What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-16 compared with 2022-11-15 · 332 added, 402 removed, 213 unchanged (78% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF

MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN

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 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

(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 through:

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

(2) creating a

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

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

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

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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,

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.

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 months ended March 31,

2023 and 2022, we generated significant amount of our revenue from sales of a broad selection of agricultural sensors and measurement

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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.

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.

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.

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 plan 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.

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

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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.

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, with 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.

within hydroponics, 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 receive new versions into our US headquarters for management approval in

November 2022.

In summary, our entire smart home and hydroponic

IoT line 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, and/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:

through Hydrofarm.

We expect to have upgraded versions of certain of these products to re-introduce new versions after the older version

are discontinued:

Specifically, we sell the following products through

Fan speed adjuster device .

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.

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.

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

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

The other filter is designed to be used with fans

from 0-6000 C.F.M.

We sell two types

of carbon filter devices.

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.

The other filter is designed to be used with fans from 0-6000 C.F.M.

HEPA filtration device.

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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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technology, artificial intelligence, PLC, and sensor networking into a single platform.

The result of such integration is a smaller, cheaper

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.

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.

We believe the result of such integration is a

smaller, cheaper, 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 prototype Ubiquitor is compatible with standard desktop

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instrument control and operation.

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.

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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During the development phase,

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

we use 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.

Historically, the primary design goal of the power

line network was electric power distribution.

The power line network was not originally designed to function as a communication channel.

Consequently, while PLC has been around for many years, the harsh electrical noise present on power lines and variations in equipment

and standards make communications over the power grid difficult and present several challenges for data transfer.

Signals propagating

along the power line are subjected to substantial amounts of noise, attenuation, and distortion.

PLC is susceptible to noise from devices

linked to the power supply infrastructure.

Because of these factors, previous attempts at implementing PLC technology resulted in power

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.

According to our internal testing, our ultra-narrowband

PLC technology can send and receive data without the customary interference that occurs in standard office and residential environments,

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

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

We have completed the development of our 4Mbps PLC modules and the printed circuit board layout.

These modules will be used for

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

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

telephones, or even Bluetooth devices at home.

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

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

link between transmitter and receiver.

Thus, we believe that our proprietary ultra-narrow band PLC technology will offer a promising alternative

to wireless networks and provide the backbone communication infrastructure for IoT devices.

Our patented PLC technology uses an ultra-narrowband

spectrum channel of less than 1 KHz to establish a long-distance link between transmitter and receiver.

Thus, we believe that our proprietary

ultra-narrowband PLC technology will offer a promising alternative to wireless networks and provide the backbone communication infrastructure

for IoT devices.

The primary design goal of the power line network

is electric power distribution, not data transmission.

The harsh electrical noise present on power lines and variations in equipment and

standards make data transmission over the power grid difficult.

These technological challenges have impeded, or even halted, progression

of PLC technology.

We continue to build upon our existing research

and development with the intention of inventing an ultra-narrowband PLC technology that attempts to tackle two challenges:

1) overcoming

interference caused by electronic noise on the power line system;

and 2) bandwidth.

Preliminary internal testing suggests that we have

achieved significant noise rejection and interference suppression.

In our preliminary internal testing, we have been able to increase

bandwidth to 4 megabits per second with the potential for more, while simultaneously effectively dealing with electrical noise and interference.

Based on the promising results of our internal testing, we have begun designing a proprietary PLC microchip and have set an intended

launch date for 2023.

We believe that because residential and commercial

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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 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:

On December 23, 2021, Focus Universal (Shenzhen)

Technology Co.

LTD was founded as a mainland China office for manufacturing procurement expertise and support research and development

Focus Universal (Shenzhen) Technology Co.

LTD is designed to function as a branch office accessing high level ability to source

products and build relationships with manufacturers in the region and as a lower cost form of support research and development as engineers

are more plentiful in the region.

This last quarter of 2022, this office has continued to grow to double digit headcount and has also

begun to handle other online and simple phone marketing and marketing materials production activities, provided a cost and quality benefit

exists at the time.

Research and Development Efforts of 5G Cellular

Just like our ultra-narrowband technology can

be used to reduce noise in powerline communication technology, our internal research suggests that our ultra-narrowband technology can

be leveraged to create a type of 5G wireless communication technology that can achieve both low band 5G coverage and an estimated 1 Gbps

high band speed.

We employ an ultra-narrow spectrum channel (<1KHz) to establish an ultra-long-distance link between the 5G base station

and the receiver which reduces noise and interference entering the bandwidth.

For a description of the ultra-narrowband technology

and the 5G applications, see “Part I - Item 1.

Business, Section 2.

“Creating a faster 5G cellular technology by using ultra-narrowband

technology” in our 10-K Annual Report filed with the SEC on March 31, 2023.

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.

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.

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 three 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.

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.

Hach developed and launched the SC1000 Multi-parameter

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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 consumption.

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

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

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.

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.

IoT Installation Industry

There are several companies that compete with

AVX in smart home installations, including Vivint Smart Home, Crestron and Control4.

However, we believe we can distinguish ourselves

from our competitors by offering a substantially lower price.

An installation by Crestron ranges between $20,000 and $100,000 and by Control4

between $20,000 and $40,000.

The cheapest competitor we can identify in this sector is Vivint Smart Home, which costs less than $5,000

however, we understand that the Vivint Smart Home focuses on security systems only and that users have no other smart applications,

which our smart home product line would include.

Air Filtration Systems and Meter Products

The air filtration system and meter products industry

is a niche industry.

Air purification methods are an effective way to control contaminants and improve indoor air quality and as a result,

many national and local governments overseeing indoor air quality and other emissions are enacting stricter workforce health and safety

regulations in this area, which drives demand.

Market Potential

We believe that wireless universal smart technology

will play a critical role for traditional instrument manufacturers, as it is too expensive and difficult to develop for medium or smaller

The cost factor is the first consideration when deciding whether a company wants to develop smart wireless technologies and

implement them in their products or use them in their field testing.

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

with smaller academic laboratories that are sensitive to price.

We believe universal wireless smart technology

will play a critical role for traditional instrument manufacturers, as currently simply the undertaking of an IoT project is too expensive

and difficult to develop for medium or smaller companies and carries 75% failure rate according to Cisco Systems 1 .

factor is the first consideration when deciding whether a company wants to develop smart wireless technologies and implement them in

their products or use them in their field testing.

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

laboratories that are sensitive to price.

Regarding the larger IoT industry statistics, overall enterprise IoT spending increased to

$201 Billion in 2022, an increase of 21.5%.

The outlook for growth in 2023 is 18.5% from this large base of enterprise spending 2 .

More specifically, the IoT sensors market is projected to reach $26 Billion by 2026 from $11.1 Billion in 2022 3 .

The IoT marketplace

size assessments usually include the hardware components and the software components which often contain a Software as a Service (SaaS)

Additionally, the rising need for reliable high bandwidth communication for IoT devices is expected to rise to $664.75 Billion

in 2028, spearheaded by the currently predominant services in the 5G category.

We would also expect this market to grow with the addition

of new categories of services delivering reliable high bandwidth communication for IoT devices and would cannibalize and expand the existing

services where the new services proved to be more effective and efficient.

We also expect our recent growth within our

IoT Installation Services segment and acquisition of AT Tech Systems to bolster and complement our AVX Design and Integration and

all other related installation businesses of these IoT products.

The number of new contracts we have signed thus far in a limited

amount of time through the segment is 13 with an average value of $13,355 and a total collection value of $485,618 in signed

contracts to date, of which we have already collected $233,801.

Additionally, thus far, we have an aggregate $1,041,897 in

contracts agreed in principle, of which we expect to be signed and deposits paid.

This is compared to our highest AVX revenue for

calendar year of $817,233 in 2019, $705,877 for 2020, $252,958 for 2021, and $260,871 for 2022 for the entire calendar year.

statistics regarding the IoT installation sectors are difficult to aggregate given that the work is often are pieced off into

various contractor service categories, the residential custom installation market ranges from $5.7B to $12.1B 5 , and we

would expect the commercial and industrial installation markets to be larger than the residential for IoT devices.

Results of Operations

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

months ended September 30, 2021

For the three months ended March 31, 2023 compared to the three

months ended March 31, 2022

Revenue, cost of revenue and gross profit

Our consolidated gross revenue for the three months

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 September 30, 2022 decreased $574,123 due to sales decrease from major customer of Perfecular

and AVX Design & Integration Inc.

being unable to generate more service work or develop a big project of high competitive environment

in Los Angeles area.

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

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

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

Compensation – officers and directors

Research and development

Professional fees

General and administrative

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

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

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

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 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 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 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 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.

ended March 31, 2023 and 2022 was $236,095 and $157,167 respectively, which included revenue from related parties of $0 and $31,542, respectively.

Revenue for the three months ended March 31, 2023 increased $78,928 due to sales increase from new acquisition, AT Tech.

This increase

of revenue was mainly a result of the increase of IoT Installation Services being bolstered by additional resources such as increased

Cost of revenue for the three months ended March

31, 2023 was $180,744, compared to $143,523 for the three months ended March 31, 2022.

While the overall cost of revenue increased, as

a percent of revenue, costs went down as a result higher margin contracts for IoT Installation Services being signed.

In addition to the

increase in revenue, gross profit increase to $55,351 compared to $13,644 three months ended March 31, 2023 and 2022, respectively.

________________________

1 Cisco Systems, Connected Futures, Executive Business

Insights, May 2017, The Journey to IOT Value, Challenges, Breakthroughs, and Best Practices, https://www.slideshare.net/CiscoBusinessInsights/journey-to-iot-value-76163389,

https://newsroom.cisco.com/c/r/newsroom/en/us/a/y2017/m05/cisco-survey-reveals-close-to-three-fourths-of-iot-projects-are-failing.html

2 IoT Analytics, Market Insights

for the Internet of Things, February 7, 2023, Global IoT market size to grow 19% in 2023—IoT shows resilience despite economic

downturn, https://iot-analytics.com/iot-market-size/

3 Markets and Markets, IoT

Sensors Market by Sensor Type, Network Technology, Vertical, Application, and Geography – Global Forecast -2026, https://www.marketsandmarkets.com/Market-Reports/sensors-iot-market-26520972.html

4 Cision PRNewswire, Research

and Markets, Global $664.75 Billion 5G Services Markets to 2028:

Rising Need for High Bandwidth to Provide Reliable Communication to

IoT Devices is Expected to Boost Overall Market Growth, https://www.prnewswire.com/news-releases/global-664-75-billion-5g-services-markets-to-2028-rising-need-for-high-bandwidth-to-provide-

reliable-communication-to-iot-devices-is-expected-to-boost-overall-market-growth-301432173.html

How Big is the Custom Installation Market?, February

5, 2018, https://www.cepro.com/news/how_big_is_custom_installation_market/

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

The major components of our cost and operating

expenses for the three months ended March 31, 2023 and 2022 are outlined in the table below:

For the three months ended March 31, 2023

For the three months ended March 31, 2022

Selling expense

4 unchanged sentences

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.

Selling expenses for the three months ended March

31, 2023 was $11,859, compared to $38,339 for the three months ended March 31, 2022.

Selling expense incurred was mainly from third party

advertising fees and marketing related fee.

The decrease of selling expense was due to a decrease in advertising fees.

Compensation – officers and directors were

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

The increase was due to granting equity compensation.

$307,534 and $325,665 for the three months ended March 31, 2023 and 2022, respectively.

Research and development costs were $276,481 and

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 $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 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.

$561,744 for the three months ended March 31, 2023 and 2022, respectively.

The decrease was due to a decrease in number of

research and development employee headcount in the Ontario, California headquarters.

Professional fees were $257,399 during the three

months ended March 31, 2023, compared to $360,866 during the three months ended March 31, 2022.

The decrease in these professional fees

compared to the prior period was due to a decrease in professional legal fees.

General and administrative expenses of $443,052

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.

incurred during the three months ended March 31, 2023 primarily consisted of insurance expense of $107,473, amortization expense of $28,741,

payroll tax of $73,067, administrative salaries of $71,956, depreciation expense of $41,798 and rent of $46,080.

General and administrative

expenses of $650,891 incurred during the three months ended March 31, 2022 primarily consisted of employee compensation of $193,930, insurance

expense of $176,915, administrative salaries of $137,162, rent of $75,597 and depreciation expense of $40,163.

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

Other income of $210,431 incurred during the three

months ended March 31, 2023 primarily consisted of interest income of $14,436, gain on bargain purchase of $61,747, unrealized gain on

marketable equity securities of $32,570, realized loss on marketable equity securities of $14,901, rental income of $39,952 and other

expense of $7,073.

Other expenses of $54,931 incurred during the three months ended March 31, 2022 primarily consisted of interest expense

of $6, rental income of $46,372 and other income of $8,565.

During the three months ended March 31, 2023 and

2022, we incurred net losses of $1,114,243 and $1,868,930 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 nine months ended September 30, 2022

For the nine months ended September 30, 2021

For the three months ended March 31, 2023

For the three months ended March 31, 2022

Net cash used in operating activities

$ (2,435,157 )

$ (1,496,812 )

Net cash used in investing activities

Net cash provided by financing activities

Net cash provided by (used in) investing activities

Net cash used in financing activities

Effect of exchange rate

3 unchanged sentences

Our net cash outflows from operating activities

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

of $838,535 for the three months ended March 31, 2023 was primarily the result of our net loss of $1,114,243 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 $8,832, a decrease in accounts receivable – related party of $34,507, a decrease in inventories of $13,109,

an increase in prepaid expense of $80,511, a decrease in deposit of $8,617, an increase in operating lease right-of-use asset of $16,075,

a decrease in accounts payable and accrued liabilities of $20,011, an increase in customer deposit of $98,838, and a decrease in lease

liabilities of $50,885.

Non-cash expense included add-backs of $5,114 in bad debt expense, $42,041 in depreciation expense, $28,741 in

amortization of intangible assets, $14,901 in realized loss on marketable securities, $149,404 in stock-based compensation - shares, and

$133,403 in stock option compensation, reduces of $32,570 in unrealized gain on marketable equity securities and $61,747 in gain on bargain

Our net cash outflows from operating activities

of $902,283 for the three months ended March 31, 2022 was primarily the result of our net loss of $1,868,930 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 $96,258, an increase in accounts receivable – related party of $70,816, an increase in inventories of

$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 $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.

$5,067, a decrease in other receivable of $13,057, a decrease in prepaid expense of $148,616, an increase in deposit of $35,142, a decrease

in operating lease right-of-use asset of $150,623, an increase in accounts payable and accrued liabilities of $38,000, a decrease in other

current liabilities of $17,135, a decrease in lease liabilities of $123,951, an increase in other liabilities of $14,736.

Non-cash expense

included add-backs of $42,080 in bad debt expense, $25,006 in reduction of inventory fair value adjustments, $40,165 in depreciation expense,

$656,370 in stock-based compensation - shares, $8,000 in stock-based compensation - services, and $228,375 in stock option compensation.

We expect that cash flows from operating activities

3 unchanged sentences

Cash Flows from Investing Activities

For the nine months ended September 30, 2022 we

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

For the three months ended March 31, 2023, we

had cash inflow from investing activities of $61,824.

That was primarily the result from the purchase of property and equipment of $9,920,

purchase of marketable securities of $17,690, and proceeds from sales of marketable securities of $89,434.

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.

For the three months ended

March 31, 2022 we had cash outflow from investing activities of $31,470 from the purchase of property and equipment.

Cash Flows from Financing Activities

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

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.

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 three months ended March 31, 2023, we

had cash outflows of $1,000,000 due to purchase of treasury stock.

There were no financing activities for the three months

ended March 31, 2022.

Off-Balance Sheet Arrangements

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

As of March 31, 2023, we did not have any off-balance-sheet arrangements,

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

1 unchanged sentence

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.

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