Focus Universal Inc. 10-K

 false 2023 FY 0001590418

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 2023-10-01

 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, 2023

 or

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

 For the transition period from _____ to _____

 Commission file number 333-193087

 (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 Locust Court, Ontario, CA

 91761

 (Address of principal executive offices)

 (Zip Code)

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

 Securities registered pursuant to Section 12(b)
of the Act:

 Title of each class

 Trading Symbol(s)

 Name of each exchange on which registered

 Common Stock, $0.001 par value

 FCUV

 The Nasdaq Stock Market LLC

(Nasdaq Global Market)

 Securities registered pursuant to Section 12(g)
of the Act:

 Title of each class

 None

 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. Yes No

(1) has 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

has submitted electronically 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

is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an 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

 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.

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.

 If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.

 Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant's
executive officers during the relevant recovery period pursuant to §240.10D-1(b).

is a shell company (as defined in Rule 12b-2 of the Act). Yes No

 As of June 30, 2023, the aggregate market
value of shares held by non-affiliates of the registrant (based upon the closing price of such shares on the Nasdaq Global Market on
June 30, 2023) was $ 47,304,201.87.
For purposes of calculating the aggregate market value of shares held by non-affiliates, we have assumed that all outstanding shares
are held by non-affiliates, except for shares held by each of our executive officers, directors and 5% or greater stockholders. In
the case of 5% or greater stockholders, we have not deemed such stockholders to be affiliates unless there are facts and
circumstances which would indicate that such stockholders exercise any control over our company, or unless they hold 10% or more of
our outstanding common stock. These assumptions should not be deemed to constitute an admission that all executive officers,
directors and 5% or greater stockholders are, in fact, affiliates of our company, or that there are not other persons who may be
deemed to be affiliates of our company. Further information concerning shareholdings of our officers, directors and principal
stockholders is included in Part III, Item 12 of this Annual Report on Form 10-K.

 The number of shares outstanding of the
registrant's common stock, $0.001 par value, outstanding as of April 1, 2024: 64,771,817.

 DOCUMENTS INCORPORATED BY REFERENCE

 None.

 Page No.

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6.

 [Reserved]

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A.

 Quantitative and Qualitative Disclosures About Market Risk

 Item 8.

 Financial Statements and Supplementary Data

 Item 9.

 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 9C.

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10.

 Directors, Executive Officers and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13.

 Certain Relationships and Related Transactions, and Director Independence

 Item 14.

 Principal Accounting Fees and Services

 Item 15.

 Exhibits, Financial Statement Schedules

 Item 16.

 Form 10-K Summary

 Signatures

 i

 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, but not limited to, 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;

 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 made 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.

 ii

 Item 1. BUSINESS

 Company Background.

 Focus Universal Inc. (the "Company,"
"we," "us," or "our") is a Nevada corporation. 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.
From March 14, 2014, through August 30, 2021, our securities traded on the OTCQB Market. From August 31, 2021, through January 27, 2022,
our securities traded on the Nasdaq Capital Market. From January 28, 2022, to the present, our securities have traded on the Nasdaq Global
Market.

 Our company websites are www.focusuniversal.com,
www.avxdesign.com, www.smart-avx.com, and www.attechsystems.com. Our website and the information contained therein or connected thereto
are not intended to be incorporated into this report.

 We have developed five proprietary platform technologies
that we believe solve the most fundamental problems plaguing the internet of things ("IoT") industry by: (1) increasing the
overall degree of chip integration capabilities by shifting integration from the component level directly 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; (4) developing a natural integrated programming language ("NIPL") applied to software development, which generates
a user interface through machine auto generation technology; and (5) developing a universal smart instrumentation platform ("USIP").

 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

 1.

 Our goal is to increase the overall degree of chip integration capabilities 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") and pushes beyond the limits of current integrated chips. Our DoC technology
works as a single component but is capable of handling entire IoT device functions (excluding sensors and architecture-specific components).
Our DoC technology includes both the hardware and software, uses less power compared to traditional IoT devices, with better performance,
includes smaller overall devices, and offers greater reliability despite decreasing the number of interconnections between components.
We believe that incorporating our DoC technology into our product offering, will simplify the manufacturing process, lowering our costs
and allowing us to achieve a faster time-to-market, when compared to our competitors' who only manufacture and sell multi-chip devices.
Our planned DoC technology allows devices to achieve interoperability with one another and are interchangeable, both features where traditional
IoT devices fall short.

 Our research and development suggest that the
existing IC integration in IoT devices is mainly focused on hardware-to-hardware integration, not incorporating software solutions. This
lack of incorporating software under a common operating system, application software, and extra interface into ICs, limits IC integration
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.

 Currently, ICs integration requires the development
and manufacture of customized hardware and software. As a result, IC fabrication 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 used by thousands of IoT and standalone devices. The electronic design and production start from a 90% completed
common foundation, our USIP, instead of the individual components that necessitate the current method of building each standalone instrument
from scratch. USIP allows ICs to be integrated from the component level up to the device level, which pushes the frontier of semiconductor
technology beyond Moore's Law. Our USIP also eliminates redundant hardware and software and results in significant cost savings
and production efficiency.

 Figure 1. From USIP to device level
integrated circuits ("IC").

 2.

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

 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 industries across a wide range of sectors at an affordable cost.
5G is an opportunity to implement wired and wireless converged networks and offers opportunities to integrate 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 World Economic Forum report stated that by 2035 5G networks would contribute $13.2 trillion in
economic value globally and generate 22.3 million jobs in the 5G global value chain 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]

 [1]

 World Economic Forum, January 2020 "The Impact of 5G: Creating New Value across Industries and Society," available at:  (last accessed March 6, 2023).

 [2]

  (last accessed on March 6, 2023).

 Though 5G offers a significant increase in speed
and bandwidth over previous generation telecommunication networks, its more limited range for high-speed internet will require further
infrastructure investments. A 5G network requires spectrum across low, mid, and high spectrum bands to deliver widespread coverage and
support a wide range of use cases [3]. A low-band cell site can cover hundreds of square miles and deliver a downlink data rate
in the range of 30-250 Mbps. [4] Mid-band frequencies (2.5/3.5Ghz) can also travel long distances but can carry a lot more data
than low-band cell sites. [5] Mid-band 5G base stations can transmit and receive high-capacity signals over fairly large areas.
They can represent an ideal mix of performance—including some networks providing download speeds around 100-900 Mbps—for the
bulk of 5G traffic in metropolitan areas. [6] High-band 5G uses millimeter-wave (mmWave) frequency bands. Despite receiving
plenty of publicity, high-band is a very specialized part of the 5G offering. [7] Functioning over a shorter radius, it's
particularly useful in urban areas and busy venues like stadiums and shopping malls. [8] With the potential to offer data rates
of up to 10 Gbps, high-band 5G is already being deployed in several major cities. Download speeds for carriers' high band 5G can
sometimes clock in around 450 Mbps, with peak speeds of nearly 1 Gbps, and upload speeds near 50 Mbps. [9]

 High band, mmWave spectrum is used primarily for
urban and dense urban markets. The characteristics of high band, mmWave spectrum is that it is very wide and provides a significant increase
in capacity. Because of the greater spectrum width, speed is increased, and transmission latency is reduced. However, the drawback is
that high-band spectrum does not propagate over a large coverage area. For example, a 28 GHz mmWave spectrum can only travel 500 feet. [10]

 Low-band frequencies can travel long distances
and penetrate buildings but can only carry a limited amount of data. High-band frequencies can carry a substantial amount of data, but
due to their shorter wavelength, they travel shorter distances and are more susceptible to buildings and trees blocking the signal. [11]

 [3]

 Horwitz, Jeremy (December 10, 2019). "The definitive guide to 5G low, mid, and high band speeds." VentureBeat online magazine (available at:  (Last accessed March 7, 2023)).

 [4]

 Id.

 [5]

 Id.

 [6]

 Id.

 [7]

 See "5G Rollout—Beyond the Hype." Parsons Cyber Blog, June 16, 2020 ("As a result, 5G base stations must be positioned as close as a third of a mile, whereas 4G base stations can provide coverage of 20 to 45 miles. This limitation becomes especially acute in more rural and/or remote areas, wherein 5G networks become impractical") (available at:  (last accessed, March 7, 2023)).

 [8]

 Id.

 [9]

  (last accessed March 7, 2023).

 [10]

  (last accessed March 7, 2023).

 [11]

  (last accessed March 7, 2023).

 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 hardware required for 5G networks can significantly increase operating expenses.
Building 5G networks is expensive. According to THALES, total global spending on 5G is set to reach $620 billion by 2025. [12]

 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.

 Our ultra-narrowband wireless communication 5G+
technology aims to achieve both low band 5G coverage and 1 Gbps high-band speed because we employ an ultra-narrow spectrum channel
(<1KHz) to establish an ultra-long-distance link between the 5G base station and the receiver. The ultra-narrowband modulation was
initially conceived in 1985 by Dr. Harold R. Walker 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, and bandwidth spectral efficiencies as high as 15 bits/sec/Hz were achieved.
A pulse width modulation baseband encoding method called the "Slip Code" was used. That method, which was a baseband method,
was limited in data rate and required excessive filtering, which precluded it from being a practical ultra-narrowband method.

 Ultra-narrowband ("UNB") technology
employs an ultra-narrow spectrum channel (<1KHz) to establish an ultra-long-distance link between transmitter and receiver. UNB allows
for long-range coverage, making it an optimal 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 the friendly coexistence of UNB on shared frequency
bands. The narrower the bandwidth, the fewer occurrences of noise and interference entering the bandwidth. In addition, UNB's transmission
of energy concentrates on ultra-narrowband width, resulting in a very high concentration of power in a very narrow frequency band.

 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.

 [12]

 THALES, Dec 29,2022, A 5G PROGRESS REPORT: LAUNCHES, SUBSCRIBERS, DEVICES & MORE,  (last accessed March 7, 2023)

 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. However, it may lack the bandwidth required to pass instantaneous changes in frequency. Conventional filters cannot be
used with ultra-narrowband signals, which are dependent upon negative or zero group delay filters.

 One important characteristic has restricted widespread
adoption of ultra-narrowband modulation, and that is the zero group delay filters, which are complex and must be hand-tuned. Furthermore,
zero group delay filters are responsible for restricting data rates to just 196 kb/s from a subcarrier at 98 kHz and bandwidth spectral
efficiency to 15 bits/sec/Hz.

 We developed an ultra-narrowband technology that
offers a potential alternative and/or complementary solution to the broadband technology used in 5G networks and meets the challenging
5G demands. A comparison of our ultra-narrowband technology with 4G and 5G is illustrated in the table below:

 Technology

 Bandwidth

 No. of subcarriers

 Operating Frequency

 Speed

 Spectral

 MHz

 GHz

 Mbps

 Bits/s/Hz

 4G

 1200

 4-60

 5G

 3276

 Up to 300

 40-1100

 UNB (finished)

 0.001

 0.004

 ~4000

 UNB (in development)

 0.001

 0.064

 64-256

 >4000

 As shown by the above table, our internal testing
shows that our finished ultra-narrowband technology can achieve speeds of 4 Mbps per second at a bandwidth of less than 1000 Hz. The spectral
efficiency of our finished technology has reached 4000 bits/sec/Hz. Development work of our ultra-narrowband technology is underway for
speeds of 64 Mbps at a bandwidth of 64 MHz with spectral efficiency of over 4000 bits/sec/Hz.

 UNB speeds will increase proportionally if it
operates at the higher frequencies used by 4G or 5G networks or adopts multiple subcarriers, equivalent to increasing bandwidth. As a
result, we believe that our ultra-narrowband technology can reach 5G speeds and has the potential for much higher speeds. Utilizing the
same bandwidth, our internal results show that UNB can save energy of up to 20,000 times when compared to current 4G technology and 100,000
times when compared to current 5G technology. Keeping the same bandwidth and energy consumption, our internal testing results suggest
the coverage provided by UNB can increase by two orders of magnitude. UNB breaks through the Shannon Law's critical limit that current
5G cellular communication is reaching, overcomes the current 5G challenges, and allows cellular communication development beyond 5G.

 Despite the excitement surrounding 5G networks, several challenges
need to be address before global adoption of 5G technology can occur.

 1)

 Spectrum availability.

 5G networks operate on higher bandwidth
frequencies reaching up to 300 GHz, which permit data rates capable of delivering ultra-fast speeds measuring as much as 20 times more
than those provided by 4G LTE networks. However, the availability and cost of spectrum bands are still an issue for wireless operators.
Wireless operators need to bid for these costly higher spectrum bands as they build and deploy their respective 5G networks. On February
24, 2021, the Federal Communications Commission announced the winning bids in Auction 107, the auction of 3.7 GHz service licenses. The
winning bids for all 5,684 available licenses totaled over $81 billion and were concentrated among just 21 bidders. [13] Given
that Focus Universal operates in the ultra-narrowband spectrum where very limited spectrum is required and public access spectrum is also
available, this is potentially less of a concern than pursuing the traditional broadband capacity pathways F-24.

 [13]

 Federal Communications Commissions (February 17, 2021),  (last accessed March 7, 2023)

 2)

 Coverage.

 Despite 5G networks offering significantly
increased speeds, their more limited range will require increased infrastructure investments. 5G requires three to four times the number
of base stations to provide the same coverage area as 4G LTE because higher frequencies are more readily absorbed by solid objects than
lower frequencies. For example, a signal at 700 MHz provides a coverage area three to four times that of a 2.6 GHz signal. Likewise, we
expect UNB coverage to potentially increase coverage over standard 5G broadband pathways.

 3)

 Cost.

 Building a 5G network is expensive.
To do so is not just building a layer on top of an existing 4G network; instead, it is laying the groundwork for something new altogether.
The cost of a current 5G base station is approximately three times that of a 4G base station. [14]

 4)

 Energy consumption.

 Two factors relate directly to the increased
energy consumption of 5G networks. First, 5G's operating on higher frequency spectrums require greater energy input. [15]
For example, a typical 5G base station consumes up to twice the power consumed by a 4G base station. Second, to provide the same coverage
area as a 4G network, a 5G network requires three to four times the number of base stations. Accordingly, the overall energy consumption
of a typical 5G network will be at least six to eight times more than the energy consumption of a 4G network with equivalent coverage.
Like the coverage applications, we also expect energy consumption to be potentially significantly less with UNB technologies over the
conventional broadband pathways.

 5G+

 We are currently developing 5G+, which we believe
is a promising alternative wireless technology that uses our innovative ultra-narrowband (UNB) wireless technology. UNB technology employs
an ultra-narrow spectrum channel (<1 kHz) to establish an ultra-long-distance link between transmitter and receiver. Our internal testing
suggests that a single 5G+ subcarrier wave has the potential to provide speeds of 64 to 256 Mbps. Moreover, multiple UNB subcarriers may
be combined, which effectively increases bandwidth. Given anticipated data rates of 64 Mbps, we believe only 4 to 16 5G+ subcarrier waves
would be needed to achieve the current 5G speeds, and just 40 to 160 5G+ subcarrier waves would be needed to achieve 6G speeds. By contrast,
5G technology requires 3,276 subcarrier waves to achieve its current speeds. Fewer subcarriers translate into cost savings because they
are more compact and consume less energy. Our goal is to increase the speed of 5G networks while simultaneously reducing the number of
subcarriers.

 Our internal testing suggests that to achieve
speeds of 1 Gbps, our 5G+ technology would only require bandwidths of 4 to 16 kHz, which is narrow enough to be operated in lower frequency
spectrums. This would mean that 5G+ providers would not need to purchase the higher frequency spectrums required by 5G technology. Accordingly,
a 5G+ provider would realize significant savings from not having to bid for costly higher spectrum band licenses. Operating in relatively
lower frequency spectrum bands, when compared to 5G, also means that 5G+ would have a more extensive coverage area than that of 5G, in
many cases three to ten times larger. It would also mean that we could reduce the number of subcarriers and reduce the overall costs of
the 5G networks infrastructure.

 Further, the design of 5G+ infrastructure means
that cost savings could be realized as there is the potential of piggybacking the required 5G+ infrastructure on the current 4G infrastructure.
Finally, 5G+ only consumes 1/25,000 to 1/6,250 of the energy consumed by 5G. As outlined above, 5G+ has the potential to overcome the
challenges presented using higher broadband spectrums required for the implementation of the broadband technology used in 5G.

 [14]

 "How much does it cost to build a 5G base station?" Phate Zhang, April 7, 2020, CNTechPost (available at:  (last accessed March 7, 2023)).

 3.

 Leveraging ultra-narrowband power line communication ("PLC") technology.

 Our patented PLC is an innovative communication
technology that enables sending data over existing power cables in the electric grid. Because PLC uses the existing power lines, it does
not require substantial new investment for a dedicated wiring infrastructure. Existing power lines already form a distribution network
that penetrates every residential, commercial, and industrial property. Given that the power grid is, for the most part, an established
ubiquitous network, PLC is potentially the most cost-effective, scalable interconnectivity approach for the backbone communication infrastructure
required for the IoT. PLC allows IoT devices to be plugged into power outlets to establish a connection using the existing electrical
wiring, permitting data sharing without the substantial investment and inconvenience of running dedicated network cables.

 Historically, the primary design goal of the power
line network was electric power distribution. The power line network was not originally designed to function as a communication channel.
Consequently, while PLC has been around for many years, the harsh electrical noise present on power lines and variations in equipment
and standards make communications over the power grid difficult and present several challenges for data transfer. Signals propagating
along the power line are subjected to substantial amounts of noise, attenuation, and distortion that make them erratic, with several attributes
varying over time. PLC is susceptible to noise from devices linked to the power supply infrastructure, including, 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 is that previous attempts at implementing PLC technology resulted in power companies
and internet service providers deciding that the technology is not a viable means of delivering data or broadband internet access. These
technological challenges have impeded or even halted progress in PLC technology's development.

 We have successfully developed ultra-narrowband
PLC technology that can transfer data through the power grid. According to our internal testing, our ultra-narrowband PLC technology can
send and receive data without the customary interference that occurs in standard office and residential environments, achieving speeds
of 4 Mbps at a bandwidth of less than 1000 Hz. To test noise interference and disturbance, we utilized six industrial blowers simultaneously
when testing, and no significant interference was found. By comparison, a single hair dryer will render our competitors' legacy
PLC technology completely useless. We have completed the development of our 4Mbps PLC modules and the printed circuit board layout. These
modules will be used for IoT systems involving over 1,000 sensors.

 Our ultra-narrowband PLC technology is a considerably
more effective way to transfer data than current in-home and commercial network systems, such as Zigbee and Z-Wave. While Zigbee and Z-Wave
will need new infrastructure to be installed, our PLC technology could operate by itself or complement existing wideband communication
tools like Wi-Fi, Zigbee, or Z-Wave. Penetrating physical barriers like walls within a single floor or reaching out to different floors
in a single building is a challenge for the wireless technology that current IoT systems are using. Moreover, wireless networks often
face performance issues due to radio-frequency interference caused by microwave ovens, cordless telephones, or even Bluetooth devices
at home. However, our PLC technology can reach every node connected via the power lines. Our technology converts virtually every standard
wall socket into an access point, in many ways incorporating the best of wired and wireless communication, making it a more consistent
and reliable system for crucial and sensitive operations. Our ultra-narrowband PLC technology's ability to reach long distances
via power lines becomes especially useful in commercial networks that require the ability to avoid physical barriers like walls, underground
structures, and hills, such as those networks used in industrial facilities, underground structures, golf course irrigation systems, and
campuses. Moreover, our technology can be an integral part of any smart city, community, or campus.

 4.

 Developing a natural integrated programming language ("NIPL") applied to software development, which generates a user interface through machine auto generation technology.

 We have developed a proprietary and patented "user
interface machine auto generation platform" ("UIMAGP") to replace the manual software designs that are currently used.
This platform is used to build the IoT user interface. The natural integrated programming language we have developed is like the language
humans use to communicate with each other, which makes it is easy for humans to learn, while still being understood by a machine. The
UIMAGP simplifies the process of software programming by saving hundreds of lines of code into a micro code that can be saved to a sensor
module. When that sensor module is plugged into a USIP, the user interface specification codes saved to the sensor module is sent to the
platform and a universal display, such as a smartphone, a computer, or a 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 can design sensor module hardware and provide the user interface specification code. Thus, the hardware-defining software
is achieved.

 UIMAGP is similar to low code or no code programming
because it reduces the amount of traditional hand-coding, enabling accelerated delivery of business applications. However, low code and
no code programming suffer from integration restrictions, absence of customization, and security risks issues, making them unsuitable
for large-scale and mission-critical enterprise applications such as IoT applications. UIMAGP has overcome these challenges while requiring
only a minimum amount of coding. The UIMAGP and user interface specification codes work collectively to perform the function of traditional
customized software, enabling UIMAGP to be shared by the estimated 20 billion IoT devices worldwide, [15}[16] a feat that current
manual software designs could not achieve.

 5.

 Developing a universal smart instrumentation platform ("USIP")

 Instrumentation is a vast industry that covers
a variety of fields, including medical, healthcare, scientific, commercial, industrial, military, and daily life. Lack of instrumentation
universality results in every instrument design starting from scratch. Moreover, each instrument can only carry out a determined measurement
or control a specific operation. Integrating existing instruments that 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. Wireless networks can be accessed by any device within the network's signal range.

 USIP is an advanced hardware and software integrated
instrumentation platform with a large-scale modular design approach. USIP integrates many technologies, including cloud technology, wired
and wireless communication technology, software programming, instrumentation technology, artificial intelligence, PLC, sensor networking,
and IoT technology into a single platform. This results in circuit designs that we believe are vastly cheaper and faster than those constructed
of discrete integrated circuit components designed from scratch.

 USIP has primary functionalities and an open architecture
capable of incorporating a variety of individual instruments, functions, sensors, and probes from different industries and vendors into
a single unit. Instruments, sensors, or probes ranging from a few to several hundred or even thousands in any combination from various
industries and vendors can share or reuse the same platform. Adding, removing, or changing instruments or sensors is all the platform
requires to switch from one type of device to another without revising the software and redesigning the hardware.

 Compared to traditional stand-alone instruments,
USIP exploits the processing power of a computer or a mobile device. Productivity, display, and connectivity capabilities to provide a
more powerful, flexible, and cost-effective measurement solution. Traditional hardware-centered instrumentation systems are made up of
multiple stand-alone instruments interconnected to carry out a determined measurement or control an operation. They have fixed vendor-defined
functionality, and the 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. We believe our USIP will revolutionize the field
of instrumentation, measurement, control, and automation.

 [15]

 Environmental Health Trust,  (last accessed March 7, 2023)

 [16]

 Gartner Insights "Leading the IoT," available at:  (last accessed March 7, 2023).

 USIP is a versatile platform, able to perform
and combine different measurements and controls, to substitute some instruments for others, and to integrate existing instruments into
it. The development of USIP is closely associated with the development and proliferation of computers and mobile devices that provide
the foundation and technical support to the universal smart instrument such as an attractive graphical user touch screen interface, data
processing and analysis capabilities, video and audio, cameras, GPS, ubiquitous wireless connectivity, artificial intelligence, cloud-based
communications and a diverse number of functions and software available to users that are not contained in traditional instruments. These
features embody the advantages of USIP, which are lacking stand-alone instrument systems. When compared with traditional instrument systems,
USIP's biggest advantage is cost savings. Other distinctive features include universality, interoperability, flexibility, compatibility,
upgradeability, expandability, scalability, security, modularity, fast prototyping, reducing inventory, plug-and-play operation, remote
accessibility, simplification, standardization, and cloud instrumentation.

 We have been dedicated to solving instrumentation
interoperability for over a decade. We subdivide instruments into a reusable foundation component to the maximum extent possible, architecture-specific
components, and sensor modules, which perform traditional instruments' functions at a fraction of their cost. For most instruments,
90% of the design, parts, and firmware are the same. These parts can be replaced by USIP.

 USIP utilizes a computer or a mobile device as
its display and control to communicate 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 the universal device, the user interface specification code saved on the blood pressure sensor
is sent to the universal device, and a computer or smartphone will then generate the user interface for the blood pressure device based
on the interface specification code saved in the sensor.

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

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

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

 As illustrated below, when a light sensor is also plugged
into our universal device using a three-way splitter, the universal device becomes a three-sensor device.

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

 As illustrated in Figure 8, the universal
device can connect any number of sensors in any combination.

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

 As an example of the capabilities of the Ubiquitor,
we implemented our universal device in the configuration pictured in Figure 9. This configuration demonstrates that our universal device
simultaneously controls 27 light sensors, 21 pH sensors, and 23 temperature humidity sensors (which have 23 temperature sensors and 23
humidity sensors), representing one device controlling a total of 72 devices and 95 sensors. Our universal device also controls two lights
in this configuration, which it can control by turning the lights on or off (including on a schedule) or by using a light sensor to control
the lights' output intensity.

 Figure 9. Our universal platform simultaneously
monitors and controls 72 different devices and 95 sensors.

 To illustrate, the entire horticulture industry
has only a few hundred devices from different vendors for various measurement and control purposes. One of our universal smart devices
and corresponding sensors or actuators can replace all at a fraction of the cost. Leveraging the same technical principles discussed above,
we can simplify the smart control and monitoring in this and related industries (including agriculture and aquaculture) with a platform
that requires little design work for interoperability between sensors and control devices.

 Figure 10. Traditional horticulture measurement
and control devices.

 Figure 11. Universal Smart Device.

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

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

 Internet of Things Overview

 IoT refers to the overarching network created
by billions of internet-compatible devices and machines that share data and information worldwide. According to a Gartner report, by the
end of 2020, there were an estimated 20 billion IoT-connected devices in use around the world. 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 worldwide,
creating a massive web of interconnected devices spanning everything from smartphones to kitchen appliances. [17] The IoT
will significantly impact the economy by transforming many enterprises into digital businesses, facilitating new business models, improving
efficiency, and increasing employee and customer engagement. It is foreseeable that the explosive growth in IoT will rapidly deplete natural
and human labor resources. We believe that IoT will soon reach a critical limit; we do not have enough human labor and natural resources
to support IoT growth. Twenty billion IoT devices challenge existing resources. We have overcome the current massive IoT production challenges
by developing a shared distributed universal IoT. Billions of internet-compatible devices and machines share data and information around
the world and share a large section of hardware and software (up to 90%).

 Billions of IoT devices are in use worldwide,
each with different terminologies, technical specifications, and functional capabilities. These differences make it challenging 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 highly susceptible to radio signals and radiation interference. They can be accessed by any
device within range of the network's signal, so unauthorized users may intercept information transmitted through the network (including
encrypted data). Walls and floors can seriously limit the range of the wireless network. Our proprietary ultra-narrowband PLC technology
offers a promising alternative to wireless networks. Integrating USIP with our ultra-narrowband PLC technology results in significant
simplification and cost savings in implementing IoT, as illustrated in Figure 13. Using these technologies, we have designed IoT products
for both residential and industrial usage and are now in the process of testing.

 Figure 13. Comparison between (a) a traditional
machine to machine IoT and (b) a shared distributed universal IoT, which depicts a USIP and sensors forming a local network through PLC
technology. The platform communicates with the cloud to form a remote cloud-based system.

 [17]

 Statista Report "Number of internet of things (IoT) connected devices worldwide in 2018, 2025 and 2030" available at  (last accessed March 7, 2023).

 Figure 14. Comparison between (a) a traditional
wireless network and (b) Focus Universal Inc.'s PLC network.

 How we will implement our business plan

 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.

 Four divisions have been established within our
Company to develop and promote our technologies. We believe that our technologies, as depicted above, can be used in standalone device
design and production and on large scale IoT device design and production, aiming to solve the attendant 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's 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 into ICs. This division
will focus on ultra-narrowband PLC research and development, promoting and marketing ultra-narrowband PLC, ICs and finished products.
We also intend to promote and market ICs, licensing, and contract designing.

 Given that the power grid is an already established,
ubiquitous network, connectivity via PLC technology may be the most cost-effective and scalable interconnectivity approach for the IoT.
Due to the harsh electrical noise and interference currently present on power lines and to the variations in equipment and standards,
that make data transfer using PLC technology limited and difficult, the global market for PLC technology is very limited.

 Figure 15. Markets and Markets Updated
date – Oct 25

 The market size for PLC is expected to reach $17.4
billion at the end of 2028. [18] 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, Schneider Electric, Texas Instruments, Maxim Integrated, Devolo, Cypress
Semiconductor, ST Microelectronics, Panasonic, Microchip, Qualcomm Atheros, TP-Link Technologies, NETGEAR, D-Link, NXP Semiconductor NV,
Landis+Gyr, Sigma Designs, Zyxel Communications, Nyx Hemera Technologies, and Renesas Electronics Corporation.

 It is our understanding that no other vendor has
developed a PLC technology application that is similar to our ultra-narrowband PLC technology. We believe that market size will increase
significantly with the introduction of our ultra-narrowband PLC technology, which can overcome the interference and noise challenges presented
by traditional PLC technology. We believe that by utilizing ultra-narrowband PLC, the global IoT communication infrastructure costs and
operating costs can be reduced.

 b) Ultra-narrowband wireless division

 This division will focus on developing ultra-narrowband
wireless technology and overcoming the challenges facing current 5G networks. We intend to sell DoC for wireless communication, licensing,
and contract designing.

 While developing our ultra-narrowband PLC technology,
we gained insight into the development of a single carrier wave ultra-narrowband wireless technology, which aims to increase data transfer
rates from 4 Mbps to 64 Mbps. We expect our ultra-narrowband wireless technology to achieve data transfer rates of 256 Mbps using 4 subcarrier
waves, which is close to 5G speeds requiring more than three thousand subcarrier waves. The projected speed can be further increased if
multiple carrier waves or higher operating frequencies are used.

 [18]

 GlobalNewswire, December 19, 2022,

 2028-Presence-of-Over-1-500-Manufacturers-Makes-it-Highly-Fragmented.html,
 (March 7, 2023)

 Our current research and development efforts are
focused 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 bandwidth, our ultra-narrowband wireless technology can save electricity usage by a factor of up to 100,000 times when compared with
a 5G network. We believe that our ultra-narrowband wireless technology has the potential to push the wireless frontier well beyond 5G.
We finalized our ultra-narrowband technology research with data transfer speeds of 64-256 Mbps in the fourth quarter of 2022. We now need
to build testing equipment. This requires us to design and build a digital device that can perform the digital speed testing. We have
designed the devices and we should receive the finished circuit boards in the next few weeks and hope that such device will be completed
by the end of 2023.

 Markets and Markets projects that the 5G infrastructure
market will 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 holdups for the successful
deployment of 5G technology. Most 5G technologies are based on broadband technology; our research suggests there are very few companies
working on ultra-narrowband technology. We believe that adopting our ultra-narrowband wireless technology can provide significant cost
savings to 5G spectrum bands, 5G network hardware, and 5G energy consumption.

 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 the iOS system. RS-485 is an industrial specification that defines the electrical interface and physical layer for point-to-point
communication of electrical devices. RS-485 is widely adopted and used in the IoT industry. Standard RS-485 modules available today usually
do not support more than 100 sensors. The first version of UIMAGP has been completed and we believe should support more than
1,000 sensors. We intend to sell and license the software to device manufacturers that use our DoC ICs and other industries where the
software can be applied.

 UIMAGP can be used in IoT software design and
can be applied to other industry sectors. This division is planning to expand to other industries as well.

 Figure 16. Software market size.

 Today, some of the biggest companies within the
software industry, including Microsoft, IBM, Oracle, SAP, and Salesforce, have still not developed a UIMAGP. Any software that 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 that includes foundational code
that may be used on any platform or operating system. This makes the final programming much more efficient, as it 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 for the commercial and residential markets. The development
of universal smart instruments and IoT have considerable overlap, with the only difference being the number of devices involved. We will
capitalize on this overlap by unifying universal smart instruments and IoT into a single system, eliminating any distinction between them.
USIP, a cost-effective and fully production-ready hardware and software platform, provides a considerable advantage in shorting design,
building, testing, and fixing cycles. Smart home products, including light controls, air conditioner controls, sprinkler controls, garden
light controls, heating floor controls, motorized curtain controls, pool filtration and algae controls, smoke detector controls, carbon
monoxide measurement, motion detectors, and doorbells, have been designed and tested.

 This division will also develop and market end-user
universal smart instruments and shared distributed universal IoT devices in the horticulture, agriculture, and aquaculture industries.
Leveraging the Company's ultra-narrowband PLC technology and USIP, we intend to provide a more stable, secure, and faster network
for large industrial operations requiring data-specific sensing and control automation to ensure optimal outcomes. According to Markets
and Markets, the agriculture IoT market is expected to grow from $11.4 billion in 2021 to $18.1 billion by 2026, at a CAGR of 9.8%. [19]
A key factor driving the growth of this market is the rising demand for agricultural production due to increasing population and adoption
of IoT and AI technologies by farmers and growers. Deere & Company (US), Trimble (US), Raven Industries (US), AGCO Corporation (AGCO)
(US), AgJunction Inc. (AgJunction) (US), DeLaval (Sweden), GEA Farm Technology (Germany), Lely (Netherlands), Antelliq (France), AG Leader
Technology (AG Leader) (US), Tigercat (Canada), Ponsse (Finland), Komatsu Forest AB (Sweden), Caterpillar (US), Treemetrics (Ireland),
Topcon Positioning Systems (US), and DICKEY-john Corporation (US) are some of the major players in the agriculture IoT market. We have
completed the design of certain PLC industrial IoT devices, including industrial light controls, temperature controls, humidity controls,
carbon dioxide controls, digital lighting controls, quantum PAR measurement and controls, pH measurement and controls, TDS measurement
and controls, and fan speed controls.

 This division will also focus on developing device-on-a-chip
(DoC) ICs, which we intend to sell to electronic device manufacturers for use in conjunction with the USIP. We will distinguish our DoC
technology from the component ICs; these ICs can perform entire device functions. According to the Cision the globally integrated circuits
market will be worth $1,248.6 billion in 2030. [20] Major players in the IC market are Intel Corporation, Texas Instruments,
Analog Devices, STMicroelectronics, NXP, ON Semiconductor, Micron, Toshiba, Broadcom, and Qualcomm.

 This division will also install and design customer
solutions for residential and commercial IoT projects. The Company currently specializes in high-performance, easy-to-use audio/video,
home theater, lighting control, automation, and home integration solutions for residential installation and custom solution services.
On the commercial side, we plan to add well-trained staff ready to handle all aspects of voice, data, fiber, paging, audio-video services,
CATV, and other low voltage premise cabling. All of our service providers hold certifications for multiple product lines and specialty
work. The Company plans to use its current client base and expertise from these installation services to integrate products developed
on the USIP into the project proposals.

 [19]

 Market and Markets, May 2021, Agriculture IoT Market worth $18.1 billion by 2026,  (last accessed March 7, 2023)

 [20]

 Cision, January 25, 2023, Integrated Circuits Market to Reach USD 1,248.6 Billion by 2030,  (last accessed March 7, 2023)

 Products we are currently selling

 We are a wholesaler of various digital, analog,
and quantum light meters and filtration products, including fan speed adjusters, carbon filters and HEPA filtration systems. We source
these products from various manufacturers in China and then sell them to a major U.S. distributor, Hydrofarm, who resells our products
directly to consumers through retail distribution channels and, in some cases, places its own branding on our products.

 In an effort to continually develop our product
lines, we plan to phase out the traditional, lower-margin products and are preparing to launch a new line of products that have been in
development for several years. These newer technology products will be released in phases, and we intend that increasing amounts of technology
will be layered upon these products. Additionally, we plan to continue to increase our efforts in protecting more intellectual property
rights. We have developed products in both the controlled agriculture industry and home automation industries, taking advantage of our
existing relationships in both sectors.

 We are building a U.S. sales team to market our
product lines. We have already begun marketing our current Smart AVX-branded large format multimedia touch screens, surveillance camera
system (cameras and network video recorders (NVRs)), indoor and outdoor LED screens, and Focus Universal-branded VOIP phone service systems,
both via our sales staff and the Internet.

 Universal Smart Device (Ubiquitor)

 The initial, simplified version of universal smart
IoT technology is our universal smart device (Ubiquitor). Theoretically, a single Ubiquitor can connect many sensors, including a vast
number of independent sensors. When a moderate number of sensors are connected, the cost of the universal Ubiquitor, averaged over the
number of sensors, becomes negligible. The Ubiquitor's efficient and cost-effective approach to the cost of connected sensors is
illustrated by the fact that development under Focus' platform system is a fraction of traditional device development cost. This
one-of-a-kind Ubiquitor was first showcased at the Consumer Technology Association's CES 2024 trade show, which attracted significant
interest from potential customers.

 Smart Home Installation

 Through AVX Design and Integration, Inc. ("AVX"),
an IoT installation and management company based in southern California, and a subsidiary of the Company, we offer residential customers
an entire smart home product line. We have finished designing smart devices for lighting control, air conditioner control, sprinkler control,
garden light control, garage door control, and heating control and are in the process of developing a swimming pool control device, smoke
detector, and carbon monoxide monitor.

 We believe smart installation based on the USIP,
and our Ubiquitor together will include more functionalities than the current systems offered by our competitors. It is our goal that
our smart systems would integrate, exchange data, interact and connect utilizing our forthcoming PLC technology. As a result, the installation
process would be simplified, and its costs would be reduced.

 Once successfully integrated, the Ubiquitor will
be central to every smart installation with our IoT Installation Services segment. The Ubiquitor's connectivity capabilities will
allow that system to be expanded and customized in the future. We also plan to offer zero down payment options for installation of our
smart systems and charge a monthly subscription fee instead.

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

 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 in that industry, 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 more significant. This two-phase approach will allow for continuous and increasing revenue growth. Moreover,
during the industrial phase of development, the Company will 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 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, Hydrofarm has developed a broad and loyal customer base that buys our existing products
on a repeat basis. The universal smart technology has been applied to our existing traditional devices and demonstrated significant functional
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 central
focus of our future business.

 Our goals over the next three years include:

 Raise capital to move into full sales and marketing team for our Ubiquitor device and growing product lines;

 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 expand 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.

 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 through M&A
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 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. 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 create 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.

 Diversification of the Revenue Streams

 We will continue to diversify our revenue stream
through various expansion opportunities and in several other markets and industries. As our platforms can be applied to several sectors
effectively to eliminate redundancy and increase effectiveness, we will seek to expand our operations into additional markets and adjacent
sectors which we believe to have the potential to be effective long term. While this diversification may initially contain the risk during
transition and adaption of moving to an adjacent market or sector, we believe the long term benefit of diversification to be net positive
as previously, we had been subject to the risk of having one large client within one single sector, which we believe bears greater risk
than the initial risk of transition.

 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, and 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 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, while we still continue to anticipate orders from Hydrofarm in 2024, we have begun to diversify away from one
single dominant distributor into more diversified distribution channels, such as direct wholesale into retail outlets and direct distribution
to end-users. We also intend to implement a direct sales method via Amazon.com and other online retailers.

 Raw Materials

 The electronic components used in the Ubiquitor
are common and can be easily purchased through a variety of suppliers with little advanced 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.

 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.

 Our subsidiary unit in the Canton province of
mainland China, Focus Universal (Shenzhen) Technology Co. LTD, was founded in December 2021 as an office for manufacturing procurement
expertise and support research and development activities. Focus Universal (Shenzhen) Technology Co. LTD is designed to function as a
branch office accessing high level ability to source products and build relationships with manufacturers in the region and as a lower
cost form of support research and development as engineers are more plentiful in the region. In the future, this office could also handle
other online marketing and marketing production activities, provided a cost and quality benefit exists at the time. This excludes any
projects subject to approval or that require a separate business license in accordance with the local laws. China allows foreign entities
to setup wholly owned limited liability companies in China, also known as Wholly Foreign Owned Enterprises (WFOEs), in non "restricted"
or "prohibited" industries or business activities. The subsidiary's business operation has been approved by the local
government in Shenzhen to be qualified as a WFOE entity in China. The entity is 100% owned by Focus Universal Inc.

 Key Competitive Advantages and Opportunities
and Strengths

 Across the world, everyday connected devices are
getting incorporated in tandem collectively, including thermostats, water meters, home alarms, kitchen gadgets, medical equipment, factory
machinery and even vehicles. Collectively, this ecosystem represents the next frontier in the digital revolution, also known as the Internet
of Things or IoT. And unlike the simple automation of machinery, IoT is also mobile and virtual, and features a continuous Internet connection.
The Internet of Things (IoT) is the next frontier in the digital revolution. It can help companies increase productivity, cut costs, offer
new products and services, and deploy new business models. However, the costs of producing a single input or output device have become
cost prohibitive to the point where a vast majority of the projects in this innovative field are considered failures.

 Despite this forward technological momentum, a
sector-wide study conducted by Cisco showed that 60 percent of IoT initiatives stalled at the very-early Proof of Concept (PoC) stage
and only 26 percent of companies have had an IoT initiative that they considered a complete success. Furthermore, a third of all
completed projects were not considered a failure. Herein lies both the key advantage of the platforms of the company and the opportunities
and strengths. Our combined platforms are able to consolidate the eliminate the redundant work in the early stage development production
costs within the IoT sector, whereby the project developers need not begin from scratch each time in the development of a new IoT product,
eliminating upwards of 90% of the redundant, cost-prohibitive workload.

 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 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 $20,000 and $100,000 and by Control4
between $20,000 and $40,000. The cheapest competitor we can identify in this sector is Vivint Smart Home, which costs less than $5,000
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 $23.83 billion by 2029 and analysts expect it to register
a CAGR of 7.2% because of the industrial need to control air quality across a range of industries. [21] 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.

 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

 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. From March 14, 2014, through August 30, 2021, our securities traded on the OTCQB Market. From August 31, 2021, our securities traded
on the Nasdaq Capital Market. From January 28, 2022, our securities traded on the Nasdaq Global 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 report.

 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.

 [21]

 Fortune, The global air filters market is projected to grow from $14.68 billion in 2022 to $23.83 billion by 2029, exhibiting a CAGR of 7.2% in forecast period, 2022-2029,  (last accessed March 7, 2023)

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

 In late 2018, we purchased a manufacturing warehouse
and office space addressed at 2311 East 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 can enhance 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 August 31, 2021, the Company commenced trading
on the Nasdaq Capital Market under the symbol "FCUV."

 On September 2, 2021, the Company announced the
closing of an underwritten public offering of 2,300,000 newly issued shares of common stock at a price to the public of $5.00 per share.
The closing included the full exercise of the underwriters' over-allotment option to purchase 300,000 shares of common stock at
the public offering price, for gross proceeds to the Company of $11.5 million, prior to deducting underwriting discounts and commissions
and offering expenses payable by us.

 On January 26, 2022, the Company announced approval
for the uplist of its stock onto the Nasdaq Global Market exchange under the symbol "FCUV."

 On June 20, 2023, the Company received an industry
award during InfoComm 2023 for its flexible transparent film display receiving Best of Show designation, winning in the AV Technology
Category for LED Technology.

 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.

 After 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. We believe that the small and cost-effective multicolor sensor and its related software protected by the potential patent could
achieve a spectral response that approximates an ideal photo response to measure optical measurement. The patent was issued on February
26, 2019.

 On November 29, 2019, the Company filed an international
utility patent application 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.

 On May 19, 2021, we filed thirteen provisional
patent applications with the USPTO that we had been researching and developing for years, encompassing a broad spectrum of technology
areas including sensor technology, wired and wireless communications, power line communications, computer security, software solutions,
interconnected technological communications, smart home systems and methods for both home and hydroponic areas, dynamic password cipher,
local file security, payment card security, infrared sensor, and a method and apparatus for high data rate transmission.

 We continue to ultilize the services of the law
firm of Knobbe Martens, Olson & Bear, LLP based in Orange County, CA to serve as outside intellectual property counsel for the Company.
The firm is working on transferring the Company's provisional patent applications to formal patent applications in addition to filing
new provisional patents. In 2021, we filed 14 patents. We filed 18 domestic patents in 2022 (plus two international patents in 2022),
and filed 3 patents in 2023.

 In addition, the Company's patent number
11,488,468 was allowed and subsequently issued on November 1, 2022. The patent, titled Sensor for Detecting the Proximity of an IEEE 802.11
Protocol Connectable Device.

 On April 3, 2023, the United States Patent and
Trademark Office ("USPTO") issued an Issue Notification for U.S. Patent No. 11580558 entitled "Dynamic Anti-Counterfeit
System and Method." The USPTO also issued an Issue Notification for U.S. Patent Application No. 11546017 entitled "System and
Method of Power Line Communication." Both patents cover patent applications regarding the Company's PLC business.

 Research and Development Activities

 For the year ended December 31, 2023, we spent
a total of $1,386,810 on research and development activities; and for the year ended December 31, 2022, we spent a total of $1,060,385.

 Focus Universal (Shenzhen) Technology Co. LTD
was founded as a mainland China office for manufacturing procurement expertise and non-confidential support research and development activities.
This wholly owned subsidiary is registered to be engaged in IoT research and development, IoT sales and service, and other related 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 report we have a total
of 46 employees, with 43 full-time employees and 3 part-time employees. The Company's Chief Executive Officer and Secretary is Dr.
Desheng Wang, and our Chief Financial Officer is Irving Kau. We have a head of marketing whose efforts are focused on the controlled agricultural
market segment. We have eleven full-time senior electrical and computer engineers working on the research and development of our products.
We have one full-time sales employee and three full-time employees are working on administrative tasks. We also have a full-time accounting
manager/controller. Four employees perform audio/visual home installations for our subsidiary AVX, with one employee serving as the supervisor
and operational head.

 Legal Proceedings

 On or about April 13, 2020, Ian Patterson, the
Chief Operations Officer of AVX resigned from his position. 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. The complaint alleges claims including discrimination, wrongful
termination, retaliation and various other provisions of the California Labor Code, and various other claims under California state law.
The complaint seeks unspecified economic and non-economic losses, as well as attorneys' fees. In response to the Complaint, defendants
filed a motion to compel arbitration asking the court to order Plaintiff to submit his claims to binding individual arbitration based
on an arbitration agreement signed by Plaintiff at the outset of his employment. The motion was unfortunately denied, and in response,
defendants filed an appeal. The appeal was also denied. Trial for this matter is set for October 30, 2024. Discovery is ongoing. AVX intends
to vigorously contest this matter and disputes that the other defendants are proper parties to the litigation. However, since litigation
and investigations are inherently uncertain, the outcome of this litigation could have a material impact on the Company.

 On or about April 14, 2020, Devesa Sarria, the
Sales and Marketing Director of the Company, was terminated. 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 discrimination, wrongful termination, retaliation and various
other provisions of the California Labor Code, and various other claims under California state law. The complaint seeks unspecified economic
and non-economic losses, as well as attorneys' fees. The parties have completed written discovery and most of the non-expert discovery.
Trial is set for May 8, 2024. AVX intends to vigorously contest this matter. Further, AVX disputes that the other defendants are proper
parties to the litigation. However, litigation and investigations are inherently uncertain, but the outcome could have a material impact
on the Company.

 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 ( that contains
reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

 Item 1A. RISK FACTORS

 Risks Related to our Business and Industry

 Although our
financial statements have been prepared on a going concern basis, we must complete the sale of our facility to fund our operations in
order to alleviate as a going concern.

 Our current liquidity position raises substantial doubt about our ability to continue as a
going concern. If we are able to improve our liquidity position by completing the sale of our facility, we may alleviate our going concern.
While we believe the sale of the facility and the sale of real estate as a whole to be less speculative as a whole, we acknowledge that
the transaction still remains to be completed and the risks remain in completion of that transaction. The accompanying consolidated financial
statements do not include any adjustments that might result.

 We have a history of operating losses, and
we may not be able to sustain profitability.

 We were incorporated on December 4, 2012; and as of
December 31, 2023, we had an accumulated deficit of $22,582,170. 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.

 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 profitable operations to date. Therefore, we have a limited profitable 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 the Ubiquitor. 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 easily. Once our product and service mature, 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 Edward Lee, the Chairman of our Board.

 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.

 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 grid, which is the communications grid 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.

 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 report, 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 quantum light meters and 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.
If the third-party manufacturers of our proprietary products misappropriate our intellectual property, our business, prospects and financial
condition could be materially and adversely affected.

 Our business operations in China may negatively
affect our ability to protect our intellectual property and our financial position.

 On December 31, 2021, we set up a branch office
in mainland China. Historically, China has not protected intellectual property rights to the same extent as the United States, and infringement
of intellectual property rights continues to pose a serious risk of doing business in China. Monitoring
and preventing unauthorized use is difficult. The measures we take to protect our intellectual property rights may not be adequate. Any
unauthorized use of our intellectual property rights could harm our competitive advantages and business. Furthermore, the application
of laws governing intellectual property rights in China is uncertain and evolving and could involve substantial risks to us. If we are
unable to adequately protect our intellectual property rights, we may lose these rights and our business may suffer materially. Moreover,
the complexities that arise from operating in a different tax jurisdiction inevitably led to an increased exposure to international taxation.
Should review of our tax filings result in unfavorable adjustments, our operating results, cash flows, and financial position could be
materially and adversely affected.

 The size and future growth in the market
for our Ubiquitor device or our PLC technology 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 is based on several internal studies, reports and estimates. In addition, our
internal estimates are based on current feedback from clients using current generation technology and our belief is that the use and implementation
of our technologies 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 the Ubiquitor device or our PLC 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 considering 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.

 Some of our products connect to the internet and
potentially expose our business to cybersecurity 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 as we diversify away from a single dominant customer.

 While in the past we were subject to volatility
as a result of having only one dominant customer, diversification away from a single customer also poses some risks associated with the
migration, While the company will possess more revenues streams, the migration away from a single steady customer poses risks as we begin
to build new relationships. Along with new marketing efforts, we need to continue to cater to the needs of these new customers or the
business may fluctuate or vanish.

 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 charcoal, 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 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 if 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
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 and our USIP platform 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 and USIP platform
in the marketplace.

 Our Ubiquitor and USIP platform relies on both
wired and wireless networks to transmit data, which is a major advantage of the Ubiquitor device and the USIP platform. 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 several 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 several 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 several 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 considering 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.

 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 several 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.

 Most 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 USIP 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 can 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 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 can 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.

 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. Desheng Wang, our
CEO, and Irving Kau, 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 are
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, because of these conflicts, we may be 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, 2023, and December 31, 2022. 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.

 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 33.343% of the outstanding shares of our common stock as of the date of this report. Two of our directors together own over 50%
of the outstanding shares of our common stock. Accordingly, our 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 most of our outstanding common stock. Consequently, management can 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 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. 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

 Our shares may be affected by short selling
practices which may decrease the stock price.

 The Company believes that certain individuals
and/or companies may have engaged in manipulative and/or suspected illegal trading practices that may artificially depress our share price.
There is great concern in today's market environment regarding the potential targeting of publicly traded companies in a market
manipulation scheme involving illegal naked short selling of stock. The Company finds such suspected manipulation completely unacceptable
as it distorts the value of the Company and negatively impacts shareholders who have invested their hard-earned money. We are considering
engaging third party service providers to further investigate these practices by aggregating and analyzing repository data from reporting
entities, broker-dealers and shareholders enabling us to proactively track shareholder ownership, identify parties involved in suspicious,
aberrant, or unusual trading activity and deploy corrective action steps to help curtail such activity.

 The SEC and other regulatory and self-regulatory
authorities have implemented various rules and taken certain actions, and may in the future adopt additional rules, and take other actions,
that may impact those engaging in short selling activity involving equity securities (including our common stock). Such rules and actions
include Rule 201 of SEC Regulation SHO, the adoption by the Financial Industry Regulatory Authority, Inc. and the national securities
exchanges of a "Limit Up-Limit Down" program, the imposition of market-wide circuit breakers that halt trading of securities
for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010. Any governmental or regulatory action that restricts the ability of investors
to effect short sales of our common stock, borrow our common stock or enter into swaps on our common stock could adversely affect the
trading price and liquidity of our shares.

 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 18,018,039 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 December 31, 2023, we had 64,771,817 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 a shareholder'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 64,771,817 shares of our common stock outstanding as of April 1, 2024, of which approximately 26,989,222 shares
are currently freely tradable.

 Certain existing holders of most 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 many 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.

 Sales of a substantial number of shares
of our common stock in the public market by certain of our shareholders could cause our stock price to fall.

 Sales of a substantial number of shares of our
common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock,
and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that
sales may have on the prevailing market price of shares of our common stock.

 An active trading market for our common
stock may not be maintained.

 Our common stock is currently
listed on the Nasdaq Global Market under the symbol "FCUV," but we can provide no assurance that we will be able to maintain
an active trading market on this or any other exchange in the future. 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).
In 2021, our common stock was listed on the Nasdaq Capital Market. Our stock was uplisted onto the Nasdaq Global Market on January 28,
2022. On March 20, 2024 and March 22, 2024, we received two separate letters from the Listing Qualifications Department (the "Staff")
of the Nasdaq Stock Market ("Nasdaq"). The March 20, 2024 letter was notifying the Company that based upon the closing bid
price for the last 30 consecutive business days, the Company no longer meets the Nasdaq Listing Rule 5450(a)(1) (the "Bid Price
Rule"). In addition, on March 22, 2024, Nasdaq notified the Company that since the Company's Market Value of Listed Securities
("MVLS") has fallen below $50,000,000 the Company no longer satisfies the requirements to qualify for the Nasdaq Global Market
pursuant to Nasdaq Listing Rule 5450(b)(2)(A) (the "MVLS Rule"). The notification received has no immediate effect on the
Company's Nasdaq listing.

 In accordance with Nasdaq
Listing Rule 5810(c)(3)(A) and 5810(c)(3)(C) (the "Compliance Period Rule"), the Company has been provided an initial period
of 180 calendar days, or until September 16, 2024 and September 18, 2024, (the "Compliance Date"), to regain compliance with
the Bid Price Rule and the MVLS Rule, respectively. If, at any time before the Compliance Date, the bid price of the Company's security
is at least $1 for a minimum of ten consecutive business days, the Staff will provide written confirmation of compliance to the Company
and this matter will be closed with respect to the Bid Price Rule. Concurrently, if, at any time before the Compliance date the Company's
MVLS is over $50,000,000 or more for a minimum of ten consecutive business days then this matter will be closed with respect to the MVLS
Rule.

 If the Company is not
in compliance with the Bid Price Rule by September 16, 2024, the Company may be afforded a second 180 calendar day period to regain compliance.
Pursuant to Rule 5810(c)(3)(A)(i)-(ii), to qualify, the Company would be required to transfer to The Nasdaq Capital Market and then meet
the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital
Market, with the exception of the bid price requirement, and would need to provide written notice of its intention to cure the deficiency
during the second compliance period, by effecting a reverse stock split, if necessary. For the MVLS Rule, if the Company does not regain
compliance by September 18, 2024, then the Company will be required to transfer to the Nasdaq Capital Market where the MVLS is $35,000,000.

 The Company will continue
to actively monitor the closing bid price of its common stock and will evaluate available options, including, without limitation, submitting
a transfer application to the Nasdaq Capital Market and/or seeking to effect a reverse stock split, in order to resolve the deficiency
and regain compliance with the Bid Price Rule and the MVLS Rule. The Company's common stock will continue to be listed and traded
on The Nasdaq Global Market during the first 180-day compliance period that ends on the Compliance Date, subject to the Company's
compliance with the other continued listing requirements of the Nasdaq Global Market.

 Our shares of common stock are only recently
listed on NASDAQ, and 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.

 If the shares of our common stock were to be delisted
from NASDAQ, we expect that it would be traded on the OTCQB or OTCQX marketplaces, 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.

 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 because of the significant
expansion of our operations and addition of operating subsidiaries, new personnel may be required in all areas of our operations 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.

 We can offer no assurance that we will be able
to retain 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 that 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 achieving 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.

 Item 1B. UNRESOLVED STAFF COMMENTS

 None.

 Item 1C.
CYBERSECURITY RISK MANAGEMENT, STRATEGY AND GOVERNANCE

 Risk Management and Strategy

 We have implemented a cybersecurity process that is
designed to assess, identify, manage and govern material risks from cybersecurity threats and requires a firewall for outside connections.
We operate a closed server in a locked room and regularly examine cybersecurity threats that could compromise our information system's
security or data and otherwise maintain our cybersecurity policies and procedures in accordance with industry standard control frameworks
and applicable regulations, laws, and standards.

 We regularly check and improve our security measures
and educate our employees about such measures with the help of our information technology (IT) team. Key personnel are made aware of our
cybersecurity process through trainings.

 We do not engage third party professionals or disclose
our internal security measures to private parties.

 We have never experienced a cybersecurity incident
that was determined to be material, although, like many technology-dependent companies operating in the current environment, we have experienced
cybersecurity incidents in the past. For additional information regarding whether any risks from cybersecurity threats are reasonably
likely to materially affect us, including our business strategy, results of operations, or financial condition, please see the section
titled " Risk Factors."

 Governance

 One of the key functions of our board of directors,
in connection with our IT team, is informed oversight of our risk management process, which includes risks from cybersecurity threats.
Our board of directors monitors and assesses strategic risk exposure, and our executive officers manage the material risks we face.

 Our Vice President of Operations, who has over 30
years of experience in IT and marketing, works with our board of directors to manage our cybersecurity policies and processes, including
those described in the "Risk Management and Strategy" section above. Together, they stay informed and manage how we identify,
address, prevent and resolve cybersecurity issues and related matters. They also track how we prevent, identify, lessen, and address cybersecurity
issues. This is done through regular checks of our systems, tests to identify security weaknesses, and maintaining an incident response
plan.

 In addition to such regular system checks, our Vice
President of Operations, together with the board, regularly discuss active, emerging and potential cybersecurity risks. They keep each
other informed about significant changes affecting cybersecurity, and they periodically update management with these changes, as well
as our cybersecurity risks, so that management can administer its oversight function as a part of its broader oversight and risk management.

 Item 2. PROPERTIES

 In September 2018, we purchased a manufacturing
warehouse and office space addressed at 2311 East 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 for warehouse space. The property includes 58 parking spaces. The purchase price for the property was approximately $4.62 million
dollars.

 Item 3. LEGAL PROCEEDINGS

 On or about April 13, 2020, Ian Patterson, the
Chief Operations Officer of AVX resigned from his position. 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. The complaint alleges claims including discrimination, wrongful
termination, retaliation and various other provisions of the California Labor Code, and various other claims under California state law.
The complaint seeks unspecified economic and non-economic losses, as well as attorneys' fees. In response to the Complaint, defendants
filed a motion to compel arbitration asking the court to order Plaintiff to submit his claims to binding individual arbitration based
on an arbitration agreement signed by Plaintiff at the outset of his employment. The motion was unfortunately denied, and in response,
defendants filed an appeal. The appeal was also denied. Trial for this matter is not set, nor has discovery been conducted.
AVX intends to vigorously contest this matter. Further, AVX disputes that the other defendants are proper parties to the litigation. However,
litigation and investigations are inherently uncertain, but the outcome could have a material impact on the Company.

 On or about April 14, 2020, Devesa Sarria, the
Sales and Marketing Director, was terminated. 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 discrimination, wrongful termination, retaliation and various other provisions
of the California Labor Code, and various other claims under California state law. The complaint seeks unspecified economic and non-economic
losses, as well as attorneys' fees. We have completed written discovery and most of the non-expert discovery. Trial is set
for October 11, 2023. AVX intends to vigorously contest this matter. Further, AVX disputes that the other defendants are proper
parties to the litigation. However, litigation and investigations are inherently uncertain, but the outcome could have a material impact
on the Company.

 Item 4. MINE SAFETY DISCLOSURES

 Not applicable to our Company.

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

 Market Information

 On August 31, 2021, the Company commenced the
trading of its common stock on the Nasdaq Capital Market under the symbol "FCUV." On January 28, 2022, the Company commenced
trading of its common stock on the Nasdaq Global Market under the symbol "FCUV." On April 1, 2024, the last reported sale
price of our common stock as reported on the Nasdaq Global Market was $0.40 per share.

 On September 23, 2014, our common stock was verified
for trading on the OTCQB Market 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
Nasdaq Capital Market (as applicable) for the four quarters of 2022 and 2023. As of April 1, 2024, our common stock trades upon the Nasdaq
Global Market.

 High

 Low

 2022: First Quarter

 $
 9.45

 $
 4.12

 2022: Second Quarter

 $
 9.72

 $
 6.67

 2022: Third Quarter

 $
 10.95

 $
 6.25

 2022: Fourth Quarter

 $
 8.99

 $
 3.93

 2023: First Quarter

 $
 4.71

 $
 2.37

 2023: Second Quarter

 $
 2.46

 $
 1.45

 2023: Third Quarter

 $
 1.97

 $
 1.5

 2023: Fourth Quarter

 $
 2.17

 $
 1.37

 Holders.

 As of April 1, 2024, there were 361 record
 holders of 64,771,817 shares of the Company's common stock. The number of record holders was determined from the records of
 our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security
 brokers, dealers, and registered clearing agencies. The transfer agent of our common stock is VStock Transfer, LLC.

 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. However, we cannot provide any assurance that we will or will
not declare or pay cash dividends on our common stock. Any future determination to declare cash dividends will be made at the discretion
of our Board of Directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements,
general business conditions and other factors that our Board of Directors may deem relevant.

 Securities Authorized for Issuance Under Equity Compensation Plans

 On December 15, 2018, our Board of Directors presented
the 2018 Equity Incentive Plan to the shareholders. On December 17, 2018, the holders of 63.051% of our issued and outstanding shares
of common stock adopted a resolution by written consent without a meeting adopting the 2018 Equity Incentive Plan. The plan reserves an
aggregate of 1,000,000 shares of the Company's common stock, which provides for the payment of various forms of incentive compensation
to employees, consultants, executives, and directors of the Company. The 2018 Equity Incentive Plan provides for the grant of the following
types of stock awards: (i) incentive stock options; (ii) non-statutory stock options; (iii) stock appreciation rights; (iv) restricted
stock awards; (v) restricted stock unit awards; and (vi) other stock awards. Under the 2018 Equity Incentive Plan, a ten percent stockholder
will not be granted an incentive stock option unless the exercise price of such option is at least one hundred and ten percent of the
fair market value on the date of grant and the option is not exercisable after the expiration of five years from the grant date. The Board
of Directors determines the vesting schedule of the grants with broad discretion. On August 6, 2019, each member of the Board was granted
45,000 options to purchase shares at $3.80 per share. On December 11, 2020, each member of the Board was granted 22,500 options to purchase
shares at $2.00 per share. On December 31, 2021, each member of the Board was granted 22,500 options to purchase shares at $5.91 per share.
On December 30, 2022, each member of the Board was granted 22,500 options to purchase shares at $4.27 per share.

 Recent sales of unregistered securities.

 None.

 Issuer Purchases of Equity Securities

 We did not repurchase any of our equity securities
during the years ended December 31, 2021, 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. [RESERVED]

 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 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.

 Focus Universal Inc., a Nevada corporation (the
"Company," "we," "us," or "our"), has developed the five proprietary platform technologies
described in the Business Section, starting on page 1. These are: (1) device on a chip; (2) universal smart instrumentation platform ("USIP");
(3) ultra-narrowband technology; (4) ultra-narrowband power line communication ("PLC") technology; and (5) natural integrated
programming language ("NIPL").

 Our
main sources of revenue are derived from our sales of sensor devices and our wholesaling 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
its established retail distribution channels and, in some cases, places its own branding on our products. For the year ended December
31, 2021, our primary source of revenue was from sales of these agricultural sensors and measurement equipment sold through Hydrofarm.
Hydrofarm was not our primary source of revenue for the year ended December 31, 2023.

 While currently, we do not believe that inflation
will play a large role and have a large affect on our current business, as our business grows, inflation may play a larger role as our
need to procure supplies increases and our borrowing requirements increase as well. As we begin to diversify away from both one single
sector and one single large customer, we also believe that market volatility in any single sector is also diminished significantly. We
believe this should have a stabilizing affect on revenues. However, as our new products begin to reach maturation and completion in development,
we do believe supply chain risk as our company needs for consistently procuring reliable inputs increases. We also believe this may hold
the largest risk factor for cash flow as production increases. For a greater description of our technologies, our business segments and
the products we are currently selling, see "Part I – Item 1. Business" above.

 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). The USIP has an open
architecture, incorporating a variety of individual instrument functions, sensors, and probes from different industries and vendors. The
platform features the ability to connect potentially thousands of different sensors or probes, addressing major limitations present in
traditional instrumentation systems. The 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.

 We have created and assembled prototype models
of the Ubiquitor in limited quantities and plan to expand our assembly in 2023. Our prototype Ubiquitor is compatible with standard desktop
computers running 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. 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. Our developers are designing and implementing a soft control touch screen interface that supports
real-time data monitoring and facilitates instrument control and operation.

 The Company continues to devote a substantial
number of resources to research and development despite a slight decrease to the overall number year over year 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 several new employees in order to gain traction in the market. We intend to introduce the Ubiquitor in smart home
and commercial 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.

 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.

 For a description of the physical hardware, see illustrations in "Figures
5-10 in Part I - Item 1. Business Section 5. "Developing a universal smart instrumentation platform ("USIP")"
above.

 We believe the Ubiquitor device can connect up to thousands of potential
sensor nodes integrate data using embedded software to display the data and all analytics onto a digital screen (desktop, smartphone or
mobile device displays) using a wired or 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.

 The Ubiquitor is a general platform that collects
data in real time and is intended to be adapted to many industrial uses.

 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 the Ubiquitor connected
to 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. We believe the combination of the Ubiquitor with these sensors would offer the same
features as a combination of dozens or even hundreds of different standalone instruments in the gardening industry. The Ubiquitor-powered
gardening system would be used to replace these standalone devices and could offer another case study of the effectiveness of the application
of universal smart technology to such systems.

 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 penetrates most residential, commercial, and industrial premises. Accordingly, connectivity via PLC is a cost-effective
and 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.

 Our PLC technology uses an ultra-narrowband spectrum
channel of less than 1 KHz to establish a long-distance link between transmitter and receiver. Thus, we believe that our proprietary ultra-narrowband
PLC technology will offer a promising alternative to wireless networks and provide the backbone communication infrastructure for IoT devices.

 The primary design goal of the power line network
is electric power distribution, not data transmission. The harsh electrical noise present on power lines and variations in equipment and
standards make data transmission over the power grid difficult. These technological challenges have impeded, or even halted, progression
of PLC technology.

 We continue to build upon our existing research
and development with the intention of inventing an ultra-narrowband PLC technology that attempts to tackle two challenges: 1) overcoming
interference caused by electronic noise on the power line system; and 2) bandwidth. Preliminary internal testing suggests that we have
achieved significant noise rejection and interference suppression. In our preliminary internal testing, we have been able to increase
bandwidth to 4 megabits per second with the potential for more, while simultaneously effectively dealing with electrical noise and interference.
Based on the promising results of our internal testing, we have begun designing a proprietary PLC microchip and have set an intended launch
date for 2023.

 We believe that because residential and commercial
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.

 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.

 On December 23, 2021, Focus Universal (Shenzhen)
Technology Co. LTD was founded as a mainland China office for manufacturing procurement expertise and support research and development
activities. Focus Universal (Shenzhen) Technology Co. LTD is designed to function as a branch office accessing high level ability to source
products and build relationships with manufacturers in the region and as a lower cost form of support research and development as engineers
are more plentiful in the region. This last quarter of 2022, this office has continued to grow to double digit headcount and has also
begun to handle other online and simple phone marketing and marketing materials production activities, provided a cost and quality benefit
exists at the time.

 Research and Development Efforts of 5G Cellular
Technology

 Just like our ultra-narrowband technology can
be used to reduce noise in powerline communication technology, our internal research suggests that our ultra-narrowband technology can
be leveraged to create a type of 5G wireless communication technology that can achieve both low band 5G coverage and we believe 1 Gbps
high band speed. We employ an ultra-narrow spectrum channel (<1KHz) to establish an ultra-long-distance link between the 5G base station
and the receiver which reduces noise and interference entering the bandwidth.

 For a description of the ultra-narrowband technology
and the 5G applications, see "Part I - Item 1. Business, Section 2. "Creating a faster 5G cellular technology by using ultra-narrowband
technology" above.

 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 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.

 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.

 On May 19, 2021, we filed thirteen provisional
patent applications with the USPTO that we had been researching and developing for years encompassing a broad spectrum of technology areas
including sensor technology, wired and wireless communications, power line communications, computer security, software solutions, interconnected
technological communications, smart home systems and methods for both home and hydroponic areas, dynamic password cipher, local file security,
payment card security, infrared sensor, and a method and apparatus for high data rate transmission.

 In the fourth quarter of 2021, we hired the law
firm of Knobbe Martens, Olson & Bear, LLP based in Orange County, CA to serve as outside intellectual property counsel for the Company.
The firm is working on transferring the Company's provisional patent applications to formal patent applications in addition to filing
new provisional patents. In 2021, we filed 14 patents. We filed 18 domestic patents in 2022 (plus two international patents in 2022),
and so far have filed 3 patents in 2023.

 In addition, the Company's patent number
11,488,468 was allowed and subsequently issued on November 1, 2022. The patent, titled Sensor for Detecting the Proximity of an IEEE 802.11
Protocol Connectable Device.

 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 a maximum to 32 digital sensors or analyzers. However, we believe their current price
points are still cost 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.

 IoT Installation Industry

 There are several companies that compete with
AVX in smart home installations, including Vivint Smart Home, Crestron and Control4. However, we believe we can distinguish ourselves
from our competitors by offering a substantially lower price. An installation by Crestron ranges between $20,000 and $100,000 and by Control4
between $20,000 and $40,000. The cheapest competitor we can identify in this sector is Vivint Smart Home, which costs less than $5,000
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 $23.83 billion by 2029 and analysts expect it to register
a CAGR of 7.2% because of the industrial need to control air quality across a range of industries. [22] 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.

 ___________________

 [22]
 Fortune, The global air filters market is projected to grow from
$14.68 billion in 2022 to $23.83 billion by 2029, exhibiting a CAGR of 7.2% in forecast period, 2022-2029,
(last accessed March 7, 2023)

 Market Potential

 We believe universal wireless smart technology
will play a critical role for traditional instrument manufacturers, as currently simply the undertaking of an IoT project is too expensive
and difficult to develop for medium or smaller companies and carries 75% failure rate according to Cisco Systems [23]. The cost
factor is the first consideration when deciding whether a company wants to develop smart wireless technologies and implement them in their
products or use them in their field testing. We also hope to play a role in academic laboratories, particularly with smaller academic
laboratories that are sensitive to price. Regarding the larger IoT industry statistics, overall enterprise IoT spending increased to $201
Billion in 2022, an increase of 21.5%. The outlook for growth in 2023 is 18.5% from this large base of enterprise spending [24].
More specifically, the IoT sensors market is projected to reach $26 Billion by 2026 from $11.1 Billion in 2022 [25]. The IoT marketplace
size assessments usually include the hardware components and the software components which often contain a Software as a Service (SaaS)
model. Additionally, the rising need for reliable high bandwidth communication for IoT devices is expected to rise to $664.75 Billion
in 2028, spearheaded by the currently predominant services in the 5G category [26]. We would also expect this market to grow with
the addition of new categories of services delivering reliable high bandwidth communication for IoT devices and would cannibalize and
expand the existing services where the new services proved to be more effective and efficient.

 We also expect our recent
growth within our IoT Installation Services segment to bolster and complement our AVX Design and Integration and all other related installation
businesses of these IoT products. While statistics regarding the IoT installation sectors are difficult to aggregate given that the work
is often are pieced off into various contractor service categories, the residential custom installation market ranges from $5.7B to $12.1B [27],
and we would expect the commercial and industrial installation markets to be larger than the residential for IoT devices.

 Financial Reporting
Software

 We have launched a beta
version of our new SEC financial reporting automation software and are testing this new software product so that we can obtain marketing
data and feedback to our development team.

 ___________________

 [23]
 Cisco Systems, Connected Futures, Executive Business Insights,
May 2017, The Journey to IOT Value, Challenges, Breakthroughs, and Best Practices,

 [24]
 IoT Analytics, Market Insights for the Internet of Things, February
7, 2023, Global IoT market size to grow 19% in 2023—IoT shows resilience despite economic downturn,

 [25]
 Markets and Markets, IoT Sensors Market by Sensor Type, Network
Technology, Vertical, Application, and Geography – Global Forecast -2026,

 [26]
 Cision PRNewswire, Research and Markets, Global $664.75 Billion 5G Services Markets to 2028: Rising Need for High Bandwidth to Provide Reliable Communication to IoT Devices is Expected to Boost Overall Market Growth,

 [27]
 CEPro. How Big is the Custom Installation Market?, February 5,
2018,

 Results of Operations

 For the year ended December 31, 2023 compared to the year ended

 Revenue in operating segments is primarily generated
from IoT product and IoT project construction and installation services. The following tables summarize revenue from each segment.

 Year Ended December 31, 2023

 Corporate

 IoT Installation Services

 Total

 $

 –

 $

 281,117

 $

 705,538

 $

 986,655

 –

 28,375

 37,168

 65,543

 Total revenue

 $

 –

 $

 309,492

 $

 742,706

 $

 Year Ended December 31, 2022

 Corporate

 IoT Installation Services

 Total

 $
 –

 $
 51,302

 $
 252,535

 $
 303,837

 –

 41,536

 8,246

 49,782

 Total revenue

 $
 –

 $
 92,838

 $
 260,781

 $

 Revenue, cost of revenue and gross profit

 For the year ended December 31, 2023

 For the year ended December 31, 2022

 Increase

(Decrease)

$

 $

 986,655

 $

 303,837

 $

 682,818

 Revenue – related party

 65,543

 49,782

 15,761

 Total Revenue

 698,579

 Cost of revenue

 958,413

 330,899

 627,514

 Gross Profit

 $

 93,785

 $

 22,720

 $

 71,065

 Our consolidated gross revenue for the years ended
December 31, 2023 and 2022 was $1,052,198 and $353,619, respectively, which included revenue from related parties of $65,543 and $49,782,
respectively. Revenue for the year ended December 31, 2023 increased $698,579 due to a sales increase from our acquisition of AT Tech
Systems and sales increase in AVX sales due to ramping up marketing efforts. This increase of revenue was mainly a result of the increase
of IoT Installation Services being bolstered by additional resources such as increased headcount.

 Cost of revenue for the year ended December 31, 2023
was $958,413, compared to $330,899 for the year ended December 31, 2022. While the overall cost of revenue increased, as a percent of
revenue, costs went down because of higher margin contracts for IoT Installation Services being signed. In addition to the increase in
revenue, gross profit increased to $93,785 for the year ended December 31, 2023, compared to $22,720 for the year ended December 31, 2022.

 Operating Expenses

 The major components of our operating expenses
for the years ended December 31, 2023 and 2022 are outlined in the table below:

 For the year ended December 31, 2023

 For the year ended December 31, 2022

 Increase

(Decrease)

$

 Selling expense

 $

 140,994

 $

 142,372

 $

 (1,378

)

 Compensation – officers and directors

 1,082,775

 1,055,133

 27,642

 Research and development

 1,386,810

 1,060,385

 326,425

 Professional fees

 705,234

 896,385

 (191,151

)

 General and administrative

 1,740,779

 2,074,091

 (333,312

)

 Total operating expenses

 $

 5,056,592

 $

 5,228,366

 $

 (171,774

)

 Selling expense for the year ended December 31,
2023 was $140,994, compared to $142,372 for the year ended December 31, 2022. Selling expense incurred was mainly from third party advertising
fees. The decrease of selling expense was due to a decrease in advertising fees and trade show expenses.

 Compensation – officers and directors were $1,082,775
and $1,055,133 for the years ended December 31, 2023 and 2022, respectively. The increase was due to increase in directors' stock-based
compensation - options.

 Research and development costs were $1,386,810
and $1,060,385 for the years ended December 31, 2023 and 2022, respectively. The increase was due to an increase in total number of research
and development employee headcount in the Ontario, California headquarters and the Shenzhen, China subsidiary.

 Professional fees were $705,234 during the year ended
December 31, 2023 compared to $896,385 during the year ended December 31, 2022. The decrease in these professional fees compared to the
prior period was due to a decrease in new transaction-based legal paperwork for the Company (as much of this paperwork was completed earlier)
and a decrease in employment litigation legal fees.

 General and administrative expenses for the year
ended December 31, 2023 was $1,740,779, compared to $2,074,091 for the year ended December 31, 2022. The relating decrease was due to
the following reasons:

 a) Decreased number of general and administrative
employees in our headquarters due to outsourcing of work to third parties;

 b) Relocated Focus Shenzhen office to lower lease
expense; and

 c) Obtained better insurance deal from another
insurance company.

 Other Income (expense)

 Other income of $244,665 incurred during the year
ended December 31, 2023, primarily consisted of interest income of $38,339, interest expense – related party of $38,333, unrealized
gain on marketable equity securities of $8,033, realized loss on marketable equity securities of $2,002, rental income of $160,910 and
other income of $77,718. Other income of $278,709 incurred during the year ended December 31, 2022, primarily consisted of interest income
of $3,887, forgiveness of debt of $158,547, unrealized loss on marketable equity securities of $42,395, realized loss on marketable equity
securities of $21,205, rental income of $166,288 and other income of $13,587.

 Net Losses

 During the years ended December 31, 2023, and 2022,
we incurred net losses of $4,718,142 and $4,926,937 respectively, due to the factors discussed above.

 Liquidity and Capital Resources

 Working Capital

2023

2022

 Current Assets

 $

 1,028,278

 $

 4,807,830

 Current Liabilities

 (1,657,646

)

 (1,387,239

)

 Working Capital

 $

 (629,368

)

 $

 3,420,591

 Cash Flows

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

 For the year ended December 31, 2023

 For the year ended December 31, 2022

 Net cash used in operating activities

 $

 (3,528,762

)

 $

 (2,957,983

)

 Net cash provided by (used in) investing activities

 54,146

 (211,257

)

 Net cash used in financing activities

 (434,048

)

 (1,158,547

)

 Effect of exchange rate

 (6,508

)

 (7,452

)

 Net change in cash

 $

 (3,915,172

)

 $

 (4,335,239

)

 Cash Flows from Operating Activities

 Our net cash outflows from operating activities of
$3,528,762 for the year ended December 31, 2023, was primarily the result of our net loss of $4,718,142 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 $112,716, decrease in accounts receivable – related party of $34,507, increase in inventory of $178,299, increase
in other receivable of $20,519, decrease in prepaid expenses of $45,602, decrease in deposits of $8,336, decrease in operating lease right-of-use
asset of $325,329, increase in accounts payable and accrued liabilities of $215,531, increase in other current liabilities of $78,455,
and decrease in lease liabilities of $342,732. Non-cash expense included add-backs of $26,631in bad debt expense, $167,983 in depreciation
expense, $8,033 in unrealized gain on marketable equity securities, $2,002 in realized loss on marketable equity securities, $431,813
in stock-based compensation – shares, and $515,490 in stock-based compensation – options.

 Our net cash outflows from operating activities of
$2,957,983 for the year ended December 31, 2022, was primarily the result of our net loss of $4,926,937 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 $37,335, increase in accounts receivable – related party of $19,331, increase in inventory of $53,684, decrease in
other receivable of $13,057, decrease in prepaid expenses of $158,474, decrease in deposits of $4,035, decrease in operating lease right-of-use
asset of $139,754, decrease in accounts payable and accrued liabilities of $21,722, decrease in other current liabilities of $17,135,
decrease in lease liabilities of $117,245, and increase in other liabilities of $12,064. Non-cash expense included add-backs of $136,337
in bad debt expense, $166,266 in depreciation expense, $42,395 in unrealized loss on marketable equity securities, $21,205 in realized
loss on marketable equity securities, $719,975 in stock-based compensation – shares, $849,043 in stock-based compensation - options,
and reduction in inventory fair value net realizable of $27,199.

 We expect that cash flows from operating activities
may fluctuate in future periods because 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, 2023, we had cash
inflow from investing activities of $54,146. That was primarily the result from the purchase of property and equipment of $20,620, purchase
of marketable securities of $43,644 and proceeds from sales of marketable securities of $118,410. For the year ended December 31, 2022,
we had cash outflow from investing activities of $211,257. That was primarily the result from the purchase of property and equipment of
$42,187, purchase of marketable securities of $768,949 and proceeds from sales of marketable securities of $599,879.

 Cash Flows from Financing Activities

 For the year ended December 31, 2023, cash outflows
from financing activities of $434,048. That was primarily the result from related party loan of $1,000,000, and purchases of treasury
stock of $1,434,048. For the year ended December 31, 2022, cash outflows from financing activities of $1,158,547. That was primarily the
result from purchase of treasury stock of $1,000,000 and forgiveness of debt of $158,547.

 Going Concern

 The Company has assessed its ability to continue as
a going concern for a period of one year from the date of the issuance of these unconsolidated financial statements. The Company has a
net loss of $4,718,142 and $4,926,937 for the years ended December 31, 2023 and 2022, respectively. In addition, the Company had an accumulated
deficit of $22,582,170 and $17,864,028 as of December 31, 2023 and 2022, respectively, and negative cash flow from operating activities
of $3,528,762 and $2,957,983 for the years ended December 31, 2023 and 2022, respectively. Substantial doubt about the Company's
ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable
that the Company will be unable to meet its obligations as they become due within one year from the financial statement issuance date.
The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of
the Company as a going concern. The Company currently suffered recurring loss from operations, generated negative cash flow from operating
activities, has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover
operating costs over an extended period of time. These conditions raise substantial doubt as to its ability to continue as a going concern.
These consolidated financial statements do not include adjustments relating to the recoverability and classification of reported asset
amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 At December 31, 2023, the Company had cash and cash
equivalents, and short-term investments, in the amount of $464,989. The ability to continue as a going concern is dependent on the Company
attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities
arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity
and debt financings, and it expects to continue to rely on these sources of capital in the future. In addition, subsequent to year end,
the Company has entered into an agreement to sell its Land and Buildings which upon completion, will provide additional working capital
to the Company. No assurance can be given that the sale of the land and building will occur, or any future financing will be available
or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing,
it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders,
in case of equity financing, or grant unfavorable terms in future licensing agreements.

 Related Party Loan

 On August 3, 2023, the Company submitted a written consent, and the Board
approved a loan amount between $1 million and $5 million. On September 7, 2023, the Company entered into a loan agreement with Golden
Sunrise Investment LLC in the amount of $1,000,000. This loan is secured against the Company's property, which serves as collateral,
with a net book value of $4.5 million pledged. At the time of entering the loan agreement, Golden Sunrise Investment LLC was owned by
two of the Company's shareholders who collectively owned approximately 19% of the Company's outstanding shares. The loan has
an annual interest rate of 12% and the principal amount has a due date of September 7, 2024. The interest expense amount was $38,333 for
the year ended December 31, 2023. There was no accrued interest as of December 31, 2023, and the total principal outstanding loan amount
was $1,000,000 as of December 31, 2023. As a note, the interest rate increases to 15% as of the due date of loan on any unpaid principal
balance outstanding.

 Off-Balance Sheet Arrangements

 As of December 31, 2023, 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, 2023 AND 2022

 Index to the Financial Statements

 Contents

 Page

 Report of Independent Registered Public Accounting Firm (PCAOB No. 572)

 Report of Independent Registered
 Public Accounting Firm (PCAOB No. 6906)

 Consolidated Balance Sheets as of December 31, 2023 and 2022

 Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022

 Consolidated Statements of Changes in Stockholders' Equity for the Years ended December 31, 2023 and 2022

 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022

 Notes to the Consolidated Financial Statements

 F- 1

 Report of Independent Registered Public Accounting
Firm

 To the Stockholders and Board of Directors

 Focus Universal Inc.

 Opinion on the Financial Statements

 We have audited the accompanying consolidated balance
sheets of Focus Universal Inc. and Subsidiaries (the "Company") as of December 31, 2023, and the related statements of operations,
stockholders' equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial
statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.

 Going
Concern

 The accompanying consolidated
financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated
financial statements, the Company has suffered recurring losses from operations and has experienced negative cash flows from operating
activities that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

 Basis for Opinion

 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. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion.

 Our audit included performing procedures to assess
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.

 F- 2

 Critical Audit Matter

 The critical audit matter
communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or
required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated
financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 Revenue recognition — identification
of contractual terms in certain customer arrangements

 As described in Note
2 to the consolidated financial statements, management applies FASB Topic 606, Revenue from Contacts with Customers ("ASC 606")
to recognize revenue. Management recognizes revenue upon transfer of control of promised goods or services to customers in an amount that
reflects the consideration the Company expects to receive in exchange for those goods or services. The Company's revenue is divided
into two sources, with one source being from project construction which is recognized over time using the percentage-of-completion method
under the cost approach. Management is required to estimate the percentage of completion when determining the amount and timing of revenue
recognition.

 The principal considerations
for our determination that performing procedures over the percentage-of-completion method of recognition of revenue contracts and subsequent
payment collections is a critical audit matter as there are more significant risks associated with the percentage-of completion recognition
of this revenue. This in turn led to significant effort in performing our audit procedures which were designed to evaluate whether the
contractual terms, the timing of revenue recognition were appropriately identified and determined by management and to evaluate the reasonableness
of management's estimates.

 Our audit procedures
included, among others, understanding the process relating to management's revenue recognition process, examining transaction related
documents, testing of calculated percentage of completion of recorded revenue, and testing of receivables at balance sheet date including
testing of subsequent collections.

 We have served as the Company's auditor
since 2023.

 Weinberg
& Company, P.A.

 April 1, 2024

 Los Angeles, CA.

 F- 3

 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 sheet of Focus Universal, Inc. (the "Company") as of December 31, 2022 the related consolidated statement of operations,
stockholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial
statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2022 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States.

 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.

 Critical Audit Matter

 The critical audit matter
communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to
be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 Revenue recognition — identification
of contractual terms in certain customer arrangements

 As described in Note
2 to the consolidated financial statements, management applies FASB Topic 606, Revenue from Contacts with Customers ("ASC
606") to recognize revenue. Management recognizes revenue upon transfer of control of promised goods or services to customers in
an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company's
revenue is divided into two sources, with one source being from project construction which is recognized over time using the percentage-of-completion
method under the cost approach. Management is required to estimate the percentage of completion when determining the amount and timing
of revenue recognition.

 The principal considerations
for our determination that performing procedures over the percentage-of-completion method of recognition of revenue contracts and subsequent
payment collections is a critical audit matter as there are more significant risks associated with the percentage-of completion recognition
of this revenue. This in turn led to significant effort in performing our audit procedures which were designed to evaluate whether the
contractual terms, the timing of revenue recognition were appropriately identified and determined by management and to evaluate the reasonableness
of management's estimates.

 Our audit procedures included, among others, understanding
of controls relating to management's revenue recognition process, examining transaction related documents, confirming revenues and
outstanding receivables at the balance sheet date with a sample of the project construction customers, and testing collections subsequent
to the balance sheet date.

 /s/ Reliant CPA PC

 Reliant CPA PC

 We have served as the Company's auditor
since 2023

 Newport Beach, CA

 March 31, 2023

 F- 4

 CONSOLIDATED BALANCE SHEETS

 2023

 2022

 ASSETS

 Current Assets:

 Cash

 $
 428,254

 $
 4,343,426

 Accounts receivable, net

 164,398

 78,313

 Accounts receivable – related party

 –

 34,507

 Inventories

 282,071

 103,772

 Other receivables

 20,519

 –

 Prepaid expenses

 96,301

 142,342

 Marketable securities

 Total Current Assets

 1,028,278

 4,807,830

 Property and equipment, net

 4,080,663

 4,228,630

 Operating lease right-of-use asset

 201,048

 253,336

 Deposits

 24,135

 33,264

 Total Assets

 $
 5,334,124

 $
 9,323,060

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current Liabilities:

 Accounts payable and accrued liabilities

 $
 482,523

 $
 267,685

 Treasury stock payable

 –

 1,000,000

 Related party loan

 1,000,000

 –

 Other current liabilities

 84,951

 6,496

 Lease liability, current portion

 90,172

 113,058

 Total Current Liabilities

 1,657,646

 1,387,239

 Non-Current Liabilities:

 Lease liability, less current portion

 118,517

 165,952

 Other liability

 12,335

 12,335

 Total Non-Current Liabilities

 130,852

 178,287

 Total Liabilities

 1,788,498

 1,565,526

 Contingencies (Note 12)

 –

 –

 Stockholders' Equity:

 Common stock, par value $ 0.001 per share, 75,000,000 shares authorized; 64,771,817 and 65,296,383 shares issued and outstanding as of December 31, 2023 and 2022, respectively

 64,771

 65,297

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

 ( 434,048
)

 ( 2,000,000
)

 Additional paid-in capital

 26,436,161

 27,514,733

 Shares to be issued, common shares ( 41,643 and 16,875 shares at December 31, 2023
 and 2022, respectively)

 74,476

 48,075

 Accumulated deficit

 ( 22,582,170
)

 ( 17,864,028
)

 Accumulated other comprehensive loss

 ( 13,564
)

 ( 6,543
)

 Total Stockholders' Equity

 3,545,626

 7,757,534

 Total Liabilities and Stockholders' Equity

 $
 5,334,124

 $
 9,323,060

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

 F- 5

 CONSOLIDATED STATEMENTS OF OPERATIONS

 For the years ended December 31,

 2023

 2022

 $
 986,655

 $
 303,837

 65,543

 49,782

 Total Revenue

 Cost of revenue

 958,413

 330,899

 Gross Profit

 93,785

 22,720

 Operating Expenses

 Selling expense

 140,994

 142,372

 Compensation - officers and directors

 1,082,775

 1,055,133

 Research and development

 1,386,810

 1,060,385

 Professional fees

 705,234

 896,385

 General and administrative

 1,740,779

 2,074,091

 Total Operating Expense

 5,056,592

 5,228,366

 Loss from Operations

 ( 4,962,807
)

 ( 5,205,646
)

 Other Income (Expense):

 Interest income, net

 38,339

 3,887

 Interest expense - related party

 ( 38,333
)

 –

 Forgiveness of debt

 –

 158,547

 Unrealized gain (loss) on marketable equity securities

 8,033

 ( 42,395
)

 Realized loss on marketable equity securities

 ( 2,002
)

 ( 21,205
)

 Rental income

 160,910

 166,288

 Other income

 77,718

 13,587

 Total other income

 244,665

 278,709

 Net Loss

 $
)

 $
)

 Other comprehensive items

 Foreign currency translation loss

 ( 7,021
)

 ( 6,539
)

 Total comprehensive loss

 $
 ( 4,725,163
)

 $
 ( 4,933,476
)

 Weight Average Number of Common Shares Outstanding: Basic and Diluted

 60,314,871

 65,119,620

 Net Loss per common share: Basic and Diluted

 $
 ( 0.08
)

 $
 ( 0.08
)

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

 F- 6

 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY

 FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022

 stock

 Treasury stock

 Additional Paid-In

 Shares
 to be issued

 Accumulated

 Accumulated Other
 Comprehensive

 Total Stockholders'

 Description

 Shares

 Amount

 Amount

 Capital

 Shares

 Deficit

 Loss

 Equity

 Balance - December 31, 2021*

 64,889,612

 $
 64,890

 $
 –

 $
 24,071,444

 $
 1,922,753

 $
 ( 12,937,091
)

 $
 ( 4
)

 $
 13,121,992

 Stock based compensation - options

 82,347

 –

 848,961

 –

 –

 –

 849,043

 Stock based compensation - shares

 93,750

 –

 663,806

 48,075

 –

 –

 711,975

 Purchase of treasury stock

 –

 –

 ( 2,000,000
)

 –

 –

 –

 –

 ( 2,000,000
)

 Common stock issued for this period services

 1,346

 –

 7,999

 –

 –

 –

 8,000

 Common stock issued for prior services

 47,604

 –

 146,661

 ( 146,709
)

 –

 –

 –

 Shares issued for cashless exercise of warrants

 181,724

 –

 1,775,862

 ( 1,776,044
)

 –

 –

 –

 Other comprehensive loss

 –

 –

 –

 –

 –

 –

 ( 6,539
)

 ( 6,539
)

 Net loss

 –

 –

 –

 –

 –

)

 –

)

 Balance – December 31, 2022*

 65,296,383

 $
 65,297

 $
 ( 2,000,000
)

 $
 27,514,733

 $
 48,075

 $
 ( 17,864,028
)

 $
 ( 6,543
)

 $
 7,757,534

 Stock based compensation - options

 –

 –

 –

 515,490

 –

 –

 –

 515,490

 Stock based compensation - cashless exercise option

 10,857

 –

 ( 10
)

 –

 –

 –

 –

 Stock based compensation - shares

 62,250

 –

 405,350

 26,401

 –

 –

 431,813

 Purchase of treasury stock

 –

 –

 ( 469,048
)

 –

 –

 –

 –

 ( 469,048
)

 Retirement of treasury stock

 ( 600,000
)

 ( 600
)

 2,000,000

 ( 1,999,400
)

 –

 –

 –

 –

 Amendment stock purchase agreement – treasury stock

 –

 –

 35,000

 –

 –

 –

 –

 35,000

 Issued stock dividend

 2,327

 –

 ( 2
)

 –

 –

 –

 –

 Other comprehensive loss

 –

 –

 –

 –

 –

 –

 ( 7,021
)

 ( 7,021
)

 Net loss

 –

 –

 –

 –

 –

)

 –

)

 Balance – December 31, 2023

 64,771,817

 $
 64,771

 $
 ( 434,048
)

 $
 26,436,161

 $
 74,476

 $
 ( 22,582,170
)

 $
 ( 13,564
)

 $
 3,545,626

 *Retroactively applied to the stock split

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

 F- 7

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 For the
 Years Ended

 2023

 2022

 Cash flows from operating activities:

 Net Loss

 $
)

 $
)

 Adjustments to reconcile net loss to net cash from operating activities:

 Bad debt expense

 26,631

 136,337

 Inventories fair value net realizable

 –

 ( 27,199
)

 Depreciation expense

 167,983

 166,266

 Unrealized (gain) or loss on marketable equity securities

 ( 8,033
)

 42,395

 Realized loss on marketable equity securities

 2,002

 21,205

 Stock-based compensation - shares

 431,813

 719,975

 Stock based compensation - options

 515,490

 849,043

 Changes in operating assets and liabilities:

 Accounts receivable

 ( 112,716
)

 ( 37,335
)

 Accounts receivable - related party

 34,507

 ( 19,331
)

 Inventories

 ( 178,299
)

 ( 53,684
)

 Other receivable

 ( 20,519
)

 13,057

 Prepaid expenses

 45,602

 158,474

 Deposit

 8,336

 4,035

 Operating lease right-of-use asset

 325,329

 139,754

 Accounts payable and accrued liabilities

 215,531

 ( 21,722
)

 Other current liabilities

 78,455

 ( 17,135
)

 Lease liabilities

 ( 342,732
)

 ( 117,245
)

 Other liabilities

 –

 12,064

 Net cash flows used in operating activities

 ( 3,528,762
)

 ( 2,957,983
)

 Cash flows from investing activities:

 Purchase of property and equipment

 ( 20,620
)

 ( 42,187
)

 Purchase of marketable securities

 ( 43,644
)

 ( 768,949
)

 Proceeds from sales of marketable securities

 118,410

 599,879

 Net cash flows provided by (used in) investing
 activities

 54,146

 ( 211,257
)

 Cash flows from financing activities:

 Proceeds from related party loan

 1,000,000

 –

 Forgiveness of debt

 –

 ( 158,547
)

 Purchase of treasury stock

 ( 1,434,048
)

 ( 1,000,000
)

 Net cash flows used in financing activities

 ( 434,048
)

 ( 1,158,547
)

 Effect of exchange rate

 ( 6,508
)

 ( 7,452
)

 Net change in cash

 ( 3,915,172
)

 ( 4,335,239
)

 Cash beginning of year

 4,343,426

 8,678,665

 Cash end of year

 $
 428,254

 $
 4,343,426

 Supplemental cash flow disclosure:

 Cash paid for income taxes

 $
 –

 $
 –

 Cash paid for interest

 $
 13,142

 $
 12,164

 Supplemental disclosure of non-cash investing and financing activities:

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

 $
 273,041

 $
 –

 Cashless exercise
 of options

 $
 41,401

 $
 –

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

 F- 8

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 DECEMBER 31, 2023 AND 2022

 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 Ontario, California, specializing in the development and commercialization of novel and proprietary
universal smart technologies and instruments. Focus Universal Inc. is also a provider of patented hardware and software design technologies
for Internet of Things ("IoT") and 5G. The company has developed five disruptive patented technology platforms with 26 patents and patents
pending in various phases and 8 trademarks pending in various phases to solve the major problems facing hardware and software design and
production within the industry today. These technologies combined to have the potential to reduce costs, product development timelines
and energy usage while increasing range, speed, efficiency, and security. The smartphone or other mobile device, foundation, and sensor
readouts together perform the functions of many traditional scientific and engineering instruments and are intended to replace the traditional,
wired stand-alone instruments at a fraction of their cost.

 The company has multiple subsidiary units, including
Perfecular Inc. ("Perfecular"), AVX Design and Integration Inc. ("AVX," also doing business as Smart AVX ("Smart
AVX")), Focus Universal (Shenzhen) Technology Company LTD ("Focus Shenzhen"), Lusher Bioscientific, Inc. ("Lusher"),
and AT Tech Systems LLC ("AT Tech LLC"). Perfecular Inc. a wholly owned subsidiary of Focus, was founded in September 2009
and is headquartered in Ontario, California, and is engaged in designing certain digital sensor products and sells a broad selection of
horticultural sensors and filters in North America and Europe. AVX, incorporated on June 16, 2000 in the state of California, is an internet
of IoT installation and management company specializing in high performance and easy to use audio/video systems, home theaters, lighting
control, automation and integration. Services provided by AVX include full integration of houses, apartments, commercial complexes, office
spaces with audio, visual and control systems to fully integrate devices in the low voltage field, specializing in high end residential
smart IoT install projects in areas throughout the Southern California area. AVX's services also include partial equipment upgrade
and installation. AVX also markets and sells our IoT Products, such as high end LED, live wall panel products and cameras, under the Smart
AVX name.

 On December 23, 2021, Focus Shenzhen was founded as
a mainland China office for manufacturing procurement expertise and support research and development activities. Focus Shenzhen is designed
to function as a branch office accessing high level ability to source products and build relationships with manufacturers in the region
and as a lower cost form of support research and development as engineers are more plentiful in the region.

 On January 5, 2022, the Company founded a wholly
owned subsidiary named Lusher Bioscientific, Inc. Lusher Bioscientific was founded to market to the hydroponic and controlled agriculture
market and to assist in the product development of IoT technology products within this sector. As of the date of this filing, Lusher's
activities are in the introductory phase.

 F- 9

 As of January 6, 2023, AT Tech Systems is a subsidiary of Focus specializing
in commercial and industrial smart IoT install projects in areas throughout the Southern California area. AT Tech Systems has several
clients from medical/dental facilities and commercial and industrial projects, including several with notable manufacturers and wholesalers,
and provides clients with integrated network, security, and multimedia design solutions and technology systems. The Company has completed
integration throughout its existing businesses, including key employees serving dual roles with its subsidiaries. For example, Mr. Anthony
Tejeda serves as the Company's director of installation services, as the vice president of operations of AVX, and as chief operating
officer of AT Tech Systems.

 Note 2 – Summary of Significant Accounting Policies

 Principles of Consolidation

 The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries, Perfecular Inc., AVX Design & Integration, Focus Universal
(Shenzhen) Technology Co. LTD, and Lusher Bioscientific. 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 three operating and
reportable segments. The Company consists of three types of operations. (1) Focus and Focus Shenzhen collectively operate our "Corporate
and R&D" segment, which involves the non-specific financing, executive expense, operations and investor relations of our public
entity, and the general shared management and costs across the Company's subsidiaries that spread across all functional categories
and research and development of technology products. (2) Perfecular, AVX (doing business as and branded under Smart AVX) and Lusher jointly
operate the "IoT Products" segment, which involves the wholesale, marketing, and production of our universal smart instruments
and devices in the hydroponic and controlled agriculture segments and of our smart products into the commercial and home automation sectors.
(3) AVX (exclusive of the smart IoT Products sales under Smart AVX) and AT Tech Systems cooperatively run our "IoT Installation
Services" segment, which handles our IoT installation and management business specializing in high performance and easy to use audio/video
systems, home theaters, lighting control, automation, and integration.

 Asset information by operating segment is not
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 useful lives of property and equipment, allowance for doubtful accounts, inventory reserves, accruals for potential liabilities,
assumptions made in valuing stock instruments issued for services, and the valuation allowance on deferred tax assets. The Company regularly
evaluates its estimates and assumptions.

 F- 10

 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. As of December 31, 2023 and 2022, approximately $ 0 and $ 3,120,763 of the Company's cash was not insured
by the FDIC. There were no cash equivalents held by the Company at December 31, 2023 and 2022.

 Accounts Receivable

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

 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, 2023 and 2022, allowance for doubtful
accounts amounted to $ 249,603 and $ 222,972, respectively.

 Concentrations of Credit Risk

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

 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 the carrying value to its estimated
market value.

 Marketable Equity Securities

 The Company invests part of its excess treasury
cash in equity securities and money market funds according to company treasury and investment policies. Marketable securities represent
trading securities bought and held primarily for sale in the near-term to generate income on short-term price differences and are stated
at fair value. Realized and unrealized gains and losses are recorded in other income (expense), net.

 F- 11

 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:

 Schedule of estimated useful lives of property, plant and equipment

 Fixed assets

 Useful life

 Furniture

 5 years

 Equipment

 5 years

 Warehouse

 39 years

 Improvement

 5 years

 Land

 N/A

 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, 2023 and 2022, the Company believes there was no impairment of its long-lived assets.

 Treasury stock

 Purchases and sales of treasury stock are accounted
for using the cost method. Under this method, shares acquired are recorded at the acquisition price directly to the treasury stock account.
Upon sale, the treasury stock account is reduced by the original acquisition price of the shares and any difference is recorded in additional
paid in capital, on a first-in first-out basis. The Company does not recognize a gain or loss to income from the purchase and sale of
treasury stock.

 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 during which
services are received.

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

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

 F- 12

 Warrants

 The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance
in FASB ASC 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815").
The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability
pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether
the warrants are indexed to the Company's own ordinary shares and whether the warrant holders could potentially require "net
cash settlement" in a circumstance outside of the Company's control, among other conditions for equity classification. This
assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly
period end date while the warrants are outstanding.

 For issued or modified warrants that meet all
of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the
time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required
to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the warrants is estimated
using a Black-Scholes pricing model. The Company does not have any outstanding warrants as of December 31, 2023 and 2022,
respectively.

 Stock Dividends

 The Company issued a fifty percent (50%) stock
dividend of the Company's common stock to its shareholders for a stock dividend of one share of common stock for every two shares
of common stock held. The Company follows paragraph ASC 505-20-25 in treating its stock dividend as a stock split due to the stock dividend
being greater than 25% of the shares then outstanding. On March 23, 2023 and April 3, 2023, the Company issued 21,592,164 stock dividends
to its shareholders for a stock dividend of one share of common stock for every two shares of common stock issued and outstanding. The
Company also adheres to paragraph ASC 260-10-55-12, wherein it retroactively adjusted its statement of stockholders' equity for
all presented periods to incorporate the alteration in capital structure. The retroactive treatment is based on a fifty percent (50%)
stock dividend of the Company's common stock to its shareholders on March 23, 2023. The Company does not capitalize its retained
earnings, and there is no impact to the Company's overall equity or its total assets.

 Fair Value of Financial Instruments

 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.

 F- 13

 The following table summarize financial
assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022:

 Schedule of fair value assets and liabilities measured on recurring basis

 Fair Value

 Carrying

 Level 1

 Level 2

 Level 3

 Value

 Assets

 Marketable securities:

 Stock

 $

 $
 –

 $
 –

 $

 Total assets measured at fair value

 $

 $
 –

 $
 –

 $

 Fair Value

 Carrying

 Level 1

 Level 2

 Level 3

 Value

 Assets

 Marketable securities:

 Stock

 $

 $
 –

 $
 –

 $

 Total assets measured at fair value

 $

 $
 –

 $
 –

 $

 The carrying amount of the Company's financial
assets and liabilities, such as cash, accounts receivable, inventories, other receivable, prepaid expenses, deposit, accounts and accrued
expenses, payable, treasury stock payable, other current liabilities, customer deposit, approximate their fair value because of the short
maturity of those instruments.

 Transactions involving related parties cannot
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. We believe the related party loan approximates its fair value based on interest rate of the loan.

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

 Comprehensive Income (Loss)

 Other comprehensive income (loss) refers to revenues,
expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from
net income (loss) as these amounts are recorded directly as an adjustment to stockholders' equity. The Company other comprehensive
loss for the years ended December 31, 2023 and 2022 was comprised of foreign currency translation adjustments.

 F- 14

 Revenue Recognition

 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 of 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 upon the delivery of the equipment to the customer and completion of performance obligation.

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

 Revenue from our project construction is recognized
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.

 A summary of our revenue by product type for
the fiscal years ended December 31, 2023 and 2022 is as follows:

 Schedule of revenue by product type

 $

 309,492

 $

 92,838

 IoT Project Construction and Installation Services

 742,706

 260,781

 Total

 $

 $

 Cost of Revenue, excluding depreciation & amortization

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

 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.

 F- 15

 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, 2023 and 2022.

 As of December 31, 2023 and 2022, the Company
did no t identify any material uncertain tax positions.

 Basic and Diluted Net Income (Loss) Per Share

 Net income (loss) per share is computed pursuant
to ASC 260-10-45. 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.

 Schedule of anti dilutive shares

 Year ended December 31,

 2023

 2022

 Stock options

 458,424

 Total

 458,424

 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.

 F- 16

 Foreign Currency Translation and Transactions

 The reporting
and functional currency of Focus is the USD. The functional currency of Focus Universal (Shenzhen) Technology Co. LTD, a wholly owned
subsidiary of Focus located in China, is the Renminbi ("RMB").

 For financial
reporting purposes, the financial statements of the Company's Chinese subsidiary, which are prepared using the RMB, are translated
into the Company's reporting currency, USD. Assets and liabilities are translated using the exchange rate on the balance sheet
date. Revenue and expenses are translated using average exchange rates prevailing during each reporting period. Stockholders' equity
is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated
other comprehensive loss in stockholders' equity.

 Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing
at the dates of the transactions. The resulting exchange difference, presented as foreign currency transaction loss, is included in the
accompanying consolidated statements of operations. The exchange rates used for consolidated financial statements are as follows:

 Schedule
 of exchange rates foreign currency

 Average Rate for the Year Ended

 2023

 2022

 China Yuan (RMB)

 RMB

 7.0714

 RMB

 6.7263

 United States Dollar ($)

 $

 1.0000

 $

 1.0000

 Exchange Rate at

 China Yuan (RMB)

 RMB

 7.0698

 RMB

 6.8973

 United States Dollar ($)

 $

 1.0000

 $

 1.0000

 Going Concern

 The Company has assessed its ability to continue as
a going concern for a period of one year from the date of the issuance of these unconsolidated financial statements. The Company has a
net loss of $ 4,718,142 and $ 4,926,937 for the years ended December 31, 2023 and 2022, respectively. In addition, the Company had an accumulated
deficit of $ 22,582,170 and $ 17,864,028 as of December 31, 2023 and 2022, respectively, and negative cash flow from operating activities
of $ 3,528,762 and $ 2,957,983 for the years ended December 31, 2023 and 2022, respectively. Substantial doubt about the Company's
ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable
that the Company will be unable to meet its obligations as they become due within one year from the financial statement issuance date.
The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of
the Company as a going concern. The Company currently suffered recurring loss from operations, generated negative cash flow from operating
activities, has an accumulated deficit and has not completed its efforts to establish a stabilized source of revenues sufficient to cover
operating costs over an extended period of time. These conditions raise substantial doubt as to its ability to continue as a going concern.
These unaudited condensed consolidated financial statements do not include adjustments relating to the recoverability and classification
of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue
as a going concern.

 At December 31, 2023, the Company had cash and cash
equivalents, and short-term investments, in the amount of $ 464,989. The ability to continue as a going concern is dependent on the Company
attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities
arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through
equity and debt financings, and it expects to continue to rely on these sources of capital in the future. In addition, subsequent to
year end, the Company has entered into an agreement to sell its Land and Buildings which upon completion, will provide additional working
capital to the Company. No assurance can be given that the sale of the land and building will occur, or any future financing will be
available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional
financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our
stockholders, in case of equity financing, or grant unfavorable terms in future licensing agreements.

 F- 17

 Note 3 – Recent Accounting Pronouncement

 In June 2016, the FASB issued Accounting
Standards Update ("ASU") No. 2016-13, (Topic 326), Financial Instruments – Credit Losses: Measurement of Credit
Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking
"expected loss" model, rather than the "incurred loss" model, which requires all expected losses to be
determined based on historical experience, current conditions and reasonable and supportable forecasts. This guidance amends the
accounting for credit losses for most financial assets and certain other instruments including trade and other receivables,
held-to-maturity debt securities, loans and other instruments. In November 2019, the FASB issued ASU No. 2019-10 to postpone the
effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the Securities
and Exchange Commission to fiscal years. The Company adopted ASU No. 2016-13 on January 1, 2024 which did not have a material
impact on its financial position and results of operations.

 In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic
280): Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily
through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision
maker and included in each reported measure of a segment's profit or loss. The update also requires all annual disclosures about
a reportable segment's profit or loss and assets to be provided in interim periods and for entities with a single reportable segment
to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. This standard
will be effective for the Company on January 1, 2024 and interim periods beginning in fiscal year 2025, with early adoption permitted.
The updates required by this standard should be applied retrospectively to all periods presented in the financial statements. The Company
does not expect this standard to have a material impact on its results of operations, financial position or cash flows.

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

 Note 4 – Inventory

 At December 31, 2023 and 2022, inventory consisted
of the following:

 Schedule of inventory

 Parts

 $
 1,051

 $
 3,767

 Finished goods

 281,020

 100,005

 Inventories

 $
 282,071

 $
 103,772

 Note 5 – Property and Equipment

 At December 31, 2023 and 2022, property and equipment consisted of
the following:

 Schedule of property and equipment

 Warehouse

 $
 3,789,773

 $
 3,789,773

 Land

 731,515

 731,515

 Building improvement

 240,256

 240,256

 Furniture and fixture

 39,223

 37,785

 Equipment

 119,556

 101,076

 Software

 1,995

 1,995

 Total cost

 4,922,318

 4,902,400

 Less accumulated depreciation

 ( 841,655
)

 ( 673,770
)

 Property and equipment, net

 $
 4,080,663

 $
 4,228,630

 Depreciation expense for the years ended December
31, 2023 and 2022 amounted to $ 167,983 and $ 166,266, respectively.

 F- 18

 Note 6– Related Party Transactions

 Revenue generated from Vitashower Corp., a company
owned by the Chief Executive Officer's wife, amounted to $ 0 and $ 41,536 for the years ended December 31, 2023 and 2022, respectively.
The accounts receivable balance due from Vitashower Corp. amounted to $ 0 and $ 34,507 as of December 31, 2023 and 2022, respectively.

 Service revenue generated from the installation
of home security equipment by AT Tech and AVX for one of the Company's directors, amounted to $ 65,543 and $ 8,246 for the year ended
December 31, 2023 and 2022, respectively.

 Note 7 – Related Party Loan

 On August 3, 2023, the Company submitted a written
consent, and the Board approved a loan amount between $1 million and $5 million. On September 7, 2023, the Company entered into a loan
agreement with Golden Sunrise Investment LLC in the amount of $ 1,000,000. This loan is secured against the Company's property, which
serves as collateral, with a net book value of $4.5 million pledged. At the time of entering the loan agreement, Golden Sunrise Investment
LLC was owned by two of the Company's shareholders who collectively owned approximately 19 % of the Company's outstanding shares.
The loan has an annual interest rate of 12 % and the principal amount has a due date of September 7, 2024. The interest expense amount
was $ 38,333 for the year ended December 31, 2023. There was no accrued interest as of December 31, 2023, and the total principal outstanding
loan amount was $ 1,000,000 as of December 31, 2023. The interest rate increases to 15% as of the due date of loan on any unpaid
principal balance outstanding.

 Note 8 – Business Concentration and Risks

 Major customers

 One customer accounted for 43 % of the total accounts
receivable as of December 31, 2023, and this customer accounted for 22 % of the total revenue as of December 31, 2023.

 Four customers accounted for 11 % of the total
accounts receivable as of December 31, 2022, and those customers accounted for 49 % of total revenue for the year ended December 31, 2022.

 Major vendors

 No major vendor accounted more than 10 % of total
purchases during the year ended December 31, 2023, One vendor, Tianjin Guanglee, accounted for 65 % of total accounts payable as of December
31, 2022; and this vendor accounted for 22 % of total purchases during the year ended December 31, 2022. Of subsequent note, Tianjin Guanglee
was once owned by the Chief Executive Officer, as fully disclosed in our annual report in 2017. In 2018, the Chief Executive Officer transferred
ownership of the entity to an unrelated third party in a transaction not considered a related party transaction per the relevant guidelines.

 F- 19

 Note 9 – Leases

 The Company recorded its operating lease
cost of $ 143,097
and $ 209,738
for the years ended December 31, 2023 and 2022, respectively. This is included in general and administrative expenses.

 On December 7, 2021, Focus Shenzhen entered into
a thirty-eight month commercial lease with a third party for an approximately 5,895 square foot office space. The lease commenced on December
25, 2021 and was scheduled to end on February 28, 2025. The monthly rent was RMB70,097 (approximately $9,915) with approximately an 11.1%
to 12.5% increase rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have
to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar terms, which is 10%. Lease
expense for this lease is recognized on a straight-line basis over the lease term. This lease was terminated on February 22, 2023.

 On January 16, 2023, Focus Shenzhen entered into
a thirty-six month commercial lease with a third party for an approximately 2,017 square foot office space. The lease commenced on February
1, 2023 and will end on January 31, 2026. The monthly rent is RMB29,974 (approximately $4,240) with approximately an 11.1% to 12.5% increase
rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized
basis to borrow an amount equal to the lease payments for the asset under similar terms, which is 10%. Lease expense for this lease is
recognized on a straight-line basis over the lease term.

 On February 22, 2023, Focus Shenzhen entered into
a thirty-six month commercial lease with a third party for an approximately 3,449 square foot office space. The lease commenced on March
31, 2023 and will end on February 28, 2026. The monthly rent is RMB35,246 (approximately $4,985) with approximately an 11.1% to 12.5%
increase rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay
on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar terms, which is 10%. Lease expense
for this lease is recognized on a straight-line basis over the lease term.

 Operating lease right-of-use assets represent
the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation
to make lease payments arising from the lease. As of December 31, 2023 and 2022, operating lease right-of use assets and lease liabilities
were as follows:

 Schedule of operating right-of-use asset and liability

2023

2022

 Operating lease right-of-use assets

 $
 273,041

 $
 353,074

 Amortization

 ( 71,993
)

 ( 99,738
)

 Operating lease right-of-use assets, net

 $
 201,048

 $
 253,336

 Lease liabilities, current portion

 $
 90,172

 $
 113,058

 Lease liabilities, less current portion

 $
 118,517

 $
 165,952

 Lease term and discount rate:

 Schedule of lease term and discount rate

2023

2022

 Weighted average remaining lease term

 Operating lease

 2.08 to 2.25 years

 2.17 years

 Weighted average discount rate

 Operating lease

 10 %

 10 %

 F- 20

 The minimum future lease payments are as follows:

 Schedule of minimum future lease payments

 Amount

 Year ending December 31, 2024

 $
 104,767

 Year ending December 31, 2025

 114,641

 Year ending December 31, 2026

 8,480

 Total minimum lease payment

 227,888

 Less: imputed interest

 ( 19,199
)

 Present value of future minimum lease payments

 $
 208,689

 Note 10 – Stockholders' Equity

 Shares authorized

 At formation, the total number of shares of all
classes of stock that the Company is authorized to issue is seventy-five million ( 75,000,000) shares of common stock, par value $ 0.001
per share.

 Common stock

 On March 23, 2023, the Company issued a fifty
percent (50%) stock dividend of the Company's common stock to its shareholders for a stock dividend of one share of common stock
for every two shares of common stock held.

 On February 13, 2023, the Company issued 62,250
shares (for consideration of $ 357,340,
based on their fair value on grant date) to employees based on their Restricted Stock Award Agreements (see
Employee stock-based compensation below). As of December 31, 2023, there was unvested amortization of 153,000
shares which will be amortized to expense over the next three years.

 On February 21, 2023, the Company issued 10,857
 shares to a prior board member who exercised his options with cashless exercise.

 On April 3, 2023, the Company issued 2,327 shares
to round up the stock dividend effective on March 23, 2023.

 On April 4, 2022, the Company issued 181,724 shares
of its common stock to Boustead Securities LLC ("Boustead"), which were for the warrants exercised by Boustead on September
7, 2021. The warrants were issued to Boustead in connection with the Company's initial public offering with an exercise price of
$4.25. The shares issued to Boustead were valued at $ 1,776,044 upon the cashless exercise option of the warrants.

 On May 2, 2022, the Company issued 48,941 shares
to consultants in exchange for professional services rendered. The shares were valued at $ 154,709 based on the closing price of the Company's
common stock on the dates that the shares were deemed earned, according to the terms of the related agreements.

 On August 17, 2022, the Company issued 82,347
shares to two board members who exercised their options. The board members exercised a combined 107,500 options, and the shares were valued
at $ 652,501 upon the cashless exercise option of the options.

 On August 22, 2022, the Company issued 93,750
shares (value of $ 642,789, based on their share price on grant date of $7.44) to employees based on the Restricted Stock Award
Agreement (see Employee stock-based compensation).

 F- 21

 Treasury stock

 On August 10, 2022, the Company entered a
stock purchase agreement (the "Stock Purchase Agreement") with a private shareholder to repurchase 400,000 shares
(600,000 shares after a fifty percent stock dividend adjustment on March 23, 2023) of its common stock for $2,000,000. The private
shareholder transferred the shares on October 4, 2022, forming a binding agreement, which the Company placed in treasury; and on
October 6, 2022, the Company wired the first $1,000,000 of the purchase price. Subsequently, on July 14, 2023, the Company entered
into an amendment to the Stock Purchase Agreement that increased the number of shares of its common stock the Company would purchase
to 1,300,000
shares and revised the total purchase price of the shares to $ 1,965,000
resulting in a $35,000 change in our obligation to purchase Treasury stock. The remaining $ 965,000
was paid on July 14, 2023. Upon receipt of the additional 900,000
shares, the Company also placed them in treasury. As of January 17, 2023, the Company retired the initial 400,000
shares (600,000 shares after a fifty percent stock dividend adjustment on March 23, 2023) and restored them to the status of
authorized and unissued shares.

 As part of the Company's repurchase program,
during the year ended December 31, 2023 the Company repurchased 263,040 shares of its common stock for $ 464,486 in the public market at
average price of $1.77 and placed them in treasury.

 As of December 31, 2023 and 2022, the Company
had 1,163,040 and 600,000 treasury shares, respectively. The intention of the Company is to retire the additional 900,000 shares obtained
pursuant to the amendment to the Stock Purchase Agreement along with the additional 263,040 shares repurchased during the year ended December
31, 2023.

 Employee stock-based compensation

 On February 11, 2022 (the "Vesting Date"),
the Company entered into a restricted stock award agreement (the "Award Agreement") with eight employees for 280,000 shares
of the Company's common stock subject to the terms and to the fulfillment of the conditions set forth in the Company's equity
incentive plan. The first 20% of the restricted shares were granted and vested on February 11, 2022. An additional 20% of the restricted
shares will vest on each anniversary of the Vesting Date until the fourth anniversary of the Vesting Date. There were 51,000 shares granted
as of February 13, 2023. The fair value of the above employee compensation was $ 357,340 as of December 31, 2023.

 In November 2021, the Company entered into a one-year
employment agreement with the then VP of Finance and Head of Investor Relations of the Company, pursuant to which the Company awarded
a 15,000-share bonus consisting of shares of the Company's common stock, which will be granted in blocks of 3,750 shares for every
quarter certain performance metrics are achieved. The share price will be determined based on the closing price as of the last day of
each quarter. Pursuant to the terms of the employment agreement, if the Company determined it was satisfied with the performance of the
VP, his position would be promoted to Chief Financial Officer after the one-year anniversary. In November 2022, the Company entered into
an amendment agreement to amend the performance metrics and extend the term. As of December 31, 2023, 15,000 shares have vested, collectively
valued at $ 27,862.

 In October 2022, the Company entered into an employee
agreement with the VP of the Company, pursuant to which the Company awarded a 15,000-share bonus consisting of shares of the Company's
common stock, which will be granted in blocks of 3,750 shares every quarter. As of December 31, 2023, 15,000 shares have vested, collectively
valued at $ 27,861.

 During the year ended December 31, 2023, the Company
entered into employment contracts with three employees of its engineering staff. These employment contracts contained provisions for a
total bonus of restricted stock grants valued at $50,000 based on the share price upon the date of completion of the performance metrics
described in the employment contracts. The fair value of the above employee compensation was $18,750 (approximately 11,643 shares) as
of December 31, 2023.

 During the years ended December 31, 2023 and 2022,
the total employee stock-based compensation amount for all employees in the company was $ 431,813 and $ 711,975, respectively.

 F- 22

 Stock options

 On December 30, 2022, each member of the
Board was granted 22,500
options to purchase shares at $ 4.27
per share with a fair value of $ 533,611.
These shares fully vested during 2023.

 As of December 31, 2023, there were 513,874 options
granted, 513,874 options vested, 0 options unvested, and 513,874 outstanding stock options.

 For the years ended December 31, 2023 and 2022,
the Company's stock option compensation expenses amounted to $ 515,490 and $ 849,043, respectively.

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

 Schedule of fair value of the stock options activity

 Risk-free interest rate

 3.99 %

 Expected life of the options

 5.5 years

 Expected volatility

 132.71 %

 Expected dividend yield

 0 %

 The following is a summary of options activity
from December 31, 2021 to December 31, 2023:

 Schedule of option activity

 Number of Options

 Weighted average exercise price

 Weighted Average Remaining Contractual Life

 Aggregate Intrinsic Value

 Outstanding at December 31, 2021

 630,000

 $
 5.82

 8.56

 –

 Vested at December 31, 2021

 472,932

 $
 4.80

 8.07

 –

 Exercisable at December 31, 2021

 472,932

 $
 4.80

 8.07

 –

 Granted

 157,500

 $
 6.41

 –

 –

 Exercised

 ( 161,250
)

 $
 5.46

 –

 –

 Cancelled or forfeited

 ( 11,189
)

 $
 8.86

 –

 –

 Outstanding at December 31, 2022

 615,061

 $
 5.93

 8.04

 –

 Vested at December 31, 2022

 458,424

 $
 5.87

 7.58

 –

 Exercisable at December 31, 2022

 458,424

 $
 5.87

 7.58

 –

 Granted

 –

 $
 –

 –

 –

 Exercised

 ( 78,811
)

 $
 3.59

 –

 –

 Cancelled or forfeited

 ( 22,376
)

 $
 4.27

 –

 –

 Outstanding at December 31, 2023

 $
 4.05

 7.25

 –

 Vested as of December 31, 2023

 $
 4.05

 7.25

 –

 Exercisable at December 31, 2023

 $
 4.05

 7.25

 –

 F- 23

 Note 11 – Segment reporting

 The Company currently has two operating segments.
First, Focus and Focus Shenzhen collectively operate our "Corporate and R&D" segment, which involves the non-specific
financing, executive expense, operations and investor relations of our public entity, and the general shared management and costs across
the Company's subsidiaries that spread across all functional categories and research and development of technology products. Second,
Perfecular, AVX (doing business as Smart AVX) and Lusher jointly operate the "IoT Products" segment, which involves the wholesale,
marketing, and production of our universal smart instruments and devices in the hydroponic and controlled agriculture segments and of
our smart instruments into the commercial and home automation sectors. And third, AVX (exclusive of the smart IoT Products sales under
Smart AVX) and AT Tech Systems cooperatively run our "IoT Installation Services" segment, which handles our IoT installation
and management business specializing in high performance and easy to use audio/video systems, home theaters, lighting control, automation,
and integration.

 The following tables summarize the financial information
of each operating segment of the Company for the year ended December 31, 2023:

 Schedules of segment reporting

 Year Ended December 31, 2023

 Corporate

 IoT Installation Services

 Total

 $
 –

 $
 281,117

 $
 705,538

 $
 986,655

 –

 28,375

 37,168

 65,543

 Total revenue

 –

 309,492

 742,706

 Cost of revenue

 –

 214,943

 743,470

 958,413

 Gross profit

 –

 94,549

 ( 764
)

 93,785

 Total operating expense

 4,957,244

 72,825

 26,523

 5,056,592

 Income (loss) from operations

 ( 4,957,244
)

 21,724

 ( 27,287
)

 ( 4,962,807
)

 Total other income (expense)

 214,225

 ( 5,680
)

 36,120

 244,665

 Net income (loss)

 $
 ( 4,743,019
)

 $
 16,044

 $
 8,833

 $
)

 The following tables summarize the financial information
of each operating segment of the Company for the year ended December 31, 2022:

 Year Ended December 31, 2022

 Corporate

 IoT Installation Services

 Total

 $
 –

 $
 51,302

 $
 252,535

 $
 303,837

 –

 41,536

 8,246

 49,782

 Total revenue

 –

 92,838

 260,781

 Cost of revenue

 –

 84,296

 246,603

 330,899

 Gross profit

 –

 8,542

 14,178

 22,720

 Total operating expense

 4,463,852

 449,060

 315,454

 5,228,366

 Loss from operations

 ( 4,463,852
)

 ( 440,518
)

 ( 301,276
)

 ( 5,205,646
)

 Total other income (expense)

 127,165

 158,259

 ( 6,715
)

 278,709

 Net loss

 $
 ( 4,336,687
)

 $
 ( 282,259
)

 $
 ( 307,991
)

 $
)

 F- 24

 Note 12 – Commitments and Contingencies

 Pending Litigation

 On or about April 13, 2020, Ian Patterson, the
Chief Operations Officer of AVX resigned from his position. 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. The complaint alleges claims including discrimination, wrongful
termination, retaliation and various other provisions of the California Labor Code, and various other claims under California state law.
Trial for this matter is set for October 30, 2024 and discovery is currently ongoing. AVX intends to contest this matter and disputes
that the other defendants are proper parties to the litigation. However, since litigation and investigations are inherently uncertain,
the outcome may have a material impact on the Company.

 Similarly, on or about April 14, 2020, Devesa
Sarria, the Sales and Marketing Director, was terminated. 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 discrimination, wrongful termination,
retaliation and various other provisions of the California Labor Code, and various other claims under California state law. The complaint
seeks unspecified economic and non-economic losses, as well as attorneys' fees. Trial is set for May 8, 2024. AVX intends to vigorously
contest this matter and disputes that the other defendants are proper parties to the litigation. However, since litigation and investigations
are inherently uncertain, the outcome may have a material impact on the Company.

 Note 13 – Income taxes

 The United States of America

 The Company is subject to taxation in the United
States and certain state jurisdictions. The provision for income taxes differs from the amounts which would be provided by applying the
statutory federal income tax rate of 21 % to the net loss before provision for income taxes. Accordingly, the Company reevaluated its deferred
tax assets on net operating loss carryforward in the U.S. As of December 31, 2023, due to uncertainties surrounding future utilization,
the Company recorded a full valuation allowance against the deferred tax assets based upon management's assessment as to their realization.

 People's Republic of China

 Effective January 1, 2008, the New Taxation Law
of PRC stipulates that domestic enterprises and foreign invested enterprises (the "FIEs") are subject to a uniform tax rate
of 25 %. Under the PRC tax law, companies are required to make quarterly estimate payments based on 25% tax rate; companies that received
preferential tax rates are also required to use a 25% tax rate for their installment tax payments. The overpayment, however, will not
be refunded and can only be used to offset future tax liabilities.

 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.

 F- 25

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

 Schedule of effective tax rate

 2023

 2022

 Federal statutory rates

 $
 ( 991,000
)

 $
 ( 1,034,596
)

 State income taxes

 ( 313,000
)

 ( 435,516
)

 Foreign income taxes

 ( 46,000
)

 ( 129,904
)

 Permanent differences

 –

 ( 86
)

 Valuation allowance against net deferred tax assets

 1,350,000

 1,600,102

 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, 2023 and 2022 is presented below:

 Schedule of deferred tax assets and liabilities

 2023

 2022

 Deferred income tax asset

 Net operating loss carryforwards

 $
 6,612,282

 $
 5,261,884

 Interest

 43,872

 43,786

 Total deferred income tax asset

 6,656,154

 5,305,670

 Less: valuation allowance

 ( 6,656,154
)

 ( 5,305,670
)

 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, 2023 the valuation allowance increased by $ 1,350,484.

 As of December 31, 2023, we had cumulative net
operating loss carryforwards for federal and state income tax purposes of $ 22,434,632, and available tax credit carryforwards of approximately
$ 4,354,568 for federal income tax purposes, which can be carried forward to offset future taxable income. The federal net operating loss
carryforwards consists of $ 17,195,453 of losses incurred prior to January 1, 2023 and which can be used to offset 100% of future taxable
income and, $ 3,540,588 of losses incurred after January 1, 2023, which can be used to offset up to 80% of taxable income in subsequent
years.

 Note 14 – Subsequent Events

 On January 2, 2024, the board of directors of
the Company authorized the Company to enter into a revolving credit facility or series of promissory notes of up to $5 million with one
or more lenders. The Company accepted the first $300,000 tranche on January 9, 2024 (the "Loan") with a third-party private
lender (the "Lender") whereby the Lender loaned $300,000 to the Company (the "Principal Amount"). The Loan has
an annual 3% compound interest rate and note payment begin on February 4, 2024 ("Due Date") whereby the Company will pay Lender
in 12 equal payments of $25,408.11 beginning on the Due Date. On January 9, 2024, the Lender transferred the Principal Amount to the Company.

 On February 22, 2024, Focus
Universal Inc. (the "Company") entered into an agreement (the "Agreement") with 620Magnolia LLC (the "Buyer")
to sell and leaseback the Company's warehouse located at 2311 E. Locust Street, Ontario, California 91761 (the "Property").
The purchase price for the Property is $7,100,000 with $3,550,000 paid directly to the Company in cash, and the remaining $3,550,000 to
be financed by the Buyer and paid to the Company upon approval of the financing. The Agreement allows for a contingency period of thirty-five
days and includes a requirement for Buyer to deposit $100,000 into escrow, which has been satisfied. Additional contingencies are set
forth in the Agreement and the closing date will occur 30 days after their satisfaction or waiver.

 In addition, on February 22,
2024, the Company entered into a Standard Industrial/Commercial Single-Tenant Lease (the "Lease") with the Buyer to lease
the Property for two years commencing at the close of escrow and ending on April 30, 2026. Base monthly rent is $39,585, with a total
of $316,680 due upon execution of the lease.

 On March 5, 2024, the Company entered into an addendum
to the loan agreement with Golden Sunrise Investment LLC, a related party obtaining an additional secured loan amount of $300,000 at an
annual interest rate of 12%.

 The Company has evaluated all other subsequent
events through the date these consolidated financial statements were issued and determined that there were no other subsequent events
or transactions that require recognition or disclosures in the consolidated financial statements.

 F- 26

 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 (the "COSO
Framework"). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. GAAP.

 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. An effective internal control system,
no matter how well designed, has inherent limitations, including the possibility of human error or overriding of controls, and therefore
can provide only reasonable assurance with respect to reliable financial reporting. Because of its inherent limitations, our internal
control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention
or overriding of controls or fraud. Effective internal controls can provide only reasonable assurance with respect to the preparation
and fair presentation of financial statements.

 In connection with the audit of our financial
statements as of and for the years ended December 31, 2023 and 2022, 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, 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 this deficiency, we
believe that it is possible that certain control deficiencies and material weaknesses may have been identified if such an evaluation had
been performed.

 We are working to remediate the deficiencies and
material weaknesses. Our remediation efforts are ongoing, and we will continue our initiatives to implement and document policies, procedures,
and internal controls. We have taken steps to enhance our internal control environment and plan to take additional steps to remediate
the deficiencies and address material weaknesses. Specifically:

 We have hired our Vice President of Finance. We have also hired additional outside consultants, and we 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 engaging an external accounting firm to supplement our efforts to the implementation of the COSO Framework for internal controls;

 We will design and implement internal controls related to revenue and expenses recognition accounting;

 We are initiating a comprehensive program and development plan to provide ongoing company-wide trainings regarding internal controls, with particular emphasis on the training of our accounting staff;

 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 information necessary to enable us to more effectively monitor and comply with applicable filing requirements on a timely basis;

 We will continue to enhance risk assessment procedures and conduct a comprehensive risk assessment to enhance overall compliance; and

 We are redesigning and implementing common internal control activities; and we will continue to establish policies and procedures and enhance corporate oversight over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility and accountability to enable remediating our material weaknesses.

 In addition to the items noted above, as we continue
to evaluate, remediate and improve our internal control over financial reporting, executive management may elect to implement additional
measures to address control deficiencies or may determine that the remediation efforts described above require modification. Executive
management, in consultation with and at the direction of our Audit Committee, will continue to assess the control environment and the
above-mentioned efforts to remediate the underlying causes of the identified material weaknesses.

 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.

 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.

 Item 9B. OTHER INFORMATION

 During the quarter ended December 31, 2023, no
director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is
defined in Item 408(a) of Regulation S-K.

 Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS

 Not applicable.

 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

 Age

 Dr. Edward Lee*

 Director and Chairman

 Dr. Desheng Wang**

 Chief Executive Officer, Secretary, and Director

 Irving Kau******

 Chief Financial Officer

 Michael Pope****

 Director (1)

 Carine Clark****

 Director (1)

 Sean Warren*****

 Director (1)

 * Appointed director on October 21, 2015

 ** Appointed director on December 29, 2014

 **** Appointed director on June 8, 2018

 ***** Appointed director on August 10, 2022

 ****** Appointed officer on November 18, 2022

 (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

 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 and 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 former director of Focus Universal.

 Irving Kau

 Irving Kau was appointed as Chief Financial Officer
on November 18, 2022, prior to that he served as Focus Universal's Vice President of Finance and Head of Investor Relations since
November 10, 2021. Prior to joining the Company, Mr. Kau served as a Managing Partner of both Elementz Ventures and KW Capital Partners,
and during his tenure he successfully invested and grew companies across various geographies. The Company expects that as CFO, Mr. Kau
will assist with many matters in the near future, including building up the Company's internal businesses, processes and controls,
the Company's external outreach and growth measures, as well as strengthen the Company's financial reporting and the investor
relations. Prior to his work at Elementz Ventures and KW Capital Partners, Mr. Kau served as the head of Asia at GHS (now known as Seaport
Global). Mr. Kau also previously served for approximately 10 years as Chief Financial Officer of an AgBiotech company Origin Agritech
Limited (Nasdaq: SEED). During his tenure, shareholders included Wellington Management, Fidelity Investments, Citadel Investments, Heartland
Fund, Mitsubishi UFJ, amongst others. Mr. Kau received undergraduate degrees from Johns Hopkins University and a graduate degree from
Rice University and pursued a PhD degree in Business Strategy (economics) at USC.

 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.

 Sean Warren

 Sean Warren is a seasoned executive with over
25 years of experience in technology and enterprise technology systems. He brings a wealth of expertise with strengths in areas such as
software development, cloud management, enterprise infrastructure development and full spectrum of IT compliance. Sean has been the CIO
of Mountain Medical, Veyo Medical and VP of IT at Larry Miller. He has worked for technology companies as Omniture, Adobe and served as
the director of cloud operations at Domo from 2016 to 2018. From 2019-2021, Mr. Warren served as the VP of OPSA Change Advisory at Wells
Fargo, and since 2021 to the present works as the VP of Global Platform Services at Cotiviti where he manages over 1,000 employees globally
in four countries. Sean is fluent in Spanish and graduated from Florida State University in accounting. Mr. Warren previously served on
our board of directors from June 2018 to November 28, 2018.

 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 and Dr. Desheng Wang are the two members of our Board
of Directors who are not independent directors. Michael Pope, Sean Warren, and Carine Clark are the three 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,
2023, 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 2023.

 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 Michael Pope, the Chairperson of the Audit Committee, Ms. Carine Clark, and Mr. Sean Warren, 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. Michael Pope 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 2023.

 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. Sean Warren, and Mr. Michael Pope. 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 2023.

 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. Sean Warren, 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 2023.

 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 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). 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 Dr. Edward Lee and Dr. Desheng Wang, are 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, Sean Warren, 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 2023 and 2022 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)

 ($)

 ($)

 ($)

 2023

 122,308

 21,000

 143,308

 CEO, Secretary and Director

 2022

 120,000

 21,020

 141,020

 Irving Kau

 2023

 203,532

 27,863

 231,395

 Chief Financial Officer

 2022

 150,000

 10,000

 160,000

 Narrative Disclosure Requirement for Summary Compensation Table

 Compensation

 Dr. Desheng Wang entered into an employment agreement
with the Company whereby the Company agreed to pay Dr. Wang a salary of $120,000 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. Irving Kau was appointed as the Company's Chief Financial Officer on November 18, 2022. Mr. Kau has executed
and employment agreement with the Company, dated November 3, 2021, for the provision of services as VP of Finance. Mr. Kau's employment
agreement included a salary and certain equity incentive. Mr. Kau would receive up to 15,000 shares of the Company's common stock
per year, vesting in 4 installments of 3,750 shares at the end of each calendar quarter, provided that certain metrics are achieved. No
other officer or director has formally entered into any compensation arrangement for services provided under consulting agreements or
employment agreements.

 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 2022 or 2023. As of
the date of this report, 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 22,500
options per person pursuant to our 2018 Stock Option Plan and such options will vest over a period of one year. In 2022, all independent
directors were paid $30,000 cash, except for Sheri Lofgren, Gregory Butterfield, and Sean Warren. Sheri Lofgren received $32,500 for serving
as the chair of the audit committee. Gregory Butterfield and Sean Warren received $10,000 and $15,699, respectively, for serving independent
board director. Additionally, a company affiliated with Mr. Pope received $20,000 for advisory services in 2022, which included $12,000
in cash and $8,000 in stock. In 2023, all independent directors were paid $40,000 cash, except for Sheri Lofgren. Sheri Lofgren received
$20,000 in 2023 for serving independent board director.

 Option Exercises and Stock Vested

 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, 2023.

 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 Price

 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 (#)

 ($)

 Date

 (#)

 Vested

 Vested

 Vested

 Edward Lee - Chairman

 45,000

 –

 –

 3.80

 August 6, 2029

 –

 –

 –

 –

 –

 –

 2.00

 December 10, 2030

 –

 –

 –

 –

 –

 –

 5.91

 –

 –

 –

 –

 –

 –

 4.27

 –

 –

 –

 –

 Desheng Wang - CEO, Secretary

 45,000

 –

 –

 3.80

 August 6, 2029

 –

 –

 –

 –

 –

 –

 2.00

 December 10, 2030

 –

 –

 –

 –

 –

 –

 5.91

 –

 –

 –

 –

 –

 –

 4.27

 –

 –

 –

 –

 Irving Kau - CFO

 –

 –

 –

 –

 25,000

 –

 –

 –

 Jennifer Gu

 45,000

 –

 –

 3.80

 August 6, 2029

 –

 –

 –

 –

 –

 –

 2.00

 December 10, 2030

 –

 –

 –

 –

 –

 –

 5.91

 –

 –

 –

 –

 11,312

 –

 –

 4.27

 –

 –

 –

 –

 Michael Pope

 9,375

 –

 –

 5.91

 –

 –

 –

 –

 –

 –

 4.27

 –

 –

 –

 –

 Carine Clark

 45,000

 –

 –

 3.80

 August 6, 2029

 –

 –

 –

 –

 –

 –

 2.00

 December 10, 2030

 –

 –

 –

 –

 –

 –

 5.91

 –

 –

 –

 –

 –

 –

 4.27

 –

 –

 –

 –

 Sheri Lofgren

 9,375

 –

 –

 5.91

 –

 –

 –

 –

 11,312

 –

 –

 4.27

 –

 –

 –

 –

 Sean Warren

 –

 –

 4.27

 –

 –

 –

 –

 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, 2023: (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, 2023, there were 64,771,817 shares of our common
stock outstanding:

 Title of Class

 Name of Beneficial Owner

 Amount and

 Nature

 of Beneficial

 Ownership

 (1)

 Percentage of

 Beneficial

 Ownership

 %

 Desheng Wang, CEO, and Director

 21,596,550

 33,43%

 Edward Lee, Chairman and Director jointly with Jennifer Gu, Former Director

 12,277,500

 18.96%

 Yan Chen

 4,475,342

 6.91%

 Michael Pope

 2,319

 *

 Irving Kau

 17,250

 *

 (1) Applicable percentage of ownership is based
on 64,771,817 shares of common stock outstanding on December 31, 2023.

 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, 2023, 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, 2023, 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, 2023, there were 29,478,696 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, Treasurer and Chief Financial Officer for the years ended December 31, 2023 and 2022 were as follows:

 For the

 Year Ended

 2023

 For the

 Year Ended

 2022

 President

 $

 $

 Chief Executive Officer, Secretary and Treasurer

 143,328

 141,020

 Chief Financial Officer

 231,395

 37,020

 $

 374,723

 $

 178,040

 Related party Transactions

 Revenue generated from Vitashower Corp., a company
owned by the Chief Executive Officer's wife, amounted to $0 and $41,536 for the years ended December 31, 2023 and 2022, respectively.
The accounts receivable balance due from Vitashower Corp. amounted to $0 and $34,507 as of December 31, 2023 and 2022, respectively.

 Service revenue generated from the installation of
home security equipment by AT Tech and AVX for one of the Company's directors, amounted to $65,543 and $8,246 for the year ended
December 31, 2023 and 2022, respectively.

 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, excluding Jennifer Gu, are independent directors.

 Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 On January 19, 2023, we changed our independent
auditor to Reliant CPA PC (the "Former Auditor"). On January 12, 2024, the Company notified the Former Auditor that the Company
is dismissing it as the independent registered public accounting firm of the Company. On January 5, 2024, the Company engaged Weinberg
& Company, P.A. (the "New Auditor") as its independent PCAOB registered public accounting firm for the Company's
fiscal year ended December 31, 2023. The recommendation to engage the New Auditor as the Company's independent registered public
accounting firm was approved by the Company's Audit Committee and the Company's Board of Directors as it being in the best
interests of the Company.

 For the years ended December 31, 2023 and 2022,
we incurred fees as discussed below:

 Year ended

2023

 Year ended

2022

 Audit fees

 $

 92,000

 $

 94,000

 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.

 Item 15. EXHIBITS

 EXHIBIT NUMBER

 DESCRIPTION

 3.1

 Articles of Incorporation, as filed with the SEC on December 26, 2013.

 3.2

 Amended and Restated Bylaws, as filed with the SEC on October 22, 2019.

 10.1

 2018 Equity Incentive Plan, as filed with the SEC on December 28, 2018.

 10.2

 Promissory Note with Chase Bank, dated March 10, 2021 for $108,750 SBA Loan, as filed with the SEC on March 23, 2021.

 10.3

 Secured Promissory Note with East West Bank, dated January 8, 2021 for $1,500,000, as filed with the SEC on March 23, 2021.

 10.4

 Loan Agreement with Golden Sunrise Investment LLC, dated March 15, 2021 for $1,500,000, as filed with the SEC on March 23, 2021.

 10.5

 Company Guarantee Agreement with Golden Sunrise Investment LLC, dated March 15, 2021, as filed with the SEC on March 23, 2021.

 10.6

 Secured Promissory Note with Golden Sunrise Investment LLC, dated March 15, 2021 for $1,500,000, as filed with the SEC on March 23, 2021.

 10.7

 Employment Agreement by and between the Company and Irving Kau, dated November 3, 2021, as filed with the SEC on March 31, 2023.

 10.8

 Amendment to I. Kau Employment Agreement, dated November 21, 2022, as filed with the SEC on March 31, 2023.

 10.9

 At the Market Sales Agreement, dated December 9, 2022, with Sutter Securities, as filed with the SEC on December 12, 2022.

 10.10

 Asset Purchase Agreement, dated December 19, 2022 with AT Tech Systems, as filed with the SEC on March 31, 2023.

 10.11

 Articles of Organization of Lusher Bioscientific, LLC, as filed with the SEC on March 31, 2023.

 10.12

 Bylaws of Lusher Bioscientific, as filed with the SEC on March 31, 2023.

 10.13

 Articles of Organization of AT Tech Systems, LLC, as filed with the SEC on March 31, 2023.

 10.14

 Operating Agreement of AT Tech Systems, LLC, as filed with the SEC on March 31, 2023.

 10.15

 Loan Agreement with Ziling Gao dated January 4, 2024. *

 21.1

 List of Subsidiaries. *

 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.*

 97.1

 Policy for the Recovery of Erroneously Awarded Compensation *

 101.INS

 101.SCH

 101.CAL

 101.DEF

 101.LAB

 101.PRE

 *

 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 Section 13 or
15(d) 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: April 1, 2024

 By:

 /s/ Desheng Wang

 Chief Executive Officer, Secretary, and Director

 Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

 SIGNATURES

 TITLE

 DATE

 /s/

 Chief
 Executive Officer, Secretary and Director

 April 1, 2024

 Focus Universal Inc., a Nevada corporation

 /s/ Desheng Wang

 By Desheng Wang,
its CEO