Form 10-K FOCUS UNIVERSAL INC. For: Dec 31 – StreetInsider.com



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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

     ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

or

☐     TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  

Commission file number 333-193087

FOCUS UNIVERSAL INC.

(Exact name of registrant as specified in
its charter)

Nevada   46-3355876
(State or other jurisdiction of   (I.R.S. Employer Identification No.)
Incorporation or organization)    
     
2311 East Locus Street, Ontario, CA   91761
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including
area code (626) 272-3883

Securities registered under Section 12(b)
of the Exchange Act:

Title of each class  

Name of each exchange on

which registered

Common Stock    
$0.001 par value   None

Securities registered under Section 12(g)
of the Exchange Act:

None

(Title of class)

Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ☐    No ☒ 

Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or 15(d) of the Act. ☐ 

Indicate by check mark whether the registrant
(1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes☒   No ☐ 

Indicate by check mark whether the registrant
has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes ☒   No ☐ 

Indicate by check mark if disclosure of
delinquent filers in response to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendments to this From 10-K. ☐ 

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐    Accelerated filer ☐ 
Non-accelerated filer ☐  Smaller reporting company  ☒ 
(Do not check if a smaller reporting company)  Emerging growth company ☒ 

If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report.  ☐

Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐   No ☒ 

As of March 22, 2021, the date
immediately preceding the filing of this Annual Report, the aggregate market value of voting stock held by non-affiliates of
the registrant, based on the closing price of the Over-The-Counter QB of $4.25 per share, at which the common equity was
sold, was $174,078,899.

The number of shares outstanding of the
registrant’s common stock, $0.001 par value, outstanding as of March 23, 2021: 40,959,741.

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

TABLE OF CONTENTS

 

 

 

 

FOCUS UNIVERSAL INC.

FORWARD LOOKING STATEMENTS

This Annual Report contains forward-looking
statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s
plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such
as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”,
“estimates”, “predicts”, “potential” or “continue” or the negative of these terms
or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause
our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These
risks include, by way of example and not in limitation:

  · the uncertainty of profitability based upon our history of losses;
  · risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern;
  · risks related to our international operations and currency exchange fluctuations; and
  · other risks and uncertainties related to our business plan and business strategy.

This list is not an exhaustive list of
the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully, and
readers should not place undue reliance on our forward-looking statements. Forward-looking statements are based on management’s
beliefs, estimates and opinions on the date the statements are made, and we undertake no obligation to update forward-looking statements
if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.

Our financial statements are stated in
United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references
to “common stock” refer to the common shares in our capital stock.

As used in this annual report, the terms
“we”, “us”, “our”, the “Company” and “Focus Universal” mean Focus Universal
Inc. unless otherwise indicated.

 

 

 

 

 

 

PART I

Item 1. BUSINESS

Company Background.

Focus
Universal Inc. (the “Company,” “we,” “us,” or “our”) is a Nevada corporation. We
have developed four fundamental disruptive proprietary technologies which solve the most fundamental problems plaguing the internet
of things (“IoT”) industry through: (1) increasing overall chip integration by shifting it to the device level; (2)
creating a faster 5G cellular technology by using Ultra-narrowband technology; (3) leveraging ultra-narrowband power line communication
(“PLC”) technology; and (4) User Interface Machine auto generation technology.

A new IC frontier:
increasing IC integration directly at the device level

  1. We push beyond the current integrated chip limits with our device on a chip technology – which increases the overall degree of chip integration by shifting integration from the component level directly to the device level

We
have developed an innovative and proprietary “device on a chip” (“DoC”) technology, which combines the
required electronic circuits of various integrated circuit components onto a single, integrated chip (“IC”). Our DoC
technology works as a single component but is capable of handling entire IoT device functions. Our DoC technology includes both
the hardware and software, uses less power, has better performance, includes
smaller overall devices,
and offers
greater reliability in spite of decreasing the number of interconnections between components.
We believe that implementing our DoC technology will allow our products to have a
faster time-to-market than our competitors,
lower the cost, and simplify production than our competitors’ multi-chip devices. Our
DoC technology allows devices to achieve interoperability with one another and interchangeability which traditional IoT devices
are unable to achieve.

Our research and
development identified that the current IC integration in IoT devices focuses on pure hardware-to-hardware integration. The lack
of incorporating software such as a common operating system, application software and extra
interface into ICs
limits IC integration only to the component level. Software is
a critical component in electronics, and the more tightly integrated the software, the better the power and performance. Software
also adds an element of flexibility and allows multiple discrete ICs which in the past were unable to be further integrated into
a single IC.

Unfortunately,
only customized hardware and software are currently available, and customized hardware and software integration leads to a custom
IC fabrication which is too expensive to manufacture on a large scale. IC is ideally designed
for products that are intended for mass production to keep manufacturing costs low by producing uniform products using repetitive
and standardized processes. Product standardization has become a major bottleneck in device-level IC fabrication because most devices
are custom-designed and manufactured.

The Universal Smart Instrumentation Platform
(“USIP”) we developed is a standardized, universal hardware and software integration platform, that provides a universal
common foundation for what we anticipate will be thousands of IoT and standalone devices. Electronic design and production starts
from a 90% completed USIP instead of the components. USIP allows ICs to be integrated from the component level up to the device
level and pushes the frontier of semiconductor technology beyond Moore’s law allowing the principle of Moore’s Law
to continue.

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Figure 1. From USIP to device
level integrated circuits.

  2. Our Ultra-narrowband (“UNB”) technology breaks through the Shannon Law’s critical limit which current 5G cellar communication is reaching

Fifth generation (“5G”) telecommunications
networks will revolutionize the digital economy by enabling new applications that depend on ultra-fast communications on an industrial
scale. 5G promises to deliver an improved end-user experience by offering new applications and services through gigabit speeds,
and significantly improved performance and reliability. 5G will build on the successes of 2G, 3G and 4G mobile networks, which
have transformed society, supporting new services and new business models. 5G provides an opportunity for wireless operators to
move beyond providing connectivity services, to developing rich solutions and services for consumers and industry across a wide
range of sectors at an affordable cost. 5G is an opportunity to implement wired and wireless converged networks and offers in particular
opportunities in integrating network management systems. The United States and China are in a race to deploy 5G, wireless networks,
and the country that gets there first will lead in standard-setting, patents, and the global supply chain. A recent World Economic
Forum report concluded that 5G networks will contribute $13.2 trillion in economic value globally and generate 22.3 million jobs
from direct network investments and residual services.1 5G networks and their related applications are expected to add
three million jobs and $1.2 trillion to the economy in the U.S.2 Though 5G offers a significant increase in speed and
bandwidth, its more limited range will require further infrastructure. Higher frequencies enable highly directional radio waves,
meaning they can be targeted or aimed. The challenge is that 5G antennas, although able to handle more users and data, can only
beam out over shorter distances.

Unlike 4G LTE, which operates on established
frequency bands below 6GHz, 5G requires frequencies up to 300GHz. Wireless carriers still need to bid for the costly higher spectrum
bands, as they build and roll out their respective 5G networks. Adding the necessary hardware required for 5G networks can significantly
increase operating expenses. Building 5G networks is expensive. According to Heavy Reading’s Mobile Operator 5G Capex, total
global spending on 5G is set to reach $88 billion by 2023. 3

____________________________________

1 http://www3.weforum.org/docs/WEF_The_Impact_of_5G_Report.pdf

2 https://www.marketsandmarkets.com/Market-Reports/power-line-communication-plc-market-912.html
(last accessed on February 9, 2021)

3 Heavy Reading, Report, “Mobile
Operator 5G Capex Forecasts: 2018-2023” available at: http://www.heavyreading.com/details.asp?sku_id=3568&skuitem_itemid=1789
(last accessed on January 24, 2021).

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Figure 2. Mobile
Operator 5G Capex Forecasts: 2018-2023.

A
typical 5G base station consumes up to twice or more the power of a 4G base station. Energy costs can grow even more at higher
frequencies, due to a need for more antennas and a denser layer of small cells. Edge computing facilities needed to support local
processing and new internet of things (IoT) services will also add to overall network power usage.

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Figure
3. Site Power requirements 2G, 2-4G and 5G.

Select
5G base stations in China are being powered off every day from 21:00 to next day 9:00 to reduce energy consumption and lower electricity
bills. 5G base stations are truly large consumers of energy such that electricity bills have become one of the biggest costs for
5G network operators.

Ultra-narrowband
Modulation was conceived in 1985 as a method to be used with’ frequency modulation (FM) Sub-Carriers’ (as opposed to
‘FM Supplementary Carriers’, or ‘In Band On Channel’ Carriers). In its original form, data rates as high
as 196 kb/s were obtained from a subcarrier at 98 kHz. A pulse width modulation baseband encoding method called the “Slip
Code” was used. That method, which was basically a baseband method, was limited in data rate and required excessive filtering,
which precluded it from being a practical Ultra-narrowband method. Bandwidth efficiencies as high as 15 bits/sec./Hz were being
achieved, Dr. Harold R. Walker is the ultra-narrowband pioneer.

  

Ultra-narrowband (“UNB”) technology
employs an ultra-narrow spectrum channel (<1KHz) to establish an ultra-long-distance link between transmitter and receiver.
It allows the long-range coverage which makes it a most suitable low-power wide-area network technique for industrial IoT systems.
Additionally, its ultra-high power spectral density creates endurance against interference and jamming, which enables friendly
coexistence of UNB on shared frequency bands. The narrower the bandwidth, the fewer noise and interference, in addition, the transmission
energy concentrates on ultra-narrowband width, and results in a very high concentration of power in a very narrow frequency band.

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Figure 4. Comparison between
Ultra-narrowband and Broadband

Many traditional modulation approaches
require allowance for upper and lower sidebands throughout the carrier frequency. UNB modulation is a modified approach for data
transmission without sidebands. UNB is extremely robust in an environment with other signals,
including spread spectrum signals. However, spread spectrum networks are affected by UNB signals.

UNB
modulation utilizes a coded baseband with abrupt edges. Any bandpass filter used at the transmitter for ultra-narrowband modulation
must exhibit zero group delay to pass the instantaneous phase changes, though it may lack the bandwidth required to pass instantaneous
changes in frequency. Conventional filters cannot be used with Ultra-Narrowband signals, which are absolutely dependent upon Negative
or Zero group delay filters.

There is one important characteristic which
is holding up widespread adoption of Ultra-Narrowband modulation, and that is the zero group delay filters which are complex and
must be hand tuned.

We developed an ultra-narrowband technology
which offers a potential alternative to broadband technology used in 5G and meets the challenging 5G demands. A comparison with
4G and 5G is given:

Technology Bandwidth No. of subcarriers Operating Frequency Speed Spectral
  MHz   GHz Mbps Bits/s/Hz
4G 20 1200 6 4-60 6
5G 100 3276 Up to 300 40-1100 10
UNB (finished) 0.001 1 0.004 4 ~4000
UNB (in development) 0.001 1 0.064 64-256 >4000

UNB speed will increase proportionally
if it operates at higher frequency like 4G or 5G did, or adopts multiple subcarriers, which is equivalent to increasing bandwidth.
Utilizing the same bandwidth, UNB can saved energy up to 20,000 times for 4G and 100,000 times for 5G. Keeping the same bandwidth
and energy consumption, the coverage can increase two orders of magnitude. UNB Breaks through the Shannon Law’s critical
limit which current 5G cellar communication is reaching, overcomes the current 5G challenges and allowing cellar communication
development beyond 5G.

  3. We believe our Ultra-narrowband Power Line Communication (“PLC”), will revolutionize the fundamental IoT communication
infrastructure

Our
patented PLC is an innovative communication technology that enables sending data over existing power cables. It does not require
substantial new investment for a dedicated wiring infrastructure. Instead, PLC uses the existing power lines. These power lines
form a distribution network that already penetrates into every residential, commercial and industrial premises.
Given that
the power grid is an established ubiquitous network, connectivity via PLC is potentially the most cost-effective, scalable interconnectivity
approach and the backbone communication infrastructure for the IoT. IoT
devices plug into power outlets and establish a connection using the existing electrical wiring. This allows instruments to share
data without the inconvenience of running dedicated network cables.

The
primary design goal of the power line network is electric power distribution. It was not originally designed 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 a number of fundamental challenges for
data transfer. Signals propagating along the power line are subjected to very large amounts of noise, attenuation, and distortion
that make them erratic, with several attributes varying over time. PLC is susceptible to noise from devices linked to the power
supply infrastructure, for example, fluorescent tube lights, drills, hair dryers, microwave ovens, computers, switch mode power
supply, cellphone
chargers, dimmers, refrigerators, televisions, washing machines, and vacuum cleaners. The
result being that previous implementations of PLC technology appear to have ended in power companies and internet service providers
deciding that the technology is not viable as a means of delivering broadband internet access. The technological challenges have
impeded, or even halted progress.

We have successfully developed ultra-narrowband
PLC technology and achieved 4 Mbps at bandwidth less than 1000 Hz. In our interference testing, six industrial blowers were used
and no significant interference was found. By comparison, a simple air dryer will render our competitors’ legacy technology
completely useless. Our 4Mbps PLC modules have been completed, and printed circuit layouts have been sent for production. These
modules will be used for IoT systems involving over 1,000 sensors. The higher communication speed PLC will be developed concurrently.

Ultra-narrowband
PLC is a considerably more effective tool than current in-home network systems. Zigbee or Z-Wave will need new infrastructure to
be installed. Moreover, penetrating physical barriers like walls within one floor, or reaching out to different floors is a challenge
for current wireless technology that current IoT systems are using. Wireless networks often face performance issues, due to radio-frequency
interference caused by devices like microwave ovens, cordless telephones or even Bluetooth devices at home. However, our PLC can
reach out to every node connected via the power lines. Our technology converts virtually every standard wall socket into an access
point, in many ways incorporating the best of wired and wireless communication.

  4. User Interface Machine auto generation technology – hardware defining software

We
have developed a proprietary and patented “user interface machine auto generation platform” (“UIMAGP”),
this cross-platform or multiple-platform, cross-operating-system platform is designated to simply the software development of 20
billion IoT devices, ranging from hardware embedded coding to user interface design. Our universal natural programming language
we developed is the programming language used to build the IoT user interface. The programming language is similar to the language
humans use amongst one another so that it is easy to learn but understood by a machine.
Future software programming is
expected to be enormously simplified to the maximum extent, with hundreds of thousands of lines of code simplified into a micro
code which can be saved in the sensor module.
When the sensor modules are plugged into the USIP, the user interface code
saved at sensor modules are sent to the platform and a universal display such as a smartphone, a computer or display unit. The
UIMAGP saved on the universal display automatically generates the user interface within milliseconds instead of requiring months
or years of software development work. An embedded coding hardware engineer is able to design both sensor module hardware and provide
the user interface micro code. Thus, the hardware defining software is achieved.

UIMAGP is similar
in spirit to low code or no code programming in reducing the amount of traditional hand coding, enabling accelerated delivery of
business applications. However, low code and no code programming suffer from integration restriction, absence of customization
and security risks issues, making them not suitable for large-scale and mission-critical enterprise applications such as IoT applications.
UIMAGP
overcome these challenges and still preserve a minimum amount of coding. The UIMAGP and user interface micro codes
work collectively to perform the function of the tradition customized software, enabling UIMAGP to be shared by the entire 20 billion
IoT devices.4

  5. Universal Smart Instrumentation Platform (“USIP”)

Instrumentation
is a huge industry which covers variety of fields including medical, healthcare, scientific, commercial, industrial, military and
daily life. Lack of the instrumentation interoperability, compatibility and universality result in every instrument design starting
from the scratch or components, each instrument is only able to carry out a determined measurement or control a specific operation.
I
ntegration of existing instruments which lack interoperability and compatibility into a platform can be difficult and expensive.
This integration is impeded by the inability of instruments to easily communicate with devices and sensors for perception, mobility,
and manipulation. As society enters the IoT era, it is not unreasonable to assume that millions of devices will need to be connected
in one square kilometer, if each IoT device requires unique hardware and software developed from scratch, implementation in dense
urban areas is simply not feasible.

USIP represents an advanced software and
hardware integrated instrumentation platform and a large-scale modular design approach. USIP integrates a large number of technologies,
including cloud technology, wired and wireless communication technology, software programming, instrumentation technology, artificial
intelligence, PLC, sensor network and internet of things into a single platform and results in circuit designs that are orders
of magnitude cheaper and faster than those constructed of discrete integrated circuit components from scratch.

USIP not only has primary functionalities
but also an open architecture of incorporating variety of many individual instruments,
functions, sensors and probes from different industries and vendors to the greatest extent
possible
into the same single unit as well. Instruments, sensors or probes from a few to several hundreds or even thousands
in any combination from variety of industries and vendors share or reuse the same platform. Adding, removing or changing, instruments
or sensors is all the platform requires to switch from one kind of device to another without revising the software and redesigning
the hardware. Future instrument integration, design and manufacture are enormously simplified
to the maximum extent, only the sensor modules are required to be replaced, designed and manufactured.

Compared
to traditional stand-alone instruments, USIP exploits the processing power, productivity, display, and connectivity capabilities
of computers or mobile devices and provide a more powerful, flexible, and cost-effective measurement solution. Traditional

hardware-centered instrumentation systems are made up of multiple stand-alone instruments
that are interconnected to carry out a determined measurement or control an operation. They
have fixed vendor-defined functionality
and their components that comprise the instruments are also fixed and permanently associated with each other. Different instruments
provided by different vendors cannot be interoperated and interchanged. For example, we simply cannot use a traditional blood pressure
meter to measure temperature or vice versa. USIP is designated to be compatible with
all instruments, sensors or probes on the market and capable of monitoring and controlling any combination of instruments or sensors.
It has brought a revolution to the field of instrumentation, measurement, control and automation.

USIP is a versatile instrument, able to
do many different measurements and controls, substitutes for many other instruments and integrate existing instruments into it.
The promise of USIP is closely associated with the development and proliferation of computers
and mobile equipment which provide the fundamental foundation and major technical support to the universal smart instrument such
as attractive graphical user touch screen interface, data processing and analysis capabilities, video and audio, cameras, GPS,
ubiquitous wireless connectivity, AI, cloud based communications and almost
unlimited functions or software available to the users that do not contain in the traditional
instruments. These features embody the advantages of USIP which are lacking in the stand-alone instrument system. As compared with
the traditional instrument, the best advantage of USIP is cost saving. O
ther distinctive
features include
universality, interoperability, flexibility,
compatibility, upgradeability, expandability, scalability, security,
modularity, fast prototyping, reducing inventory, plug-and-play
operation, remote accessibility,
simplification, standardization, cloud instrumentation.

____________________________________

4 Gartner Insights “Leading
the IoT,” available at: https://www.gartner.com/imagesrv/books/iot/iotEbook_digital.pdf (last accessed February 9, 2021).

We have been dedicated to solving instrumentation
interoperability for over a decade. We subdivide instruments into a reusable foundation
component to the maximum extent and architecture-specific components, the sensor modules,
which together perform the functions of traditional instruments at a fraction of its cost.
USIP which presents to up 90% of the instruments, consists of universal and reusable hardware and software, these reusable hardware
and software are the same for all the instruments.

USIP utilizes a computer or a mobile device
as a display and control, communicates and works with a group of sensors, instruments, probes or controllers manufactured by different
vendors in a manner that requires the user to have little or no knowledge of their unique characteristics.

The
portable version of USIP is illustrated below, when a blood pressure sensor is plugged into universal device, the user interface
specification code saved on the blood sensor module is sent the universal device and a computer or smartphone which will generate
the user interfaces in the corresponding devices based on the interface specification code.

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Figure
5. A blood pressure sensor is connected to our Universal Device we call the Ubiquitor and changes our device into a blood pressure
measurement instrument.

Similarly,
if we remove the blood pressure sensor and change to a pH sensor and a CO2 sensor, the universal device changes to a two-sensor
device which is capable of measuring pH and CO2 concentration. Each sensor has its own user interface which is auto generated based
on the user interface code saved in each sensor.

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Figure
6. A pH sensor and a CO2 sensor are connected to our universal device and our device changes into a split-sensor device. A computer
or smartphone can also be used for display.

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Figure
7, A pH sensor, a CO2 sensor and a light sensor are connected to the universal device and change it to a 3-sensor device. A computer
or smartphone can also be used for display.

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Figure
8, any number of sensors in any combination are connected to the universal device and change it to a multiple sensor device. A
computer or smartphone can also be used for the display.

The
universal platform we built as illustrated in Figure 8, can control 27 light sensors, 21 pH sensors, 23 temperature humidity sensors
which have 23 temperature sensors and 23 humidity sensors, representing one controller and a total of 72 devices and 95 sensors.
Our controller controls 2 lights, and it can turn the light on or off. The controller also uses a light sensor to control the light,
and the user can input the desired light intensity, running period and light output intensity.

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Figure
9, Our universal platform simultaneously monitors and controls 72 distinct devices.

To
illustrate, the entire horticulture industry only has a few hundred devices from different vendors for various measurement and
control. One of our universal smart devices and corresponding sensors or actuators are capable of replacing all of them at a fraction
of the cost.

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Figure
10. Traditional horticulture measurement and control devices.

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Figure
11. Universal Smart Device.

All of the
household measurement and control devices such as air conditioner control, swimming pool control, garage door control, sprinkler
control, lighting control, motorized curtain control, etc. can be replaced by a single universal smart device and corresponding
unique accessories.

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Figure 12. A single universal
smart device can replace all the household control devices.

  6. Shared
Distributed Universal Internet of Things.

IoT
refers to the overarching network created by billions of internet-compatible devices and machines which share data and information
around the world. According to a Gartner report, by the end of 2020, there were an estimated 20 billion IoT connected devices in
use around the world.5 As the sophistication of both hardware and software in the consumer electronics industry skyrockets,
an increasing share of the electronic devices produced around the world are manufactured with internet connectivity. Forecasts
suggest that by 2030 around 50 billion of these IoT devices will be in use around the world, creating a massive web of interconnected
devices spanning everything from smartphones to kitchen appliances.6 The IoT will have a great impact on the economy
by transforming many enterprises into digital businesses and facilitating new business models, improving efficiency and increasing
employee and customer engagement. It is foreseeable that the explosive IoT growth will rapidly deplete natural and human labor
resources. We believe that IoT will soon reach the critical limit, we do not have enough human labor and natural resources to support
IoT growth. 20 billion IoT devices are both challenges and resources. We have overcome the current massive IoT production challenges
through our development of a shared distributed universal IoT. Billions of internet-compatible devices and machines not only share
data and information around the world, but also share large section of hardware and software (up to 90%).

Billions of IoT devices are in use across
the country, each with different terminologies, technical specifications, and functional capabilities. These differences make it
difficult to create one standard interoperability format for acquiring, harmonizing, storing,
accessing, analyzing and sharing data in near real-time
. In fact, not even those instruments built on the same platform
are necessarily interoperable because they are often highly customized to an organization’s unique workflow and preferences.

Wireless
networks are far from perfect for IoT. They are typically slower, expensive and extremely susceptible to interference from radio
signals and radiation. They can be accessed by any device within range of the network’s signal so information transmitted through
the network (including encrypted information) may be intercepted by unauthorized users. Walls and floors can seriously limit the
range of the wireless network. Our proprietary Ultra-Narrowband power line communication technology offers a promising alternative
to wireless networks. Integrating USIP with PLC results in significant simplification and cost saving in implement of IoT as illustrated
in Figure 13.

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Figure
13. Comparison between traditional machine to machine IoT (a) and shared distributed universal IoT (b). USIP and sensors form a
local network through power line communication. The platform communicates with the cloud and forms a remote cloud-based system.

_____________________________________

5 Gartner Report “Leading the IoT: Gartner
Insights on How. To Lead in a Connected World” available at: https://www.gartner.com/imagesrv/books/iot/iotEbook_digital.pdf
(last accessed February 10, 2021).

6 Id.

18164734 image 014 ProxyEgg Form 10-K FOCUS UNIVERSAL INC. For: Dec 31 - StreetInsider.com 

Figure
14. (a) traditional wireless network and Focus Universal Inc’s PLC network.

 

How
we will implement our business plan

Once
we are fully capitalized, we will establish four divisions within our company to develop and promote our four fundamental technologies
even further. We believe that these four technologies not only can be used in standalone device design and production, but also
focus on massive scale IoT device design and production, aiming to solve the complexity and cost challenges.

a)    Ultra-narrowband
power line communication division

Our ultra-narrowband PLC technology has
achieved data transfer speeds of 4 megabits per second (“Mbps”), with a bandwidth of less than 1000 hertz (Hz). These
results are 15 times faster than the Zigbee short-range wireless technology mesh networks and 100-400 times faster than Z-wave
low-energy wave short-range wireless technology. The current 4Mbps PLC modules will be used
for IoT applications involving thousands of sensors. We are developing even higher communication speeds through our PLC. The ultra-narrowband
PLC module will be integrated to IC. This division will focus on ultra-narrowband PLC research and development, promote and market
ultra-narrowband PLC ICs and finished products.

Given that the power grid is an already
established ubiquitous network spanning back hundreds of years, connectivity via PLC technology is potentially the most cost-effective
and scalable interconnectivity approach and, thus, the ideal backbone communication infrastructure for the IoT industry. However,
the harsh electrical noise and interference present on power lines and variations in equipment and standards make data transfer
using PLC technology difficult and limits the technology’s applications. Accordingly, the global market for PLC technology
is very limited.

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Figure 15. Markets and Markets
Updated date – Oct 25

The
market size is expected to reach $9.5 billion at the end of 2023.7 This prediction is based on current PLC technology,
which provides speeds that are too slow (usually less than 9,600 bps), coverage that is too short (200-300 yards) and harsh electrical
noise and interference. The major vendors of PLC technology include ABB, General Electric, Siemens, AMETEK, Texas Instruments,
Maxim Integrated, Devolo, Cypress Semiconductor, ST Microelectronics, Panasonic, Microchip, Qualcomm Atheros, TP-Link Technologies,
NETGEAR, NXP Semiconductor NV, Sigma Designs, Zyxel Communications and Renesas Electronics Corporation.

It
is our understanding that we are the only vendor currently working on ultra-narrowband PLC technology. With the introduction of
our ultra-narrowband PLC technology, which is able to overcome the interference challenges presented by traditional PLC technology,
we believe that market size will increase significantly.
With the help of our ultra-narrowband technology, which is able
to overcome the noise challenge, we believe that the overall market size may increase significantly. Utilizing ultra-narrowband
PLC, the global IoT communication infrastructure cost and operating cost can be saved.

b)   Ultra-narrowband
wireless division

This
division will focus on developing ultra-narrowband wireless technology and overcoming the challenges faced by current 5G networks,
thereby allowing cellular communication development to go beyond the 5G networks.

In
developing our ultra-narrowband PLC technology, we gained a lot of insight that is being used to develop a single carrier wave
ultra-narrow band wireless technology, which aims to increase data transfer rates from 4 Mbps to 64 Mbps. Ideally, our ultra-narrow
band wireless technology will be able to achieve data transfer rates of 256 Mbps, which is close 5G speeds, which require 3,276
subcarrier waves. The speed can be further increased if multiple carrier waves or higher operating frequencies are used.

Our
current research and development efforts only focus on an operating frequency of 64 megahertz (MHz), which is about 100 times lower
than 4G networks (6 gigahertz (GHz)) and 5,000 times lower than 5G networks (up to 300 GHz). Our technology’s 1,000 Hz bandwidth
is approximately 20,000 times narrower than 4G networks and 100,000 times narrower than 5G networks. The narrower the bandwidth,
the less energy consumption. By maintaining the 1,000 Hz band width, our ultra-narrowband wireless technology can save electricity
usage by a factor of up to 100,000 times when compared with a 5G networks. We believe that our ultra-narrowband wireless technology
has the potential to push the wireless frontier well beyond 5G. We expect to finalize our ultra-narrowband technology with data
transfer speeds of 64-256 Mbps during the first of second quarters of 2021.

5G
infrastructure market is projected by Markets and Markets to reach USD 47,775 million by 2027, at a CAGR of 67.1%. The major players
in the 5G infrastructure market are Huawei (China), Ericsson (Sweden), Samsung (South Korea), Nokia Networks (Finland), ZTE (China),
NEC (Japan), CISCO (US), CommScope (US), Comba Telecom Systems (Hong Kong), Alpha Networks (Taiwan), Siklu Communication (Israel),
and Mavenir (US). Huawei (China) is the leader in the 5G infrastructure market. Limited coverage, high energy consumption and expensive
infrastructure installation are the major bottleneck in 5G. All the 5G technologies are based on broadband technology, our research
suggests there are very few, if any company working on ultra-narrowband technology and have difficulty finding any literature after
2014. We believe that adopting our ultra-narrowband wireless technology, the 5G higher spectrum bands cost, 5G network hardware
cost and 5G energy consumption costs could be saved significantly.

c)    User
interface machine auto generation division

Established
in 2009, our company’s software user interface machine auto generation technology division has developed 100 sensors in arbitrary
combinations, all of which have been tested for IOS system. RS-485 is the communication standard defining the electrical characteristics
of drivers and receivers for use in serial communications systems. The current RS-485 standard modules available on the market
do not support more than 100 sensors. The first version of UIMAGP has been completed and is ready for marketing.

UIMAGP
not
 only can
be used in IoT software design, but also can be applied to other industry sectors, this division is planning to expand to other
industry as well.

The software market size
is enormous. According
  to
www.grandviewresearch.com, the market reached $388.98 billion in 2020.

___________________________________

7 Market Research Report “Powerline
Communication Market by Offering (Hardware, Software, and Services), Frequency (Narrowband, and Broadband), Application (Energy
Management and Smart Grid, and Indoor Networking), Vertical, and Geography – Global Forecast to 2023,” available at:
https://www.marketsandmarkets.com/Market-Reports/power-line-communication-plc-market-912.html (last accessed February 10, 2021).

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Figure
16. Software market size.

Some
of the biggest companies within the software industry today include Microsoft, IBM, Oracle, SAP and Salesforce, all boasting billion
dollar revenue figures. None of them has developed a UIMAGP. Any software which can be created by low code and no code programming
can also be created by using UIMAGP. However, the software created by UIMAGP achieves what low code and no code programming cannot
because of the complexities of applying the code to different platforms and the accompanying required customization. One of the
distinct features of UIMAGP is that the programming provides a starting point which includes foundational code that may be used
on any platform, operating system, etc. This makes the final programming much more efficient, as it only needs relatively few lines
of code to program a complicated application.

d)   
Universal smart instrument division

This
division will focus on developing and marketing end user universal smart instruments and shared distributed universal IoT devices.
The development of universal smart instruments and IoT have a considerable amount of overlap, with the only difference being
the number of devices involved. We take this overlap a step further, unify universal smart instruments and IoT into a single system,
eliminating any distinction between them. Using USIP which is cost effective and fully production-ready hardware and software platform
have a huge advantage in shorting design, build, test and fix cycles. The design cycle improved from a few years to a few weeks.
The smart home products including light control, air conditioner control, sprinkler control, garden light control, heating floor
control, motorized curtain control, pool filtration and algae control, smoke detector control, carbon monoxide measurement, motion
detector, doorbell have been designed and tested. Industrial IoT devices design including industrial light control, temperature
control, humidity control, carbon dioxide control, digital lighting control, quantum PAR measurement and control, pH measurement
and control, TDS measurement and control, fan speed control has been completed. We anticipate that this division will market and
distribute these products during the second quarter of 2021; and start presale marketing during the first quarter of 2021.

The instrumentation industry is also very
large and difficult to estimate due to the high number of industry sectors. However, the IoT industry sector is only a fraction
of the larger market. MarketsandMarkets forecasts the global IoT market size is expected to reach $561 billion by 2022.8
The key market players include Intel Corporation (US), SAP SE (Walldorf, Germany), Cisco Systems, Inc. (US), Microsoft Corporation
(US), Oracle Corporation (US), International Business Machine (IBM) Corporation (US), PTC Inc. (US), Google Inc. (US), Hewlett-Packard
Enterprise (US), Amazon Web Services Inc. (US), Bosch Software Innovation GmbH (Stuttgart, Germany) and General Electric (US).
All of these industry players’ IoT devices are of a traditional machine to machine type and have fundamental challenges
in terms of their cost and implementation. Our shared distributed universal IoT devices are much more cost efficient.

This division will also focus on development
of device-on-a- chip ICs. We will distinguish our DoC technology from the component ICs, these ICs are able to perform entire device
functions. According to the “integrated Circuits Global Market Report 2020,” 9 the
global integrated circuits market was worth $412.3 billion in 2019. The market is expected to grow at a CAGR of 5.09% and reach
a value of $502.94 billion by 2023. Major players in the IC market are Intel Corporation, Texas Instruments, Analog Devices, STMicroelectronics,
NXP, ON Semiconductor, Micron, Toshiba, Broadcom and Qualcomm.

 

___________________________

8 Id.

9 The Business Research Company, March 2020, “Integrated
Circuits Global Market Report 2020,” available at: https://www.thebusinessresearchcompany.com/report/integrated-circuits-global-market-report
(last accessed January 24, 2021).

 

 

 

 

Products we are currently selling

We are also 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 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.

Specifically, we sell the following
products:

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

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Our Fan Speed Adjuster Device

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.

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Our Carbon Filter Device

HEPA filtration device. We provide
a high-efficiency particulate arrestance (“HEPA”) filtration device at wholesale prices to our client Hydrofarm. Manufactured,
tested, certified, and labeled in accordance with current HEPA filter standards, this device is targeted towards greenhouses and
grow rooms and designed to keep insects, bacteria, and mold out of grow rooms. We sell these devices in various sizes.

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Our HEPA Filtration Device

 

 

 

 

Digital light meter. We provide
a handheld digital light meter that is used to measure luminance in fc units, or foot-candles.

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Our Digital Light Meter Device

  

Quantum par meter. We provide a
handheld quantum par meter used to measure photosynthetically active radiation (“PAR”). This fully portable handheld
PAR meter is designed to measure PAR flux in wavelengths ranging from 400 to 700 nm. It is designed to measure up to 10,000 µmol.

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Our Quantum Par Meter Device

Strategy behind the AVX Acquisition

On March 15, 2019, the Company completed
a transaction with Patrick Calderone to purchase 100% of the outstanding stock of AVX, an IoT installation and management company
based in southern California.

Through our acquisition of AVX, we are
planning to offer ordinary families an entire smart home product line at a fraction of the current market price. We have finished
the design of smart lighting control, air conditioner, sprinkler, garden light control, garage door control and heating control.
We are developing a swimming pool control device, smoke detector and carbon monoxide monitor. We believe these product lines could
be completed by the end of 2021.

It
is our intention to offer a complete line of smart home products, designed by Focus Universal, and marketed and installed by AVX,
in the $3,000 range. Where a family would likely choose not to install a $300,000 system in a $150,000 home, even if they could
afford to do so, the same family would be more inclined to install a smart home product at the $3,000 price point. We believe smart
home installation based on the Ubiquitor will include more functionalities than the current systems offered by our competitors.
Our smart home systems would be able to integrate, exchange data, interact and connect utilizing our PLC technology. As a result,
the installation process would be simplified, and its costs would be dramatically reduced.

Once
successfully integrated, the Ubiquitor will be central to every smart home installation that AVX does. The Ubiquitor’s connectivity
capabilities will allow for that system to be expanded and customized in the future.

We
intend to complete the design for the first hardware products, specifically, a surveillance camera and a doorbell, by the end of
2021 and believe we can begin to start installing these new shared distributed smart home products in the next few years. We plan
to offer a zero down payment option for the installation of AVX’s smart home systems and charge a monthly subscription fee
instead.

Notwithstanding
the foregoing, should we be unable to successfully integrate the Ubiquitor into AVX’s smart home installations, the Ubiquitor
will continue to be a flagship product of our Company that can be applied to a variety of other purposes in the different industries
and fields mentioned above.

We currently operate in the scientific
instruments industry and the smart home installations industry and plan to apply several of our new technologies to the IoT marketplace.

Index
of Key Technical Abbreviated Terms

 

Abbreviation Full Term
5G Fifth Generation Mobile Wireless Telecommunications Network
FSK Gaussian Frequency Shift Keying
HANs Home Area Networks
IC Integrated Chip
IoT Internet of Things
LTE Networks Long-Term Evolution Networks
MOS Transistor Metal-Oxide-Silicon Transistor
PLC Power Line Communication
UNB Ultra-narrowband
USIO Universal Smart Instrumentation Operating System
USIP Universal Smart Instrumentation Platform

 

Growth Strategy

Strategy and Marketing Plan

The Company plans to market the USIP to
the industrial sector first, including key growth industries such as indoor agriculture. Once the technology is established there,
the core technologies of universality and interoperability through a readily available device, such as a mobile device or smartphone,
may be ported to products specifically intended for the consumer and residential markets.

While industrial markets are large, the
consumer and residential markets are even larger. This two-phase approach will allow for continuous and increasing revenue growth.
Moreover, during the industrial phase of development, the Company will be able to test and refine its products to ensure that they
are ready for the consumer and residential markets.

Once we have successfully entered the industrial
sector, we intend to roll out additional technologies that are currently under development. These technologies will both advance
and support the core technologies marketed in phases one and two to the industrial and consumer markets.

We will continue to design, manufacture,
market and distribute our electronic measurement devices, such as temperature humidity meters, digital meters, quantum PAR meters,
pH meters, TDS meters, and CO2 monitors. Over the years we have developed a broad and loyal customer base. The universal smart
technology has been applied to our existing traditional devices and demonstrated significant functionality improvement and hardware
cost savings. We believe hardware cost reductions of up to 90% have been achieved. However, promoting universal smart technology
and universal smart IoT devices to our customers, including traditional instrument manufacturers, will be the major focus of our
business in the future.

Different markets require different strategies.
We divided our customers into a few segments to determine what specific marketing technique will reach each targeted group and
its needs.

a) Our Existing Customer, Hydrofarm

To minimize the upfront cost of entering
a market, we must choose our entry point carefully so as to find one that offers the least possible resistance. It costs more to
attract new customers than to retain and increase sales to our existing customer, Hydrofarm. The design, development and manufacture
of our universal smart instruments is targeted to increase current sales to our existing customer.

Our current customer, Hydrofarm, is the
largest distributor in the horticulture industry with roughly 50% of the market share in the U.S. horticulture industry.

All our current universal smart devices,
including sensors and controllers, will be distributed to Hydrofarm. Smartphones can be used for display and control of all the
sensors and controllers in the horticulture industry. By the end of 2020, we completed the development all of the necessary sensors
used in the gardening industry, including a light control node, temperature sensor, humidity
sensor, digital light sensor, quantum PAR sensor, pH sensor, TDS sensor and carbon dioxide sensor; and we finished all the circuit
layouts for the
pilot IoT system for the gardening industry (consisting of approximately 1,000 sensor nodes and controllers).
We sent these circuit layouts to our manufacturer in China for production. However, due to the coronavirus pandemic, the production
was delayed. By the third quarter of 2021 , we intend to market
our Ubiquitor device to Hydrofarm, who in turn will resell and market the device to its customers in the horticulture industry.

b) Online Customers

We intend to use traditional and specialized
e-commerce outlets to help with online brand awareness. By analyzing Amazon’s data, we plan to determine which traditional
instruments have the highest selling volumes and at what price point. Future research and development will focus on integrating
the sensors used in these instruments into the universal smart instruments to leverage on their existing markets.

c) Traditional Controller and Remote-Control
Customers

Traditional controllers monitor and control
their sensors through bi-directional communication implemented by hardware. The sensors or probes in controllers not only measure
the physical environment but also give feedback to the input actuators that can make necessary corrections. They are expensive
and require a corresponding monitor in which unidirectional communication is needed. For example, a traditional temperature meter
may cost approximately $15 and a temperature controller may cost approximately $100. The wireless bi-directional communication
supported by a smartphone or mobile device offers cost reduction in controller design and manufacturing. Traditional remote control
is accomplished through hardware, which can be replaced by a smartphone. Universal smart technology will also play an important
role in traditional control applications. Traditional controller users are one of highest profit margin customers of universal
smart technology.

d) Special Customers

For customers who consider an instrument’s
compatibility, interoperability, interchangeability, universality, upgradeability, expandability, scalability, and remote access
ability as crucial, universal smart technology has several fundamental advantages over traditional instruments in terms of hardware
cost and functionality. End users will not only enjoy the remote access to their sensors wirelessly but also save the cost of the
hardware module which will be replaced by a smartphone.

e) Traditional Instruments Manufacturers

We may consider selling the Ubiquitor directly
to instrument manufacturers and allowing them to distribute it through their established platforms.

We are putting together an internal sales
team in order to establish the marketing campaign for our sensor devices, including the Ubiquitor. We are also expanding the sales
team for AVX because we believe that the Ubiquitor device will be integral to smart home installations.

We believe that universal smart technology
will play a critical role for traditional industrial instrument manufacturers, because it is too expensive and difficult to develop
industrial instrument sensors for medium or smaller companies or individual homes. The cost factor is the first consideration when
deciding whether a company wants to develop universal smart technologies and implement them in their products.

Our goals over the next three years include:

  · Raise capital to move into full manufacturing and production for our Ubiquitor device;
  · Partner with manufacturers and promote the adoption of our Ubiquitor device in a USIP;
  · Acquire a stable market share of the sensor device market;
  · Continue performing research and development on PLC technology;
  · Focus on building our smart home offerings so that we can reduce the cost of smart home implementation to focus on expanding smart home installation and implementation beyond luxury homes;
  · File additional patents to expand our intellectual property portfolio related to the many uses of our Ubiquitor device; and
  · File patents to protect our PLC technology.

In order to achieve these goals, we intend to focus on the following
initiatives:

  · Position the Ubiquitor device as the industry standard in universal sensor reading technology;
  · Establish strategic supply chain channels to facilitate efficient production operations; and
  · Communicate the product and service differentiation through direct networking and effective marketing.

Growth Strategy

Growth through Mergers and Acquisitions

Mergers and acquisitions (“M&A”)
represent a significant part of our growth strategy because M&A can fill business gaps or add key business operations without
requiring us to wait years for marketing and sales cycles to materialize. We have used this growth strategy in our acquisition
of AVX, and in the future intend to continue to use M&A to find and secure opportunities that will either: (i) achieve the
objective of growth in our market segments; or (ii) provide an area of expansion that will add to the Company’s products
and/or service lines in markets that we are currently not serving but could serve if we had the appropriate expertise. The resulting
combination of our existing products and services, new key personnel, and strategic partnerships through M&A will allow us
to operate in new markets and provide new offerings to our existing market.

Acquiring key competitors may allow the
addition of key personnel to our team. These additions may include people with vast industry knowledge, which can act as a catalyst
to further our growth and lead to the development of new products and business lines. We will seek to target synergistic acquisitions
in the same industry, targeting different geographic locations, which will allow us to actively compete on a regional or national
scale in the IoT segment. If we target businesses in the same sector or location we hope
to combine resources to reduce costs, eliminate duplicate facilities or departments and increase revenue. We believe this strategy
will allow for accelerated growth and maximize investor returns.

One of our key strategies to grow by acquisition
is to acquire smaller businesses that focus on IoT installation technology (industrial or residential) and in the USIP or PLC industries.

Original
Equipment Manufacturer (“OEM”) Engineering Consulting and Design Services

Universal
smart technology is new to most electronic engineers and manufacturers. One way to promote our universal smart technology is to
provide direct OEM engineering design consulting services to potential industrial customers. Direct, on-site consulting will educate
our industrial consumers on the many ways our technology can be implemented in a variety of industrial applications. We believe
that we are well positioned to
perform product design and perform engineering consulting services for future OEM customers.
We believe we can operate as a seamless extension of our customers’ engineering organizations and add scale, flexibility
and speed to their design processes. We will not be able to offer such engineering consulting and design consulting services until
the Ubiquitor is being produced and distributed. We believe that once the Ubiquitor is being produced and distributed, we will
have hired and trained enough engineers to execute our consulting strategy. Due to the timeline for the roll out of the Ubiquitor,
we believe that the earliest we would feasibly be able to implement such consulting services would be the fourth quarter of 2021.
Through our engineering consulting services strategy, we intend to become our customers’ engineering partner at all stages
of the design cycle so that we may effectively assist them in transforming ideas into production-ready products and accelerate
time to market for our universal smart technology product segment.

Technology Licensing

We
may also consider entering into licensing arrangements with our customers for our technology. We believe that once we educate our
industrial consumers, they may want to integrate our universal smart technology into their own technology through licensing agreements.
We believe licensing our intellectual property may provide a revenue stream with no additional overhead, all while allowing us
to retain proprietary ownership and creating long-term industrial consumers who rely on our products. By creating incentives, such
as cost incentives, to license our IP rather than design their own technology, we believe potential customers could save on design
costs and create business development opportunities. Licensing may also allow us to rely on the expertise, capacity and skill of
a licensee to commercialize our IP, which is especially valuable if we lack the infrastructure, financial resources and know-how
to bring a product to market independently. We believe that licensing will not occur until the last quarter of 2021 due to the
fact that we will need to have a team of our consulting engineers in place once we complete the offering and working with industrial
consumers on product integration, as well as time to negotiate the terms of licensing agreements with potential customers.

Distribution Method

We intend to engage in relationships predominantly
with standard U.S. component manufacturers and similar electronics providers for the manufacturing of unassembled parts of the
Ubiquitor and its sensor nodes, to then ship such parts to our Ontario, California facility where we will assemble the Ubiquitor
devices and sensor nodes. Afterwards, we would distribute our Ubiquitor devices to distributors and retailers directly and also
ship directly to traditional industrial instrument manufacturers. We have a sales department operating out of our Ontario, California
office and eventually plan to open a second sales department in China dedicated to promoting our technologies to local instrument
manufacturers who can utilize our Ubiquitor devices in their manufacturing and other processes. We intend to market the Ubiquitor
to industrial end-users through Hydrofarm, through direct business-to-business sales channels and also directly to consumers via
e-commerce internet platforms. For our quantum light meters, and air filtration products, we rely solely on Hydrofarm to distribute
to end-users through its distribution channels.

Raw Materials

The electronic components used in the Ubiquitor
are common and can be easily purchased through a variety of suppliers with little advance notice. We predominantly use large-scale
manufacturers in the United States such as Texas Instruments and Intel for the major components. Other key suppliers we could consider
include Analog Devices, Skyworks Solutions, Infineon, STMicroelectronics, NXP Semiconductors, Maxim Integrated, On Semiconductor,
and Microchip Technology. Production and assembly lines are also available worldwide if we needed to outsource or increase our
capacity, though we intend to complete our assembly in our Ontario, California facility. On October 1, 2018, we entered into an
agreement with Beijing Hengnar Technology Development Co., Ltd. to develop certain infrared online gas analyzer products that detect
O2, CO, CO2, H2, Nox, SF6 and other gases for our digital light meter and filtration business segment.

Manufacturing and Assembly

We have an assembly facility in Ontario,
California where we assemble the Ubiquitor from parts sourced predominantly in the United States. Our quantum light meters and
handheld sensors are also manufactured in our Ontario, California facility. Our air filtration products are manufactured and assembled
in China by a third-party contract manufacturer, Tianjin Guanglee.

Competitors

Sensor Node Industry

There are several competitors we have identified
in the sensor node industry, including traditional instruments or devices manufacturers such as Hanna Instruments or Extech Instruments.

Hach developed and launched the SC1000
Multi-parameter Universal Controller, a probe module for connecting up to 32 digital sensors or analyzers. However, their products
are not compatible with smart phones yet; and we believe their price point is still prohibitive to consumers.

Monnit Corporation offers a range of wireless
and remote sensors. Many of Monnit’s products are web-based wireless sensors that usually are not portable because of their
power consumption. Also, the sensors’ real-time updates are slow; and we believe security of the web-based sensor data acquisition
may be a concern. In addition to purchasing the device, consumers usually have to pay a monthly fee for using web-based services.

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 $100,000 and $500,000 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 to install; 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 Industry

The air filtration system and meter products
industry is a niche industry. The global industrial air filtration market was valued at $11.6 billion in 2018 and analysts expect
it to register a CAGR of 6.7% from 2019 to 2025 because of the industrial need to control air quality across a range of industries.10
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. One of our competitors, Donaldson Company, Inc., an air filtration company, announced
in its SEC filings that on October 18, 2018 it acquired BOFA International LTD (“BOFA”), headquartered in the United
Kingdom, for $98.2 million less cash acquired of $2.2 million. BOFA manufactures systems across a wide range of air filtration
applications.

We are not trying to compete with traditional
instruments or device manufacturers because we plan to utilize our Ubiquitor device in conjunction with our smartphone application.
We believe the resulting product may compete in a much wider product category due to its many potential applications.

Our Corporate History

The Company entered the residential and
commercial automation installation service industry through the acquisition of AVX Design and Integration, Inc. (“AVX”)
in March of 2019. AVX was established in 2000 with the goal of installing high-performance, easy-to-use Audio/Video, Home Theater,
Lighting Control, Automation and Integration systems for high-net-worth residential projects.

Additionally, we are performing research
and development on an electric power line communication technology and have filed three patents with the USPTO related to our Ubiquitor
device and the design of a quantum PAR photo sensor. Eventually, we hope that PLC will further enhance smart IoT installations
performed by AVX and powered by the Ubiquitor.

We are based in the City of Ontario, California,
and were incorporated in Nevada in 2012. In December of 2013, we filed an S-1 registration statement that went effective on March
14, 2014. Since then, our securities have been trading on the OTCQB Market.

Our website is www.focusuniversal.com.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this prospectus.

On October 21, 2015, Dr. Jennifer Gu and
Dr. Edward Lee were appointed as directors of the Company. After such appointments, the Board of Directors consisted of Dr. Desheng
Wang, Dr. Jennifer Gu and Dr. Edward Lee.

On April 2, 2018, Duncan Lee was appointed
as the Chief Financial Officer of the Company.

On June 8, 2018, we announced the appointment
of four new board members of the Company, the majority of whom were independent: Sheri Lofgren, Sean Warren, Michael Pope, and
Carine Clark. Our Board of Directors formed our Audit, Compensation, and Nominating Committees.

  

_______________________________

10 Grand View Research. (2020, February). Industrial
Air Filtration Market Size, Share & Trends Analysis Report, by Product, by End Use (Cement, Food, Metals, Power, Pharmaceutical,
Agriculture, Paper & Pulp and Woodworking, Plastic), by Regionk and Segment Forecasts, 2020-2027. Retrieved at: https://www.grandviewresearch.com/industry-analysis/industrial-air-filtration-market. 

On July 26, 2018, our Board of Directors
approved our submission of an application in compliance with the NASDAQ rules and regulations to list and trade our Company’s
securities on the NASDAQ Capital Market. As of the date of this prospectus, our application is pending NASDAQ’s approval
and our Company’s securities are not listed on the NASDAQ Capital Market.

On November 28, 2018, Sean Warren resigned
as a member of the Board of Directors; and Greg Butterfield was appointed in his place. On December 1, 2018, Mr. Warren became
a part-time consultant to the Company.

In late 2018, we purchased a manufacturing
warehouse and office space addressed at 2311 E. Locust Court, Ontario, CA, 91761. The property consists of an industrial type,
two-story building, with a total building area of 30,740 square feet. Ten thousand square feet will be utilized for office space;
and 20,000 square feet will be utilized for warehouse space. The property includes 58 parking spaces. The purchase price for the
property was approximately $4.62 million.

On March 15, 2019, the Company entered
into a stock purchase agreement with Patrick Calderone, the CEO and owner of AVX, whereby the Company purchased 100% of the outstanding
stock of AVX (the “AVX Acquisition”) for $890,716. The purchase price was structured as follows: (1) $550,000 payable
in cash at closing; (2) $290,716 payable in 39,286 shares of the Company’s common stock issued upon closing; and (3) $50,000
payable in the form of a secured promissory note at 6% interest over 12 months secured by six shares of AVX common stock. In connection
with the AVX Acquisition, Patrick Calderone also entered into a consulting agreement with the Company pursuant to which he would
offer consulting and training services during the 12-month period following the closing of the AVX Acquisition. Since AVX is an
installer of smart home products, and since we anticipate that our Ubiquitor device is capable of enhancing smart home installations,
we believe that this acquisition will allow us to test new applications and the integration capabilities of our Ubiquitor device
in smart homes.

On November 15, 2019, Dr. Edward Lee resigned
as President and was appointed to be the Chairman of the Board of Directors.

Patent, Trademark, License and Franchise
Restrictions and Contractual Obligations and Concessions

On November 4, 2016, we filed a U.S. patent
application number 15/344,041 with the USPTO. On March 5, 2018, we issued a press release announcing that the USPTO had issued
an Issue Notification for U.S. Patent Application No. 9924295 entitled “Universal Smart Device,” which covers a patent
application regarding the Company’s Universal Smart Device. The patent was granted on March 20, 2018.

Subsequent to our internal research and
development efforts, we filed with the USPTO on June 2, 2017 a patent application regarding a process for improving the spectral
response curve of a photo sensor. The small and cost-effective multicolor sensor and its related software protected by the potential
patent we believe could achieve a spectral response that approximates an ideal photo response to measure optical measurement. The
patent was issued on February 26, 2019.

In addition, we have been awarded a notice
of allowance for a patent from the USPTO for a patent application we filed on March 12, 2018 as application No. 15/925,400. The
patent title is a “Universal Smart Device,” which is a universal smart instrument that unifies heterogeneous measurement
probes into a single device that can analyze, publish, and share the data analyzed. The issue fee was paid on March 14, 2019.

Research and Development Activities

As of December 31, 2020, we spent a total
of $256,636 on research and development activities.

Compliance with Environmental Laws

We are not aware of any environmental laws
that have been enacted, nor are we aware of any such laws being contemplated for the future, that impact issues specific to our
business.

Employees

As of the date of this prospectus we have
twenty-one full-time employees and one part-time employee. The Company’s Chief Executive Officer and Secretary is Dr. Desheng
Wang, and our Chief Financial Officer is Duncan Lee. Our officers and directors are responsible for planning, developing and operational
duties, and will continue to be so throughout the early stages of our growth. Three full-time employees are working in the warehouse
orchestrating the development and distribution of our sensor devices as well as our filters.

Legal Proceedings

On April 13, 2020, Ian Patterson resigned
from his position as Chief Operations Officer of AVX. On May 5, 2020, Mr. Patterson filed an action in the Superior Court for the
County of Los Angeles, State of California, against the Company et al. We believe neither the Company nor Dr. Wang has been served
properly and venue is improper. The complaint alleges claims including 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. The Company is investigating and intends to vigorously defend itself in
the foregoing matter. However, litigation and investigations are inherently uncertain. Accordingly, the Company cannot predict
the outcome of this matter.

On April 13, 2020, AVX terminated an employee
from her position as Sales and Marketing Director. On May 13, 2020, she filed an action in the Superior Court for the County of
Los Angeles, State of California. The Complaint alleges claims including 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. The Company is investigating and intends to vigorously defend itself in
the foregoing matters. However, litigation and investigations are inherently uncertain, but the outcome could have a material impact
on the Company.

Reports to Securities Holders

We provide an annual report that includes
audited financial information to our shareholders. We make our financial information equally available to any interested parties
or investors through compliance with the disclosure rules for a small business issuer under the Exchange Act. We are subject to
disclosure filing requirements including filing Form 10-K annually and Form 10-Q quarterly. In addition, we will file Form 8-K
and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports
in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials
that we file with the Securities and Exchange Commission at the SEC’s Public Reference Room at 100 F Street NE, Washington,
DC 20549.

The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov)
that contains reports, proxy and information statements, and other information regarding issuers that file electronically with
the SEC.

Item 1A. RISK FACTORS

 

We have a limited operating history
and a history of operating losses, and we may not be able to sustain profitability. In addition, we may be unable to continue as
a going concern.

We were incorporated on December 4, 2012,
and as of December 31, 2020, we had an accumulated deficit of $9,704,575. We have a limited operating history upon which an evaluation
of our future success or failure can be made. Additionally, if we are not successful in growing revenues and controlling costs,
we will not maintain profitable operations or positive cash flow, and even if we achieve profitability in the future, we may not
be able to sustain profitability in subsequent periods. Absent a significant increase in revenue or additional equity or debt financing,
we may not be able to sustain our ability to continue as a going concern.

Because we have a limiting operating
history with positive revenues, you may not be able to accurately evaluate our operations.

We were incorporated on December 4, 2012
and have had limited operations to date. Therefore, we have a limited operating history upon which to evaluate the merits of investing
in our company. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and
delays encountered in connection with the operations that we plan to undertake. These potential problems include, but are not limited
to, unanticipated problems relating to the ability to generate sufficient cash flow to operate our business, and additional costs
and expenses that may exceed current estimates. However, we expect to continue generating revenues. Additionally, we recognize
that if the effectiveness of our business plan is not forthcoming, we will not be able to continue business operations. If we are
unsuccessful in addressing these risks, our business will most likely fail.

We require significant funding to develop, manufacture
and market our Ubiquitor wireless sensor.

We may ultimately require up to $20 million
to fund the development, manufacturing, assembly and marketing strategy for our product. Once we achieve this fund-raising goal,
we intend to position ourselves in the small device market, establishing the price at below a few hundred dollars. Due to superior
functionality and low price, we expect to capture this section of the market fairly easily. Once our product and service matures,
and the Company becomes better known, we believe we could gain market share in the high-end market. None of this will be possible
if we fail to obtain the funding we require. There is no guarantee that additional funding can be obtained on favorable terms,
if at all.

We depend on key personnel.

Our future success will depend in part
on the continued service of key personnel, particularly, Desheng Wang, our Chief Executive Officer, and the Chairman of our Board,
Edward Lee.

If any of our directors and officers choose
to leave the company, we will face significant difficulties in attracting potential candidates for replacement of our key personnel
due to our limited financial resources and operating history. In addition, the loss of any key employees or the inability to attract
or retain qualified personnel could delay our plan of operations and harm our ability to provide services to our current customer,
Hydrofarm, and harm the market’s perception of us.

Regulatory actions could limit our
ability to market and sell our products.

Many of our products and the industries
in which they are used are subject to U.S. and foreign regulation. Government regulatory action could greatly reduce the market
for our Ubiquitor device and for smart home installation. For example, the power line medium, which is the communications medium
that could be used by some of our products, is subject to special regulations in North America, Europe and Japan. In general, these
regulations limit the ability of companies such as ours to use power lines as a communication medium. In addition, some of our
competitors have attempted or may attempt to use regulatory actions to reduce the market opportunity for our products or to increase
the market opportunity for their own products.

We outsource our product manufacturing
and are susceptible to problems in connection with procurement, decreasing quality, reliability and protectability.

We assemble our
Ubiquitor devices by using fully manufactured parts, the manufacturing of which has been fully outsourced. We have no direct control
over the manufacturing processes of our products. This lack of control may increase quality or reliability risks and could limit
our ability to quickly increase or decrease production rates.

Our business
operations and financial performance may be affected by the coronavirus pandemic.

The coronavirus pandemic has adversely
affected economies throughout the world. With the continued spread of the coronavirus in the United States and other countries,
it is unclear how economic activity and workflows might be impacted on a worldwide basis. Many employers in the United States
are requiring their employees to work from home or not come into their office. If the pandemic continues and conditions worsen,
we may experience a disruption in our supply chain as well as a decline in sales activities and customer orders. The impact of
the coronavirus on our operations is uncertain at this time. Given the rapidly changing situation related to this pandemic, we
believe it could have a material adverse effect on our business, financial conditions and results of operations.

We outsource the manufacturing of
key elements of our quantum light meters and air filters to a single manufacturing partner, with whom we do not have a formal contractual
relationship.

We outsource the
manufacture of our quantum light meter and air filtration devices to a single contract manufacturer, Tianjin Guanglee Technologies
Ltd. (“Tianjin Guanglee”). If Tianjin Guanglee’s operations are interrupted or if Tianjin Guanglee is unable
to meet our delivery requirements due to capacity limitations or other constraints, we may be limited in our ability to fulfill
new customer orders, and we may be required to seek new manufacturing partners in the future. Tianjin Guanglee has limited manufacturing
capacity, is itself dependent upon third-party suppliers and is dependent on trained technical labor to effectively create components
making up our devices or to repair special tooling. In addition, as of the date of this prospectus, we do not have a formal development
and manufacturing agreement that regulates our business relationship with Tianjin Guanglee. Although we continue to operate under
the terms of an oral agreement, and we believe there are a multitude of manufacturers that could quickly replace Tianjin Guanglee,
our manufacturing operations could be adversely impacted if we are unable to enforce Tianjin Guanglee’s performance.

Our potential inability to adequately
protect our intellectual property during the outsource manufacturing of our filtration products in China could negatively impact
our performance.

In connection with our manufacturing outsourcing
arrangements, we rely on third-party manufacturers to implement customary manufacturer safeguards onsite, such as the use of confidentiality
agreements with employees, to protect our proprietary information and technologies during the manufacturing process. However, these
safeguards may not effectively prevent unauthorized use of such information and technical knowhow or prevent the manufacturers
from retaining them. We face risks that our proprietary information may not be afforded the same protection in China as it is in
countries with more comprehensive intellectual property laws, and local laws may not provide an adequate remedy in the event of
unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine
the scope of our proprietary rights in China, and failure to obtain or maintain intellectual property or trade secret protection
could adversely affect our competitive business position. In the event that the third-party manufacturers of our proprietary products
misappropriate our intellectual property, our business, prospects and financial condition could be materially and adversely affected.

The size and future growth in the
market for our Ubiquitor device or our PLC technology under development has not been established with precision and may be smaller
than we estimate, possibly materially. If our estimates and projections overestimate the size of this market, our sales growth
may be adversely affected.

Our estimates of the size and future growth
in the market for our Ubiquitor device or our PLC technology under development is based on a number of internal studies, reports
and estimates. In addition, our internal estimates are based in large part on current feedback from clients using current generation
technology and our belief is that the use and implementation in the United States and worldwide will be extensive. While we believe
we are using effective tools in estimating the total market for Ubiquitor device or our PLC technology, these estimates may not
be correct and the conditions supporting our estimates may change at any time, thereby reducing the predictive accuracy of these
underlying factors. The actual demand for our products or competitive products, could differ materially from our projections if
our assumptions are incorrect. As a result, our estimates of the size and future growth in the market for Ubiquitor device or our
power line communication technology may prove to be incorrect. If the demand is smaller than we have estimated, it may impair our
projected sales growth and have an adverse impact on our business.

If we are unable to properly forecast
future demand of our products, our production levels may not meet demands, which could negatively impact our operating results.

Our ability to manage our inventory levels
to meet our customer’s demand for our products is important for our business. Our production levels and inventory management are
based on demand estimates six to twelve months forward taking into account supply lead times, production capacity, timing of shipments,
and dealer inventory levels. If we overestimate or underestimate demand for any of our products during a given season, we may not
maintain appropriate inventory levels, which could negatively impact our net sales or working capital, hinder our ability to meet
customer demand, or cause us to incur excess and obsolete inventory charges.

Demand for our Ubiquitor product
may be affected by new entrants who copy our products and/or infringe on our intellectual property.

The ability to protect and enforce intellectual
property rights varies across jurisdictions. An inability to preserve our intellectual property rights may adversely affect our
financial performance. Competitors and others may also initiate litigation to challenge the validity of our intellectual property
or allege that we infringe their intellectual property. We may be required to pay substantial damages if it is determined our products
infringe on their intellectual property. We may also be required to develop an alternative, non-infringing product that could be
costly and time-consuming, or acquire a license on terms that are not favorable to us. Protecting or defending against such claims
could significantly increase our costs, divert management’s time and attention away from other business matters, and otherwise
adversely affect our results of operations and financial condition.

Internal system or service failures,
including as a result of cyber or other security incidents, could disrupt business operations, result in the loss of critical and
confidential information, and adversely impact our reputation, our business, financial condition, results of operations and cash
flows. Our connected products potentially expose our business to cybersecurity threats.

The Ubiquitor is a connected product and
potentially exposes our business to cybersecurity threats. As a result, we could be subject to systems, service or product failures,
natural disasters, power shortages or terrorist attacks, but also from exposure to cyber or other security threats. Global cybersecurity
threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to our systems to sophisticated
and targeted measures known as advanced persistent threats directed at our products, our customers and/or our third-party service
providers, including cloud providers. There has been an increase in the frequency and sophistication of cyber and other security
threats we face, and our customers are increasingly requiring cyber and other security protections and standards in our products,
and we may incur additional costs to comply with such demands.

The potential consequences of a material
cyber or other security incident include financial loss, reputational damage, negative media coverage, litigation with third parties,
which in turn could adversely affect our competitiveness, business, financial condition, results of operations and cash flows.

Our sensor segment is subject to
risks associated with operations that have a concentration of customers.

We only have one customer, Hydrofarm, who
resells our digital light meters and sensors. There is no guarantee that this customer will remain solvent, and/or continue with
the Company as it has in the past. Consequently, if we were to lose this customer, a material portion of our revenues in our sensor
and digital light meter segment would be lost.

Our air filtration business segment could experience price
fluctuations in raw materials, availability problems, and volatile demand.

The principal raw materials that we use
are filter media, activated carbon, perforated metal sheet, and certain other petroleum-based products, like plastics, rubber,
and adhesives. Our cost of filter media can experience price fluctuations. Larger competitors can enter into selective supply arrangements
with major suppliers that reduce medium-to-long-term volatility in costs. We cannot guarantee purchases in the volume that justifies
such selective supply arrangements. Thus, we could be subject to price volatility.

Prices and availability for the electronic
parts and plastics we need to assemble the Ubiquitor could fluctuate.

The principal raw materials that we use
for our Ubiquitor device are standard industrial electronics parts and plastics that are generally easily available through a variety
of U.S. domestic and foreign manufacturers. Such raw materials can experience price fluctuations due to a variety of factors, such
as tariffs, import/export fees and delays, and availability. If there is scarcity, then larger competitors could be given purchasing
priority with major suppliers that could make it so smaller companies like us experience volatility in costs and/or availability
issues. Also, since we have not yet manufactured in large numbers, our management team might not have the expertise to mitigate
such price fluctuations or availability concerns. Thus, suppliers could stop selling to us because of demand. Even though it is
possible to find alternative suppliers, changing to new suppliers could delay production and affect the quality of certain products.

Changes in tariffs, import or export
restrictions, Chinese regulations or other trade barriers may reduce gross margins.

We currently source products from manufacturers
in China, including digital, analog, and quantum light meters, filtration products and certain components for our Ubiquitor device.
Currently, the prices we offer to Hydrofarm are FOB (Free on Board) China. Only the cost of delivering the goods to the nearest
port is included and Hydrofarm is responsible for the shipping from China and responsible for all other fees, including tariffs,
associated with delivering the goods to the ultimate destination. If Hydrofarm changes the term to CIF (Cost, Insurance, and Freight)
United States, then we would be responsible for the shipping costs and the tariff costs, which may reduce our gross margin. Thus,
we may incur increases in costs due to changes in tariffs, import or export restrictions, other trade barriers, or unexpected changes
in regulatory requirements, any of which could reduce our gross margins. Moreover, volatile economic conditions may impact the
ability of our suppliers to make timely deliveries; and in the event that a supplier fails to make a delivery, there is no guarantee
that we will be able to timely locate an alternative supplier of comparable quality at an acceptable price.

Since the beginning of 2018, there has
been increasing rhetoric, in some cases coupled with legislative or executive action, from several U.S. and foreign leaders regarding
tariffs against foreign imports of certain materials. It is difficult to anticipate the impact on our business caused by the proposed
tariffs or whether the proposed changes in tariffs will materialize in the future. Given the relatively fluid regulatory environment
in China and the United States, there could be additional tax, tariffs or other regulatory changes in the future. Any such changes
could directly and materially adversely impact our business, financial condition, and operating results.

Our failure to respond to rapid change
in the technology markets could cause us to lose revenue and harm our competitive position.

Our future success will depend significantly
on our ability to develop and market new products that keep pace with technological developments and evolving industry standards
for technology. We are currently developing products, including our Ubiquitor device, universal smart monitors and controllers,
distributed shared universal smart home products, and smart products for the gardening industry, for MacOS, PC, as well as mobile
operating systems such as Android and iOS, that transmit data over Wi-Fi signals, cellular signals, Bluetooth, certain power line
systems, traditional wired systems, and other radio frequency systems that enable data transmission. Our delay or failure to develop
or acquire technological improvements, adapt our products to technological changes or provide technology that appeals to our customers
may cause us to lose customers and may prevent us from generating revenue which could ultimately cause us to cease operations.

Our business depends on our ability
to keep manufacturing costs low; and we may lack the expertise necessary to negotiate and maintain favorable pricing, supply, business
and credit terms with our potential vendors.

It may be difficult to negotiate or maintain
favorable pricing, supply, business or credit terms with our potential vendors, suppliers and service providers. In addition, product
manufacturing costs may increase if we fail to achieve anticipated volumes. There can be no assurance that we will be able to successfully
manage these risks. In summary, we can offer no assurance that we will be able to obtain a sufficient (but not excess) supply of
products on a timely and cost-effective basis. Our failure to do so would lead to a material adverse impact on our business.

Since wireless
networks are susceptible to interference and other limitations, and one advantage of our Ubiquitor device is that it can connect
to wireless networks as one way to transmit data, wireless network limitations may reduce the competitive advantage of the Ubiquitor
in the marketplace.

Our Ubiquitor relies on both wired and
wireless networks to transmit data, which is a major advantage of the Ubiquitor device. Wireless networks allow multiple users
to access large amounts of information without the hassle of running wires to and from each IoT device. However, wireless networks
have technological limitations and there are a number of disadvantages that our Ubiquitor device may face when using a wireless
network. Wireless networks are typically expensive; it can cost up to four times more to set up a wireless network than to set
up a wired network. The range of a wireless network is limited, and a typical wireless router will only allow individuals located
within 150 to 300 feet to access the network. Wireless networks are extremely susceptible to interference from radio signals, radiation
and other similar types of interference. Such interference may cause a wireless network to malfunction. Wireless networks can be
accessed by any IoT device within range of the network’s signal so information transmitted through the network (including
encrypted information) may be intercepted by unauthorized users. Wireless networks are typically slower than wired networks, sometimes
even up to 10 times slower. Walls and floors can seriously limit the range of your wireless network. Since wireless networks have
severe limitations, these limitations may reduce the competitive advantage that the Ubiquitor provides in the marketplace which
might prevent widespread adoption.

Demand for our products is uncertain
and depends on our currently unproven ability to create and maintain superior performance.

Our future operating results will depend
upon our ability to provide our products or services and to operate profitably in an industry characterized by intense competition,
rapid technological advances and low margins. This, in turn, will depend on a number of factors, including:

  · Our ability to generate significant sales and profit margin from the Ubiquitor device;
  · Worldwide market conditions and demand for sensor devices and other products we may continue to add as we move forward;
  · Our success in meeting targeted availability dates for our products and services;
  · Our ability to develop and commercialize new intellectual property and to protect existing intellectual property;
  · Our ability to maintain profitable relationships with our distributors, retailers and other resellers;
  · Our ability to maintain an appropriate cost structure;
  · Our ability to attract and retain competent, motivated employees;
  · Our ability to comply with applicable legal requirements throughout the world; and
  · Our ability to successfully manage litigation, including enforcing our rights, protecting our interests and defending claims made against us.

These factors
are difficult to manage, satisfy and influence and we cannot provide any assurance that we will be able to generate significant
demand for and sales of our products.

The Ubiquitor
device could fail to gain traction in the marketplace for a number of reasons that would adversely impact our financial results
and cause our investors to lose money.

Future rollout of the Ubiquitor entail
numerous risks such as:

  · Any lack of market acceptance of the Ubiquitor;
  · Failure to maintain acceptable arrangements with product suppliers, particularly in light of lower than anticipated volumes;
  · Manufacturing, technical, supplier, or quality-related delays, issues or concerns, including the loss of any key supplier or failure of any key supplier to deliver high quality products on time;
  · Competition;
  · Potential declines in demand for sensor devices; and
  · Risks that third parties may assert intellectual property claims against our products.

In order to compete
successfully, we must accurately forecast demand, closely monitor inventory levels, secure quality products, continuously drive
down costs, meet aggressive product price and performance targets, create market demand for our brand and hold sufficient, but
not excess, inventory.

Our Ubiquitor device greatly depends
on the growth and adoption of the IoT market, and other next-generation internet and smartphone-based applications.

The Internet may ultimately prove not to be a viable commercial
marketplace for IoT applications for a number of reasons, including:

  · unwillingness of consumers to shift to and use other such next-generation Internet-based, smartphone-assisted applications;
  · refusal to purchase our products and services;
  · perception by end-users with respect to the quality of our wireless sensors in an industry historically dominated by wired sensors;
  · competition;
  · inadequate development of smartphone infrastructure to keep pace with increased levels of use; and
  · increased government regulations in a relatively unregulated marketplace.

There is a risk that the market will
not adapt to using the smartphone readout as a substitute platform for sensor devices, causing our products to fail in the marketplace.

There is a risk that the market will not
receive the smartphone technology, which we currently as our sole platform. The vast majority of products on the small sensor device
market do not currently use smartphones to collect and analyze sensor data. There is no guarantee that using smartphone technology
will cut production costs and be well received. If our platform using smartphone technology is not well received, there is a risk
that device manufacturers will develop new monitoring and operating components that are incompatible with our current platform
instead of developing the traditional sensors that are compatible with our technology. Updating our platform to stay compatible
with new components could increase our costs unexpectedly.

Using wireless transmission technologies
such as Wi-Fi and Bluetooth may create security risks.

There is also a risk of failure based on
the wireless transmission of data used by our smartphone platform. If there is instability in a wireless network, Bluetooth sensor,
or other network problems that are out of our control, our new platform may not be well received. Our smartphone platform relies
on the wireless transmission of data through Wi-Fi networks and Bluetooth sensors. These networks are often deemed less secure
than a hard-wired network. The security of a wireless network is often out of our control. However, any breach of security could
result in the market and sensor device manufacturers to fail to embrace our platform.

Our business involves the use, transmission
and storage of confidential information, and the failure to properly safeguard such information could result in significant reputational
harm.

We may at times collect, store and transmit
information of, or on behalf of, our clients that may include certain types of confidential information that may be considered
personal or sensitive, and that are subject to laws that apply to data breaches. We believe that we take reasonable steps to protect
the security, integrity and confidentiality of the information we collect and store, but there is no guarantee that inadvertent
or unauthorized disclosure will not occur or that third parties will not gain unauthorized access to this information despite our
efforts to protect this information, including through a cyber-attack that circumvents existing security measures and compromises
the data that we store. If such unauthorized disclosure or access does occur, we may be required to notify persons whose information
was disclosed or accessed. Most states have enacted data breach notification laws and, in addition to federal laws that apply to
certain types of information, such as financial information, federal legislation has been proposed that would establish broader
federal obligations with respect to data breaches. We may also be subject to claims of breach of contract for such unauthorized
disclosure or access, investigation and penalties by regulatory authorities and potential claims by persons whose information was
disclosed. The unauthorized disclosure of information, or a cyber-security incident involving data that we store, may result in
the termination of one or more of our commercial relationships or a reduction in client confidence and usage of our services. We
may also be subject to litigation alleging the improper use, transmission or storage of confidential information, which could damage
our reputation among our current and potential clients and cause us to lose business and revenue.

Product liability associated with
the production, marketing and sale of our products, and/or the expense of defending against claims of product liability, could
materially deplete our assets and generate negative publicity which could impair our reputation.

The production, marketing and sale of digital
products have inherent risks of liability in the event of product failure or claim of harm caused by product operation. Furthermore,
even meritless claims of product liability may be costly to defend against. We do not currently have product liability insurance
for our products. We may not be able to obtain this insurance on acceptable terms or at all. Because we may not be able to obtain
insurance that provides us with adequate protection against all or even some potential product liability claims, a successful claim
against us could materially deplete our assets. Moreover, even if we are able to obtain adequate insurance, any claim against us
could generate negative publicity, which could impair our reputation and adversely affect the demand for our products, our ability
to generate sales and our profitability. For the products we sell through Hydrofarm, we also do not carry product liability insurance.
It is our management’s position that these handheld battery-operated products do not carry substantial product liability
risk and to the extent there are any product liability risks, such risks are born by Hydrofarm, who does carry product liability
insurance coverage for the products we provide to them and they sell to their customers. However, it is possible that we could
face liability in a products liability lawsuit for manufacturing defects or defective design since we design or manufacture the
products sold by Hydrofarm.

Some of the agreements that we may enter
into with manufacturers or distributors of our products and components of our products may require us:

  · to obtain product liability insurance; or
  · to indemnify manufacturers against liabilities resulting from the sale of our products.

If we are not able to obtain and maintain
adequate product liability insurance, then we could be in breach of these agreements, which could materially adversely affect our
ability to produce our products and generate revenues. Even if we are able to obtain and maintain product liability insurance,
if a successful claim in excess of our insurance coverage is made, then we may have to indemnify some or all of our manufacturers
or distributors for their losses, which could materially deplete our assets.

We may not be able to identify suitable
acquisition targets or otherwise successfully implement a growth strategy reliant on mergers and acquisitions.

In order to expand our business, we hope
to pursue mergers and acquisitions to acquire new or complementary businesses, services or technologies. We expect to continue
evaluating potential strategic acquisitions of businesses, services and technologies. However, we may not be able to identify suitable
candidates, negotiate appropriate or favorable acquisition terms, obtain financing that may be needed to consummate such transactions
or complete proposed acquisitions. Any such future mergers and acquisitions would be accompanied by the risks commonly encountered
in acquisitions of companies, including, among other things, the difficulty of integrating the operations and personnel of the
acquired companies; the potential disruption of the Company’s ongoing business; the inability of management to incorporate
successfully acquired technology and rights into the Company’s services and product offerings; additional expense associated
with amortization of acquired intangible assets; the maintenance of uniform standards, controls, procedures and policies; and the
potential impairment of relationships with employees, customers and strategic partners.

Our growth strategy includes licensing our intellectual
property, and we run the risk that a licensee could become a competitor.

As part of our growth strategy, we anticipate
licensing our intellectual property. Licensing our intellectual property could potentially damage our business if a licensee becomes
a competitor, especially once the statutory rights to our intellectual property have expired or the licensing arrangement with
a licensee has terminated. A licensee could develop modifications of our intellectual property and choose to compete with us in
the marketplace. Litigation may be necessary to protect our rights to our intellectual property. Even if we are successful, litigation
could result in substantial costs and be a distraction to our management team. If we are not successful, we could lose valuable
intellectual property rights.

Product defects could result in costly
fixes, litigation and damages.

Our business exposes us to potential product
liability risks that are inherent in the design, manufacture and sale of our products. If there are claims related to defective
products (under warranty or otherwise), particularly in a product recall situation, we could be faced with significant expenses
in replacing or repairing the product. For example, our filtration products or Ubiquitor devices obtain raw materials, machined
parts and other product components from suppliers who provide certifications of quality which we rely on. Should these product
components be defective and pass undetected into finished products, or should a finished product contain a defect, we could incur
significant costs for repairs, re-work and/or removal and replacement of the defective product. In addition, if a dispute over
product claims cannot be settled, arbitration or litigation may result, requiring us to incur attorneys’ fees and exposing
us to the potential of damage awards against us.

Only two officers have public company
experience on our management team which could adversely impact our ability to comply with the reporting requirements of U.S. securities
laws.

Amongst our officers, only Dr. Wang, our
CEO, and Duncan Lee, our CFO, have public company experience. Our CEO and CFO are ultimately responsible for complying with federal
securities laws and making required disclosures on a timely basis. Any such deficiencies, weaknesses or lack of compliance could
have a materially adverse effect on our ability to comply with the reporting requirements of the Securities Exchange Act of 1934,
as amended, which is necessary to maintain our public company status. If we were to fail to fulfill those obligations, our ability
to continue as a U.S. public company would be in jeopardy in which event you could lose your entire investment in our Company.

Some of our officers, directors,
consultants and advisors are involved in other businesses and not obligated to commit their time and attention exclusively to our
business and therefore they may encounter conflicts of interest with respect to the allocation of time and business opportunities
between our operations and those of other businesses.

Another example of a conflict of interest
is so called “self-dealing” transactions. If a conflict-of-interest transaction is negotiated and approved, in a manner
that approximates arms-length negotiations, the transaction is accepted unless a shareholder proves in court that the transaction
is not entirely fair to the company or its shareholders. The burden is on the shareholder to show lack of entire fairness. A self-dealing
transaction is considered invalid if challenged, unless the interested director proves in court that the transaction is entirely
fair to the company. The burden is on the director to show entire fairness.

If, as a result of before mentioned conflicts,
we are deprived of business opportunities or information, the execution of our business plan and our ability to effectively compete
in the marketplace may be adversely affected. If our audit committee becomes aware of such conflict of interests, we will take
an immediate action to resolve it. Each conflict of interest will be handled by the Company based on the nature of the conflict
and the individual involved in it.

We are not aware of any current or potential conflict of interests
with our consultants or advisors.

We have
concluded that we have not maintained effective internal control over financial reporting through the years ended December 31,
2020 and December 31, 2019. Significant deficiencies and material weaknesses in our internal control could have material adverse
effects on us.

It is important
for us to maintain effective internal control over financial reporting, which is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

A material weakness
is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or
detected on a timely basis.

A material weakness
in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information.
If we are unsuccessful in implementing or following our remediation plan, we may not be able to timely or accurately report our
financial condition, results of operations or cash flows or maintain effective disclosure controls and procedures. If we are unable
to report financial information timely and accurately or to maintain effective disclosure controls and procedures, we could be
subject to, among other things, regulatory or enforcement actions by the SEC, any one of which could adversely affect our business
prospects.

We currently have identified significant
deficiencies in our internal control over financial reporting that, if not corrected, could result in material misstatements of
our financial statements.

In connection
with the audit of our financial statements as of and for the years ended December 31, 2020 and 2019, we identified significant
deficiencies in our internal control over financial reporting and a general understanding of U.S. GAAP. As such, there is a reasonable
possibility that a misstatement of our financial statements will not be prevented or detected on a timely basis.

As we have thus
far not needed to comply with Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes Oxley Act” or
“SOX”), neither we nor our independent registered public accounting firm has performed an evaluation of our internal
control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. In light of the deficiency, we believe
that it is possible that certain control deficiencies may have been identified if such an evaluation had been performed.

We are working
to remediate the deficiencies or material weaknesses. We have taken steps to enhance our internal control environment and plan
to take additional steps to remediate the material weaknesses. Specifically:

  · We have hired additional outside consultants and will hire qualified personnel in our accounting department, especially to add an experienced accountant in a controller capacity. We will continue to evaluate the structure of the finance organization and add resources as needed;
  · we are implementing additional internal reporting procedures, including those designed to add depth to our review processes and improve our segregation of duties;
  · we are updating our systems so that we may collect the necessary information to enable us to more effectively monitor and comply with applicable filing requirements on a timely basis;
  · we are in the process of documenting, assessing and testing our internal control over financial reporting as part of our efforts to comply with Section 404 of the Sarbanes-Oxley Act.

Although we plan
to complete this remediation process as quickly as possible, we are unable, at this time to estimate how long it will take, and
our efforts may not be successful in remediating the deficiencies or material weaknesses.

Our executive officers and directors
collectively have the power to control our management and operations and have a significant majority in voting power on all matters
submitted to the stockholders of the Company.

Our CEO and one of our directors, Dr. Desheng
Wang, owns 35.14% of the outstanding shares of our common stock as of the date of this prospectus and after a fully subscribed
offering will own 33.27%. Two of our directors together own over 50% of the outstanding shares of our common stock and after a
fully subscribed offering will still own over 50% of the outstanding shares of our common stock. Accordingly, Directors have a
significant influence in determining the outcome of all corporate transactions or other matters, including mergers, consolidations
and the sale of all or substantially all of our assets. They also have the power to prevent or cause a change in control. The interests
of our directors may differ from the interests of the other stockholders and thus result in corporate decisions that are disadvantageous
to other shareholders.

Management currently beneficially owns
a majority of our outstanding common stock. Consequently, management has the ability to influence control of the operations of
the Company and, acting together, will have the ability to influence or control substantially all matters submitted to stockholders
for approval, including:

  · Election of our board of directors;
  · Removal of directors;
  · Amendment to the Company’s Articles of Incorporation or Bylaws; and
  · Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination.

These stockholders have complete control
over our affairs. Accordingly, this concentration of ownership by itself may have the effect of impeding a merger, consolidation,
takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for the common stock.

If we fail to maintain an effective
system of internal control over financial reporting, we may not be able to accurately report our financial results. As a result,
current and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading
price of our stock.

Members of our Board of Directors are inexperienced
with U.S. GAAP and the related internal control procedures required of U.S. public companies. Management has determined that our
internal audit function is also significantly deficient due to insufficient qualified resources to perform internal audit functions.

We are a smaller reporting company with
limited resources. Therefore, we cannot assure investors that we will be able to maintain effective internal controls over financial
reporting based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
in Internal Control-Integrated Framework. A material weakness is a deficiency, or a combination of deficiencies, in internal control
over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual
or interim financial statements will not be prevented or detected on a timely basis. The Company has deficiencies over financial
statements recording in areas of recording revenue and expenses in proper cut off as well as proper classification of accounts.
For these reasons, we are considering the costs and benefits associated with improving and documenting our disclosure controls
and procedures and internal controls and procedures, which includes (i) hiring additional personnel with sufficient U.S. GAAP experience
and (ii) implementing ongoing training in U.S. GAAP requirements for our CFO and accounting and other finance personnel. If the
result of these efforts are not successful, or if material weaknesses are identified in our internal control over financial reporting,
our management will be unable to report favorably as to the effectiveness of our internal control over financial reporting and/or
our disclosure controls and procedures, and we could be required to further implement expensive and time-consuming remedial measures
and potentially lose investor confidence in the accuracy and completeness of our financial reports which could have an adverse
effect on our stock price and potentially subject us to litigation.

The requirements of being a public
company may strain our resources and distract our management.

We are required to comply with various
regulatory and reporting requirements, including those required by the Securities and Exchange Commission. Complying with these
reporting and other regulatory requirements is time-consuming and may result in increased costs to us and could have a negative
effect on our business, results of operations and financial condition.

As a public company, we are subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and requirements of the Sarbanes-Oxley
Act of 2002, as amended, or SOX. These requirements may place a strain on our systems and resources. The Exchange Act requires
that we file annual, quarterly and current reports with respect to our business and financial condition. The SOX requires that
we maintain effective disclosure controls and procedures and internal controls over financial reporting. Compliance with these
rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming
or costly and increase demand on our systems and resources.

These activities may divert management’s
attention from other business concerns, which could have a material adverse effect on our business and results of operations.

In addition, changing laws, regulations
and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing
legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are
subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice
may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend
to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general
and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance
activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory
or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and
our business may be harmed.

We also expect that being a public company
and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and
we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also
make it more difficult for us to attract and retain qualified members of our Board of Directors, particularly to serve on our audit
committee and compensation committee, and qualified executive officers.

Risks Related to the Ownership of our
Common Stock

There is a very limited public (trading)
market for our common stock and; therefore, our investors may not be able to sell their shares and the price of our common stock
may fluctuate substantially.

Our common stock is listed on the over-the-counter
exchange, and is thinly traded. As a result, stockholders may be unable to liquidate their investments, or may encounter considerable
delay in selling shares of our common stock. If an active trading market does develop, the market price of our common stock is
likely to be highly volatile due to, among other things, the nature of our business and because we are a thinly-traded public company.
Further, a few individual stockholders dominate our shares. The limited trading volume subjects the price of our common stock to
manipulation by one or more stockholders and will significantly limit the number of shares that one can purchase or sell in a short
period of time. The market price of our common stock may also fluctuate significantly in response to the following factors, most
of which are beyond our control:

  · variations in our quarterly and annual operating results;
  · changes in general economic conditions;
  · changes in technologies favored by consumers;
  · price competition or pricing changes by us or our competitors; and
  · the addition or loss of key managerial and collaborative personnel.

The equity markets have, on occasion, experienced
significant price and volume fluctuations that have affected the market prices for many companies’ securities and that have
often been unrelated to the operating performance of these companies. Any such fluctuations may adversely affect the market price
of our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares,
or may be forced to sell them at a loss.

To date, there has been a limited public
market for shares of our common stock, with limited trading. An active public trading market may not develop or, if developed,
may not be sustained. The current market price of our common stock and any possible subsequent listing on another larger securities
exchange, if and when we are successful in doing so, will be affected by a number of factors, including those discussed above.

An increase of free trading shares
of our common stock could result in substantial sales of common stock on the open market which could cause our stock price to fall
substantially.

In 2018, we registered 19,904,706 shares
of our common stock for more than 300 shareholders, which is substantially more than the 15,718,309 shares of common stock that
are currently free trading. Any increase in freely trading shares, or the perception that such shares will or could come onto the
market could have an adverse effect on the trading price of the stock. No prediction can be made as to the effect, if any, that
sales of these shares, or the availability of such shares for sale, will have on the market prices prevailing from time to time.
Nevertheless, the possibility that substantial amounts of common stock may be sold in the public market may adversely affect prevailing
market prices for our common stock and could impair our ability to raise capital through the sale of our equity securities or impair
our shareholders’ ability to sell on the open market.

You could be diluted from our future
issuance of capital stock and derivative securities.

As of February 12, 2021, we had 40,959,741
shares of common stock outstanding and no shares of preferred stock outstanding. We are authorized to issue up to 75,000,000 shares
of common stock and no shares of preferred stock. To the extent of such authorization, our Board of Directors will have the ability,
without seeking stockholder approval, to issue additional shares of common stock or preferred stock in the future for such consideration
as the Board of Directors may consider sufficient. The issuance of additional common stock or preferred stock in the future may
reduce an investor’s or potential investor’s proportionate ownership and voting power.

Substantial future sales of our common stock, or the perception
in the public markets that these sales may occur, may depress our stock price.

Sales of substantial shares of our common
stock in the public market, or the perception that these sales could occur, could adversely affect the price of our common stock
and could impair our ability to raise capital through the sale of additional shares.

In the future, we may issue our securities
if we need to raise capital in connection with a capital raise or acquisitions. The number of shares of our common stock issued
in connection with a capital raise or acquisition could constitute a material portion of our then-outstanding shares of our common
stock and have a dilutive effect on our shareholders which could have a material negative effect on our stock price.

Future sales of our common stock
by existing stockholders could cause our stock price to decline.

If our existing stockholders sell substantial
shares of our common stock in the public market, then the market price of our common stock could decrease significantly. The perception
in the public market that our stockholders might sell shares of common stock also could depress the market price of our common
stock. There are approximately 40,959,741 shares of our common stock outstanding, of which approximately 15,718,309 shares are
currently freely tradable.

Certain existing holders of a majority
of our common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares
or to include their shares in registration statements that we may file for ourselves or other shareholders. If the sale of these
shares are registered, they will be freely tradable without restriction under the Securities Act. In the event such registration
rights are exercised and a large number of shares of common stock are sold in the public market, such sales could reduce the trading
price of our common stock.

A decline in the price of shares of our
common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity
securities.

We do not intend to pay dividends and there will be less
ways in which you can make a gain on any investment in Focus Universal Inc.

We have never paid any cash dividends and
currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently
not provided for in our financing plan, our funding sources may likely prohibit the payment of a dividend. Because we do not intend
to declare dividends, any gain on an investment in Focus Universal Inc. will need to come through appreciation of the stock’s
price.

There has been a limited trading
market for our common stock to date and it may continue to be the case even once our common stock is listed on NASDAQ.

There has been limited trading volume in
our common stock, which is currently quoted on the OTCQB and traded under the symbol “FCUV.” Once our shares of common
stock are listed on NASDAQ, there may still be a limited trading market for our common stock. A lack of an active market may impair
the ability of our stockholders to sell shares at the time they wish to sell or at a price that they consider favorable. The lack
of an active market may also reduce the fair market value of our common stock, impair our ability to raise capital by selling shares
of capital stock and may impair our ability to use common stock as consideration to attract and retain talent or engage in business
transactions (including mergers and acquisitions).

Once our shares of common stock are
listed on NASDAQ, we may not be able to maintain the continued listing standards.

NASDAQ requires companies to fulfill specific
requirements in order for their shares to continue to be listed. There is no guarantee that our common stock will maintain NASDAQ
continued listing standards and we may be delisted. If our common stock is delisted from NASDAQ, our shareholders could find it
difficult to sell their common stock.

In the event that the shares of our common
stock were to be delisted from NASDAQ, we expect that it would be traded on the OTCQB or OTCQX, which are unorganized, inter-dealer,
over-the-counter markets that provide significantly less liquidity than NASDAQ or other national securities exchanges. Thus, a
delisting from NASDAQ may have a material adverse effect on the trading and price of our common stock.

If we are unable to maintain compliance
with NASDAQ continued listing standards, including maintenance of at least $2.5 million of stockholders’ equity and maintenance
of a $1.00 minimum bid price, our common stock may be delisted from NASDAQ.

There can be no assurances that we will
be able to maintain our NASDAQ listing in the future. In the event we are unable to maintain compliance with NASDAQ continued listing
standards and our common stock is delisted from NASDAQ, it could likely lead to a number of negative implications, including an
adverse effect on the price of our common stock, reduced liquidity in our common stock, the loss of federal preemption of state
securities laws and greater difficulty in obtaining financing. In the event of a delisting, we would take actions to restore our
compliance with NASDAQ’s continued listing standards, but we can provide no assurance that any such action taken by us would
allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent
our common stock from dropping below the NASDAQ minimum bid price requirement or prevent future non-compliance with NASDAQ’s
continued listing requirements.

Focus Universal is an “emerging
growth company” under the Jumpstart Our Business Startups Act. We cannot be certain if the reduced reporting requirements
applicable to emerging growth companies will make our shares of common stock less attractive to investors.

Focus Universal is and will remain an “emerging
growth company” until the earliest to occur of (a) the last day of the fiscal year during which its total annual revenues
equal or exceed $1 billion (subject to adjustment for inflation), (b) the last day of the fiscal year following the fifth anniversary
of its initial public offering, (c) the date on which Focus Universal has, during the previous three-year period, issued more than
$1 billion in non-convertible debt securities, or (d) the date on which Focus Universal is deemed a “large accelerated filer”
(with at least $700 million in public float) under the Exchange Act.”).

For so long as Focus Universal remains
an “emerging growth company” as defined in the JOBS Act, it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not “emerging growth companies” as described in
further detail in the risk factors below. Focus Universal cannot predict if investors will find its shares of common stock less
attractive because Focus Universal will rely on some or all of these exemptions. If some investors find Focus Universal’s
shares of common stock less attractive as a result, there may be a less active trading market for its shares of common stock and
its stock price may be more volatile.

If Focus Universal avails itself of certain
exemptions from various reporting requirements, its reduced disclosure may make it more difficult for investors and securities
analysts to evaluate Focus Universal and may result in less investor confidence.

The JOBS Act is intended to reduce the
regulatory burden on “emerging growth companies”. Focus Universal meets the definition of an “emerging growth
company” and so long as it qualifies as an “emerging growth company,” it will not be required to:

  · have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
  · comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
  · submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
  · disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act
also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth
company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
However, Focus Universal is choosing to “opt out” of such extended transition period, and as a result, Focus Universal
will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for
non-emerging growth companies. Section 107 of the JOBS Act provides that its decision to opt out of the extended transition period
for complying with new or revised accounting standards is irrevocable.

Notwithstanding the above, we are also
currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer, or
a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $250
million or annual revenues of less than $100 million during the most recently completed fiscal year.

However, similar to “emerging growth
companies,” “smaller reporting companies” are able to provide simplified executive compensation disclosures in
their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered
public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; are not
required to conduct say-on-pay and frequency votes until annual meetings occurring on or after January 21, 2013; and have certain
other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two
years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an “emerging
growth company” or “smaller reporting company” may make it harder for investors to analyze the Company’s
results of operations and financial prospects.

Our management will have broad discretion as to the use
of proceeds from this offering, and we may not use the proceeds effectively.

Our management will have broad discretion
in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results
of operations or enhance the value of our common stock. You will not have the opportunity, as part of your investment decision,
to assess whether these proceeds are being used appropriately. Our failure to apply these funds effectively could have a material
adverse effect on our business and cause the price of our common stock to decline.

Risks Related to Our Acquisition of
AVX

If we are unable to manage our anticipated
post-acquisition growth effectively, our business could be adversely affected.

We anticipate that as a result of the significant
expansion of our operations and addition of operating subsidiaries, new personnel may be required in all areas of our operations
in order to continue to implement our post-acquisition business plan. Our future operating results depend to a large extent on
our ability to manage this expansion and growth successfully. For us to continue to manage such growth, we must put in place legal
and accounting systems and implement human resource management and other tools. We have taken preliminary steps to put this structure
in place. However, there is no assurance that we will be able to successfully manage this anticipated rapid growth. A failure to
manage our growth effectively could materially and adversely affect our profitability.

Increasing competition within our
industry could have an impact on our business prospects.

The IoT market is a growing industry where
new competitors are entering the market frequently. These competing companies may have significantly greater financial and other
resources than we have and may have been developing their products and services longer than we have been developing ours. Although
our portfolio of products and related revenue stream sources are broad, increasing competition may have a negative impact on our
profit margins.

The success of our smart home installation
business will depend upon the efforts of management of our subsidiary AVX.

Although key personnel have remained with
AVX following the business combination, we can offer no assurance that we will be able to retain them or effectively recruit new
additional personnel. The departure of any key members of AVX’s management team could make it more difficult to operate AVX.
Moreover, to the extent that we will rely upon their management team to operate AVX, we will be subject to risks regarding their
managerial competence. Accordingly, we cannot assure you that our assessment of these individuals will prove to be correct and
that they will have the skills, abilities and qualifications we expect.

If we are unable to integrate the
Ubiquitor device into the smart home installation business, we may not be able to distinguish ourselves in the segment and it could
negatively affect our ability to operate in the competitive smart home installation industry.

The smart home installation business is
a highly competitive market, and we have numerous competitors who are already well-established in the market. We expect our competitors
to continue improving the design and performance of their products and to introduce new products that could be competitive in both
price and performance. The reason we believe that we could become competitive in this market segment is because we anticipate integrating
the Ubiquitor device into AVX’s smart home installations. However, there is no guarantee that we can integrate the Ubiquitor
device into AVX’s smart home installations. If we are unable to integrate the Ubiquitor device into smart home installations,
we will not be able to achieve the competitive price and performance we anticipate to achieve success in AVX’s future smart
home installations. Alternatively, we may not be able to achieve a smart home installation at a cost-effective price that is sufficient
to distinguish us from amongst the competition in this market segment.

Risks related to the COVID-19 pandemic.

 

The recent
COVID-19 pandemic may adversely affect our business, results of operations, financial condition, liquidity, and cash flow.

The outbreak of COVID-19 originating in
Wuhan, China, sometime around December 2019, has since rapidly increased its exposure globally. On March 11, 2020, the World Health
Organization declared the outbreak a pandemic. The pandemic has impacted and may further impact the United States and the broader
economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital
markets, foreign currency exchange rates and interest rates. Due to the speed with which the situation is developing, the global
breadth of its spread and the range of governmental and community reactions thereto, there is uncertainty around its duration,
ultimate impact and the timing of recovery. Therefore, the pandemic could lead to an extended disruption of economic activity and
the impact on our consolidated results of operations, financial position, and cash flows could be material.

As a result of the adverse impact that
the COVID-19 pandemic is having on our economy and the economies of the countries in which we plan to do business, the pandemic
may affect our operations, including our supply chain distribution systems, production levels and research and development activities.
In addition, any preventive or protective actions that governments implement or that we adopt in response to the COVID-19 pandemic,
such as travel restrictions, quarantines, and limited operations of governmental agencies, may interfere with the ability of our
employees, vendors, and suppliers to perform their respective responsibilities and obligations relative to the conduct of our business.
Additionally, government regulations that have been imposed in response to the COVID-19 pandemic may cause delays our freight processes,
which would result in higher shipping costs. In addition, social distancing guidelines could have an adverse impact on our research
and development activities as our laboratories are not operating at full capacity.

The impact of the COVID-19 pandemic on
the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term
liquidity. Further, the resulting global economic downturn has negatively impacted the ability of certain of our customers to make
payments on a timely basis, adversely impacting our cash flows from operations. We do not yet know the full extent of the impact
of the COVID-19 pandemic or its resulting economic impact, which could have a material adverse effect on our liquidity, capital
resources, operations, and business.

We are also monitoring the impact of COVID-19
on our talent recruitment and retention efforts. If members of our management and other key personnel in critical functions across
our organization are unable to perform their duties or have limited availability due to COVID-19, we may not be able to execute
on our business strategy and/or our operations may be negatively impacted. The loss or limited availability of the services of
one or more of our executive officers or other key personnel, or our inability to recruit and retain qualified executive officers
or other key personnel in the future could, at least temporarily, have a material adverse effect on our business, financial condition,
and results of operations. Qualified individuals are in high demand, and we may incur significant costs to attract them, particularly
at the executive level. We may face difficulty in attracting and retaining key talent for a number of reasons, including delays
in the recruiting and hiring process as a result of the COVID-19 pandemic.

Our business, financial condition, and
results of operations could be materially adversely affected by unfavorable results in future employment litigation matters as
a result of COVID-19. Our employees may sue us due to possible exposure to COVID-19 while working at one of our facilities or sites.
In addition, employees may challenge decisions to implement protective measures such as contact tracing on the basis of local privacy
laws due to the increased collection of employee medical information. Litigation matters, regardless of their merits or their ultimate
outcomes, are costly, divert management’s attention and may materially adversely affect our reputation and demand for our
products. We cannot predict with certainty the eventual outcome of litigation matters. An adverse outcome of litigation or legal
matters could result in us being responsible for paying significant damages.

Any of these negative effects resulting
from litigation matters could materially adversely affect our business, financial condition or results of operations. To the extent
the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of
the other risks described in this Annual Report on Form 10-K.  

The extent to
which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including
new information which may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact.

  

 

 

 

Item 1B. UNRESOLVED STAFF COMMENTS

None.

  

Item 2. PROPERTIES

 

In September 2018, we purchased a manufacturing
warehouse and office space addressed at 2311 E. Locust St, Ontario, CA, 91761. The property consists of an industrial type, two-story
building, with a total building area of 30,740 square feet. 10,000 square feet will be utilized for office space; and 20,000 square
feet for warehouse space. The property includes 58 parking spaces. The purchase price for the property was approximately $4.52
million dollars.

Item 3. LEGAL PROCEEDINGS

On April 13, 2020, Ian Patterson resigned
from his position as Chief Operations Officer of AVX. On May 5, 2020, Mr. Patterson filed an action in the Superior Court for the
County of Los Angeles, State of California, against the Company et al. We believe neither the Company nor Dr. Wang has been served
properly and venue is improper. The complaint alleges claims including 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. The Company is investigating and intends to vigorously defend itself in
the foregoing matter. However, litigation and investigations are inherently uncertain. Accordingly, the Company cannot predict
the outcome of this matter.

On April 13, 2020, AVX terminated an employee
from her position as Sales and Marketing Director. On May 13, 2020, she filed an action in the Superior Court for the County of
Los Angeles, State of California. The Complaint alleges claims including 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. The Company is investigating and intends to vigorously defend itself in
the foregoing matters. However, litigation and investigations are inherently uncertain but the outcome could have a material impact
on the Company.

Item 4. MINE SAFETY DISCLOSURES

Not applicable to our Company.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART II

 

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

On September 23, 2014, our common stock
was verified for trading on OTCQB under the trading symbol FCUV. Prior to that time, there was no public market for our stock.
The following table sets forth for the indicated periods the high and low intra-day sales price per share for our common stock
on the OTCQB for the four quarters of 2019 and for the four quarters of 2020.

    High     Low  
             
2019: First Quarter   $ 7.40     $ 7.40  
2019: Second Quarter   $ 7.40     $ 5.29  
2019: Third Quarter   $ 12.25     $ 5.00  
2019: Fourth Quarter   $ 5.00     $ 5.00  
                 
2020: First Quarter   $ 5.00     $ 2.50  
2020: Second Quarter   $ 4.50     $ 3.67  
2020: Third Quarter   $ 3.60     $ 3.50  
2020: Fourth Quarter   $ 3.50     $ 2.00  

Holders.

As of March 23, 2020, there were 397 record
holders (including our directors) of 40,959,741 shares of the Company’s common stock. At December 31, 2020, there were 397
  record holders (including our directors) of 40,959,741 shares of the Company’s common stock.

Dividends.

The Company has not paid any cash dividends
to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management
to utilize all available funds for the development of the Company’s business.

Securities Authorized for Issuance Under Equity Compensation
Plans

The Company has authorized the issuance
of up to 10,000,000 shares of its common stock for issuance under the 2018 Focus Universal Inc. Stock Option Plan.

Recent sales of unregistered securities.

None.

Issuer Purchases of Equity Securities

We
did not repurchase any of our equity securities during the year ended December 31, 2020, 2019, 2018, 2017
  ,
the nine months ended December 31, 2016, the year ended March 31, 2016, 2015, 2014 or the period from December 4, 2012 (inception)
to March 31, 2013.
  

  

Item 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read
in conjunction with our audited financial statements and notes thereto included herein. In connection with, and because we desire
to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution
readers regarding certain forward-looking statements in the following discussion and elsewhere in this report and in any other
statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate to future operations, strategies, financial results
or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject
to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or
our behalf. We disclaim any obligation to update forward-looking statements.

Narrative Description of the Business

Focus Universal Inc. (the “Company,”
“we,” “us,” or “our”) is a Nevada corporation. We have
developed four fundamental disruptive proprietary technologies which we believe solve the most fundamental problems plaguing the
internet of things (“IoT”) industry through: (1) increasing overall chip integration by shifting it to the device level;
(2) creating a faster 5G cellular technology by using Ultra-narrowband technology; (3) leveraging ultra-narrowband power line communication
(“PLC”) technology; and (4) User Interface Machine auto generation technology. Our Universal smart technology is designed
to overcome instrumentation interoperability and interchangeability. The electronic design starts from a 90% completed common foundation
we call our universal smart instrumentation platform (“USIP”), instead of the current method of building each stand-alone
instrument from scratch. Our method eliminates redundant hardware and software and results in significant cost savings and production
efficiency. We have developed software machine auto generation technology to replace the manual software designs which are currently
in use and cannot satisfy the exponential growth of future IoT industry demand. Our ultra-narrowband PLC enables our users to send
data over existing electricity power cables and immediately establish a ubiquitous data network without substantial new investment
for a dedicated wiring infrastructure. Our ultra-narrow band technology is capable of overcoming the noise problems communicating
through power lines that have hindered our competitors for over a century. Our wireless communication technology allows for longer-range
coverage, is more energy effective and has much faster data sending speeds than the current 5G technology speeds 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 years ended December 31, 2020 and
2019, we generated significant amount of our revenue from sales of a broad selection of agricultural sensors and measurement equipment
which is currently our primary business.

Our Current Products Include:

Products we are currently selling

We are also 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 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.

Specifically, we sell the following products:

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

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Our Fan Speed Adjuster Device

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.

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Our Carbon Filter Device

HEPA filtration device. We provide
a high-efficiency particulate arrestance (“HEPA”) filtration device at wholesale prices to our client Hydrofarm. Manufactured,
tested, certified, and labeled in accordance with current HEPA filter standards, this device is targeted towards greenhouses and
grow rooms and designed to keep insects, bacteria, and mold out of grow rooms. We sell these devices in various sizes.

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Our HEPA Filtration Device

 

 

 

 

Digital light meter. We provide
a handheld digital light meter that is used to measure luminance in fc units, or foot-candles.

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Our Digital Light Meter Device

Quantum par meter. We provide a
handheld quantum par meter used to measure photosynthetically active radiation (“PAR”). This fully portable handheld
PAR meter is designed to measure PAR flux in wavelengths ranging from 400 to 700 nm. It is designed to measure up to 10,000 µmol.

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Our Quantum Par Meter Device

Strategy behind the AVX Acquisition

On March 15, 2019, the Company completed
a transaction with Patrick Calderone to purchase 100% of the outstanding stock of AVX, an IoT installation and management company
based in southern California.

Through our acquisition of AVX, we are
planning to offer ordinary families an entire smart home product line at a fraction of the current market price. We have finished
the design of smart lighting control, air conditioner, sprinkler, garden light control, garage door control and heating control.
We are developing a swimming pool control device, smoke detector and carbon monoxide monitor. We believe these product lines could
be completed by the end of 2021.

Ubiquitor Wireless Universal Sensor
Device

Our USIP technology 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. We believe the platform represents a technological advancement in the IoT marketplace by integrating large
numbers of technologies, including cloud technology, wired and wireless communication technology, software programming, instrumentation
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.

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 2021. Our prototype Ubiquitor is compatible with
standard desktop computers running either Windows OS or MacOS and Android- or iOS-based mobile devices and acts as a conduit that
communicates with a group of sensors or probes manufactured by different vendors in a manner that requires the user to have little
or no knowledge of their unique specifications. The data readout is displayed on the computer or mobile device display in application
software we have created for use with a Windows PC and are creating for use with a Mac. We are designing the application software
(the “App”) to have a graphical representation of control and indicator elements common in traditional tangible instruments,
such as knobs, buttons, dials, and graphs, etc. Utilizing the Ubiquitor and the App, users and instrument manufacturers will be
free to add, remove or change a sensor module for their special industrial or educational application without needing to create
their own application software and design their own hardware. Our developers are designing and implementing a soft control touch
screen interface that supports real-time data monitoring and facilitates instrument control and operation.

Recently, the Company has devoted a substantial
number of resources to research and development 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 employees in
order to gain traction in the market. We intend to introduce the Ubiquitor in smart home installations to reduce costs and increase
functionality, as well as implement the Ubiquitor device in greenhouses and other agricultural warehouses that require regulation
of light, humidity, moisture, and other measurable scientific units required 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.

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. We have completed an initial production run of prototype Ubiquitor devices
and intend to proceed into full-scale production. The Ubiquitor’s sensor analytics system integrates event-monitoring, storage
and analytics software in a cohesive package that provides a holistic view of the sensor data it is reading.

The physical hardware consists of:

  1. The sensor nodes, which come in hundreds of different varieties of sensor instruments in the form of a USB stick, with both male and female ports; and
  2. The Ubiquitor as the main hardware gateway, which is a small cell phone-sized device with integrated circuits.

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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 charts.

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The Ubiquitor is 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.

By using the universal hardware or USIP,
we believe we could achieve the following efficiencies in instrumentation systems:

  1. Cut production costs. Smartphone technology is widely used on the small sensor device market. By utilizing smartphone technology, the Ubiquitor will add superior functionality and performance, improve the product’s quality and cut production costs.
  2. Reduce the effort required to develop a new sensor product. With the Ubiquitor, we believe that there will be no need for device manufacturers to research and develop new monitoring and operating components because they will just need to develop new sensor nodes or probes that may be integrated into our software technology.
  3. Reduce clutter. 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. Currently our research and development is focused on concepts we can implement in the current first generation
Ubiquitor device.

Research and Development Efforts of
Power Line 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. We believe PLC can be an integral
part of our communication infrastructure for the IoT, which enables reliable, real-time measurements, monitoring and control. A
large variety of appliances may be interconnected by transmitting data through the same wires that provide electrical energy.

Wireless networks
allow multiple users to access large amounts of information without the hassle of running wires to and from each IoT device (See
“Risk Factors” above). The 5G cellular network, for example, promises exciting advances for telecommunication service
providers, but the implementation of the 5G network will be challenging. The implementation will require building out dense, low-latency
edge networks in ways that are affordable, secure and easily maintainable. 5G antennas will be able to handle more users and to
transmit more data, but they will have a shorter transmission range. 5G networks will also require frequencies of up to 300 GHz.
This requirement means wireless carriers will need to bid for the costly higher spectrum bands to roll out their respective 5G
networks. Generally speaking, wireless networks are typically slower and more expensive than existing wired networks and extremely
susceptible to interference from radio signals, radiation, walls and other forms of interference. Additionally, wireless networks
may be accessed by any device within range of the network’s signal, making the information transmitted on a wireless network
susceptible to access by unauthorized recipients. We are currently developing a wired alternative to wireless networks that utilizes
installed power lines to transmit information. Our 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.

PLC has been around for many years, leading
some to believe that it is a mature technology. Current leaders in the industry include Siemens (Germany), Netgear (US), ABB (Switzerland),
Ametek (US), Schneider Electric (France), General Electric (US), TP-Link Technologies (China), D-Link (Taiwan), Landis+Gyr (Switzerland),
and Nyx Hemera Technologies (Canada).

The primary design goal of the power line
network is electric power distribution, not data transmission. Consequently, although PLC is an established technology, the harsh
electrical noise present on power lines and variations in equipment and standards make communications over the power grid difficult
and present a number of fundamental challenges for data transfer. Signals propagating along the power line are subjected to very
large amounts of noise, attenuation, and distortion that make them erratic, with several attributes varying over time. PLC is susceptible
to noise from devices linked to the power supply infrastructure, for example, fluorescent tube lights, drills, hair dryers, microwave
ovens, computers, switch mode power supply, cellphone chargers, dimmers, refrigerators, televisions, washing machines, and vacuum
cleaners. All the trials of PLC technology appear to have resulted in power companies and internet service providers deciding that
the technology is not viable as a means of delivering broadband internet access. These technological challenges have impeded, or
even halted, progression of PLC technology.

We are performing research and development
with the intention of inventing our own ultra-narrow band 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 noise rejection and interference suppression at five orders of magnitude better than traditional PLC technology.
We believe our ultra-narrow band PLC technology shows robustness against noise and interference, based on our internal testing
where we found no detectable interference occurring when six industrial blowers, notorious for causing electrical noise, and a
large air conditioning unit were connected to an electrical line passing a control signal. By comparison, a small air dryer is
able to cause interference in legacy PLC systems. State of the art PLC technologies developed by other companies may offer sufficient
bandwidth, but they cannot effectively deal with the interference of electric noise on the system. However, 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. Furthermore, such data transfer rates were delivered at a bandwidth
of less than 1000 Hz, thereby achieving a bandwidth efficiency (measured as bits per second per Hz) greater than 4000. For comparison
purposes, 4G cellular networks have a bandwidth efficiency of less than 6 due to their requirement of larger bandwidth resources.
The demand for bandwidth resources will only grow with the upcoming 5G and proposed 6G networks. Accordingly, further research
of our PLC technology is warranted as it shows promise for increased data transfer rates at a lower cost than either of the 5G
and proposed 6G networks, particularly given such networks’ requirements for costly new infrastructure and bandwidth resources.
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 2021.

  

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We believe that because residential and
commercial structures already include multiple power outlets, the power line infrastructure represents an excellent network to
share data among intelligent devices, particularly in the smart home installations that we are currently performing through AVX.
Using PLC technology would mean that the requirement for costly ethernet cable networks to carry network information could be eliminated,
as the same signals may be carried on the existing power lines.

We plan to leverage the communications
technology of PLC to enhance the Ubiquitor and make the Ubiquitor a central component of the smart home and gardening systems we
are currently developing. The goal would be that our Ubiquitor would be used to send or receive control signals from a smart device,
and control hundreds of devices in near real time. We intend to apply the same concept to commercial and industrial applications.

Also,
we plan to design a full line of products for the gardening industry by integrating the Ubiquitor device into a gardening system.
The system would include a light control node, temperature sensor, humidity sensor, digital light sensor, quantum PAR sensor, pH
sensor, total dissolved solids (“TDS”) sensor and carbon dioxide sensor design. We believe the combination of these
sensors would offer the same features as a combination of dozens or even hundreds of different instruments in the gardening industry.
The Ubiquitor would be used to replace these devices and could offer another case study of the effectiveness of the application
of universal smart technology to such systems.

The development of universal smart instruments
and the IoT have a considerable amount of overlap, with the only difference being the number of sensor nodes involved. We plan
to take advantage of this overlap and unify universal smart instruments and the IoT into a single system, building the IoT infrastructure
for both residential and commercial uses and charging monthly subscription fees. End users will be able to plug any peripheral
devices into the power outlet and enjoy the IoT connectivity throughout their home.

Eventually,
we hope to establish five divisions to bring our technology together: 1) AVX with new shared distributed smart home products powered
by the Ubiquitor; 2) an IT division in software machine design; 3) Universal Smart Instrumentation; 4) PLC; and 5) an IoT division.

Intellectual Property Protection

On November 4, 2016, we filed a U.S. patent
application number 15/344,041 with the USPTO. On March 5, 2018, we issued a press release announcing that the USPTO published an
Issue Notification for U.S. Patent Application No. 9924295 entitled “Universal Smart Device,” which covers a patent
application regarding the Company’s Universal Smart Device. The patent was issued on March 20, 2018.

Subsequent to our internal research and
development efforts, we filed with the USPTO on June 2, 2017 a patent application regarding a process for improving a spectral
response curve of a photo sensor. The small and cost-effective multicolor sensor and its related software protected by the patent
we believe could achieve a spectral response that approximates an ideal photo response to take optical measurement. The patent
was issued on February 26, 2019.

In addition, we have been notified that
the USPTO published a notice of allowance for a patent application we filed on March 12, 2018 as application No. 15/925,400. The
patent title is a “Universal Smart Device,” which is a universal smart instrument that unifies heterogeneous measurement
probes into a single device that can analyze, publish, and share the data analyzed. The issue fee was paid on March 14, 2019.

On November 29, 2019, the Company filed
an international utility patent application filed through the patent cooperation treaty as application PCT/US2019/63880. In April
2020, the Company was notified that it received a favorable international search report from the International Searching Authority
regarding this patent application, which patents the Company’s PLC technology. The World International Property Organization
report cited only three category “A” documents, indicating that the Company’s application met both the novelty
and non-obviousness patentability requirements. Consequently, the Company is optimistic that the patent covering the claims for
its PLC technology will be issued in due course and will allow the Company to implement strong protections on the PLC technology
worldwide.

Competitors

There are several competitors we have identified
in the wireless sensor node industry, including traditional instruments or devices manufacturers such as Hanna Instruments and
Extech Instruments.

Hach developed and launched the SC1000
Multi-parameter Universal Controller, a probe module for connecting up to 32 digital sensors or analyzers. However, their products
are not compatible with smart phones yet; and we believe their price point is still prohibitive to consumers.

Monnit Corporation offers a range of wireless
and remote sensors. Many of Monnit’s products are web-based wireless sensors that usually are not portable because of their
power consumption. Also, the sensors’ real-time updates are slow; and we believe security of the web-based sensor data acquisition
also may be a concern. In addition to purchasing the device, consumers usually have to pay monthly fees for using web-based services.

We are not trying to compete with traditional
instruments or device manufacturers because we utilize our Ubiquitor device in conjunction with our smartphone application, which
we believe will be a completely different product category.

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 companies. 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 who are sensitive to price.

Results of Operations

For the year ended December 31, 2020 compared to the year
ended December 31, 2019

Revenue, Cost of Sales and Gross Profit

Our consolidated gross revenue for the
years ended December 31, 2020 and 2019 was $1,678,967 and $1,460,370, respectively, which included revenue from related parties
of $26,449 and $14,184, respectively. Revenue for the year ended December 31, 2020 increased $218,597 due to the acquisition of
AVX, resulting in gross profit of $283,780 and $118,231 for the years ended December 31, 2020 and 2019, respectively.

Operating Costs and Expenses

The major components of our operating expenses
for the years ended December 31, 2020 and 2019 are outlined in the table below:

    For the year ended December 31, 2020     For the year ended December 31, 2019     Increase
(Decrease)
$
 
Selling expense   $ 22,590     $ 46,624     $ (24,034 )
Officer compensation     142,100       150,154       (8,054 )
Research and development     256,636       255,232       1,404  
Professional fees     1,297,160       1,376,995       (79,835 )
General and administrative     1,269,207       1,113,201       156,006  
Goodwill impairment           458,490       (458,490 )
Intangible assets impairment           47,975       (47,975 )
Total operating expenses   $ 2,987,693     $ 3,448,671     $ (460,978 )

Selling
expense for the year ended December 31, 2020 was $22,590, compared to $46,624 for the year ended December 31, 2019. In 2019, the
Company acquired AVX, consolidating its selling expenses for its operation. Selling expense incurred was mainly from third party
advertising fees. The decrease of selling expense was due to a decrease in advertising fees.

Officer compensation was $142,100 and $150,154
for the years ended December 31, 2020 and 2019, respectively. The decrease was due to an adjustment of the Chief Financial Officer’s
compensation.

Research and development costs were $256,636
and $255,232 for the years ended December 31, 2020 and 2019, respectively. The increase was due to an increase of supplies needed
for research and development in 2020.

Professional fees were $1,376,995 during
the year ended December 31, 2019 compared to $1,297,160 during the year ended December 31, 2020. The decrease in professional fees
mainly resulted from accounting fees as we have in house accounting department handling our accounting work.

General and administrative expenses of
$1,269,207 incurred during the year ended December 31, 2020 primarily consisted of salaries of $491,638, insurance expense of $210,949
and depreciation expense of $162,242. General and administrative expenses of $1,113,201 incurred during the year ended December
31, 2019 primarily consisted of salaries of $462,833, insurance expense of $182,110, and depreciation expense of $151,670. The
increase was due to increased salaries, increased insurance premiums, and depreciation expense. Salary expense increased due to
additional employees from the acquired entity as well as additional employees hired. The increase in insurance expense is due to
the acquisition of AVX as well as NASDAQ uplisting related expenses and an increase in insurance premiums. Depreciation expense
increased mainly due to additional fixed assets acquired with AVX.

Net Losses

During the years ended
December 31, 2020 and 2019, we incurred net losses of $2,537,113 and $3,175,543 respectively, due to the factors discussed above.

Liquidity and Capital Resources

Working Capital

 

    December 31,
2020
    December 31,
2019
 
Current Assets   $ 1,007,630     $ 2,440,112  
Current Liabilities     (527,559 )     (432,999 )
Working Capital   $ 480,071     $ 2,007,113  

Cash Flows

The table below, for the periods indicated,
provides selected cash flow information:

    For the year ended December 31, 2020     For the year ended December 31, 2019  
Net cash used in operating activities   $ (1,955,091 )   $ (1,697,771 )
Net cash used in investing activities     (1,314 )     (565,110 )
Net cash provided by financing activities     346,860        
Net change in cash   $ (1,609,545 )   $ (2,262,881 )

Cash Flows from Operating Activities

Our net cash outflows from operating activities
of $1,955,091 for the year ended December 31, 2020 was primarily the result of our net loss of $2,537,113 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 $75,125, decrease in inventory of $21,289, increase in prepaid expenses of $44,282, increase
in deposits of $100,000, increase in accounts payable and accrued liabilities of $8,132, increase in accounts payable – related
party of $17,471, decrease in other current liabilities of $12,238, decrease in interest payable – related party of $1,750,
decrease in customer deposit of $70,294, and increase in other liabilities of $4,800.

Non-cash expense included add-backs of $21,907 in bad debt expense, $162,242 in depreciation expense,
$48,000 in stock-based compensation, $605,150 in stock option compensation, reduction in inventory reserve of $852 and a net of
$2,428 in amortization of right-of-use assets. Our net cash outflows from operating activities of $1,697,771 for the year ended
December 31, 2019, was primarily the result of our net loss of $3,175,543 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 $102,956, decrease of accounts receivable – related party of $39,625, decrease in inventory of $15,932, decrease
in prepaid expenses of $68,862, decrease in deposits of $7,210, decrease in accounts payable and accrued liabilities of $38,705,
decrease in accounts payable – related party of $4,921, increase in other current liabilities of $9,610, increase in interest
payable – related party of $1,750, increase  in customer deposits of $77,540, and increase in other liabilities of $12,335.

Non-cash
expense includes add-backs of $5,175 in bad debt expense, $6,448 in inventory reserve, $151,670 in depreciation expense, $9,025
in amortization of intangible assets, $47,975 in impairment of intangible assets, $458,490 in impairment of goodwill, net of $673
in amortization of right-of-use asset, $75,218 in stock-based compensation, and $432,250 in stock option compensation.
  

We expect that cash flows from operating
activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our net revenues and operating
results, utilization of new revenue streams, collection of accounts receivable, and timing of billings and payments.

Cash Flows from Investing Activities

For the year ended December 31, 2020 we
had cash outflow from investing activities of $ 1,314 from the purchase of property and equipment. The Company acquired AVX
in March 2019, resulting in a cash outflow from investment activities of $565,110 for the year ended December 31, 2019, which includes
$216,592 in purchases of property and equipment, $201,482 cash provided from the acquisition of AVX, and $550,000 cash paid for
the acquisition.

Cash Flows from Financing Activities

 

For the year ended December 31, 2020 the
Company paid off a promissory note, resulting in cash outflows of $50,000 and obtained loans from the SBA in the amount of $396,860.
For the year ended December 31, 2019, there was no cash flow from financing activities.

 

Going Concern

These financial statements
have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities
in the normal course of business. 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. Recently, the Company has devoted a substantial amount of
resources to research and development to bring the Ubiquitor and its mobile application to full production and distribution. For
the year ended December 31, 2020, the Company had a net loss of $2,537,113 and negative cash flow from operating activities of
$1,955,091. As of December 31, 2020, the Company also had an accumulated deficit of $9,716,114. These factors raise certain doubts
regarding the Company’s ability to continue as a going concern. There are no assurances, however, that the Company will
be successful in obtaining an adequate level of financing for the long-term development and commercialization of its Ubiquitor
product.

Off-Balance Sheet Arrangements

As of December 31, 2020, we did not have
any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation SK.

  

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA

FOCUS UNIVERSAL INC. AND SUBSIDIARY

FOR THE YEARS ENDED DECEMBER 31, 2020,
AND 2019

 

Index to the Financial Statements

Report of Independent Registered Public
Accounting Firm

To the shareholders and the board of directors
of Focus Universal, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated
balance sheets of Focus Universal, Inc. (the “Company”) as of December 31, 2020 and 2019, 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, 2020 and 2019, and the results of its operations and its cash flows for
the years then ended, in conformity with accounting principles generally accepted in the United States.

Basis for Opinion

These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable
basis for our opinion.

 

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.

/s/ BF Borgers CPA PC

BF Borgers CPA PC

We have served as the Company’s auditor
since 2017

Lakewood, CO

March 23, 2021

 

 

 

 

FOCUS UNIVERSAL INC.

CONSOLIDATED BALANCE SHEETS

 

    December 31,     December 31,  
    2020     2019  
             
ASSETS
Current Assets:                
Cash   $ 583,325     $ 2,192,870  
Accounts receivable, net     190,556       137,338  
Inventories, net     42,496       62,933  
Prepaid expenses     91,253       46,971  
Deposit – current portion     100,000        
Total Current Assets     1,007,630       2,440,112  
                 
Property and equipment, net     4,492,510       4,653,438  
Operating lease right-of-use asset     86,558       128,399  
Deposits     6,630       6,630  
                 
Total Assets   $ 5,593,328     $ 7,228,579  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current Liabilities:                
Accounts payable and accrued liabilities   $ 198,870     $ 192,488  
Accounts payable – related party     17,471        
Other current liabilities     6,332       16,820  
Interest payable – related party           1,750  
Customer deposit     57,377       127,671  
Loan, current portion     194,125        
Lease liability, current portion     53,384       44,270  
Promissory note short term – related party           50,000  
Total Current Liabilities     527,559       432,999  
                 
Non-Current Liabilities:                
Lease liability, less current portion     41,287       94,670  
Loan, less current portion     202,735        
Other liability     17,135       12,335  
Total Non-Current Liabilities     261,157       107,005  
                 
Total Liabilities     788,716       540,004  
                 
Contingencies (Note 11)            
                 
Stockholders’ Equity:                
Common stock, par value $0.001 per share, 75,000,000 shares authorized; 40,959,741 shares issued and outstanding as of December 31, 2020 and 2019, respectively     40,959       40,959  
Additional paid-in capital     14,381,058       13,775,908  
Shares to be issued, common shares     98,709       50,709  
Accumulated deficit     (9,716,114 )     (7,179,001 )
Total Stockholders’ Equity     4,804,612       6,688,575  
                 
Total Liabilities and Stockholders’ Equity   $ 5,593,328     $ 7,228,579  

The accompanying notes are an integral
part of these consolidated financial statements.

 

 

FOCUS UNIVERSAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

    Years ended December 31,  
    2020     2019  
Revenue   $ 1,652,518     $ 1,446,186  
Revenue – related party     26,449       14,184  
Total Revenue     1,678,967       1,460,370  
Cost of Revenue     1,395,187       1,342,139  
                 
Gross Profit     283,780       118,231  
                 
Operating Expenses:                
Selling expense     22,590       46,624  
Compensation – officers     142,100       150,154  
Research and development     256,636       255,232  
Professional fees     1,297,160       1,376,995  
General and administrative     1,269,207       1,113,201  
Goodwill impairment           458,490  
Intangible assets impairment           47,975  
Total Operating Expenses     2,987,693       3,448,671  
                 
Loss from Operations     (2,703,913 )     (3,330,440 )
                 
Other Income (Expense):                
Interest income (expense), net     (4,072 )     2,257  
Interest (expense) – related party     (81 )     (1,750 )
Other income     170,953       154,390  
Total other income (expense)     166,800       154,897  
                 
Loss before income taxes     (2,537,113 )     (3,175,543 )
                 
Income tax expense            
                 
Net Loss   $ (2,537,113 )   $ (3,175,543 )
                 
Weight Average Number of Common Shares Outstanding: Basic and Diluted     40,959,741       40,945,807  
                 
Net Loss per common share: Basic and Diluted   $ (0.06 )   $ (0.08 )

 

The accompanying notes are an integral
part of these consolidated financial statements.

 

 

FOCUS UNIVERSAL INC.

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2020
and 2019

 

                Additional     Shares to be           Total  
    Common stock     Paid-In     issued     Accumulated     Stockholders’  
Description   Shares     Amount     Capital     Common Shares     Deficit     Equity  
Balance – December 31, 2018     40,907,010     $ 40,907     $ 12,956,486     $ 72,000     $ (4,003,458 )   $ 9,065,935  
                                                 
Common stock issued for prior period service     10,133       10       71,990       (72,000 )            
                                                 
Common stock issued for service     3,312       3       24,506                   24,509  
                                                 
Common stock issued for acquisition     39,286       39       290,676                   290,715  
                                                 
Common stock to be issued for services                       50,709             50,709  
                                                 
Stock options issued for services                 432,250                   432,250  
                                                 
Net loss                             (3,175,543 )     (3,175,543 )
                                                 
Balance – December 31, 2019     40,959,741       40,959       13,775,908       50,709       (7,179,001 )     6,688,575  
                                                 
Stock options issued for services                 605,150                   605,150  
                                                 
Common stock to be issued for services                       48,000             48,000  
                                                 
Net loss                             (2,537,113 )     (2,537,113 )
                                                 
Balance – December 31, 2020     40,959,741       40,959       14,381,058       98,709       (9,716,114 )     4,804,612  

The accompanying notes are an integral
part of these consolidated financial statements

 

 

FOCUS UNIVERSAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

    For the Years Ended December 31,  
    2020     2019  
Cash flows from operating activities:                
Net Loss   $ (2,537,113 )   $ (3,175,543 )
Adjustments to reconcile net loss to net cash from operating activities:                
Bad debt expense     21,907       5,175  
Inventories reserve     (852 )     6,448  
Depreciation expense     162,242       151,670  
Amortization of intangible assets           9,025  
Impairment of intangible assets           47,975  
Impairment of goodwill           458,490  
Amortization of right-of-use assets     (2,428 )     (673 )
Stock-based compensation     48,000       75,218  
Stock option compensation     605,150       432,250  
Changes in operating assets and liabilities:                
Accounts receivable     (75,125 )     102,956  
Accounts receivable – related party           39,625  
Inventories     21,289       15,932  
Prepaid expenses     (44,282 )     68,862  
Deposit – Current portion     (100,000 )      
Deposits           7,210  
Accounts payable and accrued liabilities     8,132       (38,705 )
Accounts payable – related party     17,471       (4,921 )
Other current liabilities     (12,238 )     9,610  
Interest payable – related party     (1,750 )     1,750  
Customer deposit     (70,294 )     77,540  
Other liabilities     4,800       12,335  
Net cash flows used in operating activities     (1,955,091 )     (1,697,771 )
                 
Cash flows from investing activities:                
Cash from acquisition           201,482  
Purchase of property and equipment     (1,314 )     (11,148 )
Cash paid for building improvement           (205,444 )
Cash paid for acquisition           (550,000 )
Net cash flows used in investing activities     (1,314 )     (565,110 )
                 
Cash flows from financing activities:                
Proceeds from SBA loan     396,860        
Payment on promissory note     (50,000 )      
Net cash flows provided by financing activities     346,860        
                 
Net change in cash     (1,609,545 )     (2,262,881 )
                 
Cash beginning of period     2,192,870       4,455,751  
                 
Cash end of period   $ 583,325     $ 2,192,870  
                 
Supplemental cash flow disclosure:                
Cash paid for income taxes   $     $  
Cash paid for interest   $ 1,831     $  
                 
Supplemental disclosures of non-cash investing and financing activities:                
Promissory note issued for acquisition   $     $ 50,000  
Shares issued for acquisition   $     $ 290,716  

The accompanying notes are an integral
part of these consolidated financial statements.

 

FOCUS UNIVERSAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 AND 2019

 

Note 1 – Organization and Operations

 

Focus Universal Inc. (“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 the Los Angeles, California metropolitan area, specializing in the development
and commercialization of novel and proprietary universal smart technologies and instruments. Universal smart technology is an off-the-shelf
technology utilizing an innovative hardware integrated platform. The Focus platform provides a unique and universal combined wired
and wireless solution for embedded design, industrial control, functionality test, and parameter measurement instruments and functions.
Our smart technology software utilizes a smartphone, computer, or a mobile device as an interface platform and display that communicates
and works in tandem with a group of external sensors or probes, or both. The external sensors and probes may be manufactured by
different vendors, but the universal smart technology functions in a manner that does not require the user to have extensive knowledge
of the unique characteristics of the function of each of the sensors and probes. The universal smart instrument Focus developed
(the “Ubiquitor”) consists of a reusable foundation component which includes a wireless gateway (which allows the instrument
to connect to the smartphone via Bluetooth and WiFi technology), universal smart application software (“Application”)
which is installed on the user’s smartphone or other mobile device and allows monitoring of the sensor readouts on the smartphone
screen. The Ubiquitor also connects to a variety of individual scientific sensors that collect data, from moisture, light, airflow,
voltage, and a wide variety of applications. The data then sent through a wired or wireless connection, or a combination thereof
to the smartphone or other mobile device and the data is organized and displayed on the smartphone screen. The smartphone or other
mobile device, foundation, and sensor readouts together perform the functions of many traditional scientific and engineering instruments
and are intended to replace the traditional, wired stand-alone instruments at a fraction of their cost.

Perfecular Inc. (“Perfecular”)
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. (“AVX”)
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.

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation

The accompanying consolidated financial
statements include the accounts of Focus and its wholly-owned subsidiaries, Perfecular Inc. and AVX Design & Integration, Inc.
(collectively, the “Company”, “we”, “our”, or “us”). All intercompany balances
and transactions have been eliminated upon consolidation. The Company’s consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Going Concern

The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern basis, which assumes the Company will
continue to realize its assets and discharge its liabilities in the normal course of business. 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.
Recently, the Company has devoted a substantial amount of resources to research and development to bring the Ubiquitor and its
mobile application to full production and distribution. For the year ended December 31, 2020, the Company had a net loss of $2,537,113
and negative cash flow from operating activities of $1,955,091. As of December 31, 2020, the Company also had an accumulated
deficit of $9,716,114. These factors raise certain doubts regarding the Company’s ability to continue as a going concern.
There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing for the long-term
development and commercialization of its Ubiquitor product.

Principles of Consolidation

The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiaries, Perfecular Inc. and AVX Design & Integration.
Focus and Perfecular, collectively “the entities” were under common control; 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 similar to 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. All significant intercompany transactions and balances have been eliminated.

Segment Reporting

The Company currently has two operating
segments. In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company considers operating segments
to be components of the Company’s business for which separate financial information is available and evaluated regularly
by Management in deciding how to allocate resources and to assess performance. Management reviews financial information presented
on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has
determined that it has two operating and reportable segments.

Asset
information by operating segment is not presented as the chief operating decision maker does not review this information by segment.
The reporting segments follow the same accounting policies used in the preparation of the Company’s
  consolidated
financial statements.

Use of Estimates

The preparation of consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the accompanying consolidated
financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates
and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of
costs and expenses that are not readily apparent from other sources.

The actual results experienced by the Company
may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the
estimates and the actual results, future results of operations will be affected. 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.

Cash

The Company considers all highly liquid
investments with a maturity of three months or less to be cash. At times, such investments may be in excess of Federal Deposit
Insurance Corporation (FDIC) insurance limit. There were no cash equivalents held by the Company at December 31, 2020 and 2019.

Accounts Receivable

The Company grants credit to clients that
sell the Company’s products or engage in construction service under credit terms that it believes are customary in the industry
and do not require collateral to support customer receivables. The accounts receivable balances are generally collected within
30 to 90 days of the product sale.

Allowance for doubtful accounts

The Company estimates an allowance for
doubtful accounts based on historical collection trends and review of the current status of trade accounts receivable. It is reasonably
possible that the Company’s estimate of the allowance for doubtful accounts will change. As of December 31, 2020 and 2019, allowance
for doubtful accounts amounted to $44,519 and $22,612, respectively.

Concentrations of Credit Risk

Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company limits its exposure
to credit loss by investing its cash with high credit quality financial institutions.

Inventory

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 lower. Inventory allowances are recorded for obsolete or slow-moving inventory based on assumptions about future demand and
marketability of products, the impact of new product introductions and specific identification of items, such as discontinued products.
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 its carrying value to its estimated market value. As of December 31, 2020 and 2019, inventory reserve amounted to
$ 70,562 and $71,414, respectively.

Property and Equipment

Property and equipment are stated at cost.
The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts and any gain or loss is
included in earnings. Maintenance and repairs are expensed currently. Major renewals and betterments are capitalized. Depreciation
is computed using the straight-line method. Estimated useful lives are as follows:

Fixed assets Useful life
Furniture 5 years
Equipment 5 years
Warehouse 39 years
Improvement 5 years
Construction in progress
Land

Long-Lived Assets

The Company applies the provisions of FASB
ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal
of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’
carrying amounts. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of
the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are
reduced for the cost of disposal. Long-term assets of the Company are reviewed when circumstances warrant as to whether their carrying
value has become impaired. The Company considers assets to be impaired if the carrying value exceeds the future projected cash
flows from related operations. The Company also re-evaluates the periods of amortization to determine whether subsequent events
and circumstances warrant revised estimates of useful lives. Based on its review at December 31, 2020 and 2019, the Company believes
there was no impairment of its long-lived assets.

Intangible Assets

The Company’s intangible assets were
acquired from AVX. Amortization is computed using the straight-line method, and the Company evaluates for impairments annually.
During the year ended December 31, 2019, the Company determined that the intangible assets associated with the acquisition of AVX
was fully impaired. During the year ended December 31, 2019, impairment for intangible assets amounted to $47,975. Estimated useful
lives of intangible assets are as follows:

Intangible assets Useful life
Market related intangible assets 5 years

Goodwill

Goodwill represents the excess of the purchase
price over the fair value of net assets acquired in a business combination. Goodwill with indefinite useful lives are tested for
impairment at least annually at December 31 and whenever triggering events or changes in circumstances indicate its carrying value
may not be recoverable. Assessment of the potential impairment of goodwill is an integral part of the Company’s normal ongoing
review of operations. Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects
management’s best estimates at a particular point in time. The dynamic economic environments in which the Company’s
businesses operate and key economic and business assumptions related to projected selling prices, market growth, inflation rates
and operating expense ratios, can significantly affect the outcome of impairment tests. Estimates based on these assumptions may
differ significantly from actual results. Changes in factors and assumptions used in assessing potential impairments can have a
significant impact on the existence and magnitude of impairments, as well as the time in which such impairments are recognized.
The management tests for impairment annually at year end. During the year ended December 31, 2019, the Company determined that
the goodwill associated with the acquisition of certain AVX assets was impaired and took a charge to earnings of $458,490.

Share-based Compensation

The Company accounts for stock-based compensation
to employees in conformity with the provisions of ASC Topic 718, Stock-Based Compensation. Stock-based compensation
to employees consist of stock options grants and restricted shares that are recognized in the statement of operations based on
their fair values at the date of grant.

The measurement of stock-based compensation
is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period which
services are received.

The Company calculates the fair value of
option grants utilizing the Black-Scholes pricing model and estimates the fair value of the stock based upon the estimated fair
value of the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion
of the awards that are ultimately expected to vest.

 

The resulting stock-based compensation
expense for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service
period of the award.

 

Fair Value of Financial Instruments

The Company follows paragraph ASC 825-10-50-10
for disclosures about fair value of its financial instruments and paragraph ASC 820-10-35-37 (“Paragraph 820-10-35-37”)
to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value
in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value
measurements.

To increase consistency and comparability
in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes
the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

  Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
  Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
  Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.

Financial assets are considered Level 2
when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least
one significant model assumption or input is unobservable.

The carrying amount of the Company’s
financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued expenses, approximate their fair
value because of the short maturity of those instruments.

Transactions involving related parties
cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings
may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions
were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

However, it is not practical to determine
the fair value of advances from stockholders, if any, due to their related party nature.

 

Revenue Recognition

On September 1, 2018, the Company adopted
ASC 606 – Revenue from Contracts with Customers using the modified retrospective transition approach. The core principle
of ASC 606 is that revenue should be recognized in a manner that depicts the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled for exchange of those goods or services.
The Company’s updated accounting policies and related disclosures are set forth below, including the disclosure for disaggregated
revenue. The impact of adopting ASC 606 was not material to the Consolidated Financial Statements.

Revenue from the Company is recognized
under Topic 606 in a manner that reasonably reflects the delivery of its services and products to customers in return for expected
consideration and includes the following elements:

  executed contracts with the Company’s customers that it believes are legally enforceable;
  identification of performance obligations in the respective contract;
  determination of the transaction price for each performance obligation in the respective contract;
  allocation the transaction price to each performance obligation; and
  recognition of revenue only when the Company satisfies each performance obligation.

These five elements, as applied to each
of the Company’s revenue category, is summarized below:

  Product sales – revenue is recognized at the time of sale of equipment to the customer.
  Service sales – revenue is recognized based on the service been provided to the customer.

Revenue from our project construction is
recognized over time using the percentage-of-completion method under the cost approach. The percentage of completion is determined
by estimating stage of work completed. Under this approach, recognized contract revenue equals the total estimated contract revenue
multiplied by the percentage of completion. Our construction contracts are unit priced, and an account receivable is recorded for
amounts invoiced based on actual units produced.

Cost of Revenue

Cost of revenue includes the cost of services,
labor and product incurred to provide product sales, service sales and project sales.

Research and development

Research and development costs are expensed
as incurred. Research and development costs 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 entity; 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; (c) the dollar amounts of transactions for each of
the periods for which income statements are presented and the effects of any change in the method of establishing the terms from
that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented
and, if not otherwise apparent, the terms and manner of settlement.

Commitments and Contingencies

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

The Company accounts for income taxes in
accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for
income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,
the Company does not foresee generating taxable income in the near future and utilizing its deferred tax asset, therefore, it is
more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Under ASC 740, a tax position is recognized
as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with
a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50%
likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit
is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.

Income taxes are accounted for using the
asset and liability method. Deferred income taxes are provided for temporary differences in recognizing certain income, expense
and credit items for financial reporting purposes and tax reporting purposes. Such deferred income taxes primarily relate to the
difference between the tax basis of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities
are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities
are expected to be settled or realized. There was no material deferred tax asset or liabilities as of December 31, 2020 and 2019.

As of December 31, 2020 and 2019, the Company
did not identify any material uncertain tax positions.

Basic and Diluted Net Income (Loss) Per Share

Net income (loss) per share is computed
pursuant to ASC 260-10-45. Basic net income (loss) per share (“EPS”) is computed by dividing net income (loss) by the
weighted average number of shares outstanding during the period.

Diluted EPS is computed by dividing net
income (loss) by the weighted average number of shares of stock and potentially outstanding shares of stock during the period to
reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock
options or warrants.

Due to the net loss incurred by the Company,
potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all
periods presented. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per
share as their inclusion would be anti-dilutive.

Year ended December 31,   2020     2019  
Stock options     210,000        
Total     210,000        

Subsequent Events

The Company follows the guidance in ASC
855-10-50 for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial
statements were issued. Pursuant to ASU 2010-09, the Company as an SEC filer considers its financial statements issued when they
are widely distributed to users, such as through filing them on EDGAR. Based upon the review, other than described in Note 17 –
Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment
or disclosure in the consolidated financial statements.

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.

Note 3 – Recent Accounting Pronouncement

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842) (“Topic
842”), which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements.
Topic 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10,
Codification Improvements to Topic 842, Leases; ASU 2018-11, Targeted Improvements; and ASU 2019-01, Codification Improvements.
The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease
liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating,
with classification affecting the pattern and classification of expense recognition in the statement of income.

The new standard was effective for the
Company on January 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing
at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest
comparative period presented in the financial statements as its date of initial application. The Company adopted the new standard
on January 1, 2019 and used the effective date as its date of initial application. Consequently, prior period financial information
has not been recast and the disclosures required under the new standard have not been provided for dates and periods before January
1, 2019.

The new standard provides a number of optional
practical expedients in transition. The Company elected the “package of practical expedients”, which permits it not
to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs.
The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable
to the Company. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected
the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, it has not recognized
ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases
of those assets in transition. The Company also elected the practical expedient to not separate lease and non-lease components
for all of its leases.

The Company believes the most significant
effects of the adoption of this standard relate to (1) the recognition of new ROU assets and lease liabilities on its consolidated
balance sheet for its office operating leases and (2) providing new disclosures about its leasing activities. There was no change
in its leasing activities as a result of adoption.

In June 2018, the FASB issued ASU 2018-07,
Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for
share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees
with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption
is permitted. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In June 2020, the FASB issued ASU 2020-05
in response to the ongoing impacts to US businesses in response to the COVID-19 pandemic. ASU 2020-05, Revenue from Contracts with
Customers (Topic 606) and Leases (Topic 842) Effective Dates for Certain Entities provides a limited deferral of the effective
dates for implementing previously issued ASU 606 and ASU 842 to give some relief to businesses and the difficulties they are facing
during the pandemic. These entities may defer application to fiscal years beginning after December 15, 2019, and interim periods
within fiscal years beginning after December 15, 2020. As the Company has already adopted ASU 606 and ASU 842, the Company does
not anticipate any effect on its financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In June 2016, FASB issued ASU 2016-13,
Financial Instruments – Credit Losses, which changes the accounting for recognizing impairments of financial assets. Under the
new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance
also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration
since their origination. In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases
(Topic 842) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective
Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement
for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods
in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyzes financial
instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of determining
the effects the adoption will have on its consolidated financial statements.

In December 2019, FASB issued ASU 2019-12 “Income Taxes,” which provides for certain updates to reduce complexity in the accounting for income taxes, including
the utilization of the incremental approach for intra-period tax allocation, among others. The amendments in ASU 2019-12 are effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company does not expect
the implementation of ASU 2019-12 to have a material effect on its consolidated financial statements.

  

Management
does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying
financial statement
s. As new accounting pronouncements are
issued, we will adopt those that are applicable under the circumstances.

Note 4 – Inventory, net

At December 31, 2020 and 2019, inventory
consisted of the following:

    December 31,
2020
    December 31,
2019
 
Parts   $ 45,509     $ 31,458  
Finished goods     67,549       102,889  
Total     113,058       134,347  
Less inventory reserve     (70,562 )     (71,414 )
Inventory, net   $ 42,496     $ 62,933  

 

 

 

 

Note 5 – Deposits

Deposit balance as of December 31, 2020
amounted to $106,630, including $6,630 for lease agreement deposit and $100,000 for payment made into an escrow account. Balance
as of December 31, 2019 amounted to $6,630 for lease agreement deposit.

On August 31, 2020, the Company executed
a binding letter of intent with Communication Wiring Specialists, Inc., a California S-Corporation (“CWS”) whereby
the Company will purchase one hundred percent (100%) of the issued and outstanding common stock of CWS for five million dollars
($5,000,000). When the transaction closes, CWS will be capitalized with one million dollars ($1,000,000). The purchase price structure
includes a refundable deposit amount of $100,000 to be held in an escrow account upon execution of the letter of intent. This $100,000
is now nonrefundable. The Company is still currently negotiating the transaction and is expected to close before March 31, 2021.
  

Note 6 – Acquisition

 

On March 15, 2019, the Company entered
into and closed an asset purchase agreement with AVX Design & Integration, Inc. (“AVX”) as stated in Note 1. A
summary of the purchase price and the purchase price allocations at fair value is below.

Purchase price      
Cash   $ 550,000  
29,286 shares of common stock (1)     290,716  
Secured promissory note     50,000  
Total purchase price   $ 890,716  
         
Allocation of purchase price        
Cash   $ 201,482  
Accounts receivable     234,561  
Inventories     16,000  
Property and equipment     10,381  
Operating lease right-of-use assets     157,213  
Deposits     5,968  
Intangible assets     57,000  
Goodwill     458,016  
Accounts payable and accrued liabilities     (81,478 )
Operating lease liability     (168,427 )
Purchase price   $ 890,716  

(1) – the fair value of the common
stock was calculated based on the closing market price of the Company’s common stock at the date of acquisition.

  

Note 7 – Property and Equipment

 

At December 31, 2020 and 2019, property and equipment consisted
of the following:

    December 31,
2020
    December 31,
2019
 
Warehouse   $ 3,789,773     $ 3,789,773  
Land     731,515       731,515  
Building Improvement     238,666       238,666  
Furniture and fixture     27,631       27,631  
Equipment     48,378       47,064  
Software     1,995       1,995  
Total cost     4,837,958       4,836,644  
Less accumulated depreciation     (345,448 )     (183,206 )
Property and equipment, net   $ 4,492,510     $ 4,653,438  

Depreciation expense for the years ended
December 31, 2020 and 2019 amounted to $162,242 and $151,670, respectively.

The Company purchased a warehouse in Ontario,
California in September 2018 and leased an unused portion to a third party. The tenant paid $12,335 as security deposit, shown
as other liability in non-current liability.

On
January 22, 2019, the Company subleased a portion of the unused warehouse and office space to a third party. The Company subleased
16,000 square feet of warehouse and 446 square feet of office space with base rent at $12,335 per month and $12,335 security deposit.
The lease is for three years commencing February 15, 2019 and monthly rent to increase $0.02 per square foot each year.

On
October 19, 2020, the Company subleased 3,000 feet of the warehouse and one office space for eight months commencing December
1, 2020 with option to extend the lease to twelve months. The monthly lease payment is $2,400 with a $4,800 security deposit
.

Note 8 – Promissory Note – Related Party

 

On March 15, 2019, when the Company purchased
AVX Design & Integration, Inc. the Company agreed to pay the predecessor owner with promissory note as one of the forms of
consideration. The note was $50,000 with a fixed interest rate of 6% per annum payable in 12 equal monthly payments commencing
on June 1st, 2019 with interest calculated from the initial payment date through the date in which all amount due under
the note is paid off. As of December 31, 2019, the balance of the promissory note was $50,000 and $1,750 accrued interest incurred
for the nine months and 15 days ended December 31, 2019. The note and interest amount of $50,000 and $1,831 were paid off on January
10, 2020.

Note 9 – Related Party Transactions

Revenue generated from Vitashower Corp.,
a company owned by the CEO’s wife, amounted to $26,449 and $14,184 for the years ended December 31, 2020 and 2019,
respectively. There were no accounts receivable balance due from Vitashower Corp. as of December 31, 2020 and 2019, respectively.
Purchases generated from Vitashower Corp. amounted to $11,371 and $0 for the years ended December 31, 2020 and 2019, respectively.
There were accounts payable balance $11,371 and $0 to Vitashower Corp. as of December 31, 2020 and 2019, respectively.

Compensation payable to Chief Financial
Officer amounted to $6,100 and $0 as of December 31, 2020 and 2019, respectively. Compensation for services provided by the
Chief Financial Officer for the years ended December 31, 2020 and 2019 amounted to $22,100 and $29,000, respectively.

Compensation for services provided by the
President and Chief Executive Officer for the years ended December 31, 2020 and 2019 amounted to $120,000 and $121,154, respectively.

Promissory
note and interest accrued and payable to the previous owner of AVX amounted to $50,000 and $1,750, respectively, as of December
31, 2019. The note and interest amount of $50,000 and $1,831 were paid off on January 10, 2020.

Note 10 – Business Concentration and Risks

Major customers

One customer accounted for 0% and 18% of the total
accounts receivable as of December 31, 2020 and 2019, respectively. This customer accounted for 53% and 43% of total revenue for
the years ended December 31, 2020 and 2019, respectively.

  

Major vendors

One
vendor accounted for 0% and 21% of total accounts payable at December 31, 2020 and 2019, respectively. This vendor accounted
for 65% and 46% of the total purchases for the years ended December 31, 2020 and 2019, respectively.

Note 11 – Commitments and
Contingencies

In the normal course of business or otherwise,
the Company may become involved in legal proceedings. The Company will accrue a liability for such matters when it is probable
that a liability has been incurred and the amount can be reasonable estimated. When only a range of possible loss can be established,
the most probable amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates
of potential damages, outside legal fees, and other directly related costs expected to be incurred.

Note 12 – Operating Lease Right-of-use
Asset and Operating Lease Liability

Operating
lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement
date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 15%, as the interest
rate implicit in our lease is not readily determinable. During the years ended December 31, 2020 and 2019, the Company recorded
$65,180 and $62,322, respectively as operating lease expense.

 

The Company currently has a lease agreement
for AVX’s operation for a monthly payment of $5,258 and shall increase by 3% every year. The lease commenced July 1, 2015
and expires on August 31, 2022. A security deposit of $5,968 was also held for the duration of the lease term.

 

In
adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’, which permit
it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct
costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not
applicable to the Company. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12
months
or less. On March 15, 2019 when AVX was acquired,
upon adoption of ASC Topic 842, the Company recorded a right-of-use asset.

Right-of-use asset is summarized below:

    December 31, 2020     December 31, 2019  
Office lease   $ 157,213     $ 157,213  
Less: accumulated amortization     (70,655 )     (28,814 )
Right-of-use asset, net   $ 86,558     $ 128,399  

  

Operating Lease liability is summarized
below:

    December 31, 2020     December 31, 2019  
Office lease   $ 94,671     $ 138,940  
Less: current portion     (53,384 )     (44,270 )
Long term portion   $ 41,287     $ 94,670  

Maturity of lease liability is as follows:

Year ending December 31, 2021   $ 64,048  
Year ending December 31, 2022     43,655  
Total future minimum lease payment     107,703  
Imputed interest     (13,032 )
Lease Obligation, net   $ 94,671  

Note 13 – Loans

Paycheck protection program

On April 24, 2020, AVX Design & Integration,
Inc. entered into an agreement to receive a U.S. Small Business Administration Loan (“SBA Loan”) from JPMorgan Chase
Bank, N.A. related to the COVID-19 pandemic in the amount of $107,460, which we received on May 1, 2020. The SBA Loan has a fixed
interest rate of 0.98 percent per annum and a maturity date two years from the date loan was issued.

On May 4, 2020, Perfecular Inc.
entered into an agreement to receive a U.S. Small Business Administration Loan (“SBA Loan”) from Bank of America
related to the COVID-19 pandemic in the amount of $151,500, which we received on May 4, 2020. 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.

Economic Injury Disaster Loan

On June 4, 2020, Perfecular Inc. entered
into an agreement to receive a U.S. Small Business Administration Loan (“SBA Loan”) from Bank of America related to
the COVID-19 pandemic in the amount of $81,100, which we received on June 4, 2020. The SBA Loan has a fixed interest rate of 3.75
percent per annum and a maturity date thirty years from the date loan was issued.

On June 5, 2020, AVX Design & Integration,
Inc. entered into an agreement to receive a U.S. Small Business Administration Loan (“SBA Loan”) from JPMorgan Chase
Bank, N.A. related to the COVID-19 pandemic in the amount of $56,800, which we received on June 5, 2020. The SBA Loan has a fixed
interest rate of 3.75 percent per annum and a maturity date thirty years from the date loan was issued.

Borrower will use all the proceeds of this
Loan solely as working capital to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing
thereafter.

    December 31, 2020  
SBA Loan   $ 396,860  
Less: current portion     (194,125 )
Long term portion   $ 202,735  

Interest expense incurred from the loans
amounted to $4,746 for the year ended December 31, 2020.

Economic Injury Disaster Loan advance

In
response to the Coronavirus (COVID-19) pandemic, small businesses, including agricultural businesses, and non-profit organizations
in all U.S. states, Washington D.C., and territories can apply for an Economic Injury Disaster Loan (EIDL). The amount of the EIDL
Advance was determined by the number of employees indicated on the EIDL application at $1,000 per employee, up to a maximum of
$10,000. The EIDL Advance does not have to be repaid. Recipients did not have to be approved for an EIDL loan in order to receive
the EIDL.

On April 21, 2020 and June 16, 2020, the
Company received $9,000 and $10,000 EIDL advance and recorded the receipt as other income.

Note 14 – 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 per share.

Common stock

As of December 31, 2019 and 2020 the Company
had 40,959,741 shares of common stock issued and outstanding.

   

During the year ended December 31, 2020,
the Company did not issue common stock.

Shares to be Issued for Compensation

The Company entered into agreements with
third party consultants for financing and management consultation. The Company has incurred consulting service fees not paid in
cash amounting to $48,000 for the year ended December 31, 2020, which the Company intends to issue stock as compensation for services
rendered. Expenses incurred but not yet paid in shares as of December 31, 2020 and 2019 amounted to $98,709 and $50,709, respectively.

During the year ended December 31, 2019, the
Company had the following transactions in its common stock:

  

  Issued 13,445 shares to consultants in exchange for professional services rendered. The shares were valued at $96,509 based on the closing price of the Company’s common stock on the dates that the shares were deemed earned, according to the agreements; and
  Issued 39,286 shares as consideration for the AVX acquisition valued at $290,716. The value of the common stock was determined based on the market price on the day of the closing of the acquisition.

Stock options

On August 6, 2019, each member
of the Board was granted 30,000 options to purchase shares at $5.70 per share.

As of December 31, 2020, there were 210,000
options granted, 210,000 options vested, 0 options unvested, and 210,000 outstanding stock options.

The fair value of the warrants listed above was determined using
the Black-Scholes option pricing model with the following assumptions:

    December 31,     December 31,  
    2020     2019  
Risk-free interest rate     1.71%       1.71%  
Expected life of the options     10 years       10 years  
Expected volatility     158.86%       158.86%  
Expected dividend yield     0%       0%  

The following is a summary of options activity
from December 31, 2019 to December 31, 2020:

Options   Shares     Weighted average exercise price     Weighted Average Remaining Contractual Life     Aggregate Intrinsic Value  
Outstanding at December 31, 2019     210,000     $ 9.61       9.61        
   Granted                        
   Exercised                        
   Forfeited or expired                        
Outstanding at December 31, 2020     210,000     $ 9.61       9.61        
Vested as of December 31, 2020     210,000       5.70       9.61        
Exercisable at December 31, 2020     210,000     $ 9.61       9.61        

The exercise price for options outstanding
and exercisable at December 31, 2020:

Outstanding     Exercisable  
                     
  Number of       Exercise       Number of       Exercise  
  Options       Price       Options       Price  
  30,000     $ 5.70       30,000     $ 5.70  
  30,000       5.70       30,000       5.70  
  30,000       5.70       30,000       5.70  
  30,000       5.70       30,000       5.70  
  30,000       5.70       30,000       5.70  
  30,000       5.70       30,000       5.70  
  30,000       5.70       30,000       5.70  
  210,000               210,000          

 

Note 15 – Income taxes

Our effective tax rate differs from the
statutory federal income tax rate, primarily as a result of the changes in valuation allowance, nondeductible permanent differences,
credits, and state income taxes.

A reconciliation of the federal statutory
income tax to our effective income tax is as follows:

  

    2020     2019  
             
Federal statutory rates   $ (532,794 )   $ (666,864 )
State income taxes     (224,281 )     (280,718 )
Permanent differences     57       154,332  
Valuation allowance against net deferred tax assets     757,018       793,250  
Effective rate   $     $  

The tax effect of temporary differences
that give rise to a significant portion of the deferred tax assets and liabilities at December 31, 2020 and 2019 is presented
below:

  

    2020     2019  
Deferred income tax asset                
Net operating loss carryforwards   $ 2,704,332     $ 1,947,748  
Interest     40,261       39,827  
Total deferred income tax asset     2,744,593       1,987,575  
Less: valuation allowance     (2,744,593 )     (1,987,575 )
Total deferred income tax asset   $     $  

The Company recognizes valuation allowances
to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company’s net deferred income
tax asset is not more likely than not to be realized due to the lack of sufficient sources of future taxable income and cumulative
losses that have resulted over the years. During the year ended December 31, 2020 the valuation allowance increased by $757,018.

As of December 31, 2020, we had cumulative
net operating loss carryforwards for federal and state income tax purposes of $9,062,776, and available tax credit carryforwards
of approximately $1,903,183 for federal income tax purposes, which can be carried forward to offset future taxable income. The
federal net operating loss carryforwards consists of $6,527,307 of losses incurred prior to January 1, 2020 and which can be used
to offset 100% of future taxable income and, $2,535,469 of losses incurred after January 1, 2020, which can be used to offset up
to 80% of taxable income in subsequent years.

Note 16 – Segment reporting

The Company consists of two types of operations.
Focus Universal, Inc. and Perfecular Inc. (“Focus”) involve wholesale, research and development of universal smart
instrument and farming devices. AVX Design & Integration, Inc. (“AVX”) is an IoT installation and management company,
specializes in high performance and easy to use Audio/Video, Home Theater, Lighting Control, Automation and Integration. The table
below discloses income statement information by segment.

    Year ended December 31, 2020  
    Focus     AVX     Total  
                   
Revenue   $ 946,641     $ 705,877     $ 1,652,518  
Revenue – related party     26,449             26,449  
Total revenue     973,090       705,877       1,678,967  
                         
Cost of Revenue     728,597       666,590       1,395,187  
                         
Gross Profit     244,493       39,287       283,780  
                         
Operating Expenses:                        
Selling     13,650       8,940       22,590  
Compensation – officers     142,100             142,100  
Research and development     256,636             256,636  
Professional fees     1,291,729       5,431       1,297,160  
General and administrative     959,426       309,781       1,269,207  
Total Operating Expenses     2,663,541       324,152       2,987,693  
                         
Loss from Operations     (2,419,048 )     (284,865 )     (2,703,913 )
                         
Other Income (Expense):                        
Interest income (expense), net     (2,073 )     (1,999 )     (4,072 )
Interest (expense) – related party     (81 )           (81 )
Other income     154,194       16,759       170,953  
Total other income (expense)     152,040       14,760       166,800  
                         
Loss before income taxes     (2,267,008 )     (270,105 )     (2,537,113 )
                         
Tax expense                  
                         
Net Loss   $ (2,267,008 )   $ (270,105 )   $ (2,537,113 )

 

 

Note 17 – Subsequent Events

On January 8, 2021, Focus Universal Inc.
entered into a secured promissory note agreement with East West Bank in the amount of $1,500,000. The note has a variable interest
rate of 0.25% above Wall Street Journal Prime Rate. The final payment will be due on January 22, 2026.

On March 2, 2021, 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 March 10, 2021, AVX Design & Integration,
Inc. entered into an agreement to receive an SBA Loan from Chase Bank related to the COVID-19 pandemic in the amount of $108,750.
The SBA Loan has a fixed interest rate of 0.98 percent per annum and a maturity date five years from the date loan was issued.

On March 15, 2021, Focus Universal Inc. entered into a secured
promissory note agreement with Golden Sunrise Investment LLC in the amount of $1,500,000. The note has an interest rate of 10%
per year and has a due date of March 14, 2022. The note is subordinate in priority to the East West Bank loan entered into on January
8, 2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls

Our Chief Executive Officer and Principal
Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form
10-K (the “Evaluation Date”), concluded that as of the Evaluation Date, our disclosure controls and procedures were
not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission rules and forms.

Changes in internal control over financial
reporting.

 

There were no changes in our internal control
over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially
affect, our internal control over financial reporting.

Limitations on the Effectiveness of
Internal Controls

Disclosure controls and procedures, no
matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives.
The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include
the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human
failures such as simple errors or mistakes or intentional circumvention of the established process.

Management’s Report on Internal
Control over Financial Reporting

Our management is responsible for establishing
and maintaining adequate internal control over financial reporting; as such term is defined in the Securities Exchange Act of 1934
Rule 13a-15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based
on the framework in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“1992 COSO Framework”).

A material weakness is a deficiency or
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Our management
concluded we did not maintain effective controls over the Company’s financial reporting. The material weaknesses in our internal
control over financial reporting, caused principally by inadequate staffing and technical expertise in key positions, resulted
in overly relying on outside consultants to make numerous adjustments to our financial statements. Additionally, the significant
deficiencies or material weaknesses could result in future material misstatement of the consolidated financial statements that
would not be prevented or detected. Management has concluded that the identified control deficiency constitutes a material weakness.

This annual report does not include an
attestation report of the Company’s independent registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting
firm pursuant to rules of the SEC that permit the company to provide only management’s report on internal control in this
annual report.

  

Background and Remediation Plan

Management has
determined that its processes and procedures over accounting and financial reporting are not adequate. As a result, the Company
plans to implement a number of steps to remediate the material weakness discussed above and improve its internal control over financial
reporting. Specifically, the following are planned: hiring additional qualified accounting personnel; reviewing all areas of the
accounting process; strengthening controls and improving the reporting tools and quality of data used in the analysis of disclosures
to review activities relevant to the financial reporting process.

Management believes
that the measures described above should remediate the material weakness identified and strengthen the Company’s internal
control over financial reporting. As the Company continues to evaluate and improve its internal control over financial reporting,
additional measures to remediate the material weakness or modifications to certain of the remediation procedures described above
may be necessary. The Company expects to complete the required remedial actions during 2020.

  

Item 9B. OTHER INFORMATION

None.

 

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE

The following table presents information with respect to our
officers, directors and significant employees as of the date of this report:

Name Position
Dr. Edward Lee* Director and Chairman
Dr. Desheng Wang** Chief Executive Officer, Secretary, and Director
Duncan Lee*** Chief Financial Officer
Dr. Jennifer Gu* Director
Michael Pope**** Director (1)
Sheri Lofgren**** Director (1)
Carine Clark**** Director (1)
Greg Butterfield***** Director (1)

* Appointed director on October 21, 2015

** Appointed director on December 29, 2014

*** Appointed officer on April 2, 2018

**** Appointed director on June 8, 2018

***** Appointed director on November 28, 2018

(1) Independent director

Each director serves until our next annual
meeting of the stockholders or unless they resign earlier and serves until his or her successor is elected and qualified. At the
present time, members of the Board of Directors are not compensated with cash for their services to the board.

Each of our officers is elected by the
Board of Directors to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or
she is removed from office.

Biographical Information Regarding Officers and Directors

Desheng Wang

Dr. Desheng Wang was appointed as Chief
Executive Officer, Secretary, and has been a director since December 29, 2014. Dr. Wang has over 20 years of professional experience
in mobile technology. Dr. Wang earned his bachelor’s degree from Hebei Normal University, Physics Department in 1985. In
1988, Dr. Wang earned his master’s degree from Dalian Institute of Chemical Physics at the Chinese Academy of Science. Dr.
Wang earned his Ph.D. in Chemistry at Emory University in 1994. Dr. Wang served as a senior research fellow at California Institute
of Technology from 1994-2011. Over the last five years, Dr. Wang has served as president of Vitashower Corporation and formerly
as President of Perfecular Inc.

Edward Lee

Dr. Edward Lee was appointed President
and director on October 21, 2015. On November 15, 2019, Dr. Lee resigned as President and was appointed as Chairman of the Board
of Directors. Dr. Lee received his bachelor’s degree in Mathematics at Lanzhou University in 1983, received his master’s
degree at University of Science and Technology of China in 1985 and earned his Ph.D. in Mathematics at University of Florida in
1991. Dr. Lee worked as an assistant professor at Tsinghua University in 1986 and National University of Singapore in 1992. Since
1996, Dr. Lee has served as CEO of AIDP, a leading supplier of dietary supplement ingredients, focusing on research & development
and marketing and sales of proprietary ingredients like Magtein, KoACT, Predtic X, and Actizin. Dr. Lee is also serving as the
Vice Chairperson of the American Chinese CEO Association. Dr. Lee is married to Jennifer Gu, a current director of Focus Universal.

Duncan Lee

Duncan Lee was appointed as CFO on April
2, 2018. Mr. Lee is presently a licensed Certified Public Accountant. Mr. Lee graduated in 2006 with a bachelor’s degree
in Accounting from the University of Southern California and has more than 11 years of experience with public company accounting
and financial reporting with the SEC. Mr. Lee worked on the audit staff of the PCAOB accounting firm of Moore Stephens Wurth Frazer
and Torbet LLP and then worked as a senior associate at the PCAOB accounting firm of Simon & Edward, LLP in Diamond Bar, CA.
Since 2011, Mr. Lee has worked in-house as a staff accountant at a public company called E-world USA Holding, Inc. preparing their
routine securities filings, including their 10-K and 10-Q filings. In addition to working with E-World USA Holding, Inc., in the
past five years, Mr. Lee has also worked as an outside consultant CPA for other public companies.

Jennifer Gu

Dr. Jennifer Gu was appointed as a director
on October 21, 2015. Dr. Gu earned her bachelor’s degree in Biology from University of Florida in 1990 and earned her Ph.D.
in Experimental Pathology at University of California, Los Angeles in 1997. She also completed post-doctoral research at the California
Institute of Technology in 2004. Since 2005, Dr. Gu served, and is still currently serving, as the Vice President of Research &
Development at AIDP. Dr. Gu is married to Edward Lee, the current Chairman of the Board of Directors of Focus Universal.

Michael Pope

Michael Pope was appointed as a director
of the Company on June 8, 2018. Mr. Pope serves as the CEO and Chairman at Boxlight Corporation (Nasdaq: BOXL), a global provider
of interactive technology solutions, where he has been an executive since July 2015 and director since September 2014. Mr. Pope
has led Boxlight through nine acquisitions from 2016 to 2020, a Nasdaq IPO in November 2017, and over $100 million in debt and
equity fundraising. He previously served as Managing Director at Vert Capital, a private equity and advisory firm from October
2011 to October 2016, managing portfolio holdings in the education, consumer products, technology and digital media sectors. Prior
to joining Vert Capital, from May 2008 to October 2011, Mr. Pope was Chief Financial Officer and Chief Operating Officer for the
Taylor Family in Salt Lake City, managing family investment holdings in consumer products, professional services, real estate and
education. Mr. Pope also held positions including senior SEC reporting at Omniture (previously listed on Nasdaq and acquired by
Adobe (Nasdaq: ADBE) in 2009) and Assurance Associate at Grant Thornton. Since January 2021, Mr. Pope has served as a member of
the board of directors of Novo Integrated Sciences, Inc. (OTCQB: NVOS), a provider of multi-dimensional primary healthcare products
and services. He holds an active CPA license and earned his undergraduate and graduate degrees in accounting from Brigham Young
University.

Sheri Lofgren

Sheri
Lofgren was appointed as an independent director of the Company on June 8, 2018. Ms. Lofgren has served as a financial consultant
since March 2018. She served as Chief Financial Officer for Boxlight Corporation (Nasdaq: BOXL), a global education technology
provider, from September 2014 to March 2018. She was Chief Financial Officer at Logical Choice Technologies, Inc., a distributor
of interactive technologies to the education market, from 2005 to 2013. Ms. Lofgren is a Certified Public Accountant with extensive
experience in financial accounting and management, operational improvement, budgeting and cost control, cash management and treasury,
along with broad audit experience, internal control knowledge and internal and external reporting. She started her career with
KPMG and then joined Tarica and Whittemore, an Atlanta based CPA firm, as an audit manager. Ms. Lofgren is a graduate of Georgia
State University where she earned a B.A. in Business Administration – Accounting.

Greg Butterfield

Greg Butterfield was appointed as an independent
director of the Company on November 28, 2018. Mr. Butterfield is the founder and Managing Partner of SageCreek Partners (“SCP”)
a technology commercialization and consulting firm. Prior to starting SCP Mr. Butterfield served as the CEO of Vivint Solar, a
leading full-service residential solar integrator. Before Vivint, Mr. Butterfield was the Group President for Symantec’s
Server and Storage business units. Mr. Butterfield joined Symantec through the company’s acquisition of Altiris in April
2007. At Altiris, he served as chairman of the board, President, and CEO starting in February 2000. Mr. Butterfield is widely credited
as the driving force behind eleven acquisitions and navigated the company through a successful IPO in 2002 in spite of a notable
economic downturn in the technology sector. The IPO was followed in August of 2003 with a successful secondary offering. Mr. Butterfield
was invited to the 2006 World Economic Forum as a Technology Pioneer. He was also the winner of the 2002 Ernst and Young Entrepreneur
of the Year award and served as the chairman of the board of the Utah Information Technology Association from 2003 to 2005. Mr.
Butterfield received a Bachelor of Science in Business Administration (finance emphasis) from Brigham Young University.

Carine Clark

Carine
Clark was appointed as an independent director of the Company on June 8, 2018. Ms. Clark has served as president and CEO of four
high-growth tech companies. In March 2019, Ms. Clark was appointed to the board of directors of Domo, Inc. (NASDAQGM: DOMO) and
is currently serving as a member of Domo’s compensation committee. Since 2017 she has served as an Executive Board Member
of the Utah Governor’s Office of Economic Development and Silicon Slopes, a non-profit helping Utah’s tech community
thrive. Prior to that, Ms. Clark served from January 2015 to December 2016 as the President and CEO of MartizCX. From December
2012 to December 2016, Ms. Clark served as the President and CEO of Allegiance, Inc. Her reputation as a data-driven marketing
executive at Novell for 14 years, Altiris for five years, and Symantec for more than 10 years. She has received numerous awards
including the EY Entrepreneur of The Year® Award in the Utah Region and Utah Business Magazine’s CEO of the Year. Ms.
Clark earned a bachelor’s degree in organizational communications and an MBA from Brigham Young University.

Corporate Governance

Our Board of Directors currently consists
of seven members. Our Chairperson of the Board of Directors is Dr. Edward Lee. Dr. Edward Lee, Dr. Desheng Wang and Dr. Jennifer
Gu are the three members of our Board of Directors who are not independent directors. Michael Pope, Sheri Lofgren, Greg Butterfield,
and Carine Clark are four members of our Board of Directors who are independent directors.

Director Attendance at Meetings

Our Board of Directors conducts its business
through meetings, both in person and telephonic, and by actions taken by written consent in lieu of meetings. During the year ended
December 31, 2020, our Board of Directors held four meetings. All directors attended at least 75% of the meetings of our Board
of Directors and of the committees of our Board of Directors on which they served during 2020.

Our Board of Directors encourages all directors
to attend our annual meetings of stockholders unless it is not reasonably practicable for a director to do so.

Committees of our Board of Directors

Our Board of Directors has established
and delegated certain responsibilities to its standing Audit Committee, Compensation Committee and Nominating and Corporate Governance
Committee.

Audit Committee

We have a separately designated standing
Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee’s primary duties
and responsibilities include monitoring the integrity of our financial statements, monitoring the independence and performance
of our external auditors, and monitoring our compliance with applicable legal and regulatory requirements. The functions of the
Audit Committee also include reviewing periodically with our independent registered public accounting firm the performance of the
services for which they are engaged, including reviewing the scope of the annual audit and its results, reviewing with management
and the auditors the adequacy of our internal accounting controls, reviewing with management and the auditors the financial results
prior to the filing of quarterly and annual reports, reviewing fees charged by our independent registered public accounting firm
and reviewing any transactions between our Company and related parties. Our independent registered public accounting firm reports
directly and is accountable solely to the Audit Committee. The Audit Committee has the sole authority to hire and fire the independent
registered public accounting firm and is responsible for the oversight of the performance of their duties, including ensuring the
independence of the independent registered public accounting firm. The Audit Committee also approves in advance the retention of,
and all fees to be paid to, the independent registered public accounting firm. The rendering of any auditing services and all non-auditing
services by the independent registered public accounting firm is subject to prior approval of the Audit Committee.

The Audit Committee operates under a written
charter. The Audit Committee is required to be composed of directors who are independent under the rules of the SEC and the listing
standards of the NASDAQ Stock Market LLC (“NASDAQ”).

The current members of the Audit Committee
are directors Ms. Sheri Lofgren, the Chairperson of the Audit Committee, Mr. Michael Pope and Mr. Greg Butterfield, all of whom
have been determined by the Board of Directors to be independent under the NASDAQ listing standards and rules adopted by the SEC
applicable to audit committee members. The Board of Directors has determined that Mr. Sheri Lofgren qualifies as an “audit
committee financial expert” under the rules adopted by the SEC and the Sarbanes Oxley Act. The Audit Committee met four times
during 2020.

Compensation Committee

The primary duties and responsibilities
of our standing Compensation Committee are to review, modify and approve the overall compensation policies for the Company, including
the compensation of the Company’s Chief Executive Officer and other senior management; establish and assess the adequacy
of director compensation; and approve the adoption, amendment and termination of the Company’s stock option plans, pension
and profit-sharing plans, bonus plans and similar programs. The Compensation Committee may delegate to one or more officers the
authority to make grants of options and restricted stock to eligible individuals other than officers and directors, subject to
certain limitations. Additionally, the Compensation Committee has the authority to form subcommittees and to delegate authority
to any such subcommittee. The Compensation Committee also has the authority, in its sole discretion, to select, retain and obtain,
at the expense of the Company, advice and assistance from internal or external legal, accounting or other advisors and consultants.
Moreover, the Compensation Committee has sole authority to retain and terminate any compensation consultant to assist in the evaluation
of director, Chief Executive Officer or senior executive compensation, including sole authority to approve such consultant’s
reasonable fees and other retention terms, all at the Company’s expense.

The Compensation Committee operates under
a written charter. All members of the Compensation Committee must satisfy the independence requirements of NASDAQ applicable to
compensation committee members.

The Compensation Committee currently consists
of directors Ms. Carine Clark, Mr. Greg Butterfield, and Mr. Sheri Lofgren. Ms. Carine Clark is the Chairperson of the Compensation
Committee. Each of the Compensation Committee members has been determined by the Board of Directors to be independent under NASDAQ
listing standards applicable to compensation committee members. The Compensation Committee met four times during 2020.

Nominating and Corporate Governance
Committee

The Nominating and Corporate Governance
Committee identifies, reviews and evaluates candidates to serve on the Board; reviews and assesses the performance of the Board
of Directors and the committees of the Board; and assesses the independence of our directors. The Nominating and Corporate Governance
Committee is also responsible for reviewing the composition of the Board’s committees and making recommendations to the entire
Board of Directors regarding the chairpersonship and membership of each committee. In addition, the Nominating and Corporate Governance
Committee is responsible for developing corporate governance principles and periodically reviewing and assessing such principles,
as well as periodically reviewing the Company’s policy statements to determine their adherence to the Company’s Code
of Business Conduct and Ethics.

The Nominating and Corporate Governance
Committee has adopted a charter that identifies the procedures whereby Board of Director candidates are identified primarily through
suggestions made by directors, management and stockholders of the Company. We have implemented no material changes in the past
year to the procedures by which stockholders may recommend nominees for the Board. The Nominating and Corporate Governance Committee
will consider director nominees recommended by stockholders that are submitted in writing to the Company’s Corporate Secretary
in a timely manner and which provide necessary biographical and business experience information regarding the nominee. The Nominating
and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the criteria
considered by the Nominating Committee, based on whether or not the candidate was recommended by a stockholder. The Board of Directors
does not prescribe any minimum qualifications for director candidates, and all candidates for director will be evaluated based
on their qualifications, diversity, age, skill and such other factors as deemed appropriate by the Nominating and Corporate Governance
Committee given the current needs of the Board of Directors, the committees of the Board of Directors and the Company. Although
the Nominating and Corporate Governance Committee does not have a specific policy on diversity, it considers the criteria noted
above in selecting nominees for directors, including members from diverse backgrounds who combine a broad spectrum of experience
and expertise. Absent other factors which may be material to its evaluation of a candidate, the Nominating and Corporate Governance
Committee expects to recommend to the Board of Directors for selection incumbent directors who express an interest in continuing
to serve on the Board. Following its evaluation of a proposed director’s candidacy, the Nominating and Corporate Governance
Committee will make a recommendation as to whether the Board of Directors should nominate the proposed director candidate for election
by the stockholders of the Company.

The Nominating and Corporate Governance
Committee operates under a written charter. No member of the Nominating and Corporate Governance Committee may be an employee of
the Company, and each member must satisfy the independence requirements of NASDAQ and the SEC.

The Nominating and Corporate Governance
Committee currently consists of directors Mr. Greg Butterfield, who is the Chairperson of the committee, Mr. Michael Pope and Ms.
Carine Clark. Each of the members of the Nominating and Corporate Governance Committee has been determined by the Board of Directors
to be independent under NASDAQ listing standards. The Nominating and Corporate Governance Committee met four times in 2020.

Oversight of Risk Management

Risk is inherent with every business, and
how well a business manages risk can ultimately determine its success. We face a number of risks, including economic risks, financial
risks, legal and regulatory risks and others, such as the impact of competition. Management is responsible for the day-to-day management
of the risks that we face, while our Board, as a whole and through its committees, has responsibility for the oversight of risk
management. In its risk oversight role, our Board of Directors is responsible for satisfying itself that the risk management processes
designed and implemented by management are adequate and functioning as designed. Our Board of Directors assesses major risks facing
our Company and options for their mitigation in order to promote our stockholders’ interests in the long-term health of our
Company and our overall success and financial strength. A fundamental part of risk management is not only understanding the risks
a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate
for us. The involvement of our full Board of Directors in the risk oversight process allows our Board of Directors to assess management’s
appetite for risk and also determine what constitutes an appropriate level of risk for our Company. Our Board of Directors regularly
includes agenda items at its meetings relating to its risk oversight role and meets with various members of management on a range
of topics, including corporate governance and regulatory obligations, operations and significant transactions, risk management,
insurance, pending and threatened litigation and significant commercial disputes.

While our Board of Directors is ultimately
responsible for risk oversight, various committees of our Board of Directors oversee risk management in their respective areas
and regularly report on their activities to our entire Board of Directors. In particular, the Audit Committee has the primary responsibility
for the oversight of financial risks facing our Company. The Audit Committee’s charter provides that it will discuss our
major financial risk exposures and the steps we have taken to monitor and control such exposures. Our Board of Directors has also
delegated primary responsibility for the oversight of all executive compensation and our employee benefit programs to the Compensation
Committee. The Compensation Committee strives to create incentives that encourage a level of risk-taking behavior consistent with
our business strategy.

We believe the division of risk management
responsibilities described above is an effective approach for addressing the risks facing our Company and that our Board’s
leadership structure provides appropriate checks and balances against undue risk taking.

Code of Business Conduct and Ethics

Our Board of Directors has adopted a code
of ethical conduct that applies to our principal executive officer, principal financial officer and senior financial management.
This code of ethical conduct is embodied within our Code of Business Conduct and Ethics, which applies to all persons associated
with our Company, including our directors, officers and employees (including our principal executive officer, principal financial
officer, principal accounting officer and controller). In order to satisfy our disclosure requirements under Item 5.05 of Form
8-K, we will disclose amendments to, or waivers of, certain provisions of our Code of Business Conduct and Ethics relating to our
chief executive officer, chief financial officer, chief accounting officer, controller or persons performing similar functions
on our website promptly following the adoption of any such amendment or waiver. The Code of Business Conduct and Ethics provides
that any waivers of, or changes to, the code that apply to the Company’s executive officers or directors may be made only
by the Audit Committee. In addition, the Code of Business Conduct and Ethics includes updated procedures for non-executive officer
employees to seek waivers of the code.

Director Independence

Our Company is governed by our Board. Currently,
each member of our Board, other than Mr. Edward Lee, Mr. Desheng Wang, and Ms. Jennifer Gu, is an independent director; and all
standing committees of our Board of Directors are composed entirely of independent directors, in each case under NASDAQ’s
independence definition applicable to boards of directors. For a director to be considered independent, our Board of Directors
must determine that the director has no relationship which, in the opinion of our Board, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. Members of the Audit Committee also must satisfy a separate SEC independence
requirement, which provides that they may not accept directly or indirectly any consulting, advisory or other compensatory fee
from us or any of our subsidiaries other than their directors’ compensation. In addition, under SEC rules, an Audit Committee
member who is an affiliate of the issuer (other than through service as a director) cannot be deemed to be independent. In determining
the independence of members of the Compensation Committee, NASDAQ listing standards require our Board of Directors to consider
certain factors, including, but not limited to: (1) the source of compensation of the director, including any consulting, advisory
or other compensatory fee paid by us to the director, and (2) whether the director is affiliated with us, one of our subsidiaries
or an affiliate of one of our subsidiaries. Under our Compensation Committee Charter, members of the Compensation Committee also
must qualify as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the “Code”), and as “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act. The independent
members of the Board of Directors are Michael Pope, Sheri Lofgren, Greg Butterfield, and Carine Clark.

Item 11: EXECUTIVE COMPENSATION

Compensation of Officers 

The following summary compensation table
sets forth information concerning compensation for services rendered in all capacities during 2020, and 2019 awarded to, earned
by or paid to our executive officers.

Summary
Compensation Table

(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)  
Name and Principal         Salary     Bonus     Stock Awards     Option Awards     Non-Equity Incentive Plan Compensation     Change in Pension Value & Non-qualified Deferred Compensation Earnings     All Other
Compensation
    Totals  
Position   Year     ($)*     ($)     ($)     ($)     (S)     ($)     ($)     ($)  
Edward Lee     2020       0       0       0       0       0       0       0       0  
President and Director     2019       0       0       0       0       0       0       0       0  
                                                                         
Desheng Wang     2020       120,000       0       0       0       0       0       0       120,000  
CEO, Secretary and Director     2019       121,154       0       0       0       0       0       0       121,154  
                                                                         
Duncan Lee     2020       22,100       0       0       0       0       0       0       22,100  
Chief Financial Officer     2019       29,000       0       0       0       0       0       0       29,000  

  

 

 

 

Narrative Disclosure Requirement for Summary Compensation
Table

Compensation

Edward Lee did not receive
compensation for service provided as President in 2019 (a position he resigned from on November 15, 2019). Dr. Wang entered
into an employment agreement with the Company whereby the Company agreed to pay Dr. Wang a salary of $121,154 per year,
payable monthly, for his services as Chief Executive Officer, effective as of November 1, 2018. We have not provided our
other named executive officers with perquisites or other personal benefits. As of the date of this prospectus, no other
officer or director has formally entered into any compensation arrangement for services provided under consulting agreements
or employment agreements. Duncan Lee was hired in April 2018. In 2019, Duncan Lee received $29,000 in compensation in 2019
 and 22,100 in 2020.

  

Retirement, Resignation or Termination Plans

We sponsor no plan, whether written or
verbal, that would provide compensation or benefits of any type to an executive upon retirement, or any plan that would provide
payment for retirement, resignation, or termination as a result of a change in control of our company or as a result of a change
in the responsibilities of an executive following a change in control of our company.

Directors’ Compensation

The persons who served as affiliated members
of our Board of Directors, including executive officers, did not receive any compensation for services as directors in 2019 or
2020. As of the date of this prospectus, no director has formally entered into any compensation arrangement for services provided
under consulting agreements or employment agreements.

As of the date of this annual report, all
directors have been issued 45,000 options per person pursuant to our 2018 Stock Option Plan and such options will vest over a period
of one year. In 2019 and 2020, all independent directors were paid $20,000 cash, except for Sheri Lofgren, who received $25,000
for serving as the chair of the audit committee. Additionally, a company affiliated with Mr. Pope received $153,964 for advisory
services in 2019, which included $82,000 in cash and $71,964 in stock and $120,000 for advisory services in 2020, which included
$72,000 in cash and $48,000 in stock.

Option Exercises and Stock Vested

Previously, we did not have a stock option
plan in place; therefore, there were no options issued, outstanding, exercised, or stock issued or vested as compensation during
the years ended December 31, 2020 and 2019. On December 17, 2018, the Company adopted the 2018 Stock Option Plan (the “2018
Stock Option Plan”) whereby the Company reserved for issuance 1,000,000 shares of common stock and agreed that such shares
shall, when issued and paid for in accordance with the provisions of the 2018 Stock Option Plan, constitute validly issued, fully
paid and non-assessable shares of common stock.

  

Pension Benefits and Nonqualified Deferred Compensation

The Company does not maintain any qualified
retirement plans or non-nonqualified deferred compensation plans for its employees or directors.

Executive Officer Outstanding Equity Awards at Fiscal
Year-End

The following table provides certain information
concerning any common share purchase options, stock awards or equity incentive plan awards held by each of our named executive
officers that were outstanding as of December 31, 2020.

 

 

 

Option Awards     Stock Awards  
     

Number of

Securities

Underlying

Unexercised

Options (#)

   

Number of

Securities

Underlying

Unexercised

Options (#)

   

Equity

Incentive Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

     

Option

Exercise

   

Option

Expiration

   

Number of

Shares or

Units of

Stock That

Have Not

Vested

     

Market

Value of

Shares or

Units of

Stock That

Have Not

   

Equity

Incentive

Plan

Awards:

Number

of

Unearned

Shares,

Units or

Other

Rights

That Have

Not

     

Equity

Incentive Plan

Awards:

Market or

Payout Value of

Unearned

Shares, Units or

Other Rights

That Have Not

 
Name     Exercisable     Unexercisable     Options (#)       Price ($)     Date     (#)       Vested     Vested       Vested  
Edward Lee – Chairman     30,000          –     $ 5.70     August 6, 2029                      
Desheng Wang – CEO, Secretary     30,000             $ 5.70     August 6, 2029                      
Duncan Lee – CFO                                            
Jennifer Gu     30,000               $ 5.70     August 6, 2029                      
Michael Pope     30,000             $ 5.70     August 6, 2029                      
Carine Clark     30,000             $ 5.70     August 6, 2029                      
Sheri Lofgren     30,000             $ 5.70     August 6, 2029                      
Greg Butterfield     30,000             $ 5.70     August 6, 2029                      

 

 

 

 

 

Item
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding
beneficial ownership of our common stock as of December 31, 2020: (i) by each of our directors, (ii) by each of the Named Executive
Officers, (iii) by all of our executive officers and directors as a group, and (iv) by each person or entity known by us to beneficially
own more than five percent (5%) of any class of our outstanding shares. As of December 31, 2020, there were 40,959,741 shares of
our common stock outstanding:

Title of Class     Name of Beneficial Owner  

Amount and
Nature
of Beneficial
Ownership

(1)

   

Percentage of
Beneficial
Ownership

%

 
                   
Common     Desheng Wang, CEO, and Director     14,392,400       35.137  
                       
Common     Edward Lee, Chairman and Director jointly with Jennifer Gu, Director     8,359,000       20.407  
                       
Common     Yan Chen     3,000,000       7.324  
                       
Common     Michael Pope     49,032 (2)     *  
                       
Common     Duncan Lee     1,400       *  

(1) Applicable percentage of ownership
is based on 40,959,741 shares of common stock outstanding on December 31, 2020.

(2) Share held by company affiliated
with Mr. Pope

Percentage ownership is determined based
on shares owned together with securities exercisable or convertible into shares of common stock within 60 days of December 31,
2020, for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting
or investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares
of common stock that are currently exercisable or exercisable within 60 days of December 31, 2020, are deemed to be beneficially
owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not
treated as outstanding for the purpose of computing the percentage ownership of any other person. Our common stock is our only
issued and outstanding class of securities eligible to vote.

As of December 31, 2020, there were 22,842,832
shares of common stock outstanding owned by our officers and directors. 

  

Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Consulting services provided by the President, Chief Executive
Officer, Secretary and Treasurer and Chief Financial Officer for the years ended December 31, 2020 and 2019 were as follows:

   

For the
Year

Ended

December 31,

2020

   

For the
Year

Ended

December 31,
2019

 
             
President   $ 0     $ 0  
Chief Executive Officer, Secretary and Treasurer     120,000       121,154  
Chief Financial Officer     22,100       29,000  
    $ 142,100     $ 150,154  

Advances to (from) related party

Revenue generated
from Vitashower Corp., a company owned by the CEO’s wife, amounted to $26,449 and $14,184 for the years ended
December 31, 2020 and 2019, respectively. Account receivable balance due from Vitashower Corp. amounted to $0 and $39,625 as of
December 31, 2019 and 2018, respectively. Purchases generated from Vitashower Corp. amounted to $11,371 and $0 for the years
ended December 31, 2020 and 2019, Respectively. There were accounts payable balance $11,371 and $0 to Vitashower Corp. as of December
31, 2020 and 2019, respectively.

Delinquent Section 16(a) Beneficial
Ownership Report

Section 16(a)
of the Exchange Act requires our directors, executive officers and persons who beneficially own more than ten percent (10%) of
a registered class of our equity securities to file reports of ownership and changes in ownership of our common stock and other
equity securities with the SEC on a timely basis. The Company believes, based solely on a review of Section 16 reports filed with
the SEC and representations by the Company’s reporting persons that no other reports were required during the year ended
December 31, 2019, that all Section 16(a) filing requirements applicable to our executive officers, directors and greater than
ten percent (10%)_beneficial owners were timely filed during 2019 other than as follows: on September 12, 2019, a late Form 3 was
filed for each of Mr. Butterfield, Ms. Clark, Ms. Gu, Mr. Lee, Mr. Pope, Mr. Wang and Mr. Lee to report their status as an executive
officer, director and/or ten percent (10%) beneficial owner; on September 12, 2019, Mr. Wang,
filed a late Form 5 report for the year 2015 to report the common stock exchange on December 30, 2015 pursuant to the Perfecular
Inc. merger;
on September 12, 2019, Mr. Wang, filed a late Form 5 report for the year
2018 to report his three purchases of Common Stock on July 5, 2018, July 10, 2018 and July 12, 2018; on September 12, 2019, Mr.
Lee filed a late Form 5 for the year 2018 to report his purchase of Common Stock on June 29, 2018; and
on September 13,
2019, a late Form 3 was filed for Ms. Lofgren to report her appointment as an independent director on June 8, 2018;

On
February 7, 2020, Mr. Wang amended a Form 5 originally filed on September 12, 2019 for the year 2015 to report his five purchases
of Common Stock on March 31, 2015, June 12, 2015 and December 30, 2015. On February 7, 2020, Mr. Wang amended a Form 5 originally
filed on September 12, 2019 for the year 2018 to report two separate transactions on July 12, 2018 instead of one transaction for
the same number of shares of Common Stock on that date. On February 7, 2020, Mr. Wang filed a late Form 5 for the year 2017 reporting
his two purchases of Common Stock on September 28, 2017 and October 18, 2017.

To the best of
the Company’s knowledge, the rest of the Company’s Section 16 reports have been filed as of the date of this annual
report.

Director Independence

A director is not considered to be independent
if he or she is also an executive officer or employee of the corporation. Our director, Edward Lee, is also our Chairman; our director
Desheng Wang is also our Chief Executive Officer. The rest of our directors are considered to be independent directors

  

Item 14. PRINCIPAL
ACCOUNTING FEES AND SERVICES

During the year ended March 31, 2015, 2014,
and the period from December 4, 2012 (Inception) to March 31, 2013, we engaged Cutler & Co, LLC, as our independent auditor.
On October 20, 2015, we changed our independent auditor to DYH & Company. On April 16, 2017, we changed our independent auditor
to BF Borgers CPA PC. For the years ended December 31, 2020 and 2019, we incurred fees as discussed below:

    Year ended
December 31,
2020
    Year ended
December 31,
2019
 
             
Audit fees     $ 106,598     $ 91,460  
Audit – related fees     $ Nil     $ Nil  
Tax fees     $ Nil     $ Nil  
All other fees     $ Nil     $ Nil  

Audit fees consist of fees related to professional
services rendered in connection with the audit of our annual financial statements and review of our quarterly financial statements.
Tax fees represent fees related to preparation of our corporation income tax returns. Our policy is to pre-approve all audit and
permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related
services, tax services and other services.

PART IV

Item 15. EXHIBITS

EXHIBIT NUMBER   DESCRIPTION
3.1   Articles of Incorporation. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on December 26, 2013.
3.2   Amended and Restated Bylaws, as filed with the SEC on October 22, 2019.
4.2   Subscription Agreement. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on December 26, 2013.
10.1   Form of Stock Purchase Agreement, as filed with the SEC on March 18, 2019.
10.2   Form of Secured Promissory Note, as filed with the SEC on March 18, 2019.
10.3   Form of Stock Pledge Agreement, as filed with the SEC on March 18, 2019.
10.4   Form of Subscription Agreement, as filed with the SEC on March 18, 2019.
10.5   Form of Consulting Agreement, as filed with the SEC on March 18, 2019.
10.7   2018 Equity Incentive Plan, as filed with the SEC on December 28, 2018.
10.8   Promissory Note with Chase Bank, dated March 10, 2021 for $108,750 SBA Loan.*
10.9   Secured Promissory Note with East West Bank, dated January 8, 2021 for $1,500,000.*
10.10   Loan Agreement with Golden Sunrise Investment LLC, dated March 15, 2021 for $1,500,000.*
10.11   Company Guarantee Agreement with Golden Sunrise Investment LLC dated March 15, 2021.*
10.12   Secured Promissory Note with Golden Sunrise Investment LLC dated March 15, 2021 for $1,500,000.*
31.1   Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2   Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1   Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2   Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS   XBRL Instance Document **
101.SCH   XBRL Taxonomy Extension Schema Document **
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document **
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document **
101.LAB   XBRL Taxonomy Extension Label Linkbase Document **
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document **

* Filed herewith.

** XBRL (Extensible Business Reporting
Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11
or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended, and otherwise is not subject to liability under these sections.

Item 16. FORM 10-K SUMMARY

None.

 

SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date: March 23, 2021

  FOCUS UNIVERSAL INC.
     
  By: /s/  Desheng Wang
    Desheng Wang
    Chief Executive Officer, Secretary, and Director

In accordance with the Exchange Act, this
report has been signed below by the following persons on behalf of Focus Universal Inc. and in the capacities and on the dates
indicated.

SIGNATURES   TITLE   DATE
         
/s/ Desheng Wang   Chief Executive Officer, Secretary and Director   March 23, 2021
Desheng Wang        
         

Exhibit 10.8

18164734 chase logo ProxyEgg Form 10-K FOCUS UNIVERSAL INC. For: Dec 31 - StreetInsider.com 

Note

Review this document and choose “Close”
at the bottom of this page to continue.

Date:   March 10, 2021
     
Note Amount:   $108,750
     
Borrower:   AVX DESIGN & INTEGRATION, INC.
     
Lender:   JPMorgan Chase Bank, N.A.

1. PROMISE TO PAY.

Borrower promises to pay to the order of Lender the
Note Amount, plus interest on the unpaid principal balance at the Note Rate, and all other amounts required by this Note.

2. DEFINITIONS.

“CARES Act” means the Coronavirus
Aid, Relief, and Economic Security Act, as amended, and the applicable Paycheck Protection Program rules, interim rules, regulations,
guidance and Frequently Asked Questions.

“Covered Period” means the period beginning
on the date on which the proceeds of the Loan are disbursed to Borrower and ending on any date selected by Borrower that occurs
during the period (i) beginning on the date that is 8 weeks after the date of disbursement, and (ii) ending on the date that is
24 weeks after the date of disbursement.

“Deferral Period” means the period ending
on the date on which the amount of any forgiveness of the Loan determined under the CARES Act is remitted to Lender by SBA or forgiveness
is denied. However, if Borrower does not apply for forgiveness of the Loan within 10 months after the last day of the Covered Period,
the Deferral Period will end on the date that is 10 months after the last day of the Covered Period.

“Loan” means the loan evidenced by this
Note.

“Maturity Date” means the fifth anniversary
of the original disbursement date of the Loan.

“Note Rate” means an interest rate
of 0.98% Per Annum and interest shall accrue on the unpaid principal balance computed on the basis of the actual number of days
elapsed in a year of 360 days.

“Per Annum” means for a year deemed to
be comprised of 360 days.

“SBA” means the Small Business Administration,
an agency of the United States of America.

3. CONDITIONS PRECEDENT TO FUNDING OF LOAN.

Before the funding of the Loan, the following conditions
must be satisfied:

  A. Lender has approved the request for the Loan.
  B. Lender has received approval
from SBA to fund the Loan.

4. PAYMENT TERMS.

Borrower will pay this Note as follows:

A. No Payments During Deferral Period. There shall be no payments due by Borrower during the Deferral
Period.
B. Principal and Interest Payments. Lpon the expiration of the Deferral Period, Lender will notify Borrower (in a billing statement
or by other means) of the due date for the first payment (the “First Payment Date”). Commencing on the First Payment
Date and continuing on the same day of each month thereafter until the Maturity Date, Borrower shall pay to Lender equal monthly
payments of principal and interest, through the month prior to the Maturity Date; provided that the initial payments shall be applied
to the interest accrued during the Deferral Period until such amount has been satisfied.
C. Maturity Date. On the Maturity Date, Borrower shall pay to Lender any and all unpaid principal
plus accrued and unpaid interest. This Note will mature on the Maturity Date.
D. If any payment is due on a date for which there is no numerical equivalent in a particular calendar
month then it shall be due on the last day of such month. If any payment is due on a day that is not a Business Day, the payment
will be made on the next Business Day. The term “Business Day” means a day other than a Saturday, Sunday or any other
day on which national banking associations are authorized to be closed.
E. Payments shall be allocated among principal and interest at the discretion of Lender unless otherwise
agreed or required by applicable law. However, in the event the Loan, or any portion thereof, is forgiven pursuant to the Paycheck
Protection Program under the CARES Act, the amount so forgiven shall be applied in accordance with applicable law and regulations.
F. If Lender or SBA determines that Borrower was not eligible for all or any portion of the Loan,
then Borrower shall repay the Loan, or the portion of the Loan for which Borrower was not eligible, together with any accrued and
unpaid interest, immediately upon notice from Lender or SRA of this determination.
G. Borrower may prepay this Note at any time without payment of any premium.

5. AGREEMENTS.

Borrower understands and agrees as follows: 

A. The Loan is to be made under the SBA’s Paycheck Protection Program.
B. Any loan made under the SBA’s Paycheck Protection Program must be submitted to and approved by SBA. As there is limited funding
available under the Paycheck Protection Program, it is possible that not all applications submitted will be approved by SBA. Lender
is participating in the Paycheck Protection Program to help businesses experiencing the economic impacts from COVID 19 obtain funding
through the program. Lender anticipates high application volume and that there may be processing and system issues that impact
the intake, ordering and/or submission of loan requests to SBA. While Lender will use best efforts in this extraordinary time,
Lender cannot guarantee it will be able to submit Borrower’s application before SBA funding is no longer available. Borrower understands
and agrees that Lender will not be liable to Borrower if Borrower fails to obtain the loan applied for. As such, Borrower releases
and waives claims concerning Lender’s processes and systems for obtaining, ordering and submitting applications to SBA and further
releases and waives to the maximum extent not prohibited by law any claims against Lender for special, exemplary, punitive or consequential
damages relating to any application. This provision supersedes any prior communications, understandings or agreements on the issues
set forth herein.
C. Borrower must use all Loan proceeds only for purposes permitted under the Paycheck Protection
Program provided for in the CARES Act.
D. Forgiveness of the Loan is not automatic and Borrower must request it. Borrower is responsible
for understanding the requirements for obtaining forgiveness, and for complying with those requirements. Borrower is not relying
on Lender for its understanding of the requirements for forgiveness such as eligible expenditures, necessary records/documentation,
Borrower certifications, or possible reductions due to changes in number of employees or compensation. Rather Borrower will consult
the SBA’s Paycheck Protection Program materials. Borrower understands that these requirements may change from time to time.
E. The application for this Loan is subject to review and Borrower may nol receive the Loan. The
Loan also remains subject to availability of funds under the SBA’s Paycheck Protection Program, and to the SBA issuing an SBA loan
number.
F. If the terms and conditions of the SBAs Paycheck Protection Program are changed in any manner
that retroactively makes or requires changes to the terms of the Loan, whether by statute, regulation, interpretation, guidance
or judicial action, then the terms of this Note will be automatically amended to reflect :hose retroactively made or required changes.

6. DEFAULT.

 

Borrower is in default under this Note if Borrower:

A. Fails to make a payment when due under the Note or otherwise fails to comply with any provision
of this Note.
B. Does not disclose, or anyone acting on its behalf does not disclose, any material fact to Lender or SBA.
C. Makes, or anyone acting on its behalf makes, a materially false or misleading representation,
attestation or
certification to Lender or SBA in connection with Borrower’s request for this Loan under the CARES Act.
D. Becomes the subject of a proceeding under any bankruptcy or insolvency law, has a receiver or
liquidator
appointed for any part of its business or property, or makes an assignment for the benefit of creditors.
E. Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without
Lender’s prior written consent.
F. Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower’s
ability to pay this Note.

7. LENDER’S RIGHTS IF THERE IS A DEFAULT.

 

Without notice or demand and without giving up any
of its rights, Lender may:

A. Require immediate payment of all amounts owing under this Note.
B. Collect all amounts owing from Borrower.
C. File suit and obtain judgment.

8. LENDER’S GENERAL POWERS.

 

Without notice or Borrower’s consent, Lender may incur
expenses to collect amounts due under this Note and enforce the terms of this Note. Among other things, the expenses may include
reasonable attorney’s fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the
expenses to the principal balance.

9. GOVERNING LAW AND VENUE; WHEN FEDERAL LAW APPLIES.

When SBA is the holder, this Note shall be interpreted
and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording
documents, giving notice, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local
control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny
any obligation, defeat any claim of SBA, or preempt federal law.

If SBA is not the holder, this Note shall be governed
by and construed in accordance with the laws of the State of Ohio where the main office of Lender is located. MATTERS REGARDING
INTEREST TO BE CHARGED BY LENDER AND THE EXPORTATION OF INTEREST SHALL BE GOVERNED BY FEDERAL LAW (INCLUDING WITHOUT LIMITATION
12 U.S.C. SECTIONS 85 AND 1831 u) AND THE LAW OF THE STATE OF OHIO. The extension of credit that is the subject of this Note is
being made by Lender in Ohio.

10. SUCCESSORS AND ASSIGNS.

Under this Note, Borrower includes its successors,
and Lender includes its successors and assigns.

11. GENERAL PROVISIONS.

A. Borrower must sign all documents necessary at any time to comply with the Loan.
B. Borrower’s execution of this Note has been duly authorized by all necessary actions of its governing
body. The person signing this Note is duly authorized to do so on behalf of Borrower.
C. This Note shall not be governed by any existing or future credit agreement or loan agreement with Lender. The liabilities guaranteed
pursuant to any existing or future guaranty in favor of Lender shall not include this Note. The liabilities secured by any existing
or future security instrument in favor of Lender shall not include this Note.
D. Lender
may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay or forgo enforcing
any of its rights without giving up any of them.
E. Borrower may not use an oral statement of Lender or SBA to contradict or
alter the written terms of this Note.
F. If any part of this Note is unenforceable, all other parts remain in effect.

G. To the extent allowed by law, Borrower waives all demands and notices in connection with this
Note, including presentment, demand, protest, and notice of dishonor.
H. Borrower’s liability under this Note will continue with respect to any amounts SBA may pay Lender
based on an SBA guarantee of this Note. Any agreement with Lender under which SBA may guarantee this Note does not create any third
party rights or benefits for Borrower and, if SBA pays Lender under such an agreement, SBA or Lender may then seek recovery from
Borrower of amounts paid by SBA.
I. Lender reserves the right to modify the Note Amount based on documentation received from Borrower.

12. ELECTRONIC SIGNATURES.

Borrower agrees that its electronic signature
shall have the same force and effect as an original signature and shall be deemed (i) to be “written” or “in writing”
or an “electronic record”, (ii) to have been signed, and (iii) to constitute a record established and maintained in the
ordinary course of business and an original written record when printed from electronic files. Such paper copies or “printouts,”
if introduced as evidence in any judicial, arbitral, mediation or administrative proceeding, will be admissible as between the
parties to the same extent and under the same conditions as other original business records created and maintained in documentary
form.

Exhibit 10.9

PROMISSORY NOTE

 

Borrower: FOCUS UNIVERSAL INC. Lender: East West Bank
  2311 E Locust St   Loan Servicing Department
  Ontario, CA 91761   9300 Flair Drive, 6th Floor
      El Monte, CA 91731

 

Principal Amount:           $1,500,000.00 Date of Note:           January 8, 2021

PROMISE TO PAY.
FOCUS UNIVERSAL INC. (“Borrower’) promises to pay to East West Bank (“Lender”), or order, in lawful money of the
United States of America, the principal amount of One Million Five Hundred Thousand & 00/100 Dollars ($1,500,000.00), together
with interest on the unpaid principal balance from January 8, 2021, until paid in full.

 

PAYMENT. An initial
disbursement of $1,000,000,00 at Loan funding will be payable as follows: Subject to any payment changes resulting from changes
in the Index, Borrower will pay this loan in 59 regular payments of $4,518.51 each and one irregular last payment estimated at
$902,252.95. Borrowers first payment is due February 22, 2021, and all subsequent payments are due on the same day of each month
after that. Borrower’s final payment will be due on January 22, 2026, and will be for all principal and all accrued interest
not yet paid. Payments include principal and interest. Unless otherwise agreed or required by applicable law, payments will be
applied first to any accrued unpaid interest as shown on the most recent statement or bill provided to Borrower (if no statement
or bill has been provided for any reason, it shall be applied to the unpaid interest accrued since the fast payment); then to
principal; then to any late charges; and then to any unpaid collection costs. Borrower will pay Lender at Lender’s address shown
above or at such other place as Lender may designate in writing. If a subsequent disbursement of $500,000.00 occurs pursuant to
the section entitled “Hold Back” stated in the Business Loan Agreement of even date herewith executed by and between
Borrower and Lender, the monthly payments stated herein shall increase in accordance with a 30-year amortization schedule for
the remainder of the loan period.

VARIABLE INTEREST RATE.
The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the
daily Wall Street Journal Prime Rate, as quoted in the “Money Rates” column of The Wall Street Journal (Western Edition)
as determined by Lender (the “Index”). The Index is not necessarily the lowest rate charged by Lender on its loans. Lender
will tell Borrower the current Index rate upon Borrower’s request. The interest rate change will not occur more often than each
day. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 3.250% per annum.
Interest on the unpaid principal balance of this Note will be calculated as described in the “INTEREST CALCULATION METHOD”
paragraph using a rate of 0.250 percentage points over the Index (the “Margin”), resulting in an initial rate of 3.500%.
If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower.
NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. Whenever
increases occur in the interest rate, Lender, at its option, may do one or more of the following: (A) increase Borrower’s payments
to ensure Borrower’s loan will pay off by its original final maturity date, (B) increase Borrower’s payments to cover accruing
interest, (C) increase the number of Borrowers payments, and (D) continue Borrower’s payments at the same amount and increase Borrower’s
final payment.

INTEREST CALCULATION
METHOD.
Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year
of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is
outstanding. All interest payable under this Note is computed using this method.

PREPAYMENT; MINIMUM INTEREST
CHARGE.
Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by
law. In any event, even upon full prepayment of this Note, Borrower understands that Lender is entitled to a minimum interest
charge of $100.00.
Other than Borrower’s obligation to pay any minimum interest charge, Borrower may pay without penalty all
or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower’s obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the
principal balance due and may result in Borrower’s making fewer payments. Borrower agrees not to send Lender payments marked “paid
in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment
constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full
satisfaction of a disputed amount must be mailed or delivered to: East West Bank, Loan Service Department, 9300 Flair Drive, 6th
Floor El Monte, CA 91731.

 

LATE CHARGE. If a
payment is 11 days or more late, Borrower will be charged 6.000% of the unpaid portion of the regularly scheduled payment or
$5.00, whichever is greater.

INTEREST AFTER DEFAULT.
Upon default, the interest rate on this Note shall, if permitted under applicable law, immediately increase by adding an additional
5.000 percentage point margin (“Default Rate Margin”). The Default Rate Margin shall also apply to each succeeding interest
rate change that would have applied had there been no default.

DEFAULT.
Each of the following shall constitute an event of default (“Event of Default”) under this Note:

Payment Default.
Borrower fails to make any payment when due under this Note.

Other Defaults. Borrower
fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related
documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between
Lender and Borrower.

Default in Favor of
Third Parties.
Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrowers property
or Borrower’s ability to repay this Note or perform Borrowers obligations under this Note or any of the related documents.

False Statements. Any
warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the time made or furnished or becomes
false or misleading at any time thereafter.

Insolvency. The
dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

Creditor or Forfeiture
Proceedings.
Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession
or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes
a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender, However, this Event of Default shall not
apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits
with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion,
as being an adequate reserve or bond for the dispute.

Events
Affecting Guarantor.
Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced
by this Note.

Change In Ownership. Any change in ownership
of twenty-five percent (25%) or more of the common stock of Borrower.

Adverse Change. A material adverse change
occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.

Cure Provisions. If
any default, other than a default in payment, is curable and if Borrower has not been given a notice of a breach of the same provision
of this Note within the preceding twelve (12) months, it may be cured if Borrower, after Lender sends written notice to Borrower
demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15)
days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

OTHER DEFAULTS MODIFIED.
Notwithstanding the section above entitled “Other Defaults”, Borrower fails to comply with or to perform any other
term. obligation, covenant or condition contained in this Note or Agreement or in any of the Related Documents between Lender and
Borrower; or any shareholder, member, trustor, or any owner of the Borrower also holding a controlling interest in any given entity’
s common stock, membership interest, trust interest, or any other ownership interest (“Related Entity”), fails to comply
with or to perform any other term, obligation, covenant or condition contained in any other agreement between Lender and the Related
Entity.

LENDER’S RIGHTS. Upon
default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due,
and then Borrower will pay that amount.

JUDICIAL REFERENCE.
If the waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies
of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties
or, if they cannot agree, then any party may seek to have a private judge appointed in accordance with California Code of Civil
Procedure §§ 638 and 640 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive
jurisdiction of the federal courts). The reference proceedings shall be conducted pursuant to and in accordance with the provisions
of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among
others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records
relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief,
but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the
Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court
under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted
in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge
shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as
a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in
the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code
of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help
remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating
to the applicability, interpretation, and enforceability of this paragraph.

The parties agree that
time is of the essence in conducting the referenced proceedings. The parties shall promptly and diligently cooperate with one another
and the referee, and shall perform such acts as may be necessary to obtain prompt and expeditious resolution of the dispute or
controversy in accordance with the terms hereof. The costs shall be borne equally by the parties.

ATTORNEYS’ FEES; EXPENSES.
Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not
there is a lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), and appeals. Borrower also will pay any court costs, in addition to all other sums provided by law.

JURY WAIVER. To the
extent permitted by applicable law, Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Borrower against the other.

GOVERNING LAW.
This Note win be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the
State of California without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of California.

DISHONORED ITEM FEE.
Borrower will pay a fee to Lender of $25.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorized charge
with which Borrower pays is later dishonored.

COLLATERAL. Borrower acknowledges this Note
is secured by the following collateral described in the security instruments listed herein:

(A)  a Deed of Trust dated January 8, 2021,
to a trustee in favor of Lender on real property located in San Bernardino County, State of California. That agreement contains
the following due on sale provision: Lender may, at Lender’s option, declare immediately due and payable all sums secured by the
Deed of Trust upon the sale or transfer, without Lender’s prior written consent, of all or any part of the Real Property, or any
interest in the Real Property. A “sale or transfer’ means the conveyance of Real Property or any right, title or interest
in the Real Property; whether legal, beneficial or equitable; whether voluntary or involuntary; whether by outright sale, deed,
installment sale contract, land contract, contract for deed, leasehold interest with a term greater than three (3) years, lease-option
contract, or by sale, assignment, or transfer of any beneficial interest in or to any land trust holding title to the Real Property,
or by any other method of conveyance of an interest in the Real Property. if any Borrower is a corporation, partnership or limited
liability company, transfer also includes any restructuring of the legal entity (whether by merger, division or otherwise) or
any change in ownership of more than twenty-five percent (25%) of the voting stock, partnership interests or limited liability
company interests, as the case may be, of such Borrower. However, this option shall not be exercised by Lender if such exercise
is prohibited by applicable law.

(B)  an Assignment of All Rents
to Lender on real property located in San Bernardino County, State of California.

(C) 
an Assignment of Deposit Account dated January 8, 2021 made and executed between FOCUS UNIVERSAL INC. and Lender on collateral
described as a deposit account.

CERTIFICATION OF ACCURACY.
Borrower certifies under penalty of perjury that all financial documents provided to Lender, which may include income statements,
balance sheets, accounts payable and receivable listings, inventory listings, rents rolls, and tax returns, are the most recent
such documents prepared by Borrower, that they give a complete and accurate statement of the financial condition of Borrower, as
of the dates of such statements, and that no material change has occurred since such time, except as disclosed to Lender in writing.
Borrower agrees to notify Lender immediately of the extent and character of any material adverse change in the Borrower’s financial
condition. The financial documents shall constitute continuing representations of Borrower and shall be construed by Lender to
be continuing statements of the financial condition of Borrower and to be new and original statement of all assets and liabilities
of Borrower with respect to each advance under this Note and every other transaction in which Borrower becomes obligated to Lender
until Borrower advises Lender to the contrary. The financial documents are being given to induce Lender to extend credit and Lender
is relying upon such documents. Lender may verify with third parties any information contained in financial documents delivered
to Lender, obtain information from others, and ask and answer questions and requests seeking credit experience about the undersigned.

CHOICE OF VENUE. If
there is a lawsuit, the undersigned, and if more than one, each of the undersigned, agree upon Lender’s request to submit to the
jurisdiction of the courts of Los Angeles County, State of California.

SUCCESSOR INTERESTS.
The terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs, personal representatives, successors and
assigns, and shall inure to the benefit of Lender and its successors and assigns.

NOTIFY US OF INACCURATE
INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Borrower may notify Lender if Lender reports any inaccurate information
about Borrower’s account(s) to a consumer reporting agency. Borrower’s written notice describing the specific inaccuracy(ies) should
be sent to Lender at the following address: East West Bank Loan Service Department P.O. Box 60021 City of Industry, CA 91716-0021.

ORAL AGREEMENTS NOT
EFFECTIVE.
This Note or Agreement embodies the entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior oral or written negotiations, agreements and understandings of the parties with
respect to the subject matter hereof and shall remain in full force and effect in accordance with its terms and conditions. Moreover,
any subsequent oral statements, negotiations, agreements or understandings of the parties shall not be effective against Lender
unless (i) expressly stated in writing, (ii) duly approved and authorized by an appropriate decision making committee of Lender
on such terms and conditions as such committee shall deem necessary or appropriate in the committee’s sole and absolute opinion
and judgment and (iii) executed by an authorized officer of Lender. Borrower shall not rely or act on any oral statements, negotiations,
agreements or understandings between the parties at anytime whatsoever, including before or during any Lender approval process
stated above. Borrower acknowledges and agrees that Borrower shall be responsible for its own actions, including any detrimental
reliance on any oral statements, negotiations, agreements or understandings between the parties and that Lender shall not be liable
for any possible claims, counterclaims, demands, actions, causes of action, damages, costs, expenses and liability whatsoever,
known or unknown, anticipated or unanticipated, suspected or unsuspected, at law or in equity, originating in whole or in part
in connection with any oral statements, negotiations, agreements or understandings between the parties which the Borrower may now
or hereafter claim against the Lender. Neither this Note or Agreement nor any other Related Document, nor any terms hereof or thereof
may be amended, supplemented or modified except in accordance with the provisions of this section. Lender may from time to time,
(a) enter into with Borrower written amendments, supplements or modifications hereto and to the Related Documents or (b) waive,
on such terms and conditions as Lender may specify in such instrument, any of the requirements of this Note or Agreement or the
Related Documents or any Event Default and its consequences, if, but only if, such amendment, supplement, modification or waiver
is (i) expressly stated in writing, (ii) duly approved and authorized by an appropriate decision making committee of Lender on
such terms and conditions as such committee shall deem necessary or appropriate in the committee’s sole and absolute opinion and
judgment and (iii) executed by an authorized officer of Lender. Then such amendment, supplement, modification or waiver shall be
effective only in the specific instance and specific purpose for which given.

GENERAL PROVISIONS.
If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses
this Note, to the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, and notice
of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this
Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that
Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the
consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint
and several.

PRIOR TO SIGNING THIS
NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES
TO THE TERMS OF THE NOTE

BORROWER ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

 

BORROWER:

FOCUS UNIVERSAL INC.

 

By: /s/ Desheng
Wang
                                                 

Desheng Wang, CEO / Secretary
of FOCUS UNIVERSAL INC.

Exhibit 10.10

LOAN AGREEMENT

$1,500,000.00 Date: March 15th, 2021

For
value received, the undersigned Focus Universal, Inc., a Nevada corporation(“Borrower”), promises to pay to the order
of Golden Sunrise Investment LLC (“Lender”), at 22443 Ridge Line Rd Diamond Bar CA 91765 (or at such other place as
the Lender may designate in writing), and Lender agrees to lend to the Borrower, the sum of One Million Five Hundred Thousand
dollars ($1,500,000.00) with interest thereon from the date the loan is funded, on the unpaid principal at the rate of 10% per
annul fixed until the date it is due.

I. TERMS OF REPAYMENT

A. Payments

Upon
Borrower signing this Loan Agreement, Borrower shall pay Lender: (a) the sum of $15,000, which represents an Arrangement Fee of
1% of the loan amount,

The
principal and accrued interest of the loan shall be payable in full on March, 15 2022, or six months from the date of the loan
is funded, whichever is later (the “Due Date”).

Unpaid
principal after the Due Date or after any default by Borrower as described below shall accrue interest at a rate of 12% per annul
fixed until paid.

In
addition, Borrower will pay for: (a) the ALTA Loan title insurance issued by First American Title for the benefit of the Lender,
(b) all recording fees and service fees related to the recording of any document to protect Lender’s security with regards to
the properties in the States of California, (c) all escrow fee and escrow related fee

B.
Application of Payments

All
interest payments on this Loan Agreement shall be applied on the 1st day of each month.

II. SECURITY

This Loan Agreement shall be secured by
a Deed of Trust on the real property owned by the Borrower (“Secured Property”) commonly known as:

2311
E Locust Ct., Ontario, CA, 91761 Parcel #0113-396-09-0000, Parcel Map 12035, Parcel 5 in San Bernardino County,

III. GUARANTEES

Any
and all of Borrower’s obligations under this Loan Agreement and any other related agreements shall be further guaranteed by
Focus
Universal, Inc., a Nevada corporation (company) pursuant to their company
Guarantee Agreements.

IV. PREPAYMENT

The
Borrower reserves the right to prepay this Loan Agreement (in whole or in part) after 6 months of the first day with no prepayment
penalty. The Borrower may make, at Borrower’s sole discretion, payments of interest only, or interest and principal, provided
that the principal is not paid in full prior to six months from the date the loan is funded.

V. COLLECTION COSTS

If any action or proceeding is commenced
that would materially affect Lender’s interest in the Secured Property or if Borrower fails to comply with any provision of this
Agreement, including but not limited to Borrower’s failure to pay when due any amounts Borrower is required to pay under this
Agreement, Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including
but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied
or placed on the Secured Property and paying all costs for insuring, maintaining and preserving the Secured Property. All such
expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the
date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness
and, at Lender’s option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be
payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the
remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity.

VI. 
DEFAULT

If any of the following events of default occur,
this Loan Agreement and any other obligations of the Borrower to the Lender, shall become immediately due, without demand or notice:

1) the failure of the
Borrower to pay the principal and any accrued interest when due;

2) the liquidation or
dissolution of the Borrower;

3) the filing of bankruptcy
proceedings involving the Borrower as a debtor;

4) the application for the
appointment of a receiver for the Borrower;

5) the making of a general
assignment for the benefit of the of the Borrower’s creditors;

6) the insolvency of the Borrower;

7) a
material misrepresentation by the Borrower to the Lender for the purpose of obtaining or extending credit;

8) the sale of the
Borrower;

9) Any default in the
deed of trust securing this loan, or judicial or non-judicial foreclosure proceedings against the Secured Property;

10) Any sale, transfer,
assignment, or any other disposition of title to the Secured Property;

11) Any of the
Undertakings or representations is deemed incorrect when made or failed to be made;

12) Other than
Permitted Liens, Borrower has or shall have entered into or granted any security agreement, or permitted the filing or attachment
of any security interest on or affecting any of the Secured Property directly or indirectly securing repayment of Borrower’s obligations
under this Loan Agreement and Note that would be prior or that may in any way be superior to Lender’s security interest and rights
in and to such Secured Property. Permitted Liens shall mean (1) liens and security interest securing indebtedness owed by Borrower
to Lender (2) liens for taxes, assessment, or similar charges either not yet due or being contested in good faith; (3) liens of
materialmen, mechanics, warehousemen, or carriers or other like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (4) purchase money liens or purchase money security interest upon or in any property acquired or
held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement (5) liens
and security interest which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing;

VII. UNDERTAKINGS

Borrower agrees to the following without limitation:

1. To maintain the Secured
Properties in good order and operating conditions and in compliance with any applicable building codes and ordinances; and

2. To notify Lender immediately of any insurance
claims in any amount over $10,000 per claim or $20,000 cumulative claims over a 3-month period on any Secured Property.

3. To maintain fire and other risk
insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower’s properties and
operations, in form, amounts, coverage and with insurance companies acceptable to Lender. Borrower will deliver to Lender from
time to time the policies or certificate of insurance in form satisfactory to Lender, including stipulations that coverages will
not be cancelled or diminished without at least 30 day prior written notice to Lender.

VIII. TAXES AND DEDUCTIONS

 

All payments due under any operative
documents related with this Loan Agreement shall be made free and clear of any deduction for any present or future taxes, set off,
counterclaims, withholdings, levies, charges, duties or any other taxes imposed by local governments. The loan documents will include
the customary provisions and carve-outs in respect of taxes deducted or withheld from payments so that the net amount received
by Lender shall be the same as if such taxes deducted or withheld from payment would not have existed.

I. INDEMNIFICATION OF LENDER:

The Borrower hereby indemnifies
and holds harmless the Lender from and against any and all liabilities, losses, increased cost, charges, penalties, costs or claims
arising out of, or damages caused as a consequence of the ownership, financing, operation, possession, use and/or maintenance of
any Secured Property during the Loan Term, the transactions contemplated hereby and other customary matters (including to third
parties), except to the extent caused by the Lender’s gross negligence or willful misconduct.

X. SEVERABILITY OF PROVISIONS

If
any one or more of the provisions of this Loan Agreement are determined to be unenforceable, in whole or in part, for any reason,
the remaining provisions shall remain fully operative.

Xl. NOT A CONSUMER LOAN

Borrower hereby represents, warrants
and affirms that Borrower intends to use and will use the funds lent by the Lender pursuant to this Loan Agreement only for investment
purposes. No proceeds of the loan will in any way be used for personal, family, or household purposes. Borrower further represents
that, to the extent it may be later alleged that the Loan is a consumer credit transaction and/or that certain consumer disclosures
and protections should have been given to Borrower, Borrower waives and relinquishes any right to such disclosures and protections.

XII.
MISCELLANEOUS

All payments of principal and interest on this Loan Agreement
shall be paid in the legal currency of the United States. The Borrower waives presentment for payment, protest, and notice of protest
and demand of this Loan Agreement.

No delay in enforcing any right
of the Lender under this Loan Agreement, or assignment by Lender of this Loan Agreement, or failure to accelerate the debt evidenced
hereby by reason of default in the payment of a monthly installment or the acceptance of a past-due installment shall be construed
as a waiver of the right of Lender to thereafter insist upon strict compliance with the terms of this Loan Agreement without notice
being given to Borrower. All rights of the Lender under this Loan Agreement are cumulative and may be exercised concurrently or
consecutively at the Lender’s option.

Choice
of Venue: If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of San Bernardino
County, State of California

Waiver Jury: To the extent permitted
by applicable law, all parties to this Agreement waive the right to any jury trial in any action, proceeding, or counter claim
brought by any party against the other party.

This Loan Agreement may not
be amended without the written approval of the Borrower and the Lender.

XIII.
GOVERNING LAW

This Loan Agreement shall
be construed in accordance with the laws of the State of California.

XIV.
SIGNATURES

This Loan Agreement shall be signed
by Mr. Wang Desheng, on behalf of Borrower and Betty Qi as the Lender

Borrower represents that the person signing this Loan
Agreement on behalf of Focus Universal, Inc. has full authority to bind the company to this Loan Agreement.

IN WITNESS WHEREOF, this
Agreement has been executed and delivered in the manner prescribed by law as of the date first written above.

Signed this 17 day of March, 2001, at Ontario, CA

Borrower:

Focus Universal, Inc., a Nevada corporation

By: /s/ Desheng
Wang                                   

Desheng Wang, as company CEO

 

 

Lender:

Golden Sunrise Investment LLC, a California limited liability
Company

By: /s/ Betty Qi                                              

Betty Qi, as company manager

Exhibit 10.11

COMPANY GUARANTEE AGREEMENT

 

The undersigned Focus Universal, Inc., a Nevada corporation(“GUARANTOR”)
agrees with GOLDEN SUNRISE INVESTMENT LLC (“LENDER”) as follows:

1.          GUARANTOR desires to have LENDER loan the
sum of two hundred fifty thousand dollars ($1,500,000.00) to Focus Universal, Inc., a Nevada corporation, a company in which GUARANTOR
has the majority ownership interest (“BORROWER”). LENDER has advised GUARANTOR that LENDER will not make such loan and
will not enter into that certain Loan Agreement (“Loan Agreement”) and Promissory Note Secured by Deed of Trust (“Note”)
with BORROWER, without GUARANTOR personally guaranteeing by this Agreement all sums owed to LENDER by BORROWER and all other obligations
in the Loan Agreement and Note (the “Guaranteed Sums”). The Guaranteed Sums include all amounts now or hereafter due
and owing by BORROWER to LENDER, and all advances, debts, obligations and liabilities of BORROWER, whether presently existing or
hereafter arising, whether voluntary or involuntary, absolute or contingent, and whether or not unenforceable against BORROWER,
together with any and all losses, damages, reasonable costs, reasonable attorneys’ fees, and reasonable expenses suffered by LENDER
by reason of BORROWER’s default in payment of any of the foregoing indebtedness or the enforcement of this Guarantee; and, any
renewal, extension or rearrangement of the indebtedness, costs, or expenses described hereinabove. Without limiting the foregoing,
the Guaranteed Sums shall include the payment of the Note, and the performance of all obligations contained in the Guaranteed Sums.
Further, the term Guaranteed Sums shall include, without limitation, interest, reasonable attorney’s fees and other charges on
any debt or obligation of the BORROWER accruing after the filing of a petition under any chapter of the Federal Bankruptcy Code
by or against the BORROWER, and any loans or other credit extended to the BORROWER after the filing of any such petition, notwithstanding
the release of the BORROWER from the performance or observance of any of its agreements, covenants or obligations by operation
of law.

2.          In consideration of LENDER making
the loan credit to BORROWER, the receipt and sufficiency and adequacy of which are hereby acknowledge, Guarantor hereby absolutely
and unconditionally guarantees to Lender the prompt payment and performance of the BORROWER under the Guaranteed Sums as and when
the same shall be due and payable, whether by lapse of time, by acceleration of maturity or otherwise, and at all times thereafter,
including payment of the Note, and the performance of all obligations contained in the Guaranteed Sums.

3.          This Guarantee shall be an absolute and
continuing guarantee, until payment in full of the Guaranteed Sums, and is a guarantee of payment and performance and not merely
of collection. Upon the full repayment of the Guaranteed Sums, this Guarantee shall automatically be null and void and, upon the
request of BORROWER, LENDER shall deliver a release of this Guarantee to GUARANTOR.

4.          
If the GUARANTOR becomes liable for any indebtedness owing by BORROWER to LENDER, by endorsement or otherwise, other than under
this Guarantee, such liability shall not be in any manner impaired or affected hereby, and the rights of LENDER hereunder shall
be cumulative of any and all other rights that LENDER may ever have against the GUARANTOR. The exercise by LENDER of any right
or remedy hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise
of any other right or remedy. If, for any reason whatsoever, BORROWER is now, or hereafter becomes indebted to the
GUARANTOR, such indebtedness and all interest thereon shall, at all times, be subordinate in all respects to the sums due under
the Guaranteed Sums, and the GUARANTOR shall not be entitled to enforce or receive payment thereof until the Guaranteed Sums have
been fully paid. Notwithstanding anything to the contrary contained in this Guarantee or any payments made by any party hereunder,
the GUARANTOR shall not have any right of subrogation in or under the documents securing payment of the Guaranteed Sums or this
Guarantee or to participate in any way therein, or in any right, title or interest in and to any mortgaged property or any collateral
for the Guaranteed Sums or this Guarantee, all such rights of subrogation and participation being hereby expressly waived and released,
until the Guaranteed Indebtedness has been fully paid.

5.          
Should BORROWER default in the payment of sums due under the Guaranteed Sums, or any part thereof, when such indebtedness becomes
due, either by its terms or as the result of the exercise of any power to accelerate, or the occurrence of a Default under the
Loan Agreement, the GUARANTOR shall, on demand and without further notice of nonpayment or of dishonor, without any notice having
been given to the GUARANTOR previous to such demand of the acceptance by LENDER of this Guarantee, and without any notice having
been given to the GUARANTOR previous to such demand of the creating or incurring of such indebtedness, pay the amount due thereon
to LENDER, and it shall not be necessary for LENDER, in order to enforce such payment by the GUARANTOR, first to institute suit
or exhaust its remedies against BORROWER or others liable on such indebtedness, or to enforce its rights against any security which
shall ever have been given to secure such indebtedness. Suit may be brought, or demand may be made against GUARANTOR without impairing
the rights of LENDER against any other party guaranteeing the Guaranteed Sums. GUARANTOR hereby specifically agrees that his liability
hereunder is absolute, and not contingent on the occurrence of any event.

6.          
The GUARANTOR hereby agrees that the GUARANTOR’s obligations under the terms of this Guarantee shall not be released,
diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (a) the taking or
accepting of any other security or guaranty for any or all of the Guaranteed Sums; (b) any release, surrender, exchange,
subordination, or loss of any security at any time existing in connection with any or all of the Guaranteed Sums; (c) the
complete or partial release from liability of any other Guarantor of the Guaranteed Sums; (d) the insolvency, bankruptcy,
disability, dissolution, termination, receivership, reorganization or lack of corporate, partnership or other power of
Borrower, or any party at any time liable for the payment of any or all of the Guaranteed Sums, whether now existing or
hereafter occurring; (e) renewal, extension, modification or rearrangement of the payment of any or all of the Guaranteed
Sums, either with or without notice to or consent of the GUARANTOR, or any adjustment, indulgence, forbearance, or compromise
that may be granted or given by LENDER to Borrower, or the GUARANTOR; (f) any neglect, delay, omission, failure, or refusal
of LENDER to take or prosecute any action for the collection of any of the Guaranteed Sums or to foreclose or take or
prosecute any action to foreclose upon any security therefor or to take or prosecute any action in connection with any
instrument or agreement evidencing or securing all or any part of the Guaranteed Sums; (g) any failure of LENDER to notify
the GUARANTOR of any renewal, extension, rearrangement, modification or assignment of the Guaranteed Sums or any part
thereof, or of any instrument evidencing or securing the Guaranteed Sums or any part thereof, or of the release of or change
in any security or of any other action taken or refrained from being taken by LENDER against Borrower, or of any new
agreement between LENDER and Borrower, it being understood that LENDER shall not be required to give the GUARANTOR any notice
of any kind under any circumstances with respect to or in connection with the Guaranteed Sums; (h) the unenforceability of
all or any part of the Guaranteed Sums against BORROWER, whether because the Guaranteed Sums exceed the amount permitted by
law, the act of creating the Guaranteed Sums, or any part thereof, is ultra vires, the officers or persons creating same
acted in excess of their authority, or otherwise, it being agreed that the GUARANTOR shall remain liable hereon regardless of
whether BORROWER or any other person be found not liable on the Guaranteed Sums, or any part thereof, for any reason; or (i)
any payment by BORROWER to LENDER is held to constitute a preference under the bankruptcy laws or if for any other reason
LENDER is required to refund such payment or pay the amount thereof to someone else. It is the intent of the GUARANTOR and
LENDER that the obligations and liabilities of the GUARANTOR hereunder are absolute and unconditional under any and all
circumstances and that until the Guaranteed Sums is fully and finally paid, such obligations and liabilities shall not be
discharged or released, in whole or in part, by any act or occurrence which might, but for the provisions of this Guarantee,
be deemed a legal or equitable discharge or release of a GUARANTOR.

8.          The GUARANTOR represents and warrants that the value of the consideration received and to be received by the GUARANTOR as a result
of the execution of this Guarantee is fair and adequate and is reasonably worth at least as much as the liability and obligation
of the GUARANTOR hereunder, and such liability and obligation may reasonably be expected to benefit the GUARANTOR directly or indirectly.

9.          This Guarantee is for the benefit of LENDER and LENDER’s successors and assigns, and in the event of an assignment of the Guaranteed
Sums, or any part thereof, the rights and benefits hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guarantee is binding not only on the GUARANTOR, but on the GUARANTOR’s heirs, personal
representatives, successors and assigns.

10.          THIS GUARANTEE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, AND IS INTENDED TO BE PERFORMED IN
ACCORDANCE WITH, AND ONLY TO THE EXTENT PERMITTED BY SUCH LAWS.

11.          If any provision
of this Guarantee or the application thereof to any person or circumstance shall, for any reason and to any extent, be invalid
or unenforceable, neither the remainder of this Guarantee nor the application of such provisions to any other person or circumstances
shall be affected thereby, but rather the same shall be enforced to the greatest extent permitted by law.

12.          The GUARANTOR hereby agrees with LENDER
that all rights, remedies and recourses afforded to LENDER by reason of this Guarantee or otherwise are separate and cumulative
and may be pursued separately, successively or concurrently, as occasion therefor shall arise, and are non-exclusive and shall
in no way limit or prejudice any other legal or equitable right, remedy or recourse which LENDER may have.

13.          THE UNDERSIGNED
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM THAT
RELATES TO OR ARISES OUT OF THIS GUARANTEE OR THE ACTS OR FAILURE TO ACT OF OR BY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS
OR PROVISIONS OF THIS GUARANTEE OR THE OTHER LOAN DOCUMENTS.

Agreed and Accepted:

DATE: March 15, 2021

GUARANTOR

/s/
Desheng Wang                  

Desheng Wang, CEO

Address and Phone:

Exhibit 10.12

PROMISSORY NOTE SECURED BY DEED OF TRUST

 

Date: March 15, 2021
Borrower: Focus Universal, Inc., a Nevada corporation
Payee: Golden Sunrise Investment LLC
Principal Amount: One Million Five Hundred Thousand US Dollars
($1,500,000.00)
Term: The Principal is payable in whole on the Due Date as set forth herein.
Due Date: March 14, 2022.
Payment Terms: This unpaid principal and all unpaid accrued interest on this Note shall be due and payable on the Due Date.
Form of Payment: Wire transfer or certified check in payment of all or any portion hereof may be accepted by Payee and handled in collection in
the customary manner.
Interest Rate: This Note shall bear interest at the rate of 10% per annum.
The 1st of each month is a due day for interest only
Security for Note: This Note represents the indebtedness owed by Borrower to Payee pursuant to the March 15,2021 Loan Agreement between Borrower and Payee. Borrower agrees that until such time as the principal and interest owed under this note are paid in full, the note shall be secured by a deed of trust to real property commonly known as 2311 E Locust Ct., Ontario, CA, 91761 Parcel #0113-396-09-0000, Parcel Map 12035, Parcel 5 in San Bernardino County, CA (the “Property”). owned by the Borrower, executed on March 15, 2021, and recorded on or about March 14, 2022 in the records of San Bernardino County, California.
Subordination: The deed of trust wider this Note shall be and shall remain, at all times. and in each and every
respect, subject and subordinate to the Deed of trust of EastWest Bank (the “Primary Security Instrument”). Documents,
and to any and all renewals. amendments, modifications. supplements, extensions. consolidations, and replacements thereof, including
without limitation, amendments which increase the amount of the indebtedness secured by the Note.

 

Attorneys’ Fees; Expenses for Note: In any action at law or equity to enforce this Note, even if a lawsuit is not filed, the prevailing party shall be entitled to his/her reasonable attorneys’ fees and all costs, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. Borrower also will pay any court costs, in addition to all other sums provided by law.

Severability: If any provision of this Note or the application thereof shall for any reason and to any extent, be invalid or unenforceable,
neither the remainder of this Note nor the application of the provision to other persons, entities or circumstances shall be affected
thereby, but instead shall be enforced to the maximum extent permitted by law.
Binding Effect: The covenants, obligations and conditions herein contained shall be binding on and inure to the benefit of the heirs, legal representatives,
and assigns of the parties hereto.
Governing Law: This Note shall be governed by and construed in accordance with the laws of the State of California.

Executed on this 15th day of March, 2021

Focus Universal, Inc., a Nevada corporation

/s/ Desheng
Wang                                 

     By
Desheng Wang, its CEO

Exhibit 31.1

CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO
SECTION 302 OF THE

SARBANES-OXLEY
ACT OF 2002

I, Desheng Wang, certify that:

1. I have reviewed this Annual Report
on Form 10-K of Focus Universal Inc. for the year ended December 31, 2020;

2. Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial
statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:

a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
c)   evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
d)   disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of
the registrant’s board of directors (or persons performing the equivalent function):

a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: March 23, 2021 By: /s/ Desheng Wang
    Desheng Wang
Chief Executive Officer
(Principal Executive Officer)

  

 

 

Exhibit 31.2

CERTIFICATION
OF PRINCIPAL ACCOUNTING OFFICER

PURSUANT TO
SECTION 302 OF THE

SARBANES-OXLEY
ACT OF 2002

I, Duncan Lee, certify that:

1. I have reviewed this Annual Report
on Form 10-K of Focus Universal Inc. for the year ended December 31, 2020;

2. Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial
statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:

a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
c)   evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
d)   disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of
the registrant’s board of directors (or persons performing the equivalent function):

a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: March 23, 2021 By: /s/ Duncan Lee
   

Duncan Lee

Chief Financial Officer
(Principal Financial Officer)

 

 

Exhibit 32.1

CERTIFICATION
PURSUANT TO

18 U.S.C. SECTION
1350,

AS ADOPTED PURSUANT
TO

SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In
connection with the Annual Report of Focus Universal Inc. (the “Company”) on Form 10-K for the year ended December
31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Desheng Wang,
Chief Executive Officer (Principal Executive Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:

  (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: March 23, 2021 By: /s/ Desheng Wang
    Desheng Wang
Chief Executive Officer
(Principal Executive Officer)

 

 

Exhibit 32.2

CERTIFICATION
PURSUANT TO

18 U.S.C. SECTION
1350,

AS ADOPTED PURSUANT
TO

SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In
connection with the Annual Report of Focus Universal Inc. (the “Company”) on Form 10-K for the year ended December
31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Duncan Lee, Chief
Financial Officer (Principal Financial Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:

  (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: March 23, 2021 By: /s/ Duncan Lee
   

Duncan Lee

Chief Financial Officer
(Principal Financial Officer)

Source of this news: https://www.streetinsider.com/SEC+Filings/Form++10-K+++++++FOCUS+UNIVERSAL+INC.++++++For%3A+Dec+31/18164734.html

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