

The fair value of above employee compensation was $ 136,904 as of March 31, 2023.

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 awarded 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.

In November 2022, the Company entered into an amendment agreement to amend the performance metrics.

As of March 31,

2023, 2,500 shares have vested.

In October 2022, the Company entered into an

employee agreement with VP of the Company, pursuant to which the Company awarded a 10,000-share

bonus consisting of shares of $0.001 par value voting common stock, which will be granted in 2,500 shares every quarter.

As of March 31, 2023, 2,500 shares have vested.

During the three months ended March 31, 2023 and

2022, the total employee compensation amount for all employees in the company, was $ 149,404 and $ 656,370 , respectively.

Stock options

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

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

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

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

granted 45,000 options to purchase shares at $ 3.80 per share.

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

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

granted 22,500 options to purchase shares at $ 2.00 per share.

On December 31, 2021, each member of the Board

was granted 22,500 options to purchase shares at $ 5.91 per share.

On December 31, 2022, each member of the Board

was granted 22,500 options to purchase shares at $ 4.27 per share.

As of March 31, 2023, there were 615,061 options

granted, 423,457 options vested, 116,620 options unvested, and 536,250 outstanding stock options.

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

For the three months ended March 31, 2023 and

2022, the Company’s stock option compensation expenses amounted to $ 133,403 and $ 228,375 , respectively.

The fair value of the stock options listed above was

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

Schedule of option activity

September 30, 2022

September 30, 2021

The fair value of the stock options listed above

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

Schedule of fair value of stock option

March 31, 2023

December 31, 2022

Risk-free interest rate

0.93 – 1.52 %

Expected life of the options

Expected volatility

122.93 – 148.18 %

Expected dividend yield

The following is a summary of the option activity

from December 31, 2021 to September 30, 2022:

from December 31, 2022 to March 31, 2023:

Schedule of options activity

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Forfeited or expired

Outstanding at September 30, 2022

Vested as of September 30, 2022

Exercisable at September 30, 2022

Outstanding at March 31, 2023

Vested as of March 31, 2023

Exercisable at March 31, 2023

Note 12 – Segment reporting

The Company consists of three types of operations.

(1) Focus Universal, Inc.

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

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

units which spread across all functional categories.

(2) Perfecular Inc.

(“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

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

IoT Installation

Revenue – related party

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( 1,240,974 )

( 4,103,175 )

Other Income (Expense):

Interest income (expense), net

Gain on bargain purchase

Unrealized loss on marketable equity securities

Realized loss on marketable equity securities

Rental income

Other income (expense), net

5 unchanged sentences

$ ( 1,114,243 )

Segment Reporting

Three Months Ended March 31, 2022

IoT Installation

Revenue – related party

Total revenue

Cost of revenue

Operating Expenses

Selling expense

Compensation – officers and directors

Research and development

Professional fees

General and administrative

Total Cost and Operating Expenses

Loss from Operations

( 1,509,464 )

( 1,923,861 )

Other Income (Expense):

Interest income (expense), net

Gain on bargain purchase

Unrealized loss on marketable equity securities

Realized loss on marketable equity securities

Rental income

Other income (expense), net

Total other income (expense)

Loss before income taxes

( 1,451,781 )

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.

( 1,868,930 )

$ ( 1,451,781 )

$ ( 355,563 )

$ ( 1,868,930 )

Note 13 – Business Combination

On January 6, 2023, the Company completed

the acquisition of 100 %

of AT Tech for a purchase price of $1 in cash.

The Company’s intangible assets were acquired from AT Tech due to customer

relationship.

Amortization on the intangible assets was fully amortized during the three months ended March 31, 2023.

purchase gain is recognized when the net assets acquired in a business combination have a higher fair value than the consideration

The result of AT Tech’s operations has been included in the condensed consolidated financial statement since that

The following table summarizes the purchase consideration

and fair value of the assets acquired and liabilities assumed as of January 6, 2023:

Fair value of assets acquired and liabilities assumed

Accounts receivable

Total assets acquired

Accounts payable

Total liabilities assumed

Purchase Price

Total bargain purchase gain

As a result of above information that existed

as of the acquisition date, the Company recorded a bargain purchase gain of $ 61,747 during the three months ended March 31, 2023.

The excess of the aggregate net fair value of

assets acquired and liabilities assumed over the fair value of consideration transferred as the purchase price has been recorded as a

bargain purchase gain.

Upon completion of the valuation of the acquired assets, the Company concluded that recording a bargain

purchase gain with respect to AT Tech was appropriate and required under U.S.

The Company believes the seller was motivated to

complete the transaction as part of an overall repositioning of its business.

Note 14 – Subsequent Events

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

On April 5, 2023, the board of directors of the

Company approved the Company’s establishment of a share repurchase program (the “Repurchase Program”) authorizing the

Company to purchase up to $7 million of the Company’s common stock.

Pursuant to the Repurchase Program, the Company may, from time

to time, repurchase its common stock in the open market, in privately negotiated transactions or by other means, including through the

use of trading plans intended to qualify under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, in accordance with applicable

securities laws and other restrictions.

The timing and total amount of any repurchases made under the Repurchase Program will depend upon

business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations.

authorization expires on April 1, 2025, and may be suspended or discontinued at any time, and does not obligate the company to acquire

any amount of common stock.

The Company has evaluated all subsequent events

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

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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