What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-04-01 compared with 2023-03-31 · 518 added, 537 removed, 684 unchanged (61% of the section changed)

4 unchanged sentences

Index to the Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB No.

Report of Independent Registered

Public Accounting Firm (PCAOB No.

Report of Independent Registered Public Accounting Firm (PCAOB

Consolidated Balance Sheets as of December 31, 2023 and 2022

4 unchanged sentences

Report of Independent Registered Public Accounting

To the shareholders and the board of directors

of Focus Universal, Inc.

To the Stockholders and Board of Directors

Focus Universal Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheet of Focus Universal, Inc.

(the “Company”) as of December 31, 2022 the related consolidated statement

of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred

to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of December 31, 2022 and the results of its operations and its cash flows for the year then

ended, in conformity with accounting principles generally accepted in the United States.

We have audited the accompanying consolidated balance

sheets of Focus Universal Inc.

and Subsidiaries (the “Company”) as of December 31, 2023, and the related statements of operations,

stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company

as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles

generally accepted in the United States of America.

The accompanying consolidated

financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated

financial statements, the Company has suffered recurring losses from operations and has experienced negative cash flows from operating

activities that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these

matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the

outcome of this uncertainty.

Basis for Opinion

10 unchanged sentences

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess

7 unchanged sentences

The critical audit matter

communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to

be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter

in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,

providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or

required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated

financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the

critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition — identification

3 unchanged sentences

to recognize revenue.

Management recognizes revenue upon transfer of control of promised goods or services to customers in

an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.

The Company’s

revenue is divided into two sources, with one source being from project construction which is recognized over time using the percentage-of-completion

method under the cost approach.

Management is required to estimate the percentage of completion when determining the amount and timing

of revenue recognition.

Management recognizes revenue upon transfer of control of promised goods or services to customers in an amount that

reflects the consideration the Company expects to receive in exchange for those goods or services.

The Company’s revenue is divided

into two sources, with one source being from project construction which is recognized over time using the percentage-of-completion method

under the cost approach.

Management is required to estimate the percentage of completion when determining the amount and timing of revenue

The principal considerations

5 unchanged sentences

of management’s estimates.

Our audit procedures included, among others, understanding

of controls relating to management’s revenue recognition process, examining transaction related documents, confirming revenues and

outstanding receivables at the balance sheet date with a sample of the project construction customers, and testing collections subsequent

to the balance sheet date.

/s/ Reliant CPA PC

Reliant CPA PC

Our audit procedures

included, among others, understanding the process relating to management’s revenue recognition process, examining transaction related

documents, testing of calculated percentage of completion of recorded revenue, and testing of receivables at balance sheet date including

testing of subsequent collections.

We have served as the Company’s auditor

& Company, P.A.

April 1, 2024

Los Angeles, CA.

Report of Independent Registered Public Accounting

4 unchanged sentences

balance sheet of Focus Universal, Inc.

(the “Company”) as of December 31, 2021, the related statement of operations, stockholders’

equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally

accepted in the United States.

Substantial Doubt about the Company’s

Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that

the Company will continue as a going concern.

As discussed in Note 2 to the financial statements, the Company’s significant operating

losses raise substantial doubt about its ability to continue as a going concern.

The financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

(the “Company”) as of December 31, 2022 the related consolidated statement of operations,

stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company

as of December 31, 2022 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles

generally accepted in the United States.

Basis for Opinion

48 unchanged sentences

to the balance sheet date.

/s/ BF Borgers CPA PC

BF Borgers CPA PC

/s/ Reliant CPA PC

Reliant CPA PC

We have served as the Company’s auditor

since 2017 to 2022.

Newport Beach, CA

March 31, 2023

7 unchanged sentences

Marketable securities

Deposit - current portion

Total Current Assets

5 unchanged sentences

Treasury stock payable

Related party loan

Other current liabilities

Loan, current portion

Lease liability, current portion

2 unchanged sentences

Lease liability, less current portion

Loan, less current portion

Other liability

5 unchanged sentences

64,771,817 and 65,296,383 shares issued and outstanding as of December 31, 2023 and 2022, respectively

Treasury stock ( 400,000

held at December 31, 2022 and 2021, respectively)

Treasury stock ( 1,163,040 and 600,000 shares held at December 31, 2023 and 2022, respectively)

( 2,000,000 )

Additional paid-in capital

Shares to be issued, common shares

Shares to be issued, common shares ( 41,643 and 16,875 shares at December 31, 2023

and 2022, respectively)

Accumulated deficit

8 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31,

For the years ended December 31,

Revenue - related party

7 unchanged sentences

General and administrative

Total Cost and Operating Expense

Total Operating Expense

Loss from Operations

2 unchanged sentences

Other Income (Expense):

Interest income (expense), net

Interest income, net

Interest expense - related party

Forgiveness of debt

Change in fair value of warrant liability

( 1,284,780 )

Gain on settlement of derivative liability

Unrealized loss on marketable equity securities

Unrealized gain (loss) on marketable equity securities

Realized loss on marketable equity securities

Rental income

Total other income (expense)

Loss before income taxes

( 4,926,937 )

( 3,220,977 )

Income tax expense

Total other income

$ ( 4,718,142 )

15 unchanged sentences

Treasury stock

Shares to be issued

Additional Paid-In

Accumulated Other

Comprehensive

Stockholders'

Total Stockholders'

Balance - December 31, 2021*

$ ( 12,937,091 )

Issuance of common stock

Stock based compensation - options

Common stock issued for services

Stock based compensation - shares

Purchase of treasury stock

( 2,000,000 )

Common stock issued for this period services

Common stock issued for prior services

Shares issued for cashless exercise of warrants

( 1,776,044 )

Other comprehensive loss

3 unchanged sentences

$ ( 2,000,000 )

$ ( 17,864,028 )

Stock based compensation - options

2 unchanged sentences

Purchase of treasury stock

( 2,000,000 )

Common stock issued for current services

Common stock issued for prior services

Shares issued for cashless exercise of warrants

Retirement of treasury stock

( 1,999,400 )

Amendment stock purchase agreement – treasury stock

Issued stock dividend

Other comprehensive loss

4 unchanged sentences

$ ( 22,582,170 )

*Retroactively applied to the stock split

The accompanying notes are an integral part

9 unchanged sentences

Depreciation expense

Unrealized loss on marketable equity securities

Unrealized (gain) or loss on marketable equity securities

Realized loss on marketable equity securities

Change in fair value of warrant liability

Gain on settlement of derivative liability

Stock-based compensation - shares

Stock-based compensation - services

Stock based compensation - options

6 unchanged sentences

Accounts payable and accrued liabilities

Accounts payable - related party

Other current liabilities

Customer deposit

Lease liabilities

6 unchanged sentences

Purchase of marketable securities

Proceeds from sales of marketable

Net cash flows used in investing activities

Proceeds from sales of marketable securities

Net cash flows provided by (used in) investing

Cash flows from financing activities:

Proceeds from SBA loan

Repayment on SBA loan

Proceeds from related party loan

Forgiveness of debt

Purchase of treasury stock

( 1,434,048 )

Proceeds from bank loan

Repayment on bank loan

( 1,000,000 )

Forgiveness of debt

Proceeds from IPO, net

Net cash flows provided by (used in) financing

Net cash flows used in financing activities

( 1,158,547 )

2 unchanged sentences

( 3,915,172 )

( 4,335,239 )

Cash beginning of year

3 unchanged sentences

Cash paid for interest

Supplemental disclosure of non-cash financing activities:

Cashless warrant

The accompanying

notes are an integral part of these consolidated financial statements.

Supplemental disclosure of non-cash investing and financing activities:

Right-of-use assets obtained in exchange for operating

lease liabilities

Cashless exercise

The accompanying notes are an integral part

of these consolidated financial statements.

FOCUS UNIVERSAL INC.

3 unchanged sentences

Focus Universal Inc.

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 the Ontario, California, specializing in the development and

commercialization of novel and proprietary universal smart technologies and instruments.

(“Focus”) 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 also a provider of

patented hardware and software design technologies for Internet of Things (IoT) and 5G.

The company has developed five disruptive

patented technology platforms with 26 patents and patents pending in various phases and 8 trademarks pending in various phases to

solve the major problems facing hardware and software design and production within the industry today.

These technologies combined

to have the potential to reduce costs, product development timelines and energy usage while increasing range, speed, efficiency, and

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

is also a provider of patented hardware and software design technologies

for Internet of Things (“IoT”) and 5G.

The company has developed five disruptive patented technology platforms with 26 patents and patents

pending in various phases and 8 trademarks pending in various phases to solve the major problems facing hardware and software design and

production within the industry today.

These technologies combined to have the potential to reduce costs, product development timelines

and energy usage while increasing range, speed, efficiency, and security.

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

1 unchanged sentence

(“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

(“AVX,” also doing business as Smart AVX (“Smart

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

and AT Tech Systems LLC (“AT Tech LLC”).

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 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 market to the hydroponic and controlled agriculture market

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

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, incorporated on June 16, 2000 in the state of California, is an internet

of IoT installation and management company specializing in high performance and easy to use audio/video systems, home theaters, lighting

control, automation and integration.

Services provided by AVX include full integration of houses, apartments, commercial complexes, office

spaces with audio, visual and control systems to fully integrate devices in the low voltage field, specializing in high end residential

smart IoT install projects in areas throughout the Southern California area.

AVX’s services also include partial equipment upgrade

and installation.

AVX also markets and sells our IoT Products, such as high end LED, live wall panel products and cameras, under the Smart

On December 23, 2021, Focus Shenzhen was founded as

a mainland China office for manufacturing procurement expertise and support research and development activities.

Focus Shenzhen 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.

On January 5, 2022, the Company founded a wholly

owned subsidiary named Lusher Bioscientific, Inc.

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.

As of January 6, 2023, AT Tech Systems is a subsidiary of Focus specializing

in commercial and industrial smart IoT install projects in areas throughout the Southern California area.

AT Tech Systems has several

clients from medical/dental facilities and commercial and industrial projects, including several with notable manufacturers and wholesalers,

and provides clients with integrated network, security, and multimedia design solutions and technology systems.

The Company has completed

integration throughout its existing businesses, including key employees serving dual roles with its subsidiaries.

For example, Mr.

Tejeda serves 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.

Note 2 – Summary of Significant Accounting Policies

4 unchanged sentences

LTD, and Lusher Bioscientific.

Focus and Perfecular, collectively “the entities,” were under common

therefore, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

805-50-45, the acquisition of Perfecular was accounted for as a business combination between entities under common control and treated

like a pooling of interest transaction.

On March 15, 2019, Focus entered into a stock purchase agreement with AVX whereby Focus purchased

100% of the outstanding stock of AVX.

On December 23, 2021, Focus established Focus Universal (Shenzhen) Technology Co.

LTD as a wholly

owned subsidiary.

On January 5, 2022, the Company founded a wholly owned subsidiary named Lusher Bioscientific, Inc.

All significant intercompany transactions and balances

have been eliminated.

All significant intercompany

transactions and balances have been eliminated.

Segment Reporting

5 unchanged sentences

of allocating resources and evaluating financial performance.

Accordingly, the Company has determined that it has three operating

and reportable segments.

Accordingly, the Company has determined that it has three operating and

reportable segments.

The Company consists of three types of operations.

(1) Focus and Focus Shenzhen (“Corporate”) involve

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 and Lusher (“Product”) involve wholesale, marketing, and production of universal smart instruments and devices

in the hydroponic and controlled agricultural segments.

(3) AVX (“Installation service”) is an IoT installation and management

company specializing in high performance and easy to use audio/video, home theater, lighting control, automation, and integration.

(1) Focus and Focus Shenzhen collectively operate our “Corporate

and R&D” segment, which involves the non-specific financing, executive expense, operations and investor relations of our public

entity, and the general shared management and costs across the Company’s subsidiaries that spread across all functional categories

and research and development of technology products.

(2) Perfecular, AVX (doing business as and branded under Smart AVX) and Lusher jointly

operate the “IoT Products” segment, which involves the wholesale, marketing, and production of our universal smart instruments

and devices in the hydroponic and controlled agriculture segments and of our smart products into the commercial and home automation sectors.

(3) AVX (exclusive of the smart IoT Products sales under Smart AVX) and AT Tech Systems cooperatively run our “IoT Installation

Services” segment, which handles our IoT installation and management business specializing in high performance and easy to use audio/video

systems, home theaters, lighting control, automation, and integration.

Asset information by operating segment is not

12 unchanged sentences

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

1 unchanged sentence

Significant estimates in the accompanying financial statements

include the lease term impacting right-of use asset and lease liability, useful lives of property and equipment, useful lives of intangible

assets, allowance for doubtful accounts, inventory reserves, debt discounts, valuation of derivatives, and the valuation allowance on

deferred tax assets.

The Company regularly evaluates its estimates and assumptions.

include the useful lives of property and equipment, allowance for doubtful accounts, inventory reserves, accruals for potential liabilities,

assumptions made in valuing stock instruments issued for services, and the valuation allowance on deferred tax assets.

The Company regularly

evaluates its estimates and assumptions.

The Company considers all highly liquid investments

2 unchanged sentences

(FDIC) insurance limit.

As of December 31, 2022 and 2021, approximately $ 3,120,763 and $ 7,464,846 of the Company’s cash was not

insured by the FDIC.

As of December 31, 2023 and 2022, approximately $ 0 and $ 3,120,763 of the Company’s cash was not insured

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

17 unchanged sentences

loss by investing its cash with high credit quality financial institutions.

Inventory consists primarily of parts and

finished goods and is valued at the lower of the inventory’s cost or net realizable value under the first-in-first-out method.

Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if

Inventory allowances are recorded for obsolete or slow-moving inventory based on assumptions about future demand and

marketability of products, the impact of new product introductions and specific identification of items, such as discontinued

These estimates could vary significantly from actual requirements, for example, if future economic conditions, customer

inventory levels or competitive conditions differ from expectations.

The Company regularly reviews the value of inventory based on

historical usage and estimated future usage.

If estimated realized value of our inventory is less than cost, we make provisions in

order to reduce the carrying value to its estimated market value.

As of December 31, 2022 and 2021, inventory fair value net

realizable amounted to $ 41,741 and $ 68,940 ,

respectively.

Marketable Securities

Inventory consists primarily of parts and finished

goods and is valued at the lower of the inventory’s cost or net realizable value under the first-in-first-out method.

compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower.

allowances are recorded for obsolete or slow-moving inventory based on assumptions about future demand and marketability of products,

the impact of new product introductions and specific identification of items, such as discontinued products.

These estimates could vary

significantly from actual requirements, for example, if future economic conditions, customer inventory levels or competitive conditions

differ from expectations.

The Company regularly reviews the value of inventory based on historical usage and estimated future usage.

estimated realized value of our inventory is less than cost, we make provisions in order to reduce the carrying value to its estimated

market value.

Marketable Equity Securities

The Company invests part of its excess treasury

32 unchanged sentences

for using the cost method.

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

Under this method, shares acquired are recorded 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

33 unchanged sentences

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

The fair value of the warrants was estimated

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

The Company does no t have any outstanding warrants as of December 31, 2022 and 2021,

The fair value of the warrants is estimated

using a Black-Scholes pricing model.

The Company does not have any outstanding warrants as of December 31, 2023 and 2022,

respectively.

Stock Dividends

The Company issued a fifty percent (50%) stock

dividend of the Company’s common stock to its shareholders for a stock dividend of one share of common stock for every two shares

of common stock held.

The Company follows paragraph ASC 505-20-25 in treating its stock dividend as a stock split due to the stock dividend

being greater than 25% of the shares then outstanding.

On March 23, 2023 and April 3, 2023, the Company issued 21,592,164 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.

Company also adheres to paragraph ASC 260-10-55-12, wherein it retroactively adjusted its statement of stockholders’ equity for

all presented periods to incorporate the alteration in capital structure.

The retroactive treatment is based on a fifty percent (50%)

stock dividend of the Company’s common stock to its shareholders on March 23, 2023.

The Company does not capitalize its retained

earnings, and there is no impact to the Company’s overall equity or its total assets.

Fair Value of Financial Instruments

16 unchanged sentences

The following table summarize financial

assets and liabilities measured at fair value on a recurring basis as of December 31, 2022:

assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022:

Schedule of fair value assets and liabilities measured on recurring basis

2 unchanged sentences

Total assets measured at fair value

December 31, 2022

Marketable securities:

Total assets measured at fair value

The carrying amount of the Company’s financial

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

and accrued expenses, other current liabilities, customer deposit, approximate their fair value because of the short maturity of those

assets and liabilities, such as cash, accounts receivable, inventories, other receivable, prepaid expenses, deposit, accounts and accrued

expenses, payable, treasury stock payable, other current liabilities, customer deposit, approximate their fair value because of the short

maturity of those instruments.

Transactions involving related parties cannot

2 unchanged sentences

on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

We believe the related party loan approximates its fair value based on interest rate of the loan.

However, it is not practical to determine the

18 unchanged sentences

Product sales –

revenue is recognized at the time of sale upon the delivery of the equipment to the customer.

Service sales –

revenue is recognized based on the service been provided and the agreed upon performance obligation has been completed to the

revenue is recognized at the time of sale upon the delivery of the equipment to the customer and completion of performance obligation.

Service sales – revenue is recognized based on the service been provided and the agreed upon performance obligation has been completed to the customer.

Revenue from our project construction is recognized

6 unchanged sentences

on actual units produced.

A summary of our revenue by product type for

the fiscal years ended December 31, 2023 and 2022 is as follows:

Schedule of revenue by product type

December 31, 2023

December 31, 2022

IoT Project Construction and Installation Services

Cost of Revenue, excluding depreciation & amortization

4 unchanged sentences

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

Related Parties

The Company follows ASC 850-10 for the identification

of related parties and disclosure of related party transactions.

Pursuant to ASC 850-10-20 the related parties include:

a) affiliates

of the Company;

b) entities for which investments in their equity securities would be required, absent the election of the fair value

option under the Fair Value Option Subsection of ASC 825–10–15, to be accounted for by the equity method by the investing

c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship

of management;

d) principal owners of the Company;

e) management of the Company;

f) other parties with which the Company may deal if one

party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting

parties might be prevented from fully pursuing its own separate interests;

and g) other parties that can significantly influence the management

or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly

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 consolidated financial statements shall include

disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items

in the ordinary course of business.

However, disclosure of transactions that are eliminated in the preparation of consolidated financial

statements is not required in those statements.

The disclosures shall include:

(a) the nature of the relationship(s) involved;

(b) a description

of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income

statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the consolidated

financial statements;

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

The Company follows ASC 450-20 to report accounting

for contingencies.

Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a

loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.

The Company assesses such

contingent liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal

proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived

merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be

sought therein.

If the assessment of a contingency indicates that

it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would

be accrued in the Company’s consolidated financial statements.

If the assessment indicates that a potential material loss contingency

is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an

estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally

not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Management does not believe, based upon

information available at this time that these matters will have a material adverse effect on the Company’s financial position,

results of operations or cash flows.

However, there is no assurance that such matters will not materially and adversely affect the Company’s

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

Income Tax Provision

50 unchanged sentences

to users, such as through filing them on EDGAR.

Reclassification

Certain reclassifications have been made to the

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

Such reclassifications have no effect on net

income as previously reported.

Foreign Currency Translation and Transactions

9 unchanged sentences

Revenue and expenses are translated using average exchange rates prevailing during each reporting period.

Stockholders’

equity is translated at historical exchange rates.

Adjustments resulting from the translation are recorded as a separate component of

accumulated other comprehensive loss in stockholders’ equity.

Stockholders’ equity

is translated at historical exchange rates.

Adjustments resulting from the translation are recorded as a separate component of accumulated

other comprehensive loss in stockholders’ equity.

denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing

3 unchanged sentences

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

Schedule Of Intercompany Foreign Currency Balances

of exchange rates foreign currency

Average Rate for the Year Ended

6 unchanged sentences

United States Dollar ($)

Going Concern

The Company has assessed its ability to continue as

a going concern for a period of one year from the date of the issuance of these unconsolidated financial statements.

The Company has a

net loss of $ 4,718,142 and $ 4,926,937 for the years ended December 31, 2023 and 2022, respectively.

In addition, the Company had an accumulated

deficit of $ 22,582,170 and $ 17,864,028 as of December 31, 2023 and 2022, respectively, and negative cash flow from operating activities

of $ 3,528,762 and $ 2,957,983 for the years ended December 31, 2023 and 2022, respectively.

Substantial doubt about the Company’s

ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable

that the Company will be unable to meet its obligations as they become due within one year from the financial statement issuance date.

The accompanying consolidated financial statements have been prepared in conformity with U.S.

GAAP, which contemplate continuation of

the Company as a going concern.

The Company currently suffered recurring loss from operations, generated negative cash flow from operating

activities, has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover

operating costs over an extended period of time.

These conditions raise substantial doubt as to its ability to continue as a going concern.

These unaudited condensed consolidated financial statements do not include adjustments relating to the recoverability and classification

of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue

as a going concern.

At December 31, 2023, the Company had cash and cash

equivalents, and short-term investments, in the amount of $ 464,989 .

The ability to continue as a going concern is dependent on the Company

attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities

arising from normal business operations when they come due.

Since inception, the Company has funded its operations primarily through

equity and debt financings, and it expects to continue to rely on these sources of capital in the future.

In addition, subsequent to

year end, the Company has entered into an agreement to sell its Land and Buildings which upon completion, will provide additional working

capital to the Company.

No assurance can be given that the sale of the land and building will occur, or any future financing will be

available or, if available, that it will be on terms that are satisfactory to the Company.

Even if the Company is able to obtain additional

financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our

stockholders, in case of equity financing, or grant unfavorable terms in future licensing agreements.

Note 3 – Recent Accounting Pronouncement

In June 2016, the FASB issued ASU No.

In June 2016, the FASB issued Accounting

Standards Update (“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 forecasts.

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

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

In November 2019, the FASB issued

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

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

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

believes the adoption of ASU No.

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

Management does not believe that any recently

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 – Inventories

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 ASU No.

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 Securities

and Exchange Commission to fiscal years.

The Company adopted ASU No.

2016-13 on January 1, 2024 which did not have a material

impact on its financial position and results of operations.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic

Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily

through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision

maker and included in each reported measure of a segment’s profit or loss.

The update also requires all annual disclosures about

a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment

to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures.

This standard

will be effective for the Company on January 1, 2024 and interim periods beginning in fiscal year 2025, with early adoption permitted.

The updates required by this standard should be applied retrospectively to all periods presented in the financial statements.

does not expect this standard to have a material impact on its results of operations, financial position or cash flows.

Management does not believe that any other

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 December 31, 2023 and 2022, inventory consisted

4 unchanged sentences

Finished goods

Note 5 – Deposits

Deposit balance as of December 31, 2022, amounted

to $ 33,264 for lease agreement and utility deposit.

Deposit balance as of December 31, 2021, amounted to $ 39,901 for lease agreement and

utility deposit.

Note 5 – Property and Equipment

12 unchanged sentences

Revenue generated from Vitashower Corp., a company

owned by the Chief Executive Officer’s wife, amounted to $ 41,536

for the year ended December 31, 2022 and 2021, respectively.

Account receivable balance due from Vitashower Corp.

as of December 31, 2022 and 2021, respectively.

owned by the Chief Executive Officer’s wife, amounted to $ 0 and $ 41,536 for the years ended December 31, 2023 and 2022, respectively.

The accounts receivable balance due from Vitashower Corp.

amounted to $ 0 and $ 34,507 as of December 31, 2023 and 2022, 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 year ended December 31, 2022 and 2021, respectively.

Compensation for services provided by the President

and Chief Executive Officer for the year ended December 31, 2022 and 2021 amounted to $ 141,020 and $ 124,615 , respectively.

Of subsequent

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

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

of home security equipment by AT Tech and AVX for one of the Company’s directors, amounted to $ 65,543 and $ 8,246 for the year ended

December 31, 2023 and 2022, respectively.

Note 7 – Related Party Loan

On August 3, 2023, the Company submitted a written

consent, and the Board approved a loan amount between $1 million and $5 million.

On September 7, 2023, the Company entered into a loan

agreement with Golden Sunrise Investment LLC in the amount of $ 1,000,000 .

This loan is secured against the Company’s property, which

serves as collateral, with a net book value of $4.5 million pledged.

At the time of entering the loan agreement, Golden Sunrise Investment

LLC was owned by two of the Company’s shareholders who collectively owned approximately 19 % of the Company’s outstanding shares.

The loan has an annual interest rate of 12 % and the principal amount has a due date of September 7, 2024 .

The interest expense amount

was $ 38,333 for the year ended December 31, 2023.

There was no accrued interest as of December 31, 2023, and the total principal outstanding

loan amount was $ 1,000,000 as of December 31, 2023.

The interest rate increases to 15% as of the due date of loan on any unpaid

principal balance outstanding.

Note 8 – Business Concentration and Risks

Major customers

One customer accounted for 43 % of the total accounts

receivable as of December 31, 2023, and this customer accounted for 22 % of the total revenue as of December 31, 2023.

Four customers accounted for 11 % of the total

accounts receivable as of December 31, 2022 and those customers accounted for 49 % of total revenue for the years ended December 31, 2022.

One customer accounted 9 % of the total accounts

receivable as of December 31, 2021 and this customer accounted for 77 % of total revenue for the year ended December 31, 2021.

accounts receivable as of December 31, 2022, and those customers accounted for 49 % of total revenue for the year ended December 31, 2022.

Major vendors

One vendor, Tianjin Guanglee, accounted for 65 %

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

This same vendor, Tianjin Guanglee, accounted for 22 % and

81 % of the total purchases for the years ended December 31, 2022 and 2021, respectively.

No major vendor accounted more than 10 % of total

purchases during the year ended December 31, 2023, One vendor, Tianjin Guanglee, accounted for 65 % of total accounts payable as of December

and this vendor accounted for 22 % of total purchases during the year ended December 31, 2022.

Of subsequent note, Tianjin Guanglee

was once owned by the Chief Executive Officer, as fully disclosed in our annual report in 2017.

In 2018, the Chief Executive Officer transferred

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

Note 9 – Leases

1 unchanged sentence

cost of $ 143,097

and $ 209,738

for the years ended December 31, 2023 and 2022, respectively.

This included in general and administrative expenses.

8, 2015, AVX Design & Integration Inc.

entered an eighty-six-month commercial lease with a third party for an approximately 2,592

square foot office space.

The lease commenced on July 1, 2015, and ended upon August 31, 2022, as AVX operations moved into our corporate

headquarters in Ontario.

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

On December 7, 2021, Focus Universal (Shenzhen)

Technology Co.

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

The lease commenced on December 25, 2021, and will end on February 28, 2025.

The monthly rent is RMB70,097 (approximately $11,014) 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 is included in general and administrative expenses.

On December 7, 2021, Focus Shenzhen entered into

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

The lease commenced on December

25, 2021 and was scheduled to end on February 28, 2025.

The monthly rent was RMB70,097 (approximately $9,915) 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 terms, which is 10%.

expense for this 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 Shenzhen 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 $4,240) 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 terms, which is 10%.

Lease expense for this lease is

recognized on a straight-line basis over the lease term.

On February 22, 2023, Focus Shenzhen 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 $4,985) 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 terms, which is 10%.

Lease expense

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

Operating lease right-of-use assets represent

4 unchanged sentences

Schedule of operating right-of-use asset and liability

December 31, 2022

December 31, 2021

Operating lease right-of-use assets

Operating lease right-of-use assets, net

Lease liabilities, current portion

1 unchanged sentence

Lease term and discount rate:

Schedule Lease term and discount rate

December 31, 2022

December 31, 2021

Schedule of lease term and discount rate

Weighted average remaining lease term

4 unchanged sentences

The minimum future lease payments are as follows:

Schedule of maturity of lease liabilities

Schedule of minimum future lease payments

Year ending December 31, 2024

4 unchanged sentences

Present value of future minimum lease payments

Note 10 – Loans

Paycheck Protection Program

On March 2, 2021, our subsidiary Perfecular Inc.

entered 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

Schedule of debt

December 31, 2022

December 31, 2021

current portion

Long term portion

Note 10 – 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 year ended December 31, 2022, the Company

issued 271,174 shares of common stock.

At 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

On March 23, 2023, the Company issued a fifty

percent (50%) stock dividend of the Company’s common stock to its shareholders for a stock dividend of one share of common stock

for every two shares of common stock held.

On February 13, 2023, the Company issued 62,250

shares (for consideration of $ 357,340 ,

based on their fair value on grant date) to employees based on their Restricted Stock Award Agreements (see

Employee stock-based compensation below).

As of December 31, 2023, there was unvested amortization of 153,000

shares which will be amortized to expense over the next three years.

On February 21, 2023, the Company issued 10,857

shares to a prior board member who exercised his options with cashless exercise.

On April 3, 2023, the Company issued 2,327 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

to round up the stock dividend effective on March 23, 2023.

On April 4, 2022, the Company issued 181,724 shares

of its common stock to Boustead Securities LLC (“Boustead”), which were for the warrants exercised by Boustead on September

The warrants were issued to Boustead in connection with the Company’s initial public offering with an exercise price of

The shares issued to Boustead were valued at $ 1,776,044 upon the cashless exercise option of the warrants.

On May 2, 2022, the Company issued 48,941 shares

1 unchanged sentence

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.

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

On August 17, 2022, the Company issued 82,347

shares to two of the board members who exercised their options.

shares to two board members who exercised their options.

The board members exercised a combined 107,500 options, and the shares were valued

at $ 652,501 upon the cashless exercise option of the options.

On August 22, 2022, the Company issued 93,750

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

During the year ended December 31, 2021, the Company

issued 2,300,000 shares of common stock.

On September 2, 2021, the Company closed its initial

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

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

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

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

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

As of December 31, 2022 and 2021, the Company

had 43,530,915 and 43,259,741 shares of common stock issued and outstanding, respectively.

shares (value of $ 642,789 , based on their share price on grant date of $7.44) to employees based on the Restricted Stock Award

Agreement (see Employee stock-based compensation).

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.

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 due on or before February

This $1,000,000 is still not paid off as of the filing date.

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 paid in cash amounting to

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

incurred and paid in shares as of December 31, 2022 and 2021 amounted to $ 8,000 and $ 48,000 , respectively.

On August 30, 2021, the Company entered into a

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

(“Boustead”) for 161,000 shares and the exercise price is $6.25.

Boustead exercised the warrants on September 7, 2021.

The fair value of the warrants was $ 1,041,670 and $ 2,326,450 as of August 30 and September 7, 2021, respectively.

For the year ended December

31, 2022 and 2021, the Company recorded a loss from change in the fair value of warrant liability which amounted to a difference of $ 0

and $ 1,284,780 , respectively.

These warrants were valued using a Black-Scholes

pricing model with the following assumptions:

Schedule of warrant 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 will be issued six months after these warrants have

been exercised.

For the year ended December 31, 2022 and 2021, the Company has a gain on settlement of derivative liability which amounted

to $0 and $550,406, respectively.

Shares to be issued as of December 31, 2022 and December 31, 2021 amounted to $0 and $1,776,044, 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 on February 11, 2022.

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

as of December 31, 2022.

On August 10, 2022, the Company entered a

stock purchase agreement (the “Stock Purchase Agreement”) with a private shareholder to repurchase 400,000 shares

(600,000 shares after a fifty percent stock dividend adjustment on March 23, 2023) of its common stock for $2,000,000.

shareholder transferred the shares on October 4, 2022, forming a binding agreement, which the Company placed in treasury;

October 6, 2022, the Company wired the first $1,000,000 of the purchase price.

Subsequently, on July 14, 2023, the Company entered

into an amendment to the Stock Purchase Agreement that increased the number of shares of its common stock the Company would purchase

shares and revised the total purchase price of the shares to $ 1,965,000

resulting in a $35,000 change in our obligation to purchase Treasury stock.

The remaining $ 965,000

was paid on July 14, 2023.

Upon receipt of the additional 900,000

shares, the Company also placed them in treasury.

As of January 17, 2023, the Company retired the initial 400,000

shares (600,000 shares after a fifty percent stock dividend adjustment on March 23, 2023) and restored them to the status of

authorized and unissued shares.

As part of the Company’s repurchase program,

during the year ended December 31, 2023 the Company repurchased 263,040 shares of its common stock for $ 464,486 in the public market at

average price of $1.77 and placed them in treasury.

As of December 31, 2023 and 2022, the Company

had 1,163,040 and 600,000 treasury shares, respectively.

The intention of the Company is to retire the additional 900,000 shares obtained

pursuant to the amendment to the Stock Purchase Agreement along with the additional 263,040 shares repurchased during the year ended December

Employee stock-based compensation

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

the Company entered into a restricted stock award agreement (the “Award Agreement”) with eight employees for 280,000 shares

of the Company’s common stock subject to the terms and to the fulfillment of the conditions set forth in the Company’s equity

incentive plan.

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

An additional 20% of the restricted

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

There were 51,000 shares granted

as of February 13, 2023.

The fair value of the above employee compensation was $ 357,340 as of December 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 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.

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

In October 2022, the Company entered into a employee

agreement with VP 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 shares every quarter.

employment agreement with the then VP of Finance and Head of Investor Relations of the Company, pursuant to which the Company awarded

a 15,000-share bonus consisting of shares of the Company’s common stock, which will be granted in blocks of 3,750 shares for every

quarter certain performance metrics are achieved.

The share price will be determined based on the closing price as of the last day of

each quarter.

Pursuant to the terms of the employment agreement, if the Company determined it was satisfied with the performance of the

VP, his position would be promoted to Chief Financial Officer after the one-year anniversary.

In November 2022, the Company entered into

an amendment agreement to amend the performance metrics and extend the term.

As of December 31, 2023, 15,000 shares have vested, collectively

valued at $ 27,862 .

In October 2022, the Company entered into an employee

agreement with the VP of the Company, pursuant to which the Company awarded a 15,000-share bonus consisting of shares of the Company’s

common stock, which will be granted in blocks of 3,750 shares every quarter.

As of December 31, 2023, 15,000 shares have vested, collectively

valued at $ 27,861 .

During the year ended December 31, 2023, the Company

entered into employment contracts with three employees of its engineering staff.

These employment contracts contained provisions for a

total bonus of restricted stock grants valued at $50,000 based on the share price upon the date of completion of the performance metrics

described in the employment contracts.

The fair value of the above employee compensation was $18,750 (approximately 11,643 shares) as

of December 31, 2023.

During the years ended December 31, 2023 and 2022,

2021, the total employee compensation amount for all employees in the company, was $ 711,975

respectively.

The Company issued 62,500

shares with total value of $ 663,900 for employee compensation as of the year ended December 31, 2022.

During the year ended

December 31, 2022, the Company recognized employee compensation in amount of $ 107,390

for the fixed salary of the VP of Finance and $ 16,025

The Company has incurred expenses amount of $ 48,075 employee compensation

for the year ended December 31, 2022 and not yet paid in shares as of December 31, 2022.

the total employee stock-based compensation amount for all employees in the company was $ 431,813 and $ 711,975 , 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 granted 15,000 options to purchase shares at $ 8.86 per share.

On December 30, 2022, each member of the Board

was granted 15,000 options to purchase shares at $ 6.41 per share.

On December 30, 2022, each member of the

Board was granted 22,500

options to purchase shares at $ 4.27

per share with a fair value of $ 533,611 .

These shares fully vested during 2023.

As of December 31, 2023, there were 513,874 options

4 unchanged sentences

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

Schedule of option assumptions

December 31, 2022

Schedule of fair value of the stock options activity

December 31, 2023

Risk-free interest rate

0.93 – 1.52 %

Expected life of the options

Expected volatility

122.93 – 148.18 %

Expected dividend yield

1 unchanged sentence

from December 31, 2021 to December 31, 2023:

Schedule of options activity

Schedule of option activity

Number of Options

Weighted average exercise price

2 unchanged sentences

Outstanding at December 31, 2021

Vested at December 31, 2021

Exercisable at December 31, 2021

Cancelled or forfeited

Outstanding at December 31, 2022

Vested at December 31, 2022

Exercisable at December 31, 2022

Cancelled or forfeited

Outstanding at December 31, 2023

Vested as of December 31, 2023

Exercisable at December 31, 2023

Note 11 – Segment reporting

The Company consists of three types of operations.

(1) Focus and Focus Shenzhen (“Corporate”) involve 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 and Lusher (“IoT Products”) involve

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

(3) AVX (“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.

The table below discloses income statement information

Segment Reporting

The Company currently has two operating segments.

First, Focus and Focus Shenzhen collectively operate our “Corporate and R&D” segment, which involves the non-specific

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

the Company’s subsidiaries that spread across all functional categories and research and development of technology products.

Perfecular, AVX (doing business as Smart AVX) and Lusher jointly operate the “IoT Products” segment, which involves the wholesale,

marketing, and production of our universal smart instruments and devices in the hydroponic and controlled agriculture segments and of

our smart instruments into the commercial and home automation sectors.

And third, AVX (exclusive of the smart IoT Products sales under

Smart AVX) and AT Tech Systems cooperatively run our “IoT Installation Services” segment, which handles our IoT installation

and management business specializing in high performance and easy to use audio/video systems, home theaters, lighting control, automation,

and integration.

The following tables summarize the financial information

of each operating segment of the Company for the year ended December 31, 2023:

Schedules of segment reporting

Year Ended December 31, 2023

3 unchanged sentences

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

Total operating expense

Income (loss) from operations

( 4,957,244 )

( 4,962,807 )

Other Income (Expense):

Interest income (expense), net

Gain on extinguishment of debt

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

Net income (loss)

$ ( 4,743,019 )

$ ( 4,718,142 )

The following tables summarize the financial information

of each operating segment of the Company for the year ended December 31, 2022:

Year Ended December 31, 2022

IoT Installation Services

Revenue - related party

Total revenue

Cost of revenue

Total operating expense

Loss from operations

( 4,463,852 )

( 5,205,646 )

Total other income (expense)

$ ( 4,336,687 )

$ ( 282,259 )

$ ( 307,991 )

$ ( 4,926,937 )

Note 12 – Commitments and Contingencies

7 unchanged sentences

termination, retaliation and various other provisions of the California Labor Code, and various other claims under California state law.

Trial for this matter is not set, nor has discovery been conducted.

AVX intends to contest this matter.

Further, AVX disputes that the

other defendants are proper parties to the litigation.

However, litigation and investigations are inherently uncertain, but the outcome

could have a material impact on the Company.

Trial for this matter is set for October 30, 2024 and discovery is currently ongoing.

AVX intends to contest this matter and disputes

that the other defendants are proper parties to the litigation.

However, since litigation and investigations are inherently uncertain,

the outcome may have a material impact on the Company.

Similarly, on or about April 14, 2020, Devesa

2 unchanged sentences

Los Angeles, State of California.

The Complaint alleges claims including discrimination, wrongful termination, retaliation and various

other provisions of the California Labor Code, and various other claims under California state law.

The complaint seeks unspecified economic

and non-economic losses, as well as attorneys’ fees.

Trial is set for October 11, 2023.

AVX intends to vigorously contest this matter.

Further, AVX disputes that the other defendants are proper parties to the litigation.

However, litigation and investigations are inherently

uncertain, but the outcome could have a material impact on the Company.

On January 19, 2023, the company filed an action in

the Superior Court of California, County of San Bernardino against Jaqueline Li.

AVX Design and Integration pre-paid for equipment toward

a joint project with her father Jeffrey Li.

Payment was made to Jaqueline’s father’s company Sing Young Music, while no goods

or services were ever received.

Upon death, Jacqueline Li distributed assets from the business Sing Young Music without consideration

toward the business entity or any formation of an estate for Jeffrey Li.

We attended the trial on March 17, 2023 to represent our side

of the case and are awaiting judgement from the court.

The Complaint alleges claims including discrimination, wrongful termination,

retaliation and various other provisions of the California Labor Code, and various other claims under California state law.

The complaint

seeks unspecified economic and non-economic losses, as well as attorneys’ fees.

Trial is set for May 8, 2024.

AVX intends to vigorously

contest this matter and disputes that the other defendants are proper parties to the litigation.

However, since litigation and investigations

are inherently uncertain, the outcome may have a material impact on the Company.

Note 13 – Income taxes

52 unchanged sentences

income and, $ 3,540,588 of losses incurred after January 1, 2023, which can be used to offset up to 80% of taxable income in subsequent

15 – Subsequent Events

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.

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.

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.

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.

As of February 7, the Company approved a fifty

percent (50%) stock dividend of the Company’s common stock.

The Company will issue one share of common stock for every two shares

of common stock held.

The record date for the stock dividend will be February 23, 2023, and the payment date will be March 23, 2023.

Company’s common stock shares will be traded in accordance with the “due bill” procedures of NASDAQ from February 7,

2023 through March 2, 2023.

This means any trades that are executed on the NASDAQ Stock Exchange during this period will be identified

to ensure purchasers of the Company’s common stock receive the entitlement to the stock dividend.

The Company’s common stock

shares are expected to begin trading on a post-stock dividend basis on the NASDAQ Stock Exchange on March 23, 2023.

As of February 13, 2023, the Company granted and

vested the second 20% of the restricted shares based on 2022 Award Agreement, which is 34,000 shares with the total fair value of $205,360.

As of February 16, 2023, one of the Company predecessor

Director accept the cashless exercise of his entirety grant options to be exercised for 7,238 shares.

As of March 1, 2023, the Company reduced its previously

announced at-the-market (ATM) offering from December 12, 20222 from US $25 million to US $1 million.

As of March 8, 2023, the Board of Directors also

agreed to include on the Annual Shareholder Meeting ballot the increase of share count from 75,000,000 to 750,000,000.

This increase is

to facilitate additional stock dividends in the future as needed.

The Company has evaluated other subsequent events

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

that require recognition or disclosures in the consolidated financial statements.

Note 14 – Subsequent Events

On January 2, 2024, the board of directors of

the Company authorized the Company to enter into a revolving credit facility or series of promissory notes of up to $5 million with one

or more lenders.

The Company accepted the first $300,000 tranche on January 9, 2024 (the “Loan”) with a third-party private

lender (the “Lender”) whereby the Lender loaned $300,000 to the Company (the “Principal Amount”).

an annual 3% compound interest rate and note payment begin on February 4, 2024 (“Due Date”) whereby the Company will pay Lender

in 12 equal payments of $25,408.11 beginning on the Due Date.

On January 9, 2024, the Lender transferred the Principal Amount to the Company.

On February 22, 2024, Focus

Universal Inc.

(the “Company”) entered into an agreement (the “Agreement”) with 620Magnolia LLC (the “Buyer”)

to sell and leaseback the Company’s warehouse located at 2311 E.

Locust Street, Ontario, California 91761 (the “Property”).

The purchase price for the Property is $7,100,000 with $3,550,000 paid directly to the Company in cash, and the remaining $3,550,000 to

be financed by the Buyer and paid to the Company upon approval of the financing.

The Agreement allows for a contingency period of thirty-five

days and includes a requirement for Buyer to deposit $100,000 into escrow, which has been satisfied.

Additional contingencies are set

forth in the Agreement and the closing date will occur 30 days after their satisfaction or waiver.

In addition, on February 22,

2024, the Company entered into a Standard Industrial/Commercial Single-Tenant Lease (the “Lease”) with the Buyer to lease

the Property for two years commencing at the close of escrow and ending on April 30, 2026.

Base monthly rent is $39,585, with a total

of $316,680 due upon execution of the lease.

On March 5, 2024, the Company entered into an addendum

to the loan agreement with Golden Sunrise Investment LLC, a related party obtaining an additional secured loan amount of $300,000 at an

annual interest rate of 12%.

The Company has evaluated all other subsequent

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

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

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data