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

FOCUS UNIVERSAL INC.

FORWARD LOOKING STATEMENTS

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

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

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

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

Company Background.

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

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

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

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

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

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

Figure 1. From USIP to device
level integrated circuits.

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

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

____________________________________

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

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

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

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

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

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

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

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

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

Figure 4. Comparison between
Ultra-narrowband and Broadband

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

____________________________________

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

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

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

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

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

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

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

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

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

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

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

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

Figure
10. Traditional horticulture measurement and control devices.

Figure
11. Universal Smart Device.

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

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

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

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

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

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

_____________________________________

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

⁶ Id.

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

How
we will implement our business plan

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

a)    Ultra-narrowband
power line communication division

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

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

Figure 15. Markets and Markets
Updated date – Oct 25

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

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

b)   Ultra-narrowband
wireless division

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

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

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

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

c)    User
interface machine auto generation division

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

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

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

___________________________________

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

Figure
16. Software market size.

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

d)   
Universal smart instrument division

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

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

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

___________________________

⁸ Id.

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

Products we are currently selling

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

Specifically, we sell the following
products:

Fan speed adjuster device. We provide
a fan speed adjuster device to our client Hydrofarm. Designed specifically for centrifugal fans with brushless motors, our adjuster
device helps ensure longer life by preventing damage to fan motors by adjusting the speed of centrifugal fans without causing the
motor to hum. These devices are rated for 350 watts max, have 120VAC voltage capacity and feature an internal, electronic auto-resetting
circuit breaker.

Our Fan Speed Adjuster Device

Carbon filter devices. We sell two
types of carbon filter devices to our client Hydrofarm. These carbon filter devices are professional grade filters specifically
designed and used to filter air in greenhouses that might be polluted by fermenting organics. One of these filters can be attached
to a centrifugal fan to scrub the air in a constant circle or can be attached to an exhaust line as a single pass filter, which
moves air out of the growing area and filters unwanted odors and removes pollens, dust, and other debris in the air. The other
filter is designed to be used with fans from 0-6000 C.F.M.

Our Carbon Filter Device

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

Our HEPA Filtration Device

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

Our Digital Light Meter Device

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

Our Quantum Par Meter Device

Strategy behind the AVX Acquisition

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

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

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

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

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

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

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

Index
of Key Technical Abbreviated Terms

Growth Strategy

Strategy and Marketing Plan

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

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

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

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

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

a) Our Existing Customer, Hydrofarm

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

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

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

b) Online Customers

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

c) Traditional Controller and Remote-Control
Customers

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

d) Special Customers

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

e) Traditional Instruments Manufacturers

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

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

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

Our goals over the next three years include:

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

Growth Strategy

Growth through Mergers and Acquisitions

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

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

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

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

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

Technology Licensing

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

Distribution Method

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

Raw Materials

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

Manufacturing and Assembly

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

Competitors

Sensor Node Industry

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

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

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

IoT Installation Industry

There are several companies that compete
with AVX in smart home installations, including Vivint Smart Home, Crestron   and
Control4. However, we believe we can distinguish ourselves from our competitors by offering a substantially lower price. An installation
by Crestron ranges between $100,000 and $500,000 and by Control4 between $20,000 and $40,000. The cheapest competitor we can identify
in this sector is Vivint Smart Home, which costs less than $5,000 to install; however, we understand that the Vivint Smart Home
focuses on security systems only and that users have no other smart applications, which our smart home product line would include.

Air Filtration Systems and Meter
Products Industry

The air filtration system and meter products
industry is a niche industry. The global industrial air filtration market was valued at $11.6 billion in 2018 and analysts expect
it to register a CAGR of 6.7% from 2019 to 2025 because of the industrial need to control air quality across a range of industries.¹⁰
Air purification methods are an effective way to control contaminants and improve indoor air quality and as a result, many
national and local governments overseeing indoor air quality and other emissions are enacting stricter workforce health and safety
regulations in this area, which drives demand. One of our competitors, Donaldson Company, Inc., an air filtration company, announced
in its SEC filings that on October 18, 2018 it acquired BOFA International LTD (“BOFA”), headquartered in the United
Kingdom, for $98.2 million less cash acquired of $2.2 million. BOFA manufactures systems across a wide range of air filtration
applications.

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

Our Corporate History

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

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

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

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

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

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

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

_______________________________

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

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

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

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

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

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

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

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

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

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

Research and Development Activities

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

Compliance with Environmental Laws

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

Employees

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

Legal Proceedings

On April 13, 2020, Ian Patterson resigned
from his position as Chief Operations Officer of AVX. On May 5, 2020, Mr. Patterson filed an action in the Superior Court for the
County of Los Angeles, State of California, against the Company et al. We believe neither the Company nor Dr. Wang has been served
properly and venue is improper. The complaint alleges claims including wrongful termination, retaliation and various other provisions
of the California Labor Code, and various other claims under California state law. The complaint seeks unspecified economic and
non-economic losses, as well as attorneys’ fees. The Company is investigating and intends to vigorously defend itself in
the foregoing matter. However, litigation and investigations are inherently uncertain. Accordingly, the Company cannot predict
the outcome of this matter.

On April 13, 2020, AVX terminated an employee
from her position as Sales and Marketing Director. On May 13, 2020, she filed an action in the Superior Court for the County of
Los Angeles, State of California. The Complaint alleges claims including wrongful termination, retaliation and various other provisions
of the California Labor Code, and various other claims under California state law. The complaint seeks unspecified economic and
non-economic losses, as well as attorneys’ fees. The Company is investigating and intends to vigorously defend itself in
the foregoing matters. However, litigation and investigations are inherently uncertain, but the outcome could have a material impact
on the Company.

Reports to Securities Holders

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

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

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

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

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

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

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

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

We depend on key personnel.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Future rollout of the Ubiquitor entail
numerous risks such as:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risks Related to the Ownership of our
Common Stock

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risks Related to Our Acquisition of
AVX

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

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

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

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

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

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

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

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

Risks related to the COVID-19 pandemic.

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

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

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

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

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

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

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

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

None.

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

On April 13, 2020, Ian Patterson resigned
from his position as Chief Operations Officer of AVX. On May 5, 2020, Mr. Patterson filed an action in the Superior Court for the
County of Los Angeles, State of California, against the Company et al. We believe neither the Company nor Dr. Wang has been served
properly and venue is improper. The complaint alleges claims including wrongful termination, retaliation and various other provisions
of the California Labor Code, and various other claims under California state law. The complaint seeks unspecified economic and
non-economic losses, as well as attorneys’ fees. The Company is investigating and intends to vigorously defend itself in
the foregoing matter. However, litigation and investigations are inherently uncertain. Accordingly, the Company cannot predict
the outcome of this matter.

On April 13, 2020, AVX terminated an employee
from her position as Sales and Marketing Director. On May 13, 2020, she filed an action in the Superior Court for the County of
Los Angeles, State of California. The Complaint alleges claims including wrongful termination, retaliation and various other provisions
of the California Labor Code, and various other claims under California state law. The complaint seeks unspecified economic and
non-economic losses, as well as attorneys’ fees. The Company is investigating and intends to vigorously defend itself in
the foregoing matters. However, litigation and investigations are inherently uncertain but the outcome could have a material impact
on the Company.

Not applicable to our Company.

Market Information

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

Holders.

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

Dividends.

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

Securities Authorized for Issuance Under Equity Compensation
Plans

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

Recent sales of unregistered securities.

None.

Issuer Purchases of Equity Securities

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

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.

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

Narrative Description of the Business

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

For the years ended December 31, 2020 and
2019, we generated significant amount of our revenue from sales of a broad selection of agricultural sensors and measurement equipment
which is currently our primary business.

Our Current Products Include:

Products we are currently selling

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

Specifically, we sell the following products:

Fan speed adjuster device. We provide
a fan speed adjuster device to our client Hydrofarm. Designed specifically for centrifugal fans with brushless motors, our adjuster
device helps ensure longer life by preventing damage to fan motors by adjusting the speed of centrifugal fans without causing the
motor to hum. These devices are rated for 350 watts max, have 120VAC voltage capacity and feature an internal, electronic auto-resetting
circuit breaker.

Our Fan Speed Adjuster Device

Carbon filter devices. We sell two
types of carbon filter devices to our client Hydrofarm. These carbon filter devices are professional grade filters specifically
designed and used to filter air in greenhouses that might be polluted by fermenting organics. One of these filters can be attached
to a centrifugal fan to scrub the air in a constant circle or can be attached to an exhaust line as a single pass filter, which
moves air out of the growing area and filters unwanted odors and removes pollens, dust, and other debris in the air. The other
filter is designed to be used with fans from 0-6000 C.F.M.

Our Carbon Filter Device

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

Our HEPA Filtration Device

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

Our Digital Light Meter Device

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

Our Quantum Par Meter Device

Strategy behind the AVX Acquisition

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

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

Ubiquitor Wireless Universal Sensor
Device

Our USIP technology is an advanced software
and hardware integrated instrumentation platform that uses a large-scale modular design approach. The large-scale modular design
approach subdivides instruments into a foundation component (a USIP) and architecture-specific components (sensor nodes), which
together replaces the functions of traditional instruments at a fraction of their cost. The USIP has an open architecture, incorporating
a variety of individual instrument functions, sensors, and probes from different industries and vendors. The platform features
the ability to connect potentially thousands of different sensors or probes, addressing major limitations present in traditional
instrumentation systems. We believe the platform represents a technological advancement in the IoT marketplace by integrating large
numbers of technologies, including cloud technology, wired and wireless communication technology, software programming, instrumentation
technology, artificial intelligence, PLC, and sensor networking into a single platform. The result of such integration is a smaller,
cheaper and faster circuit system design than those currently offered in the instrumentation market.

The USIP, which is compatible with a significant
percentage of the instruments currently manufactured, consists of universal and reusable hardware and software. The universal hardware
in the USIP is (i) a smartphone, computer, or any mobile device capable of running our software that includes a display and either
hardware controls or software control surfaces, and (ii) our Ubiquitor, which is designed to be the universal data logger that
acts as a bridge between the computer or mobile device and the sensor nodes. We call our flagship USIP device the “Ubiquitor”
due to its ability to measure and test a variety of electrical and physical phenomena such as voltage, current, temperature, pressure,
sound, light, and humidity—both wired and wirelessly.

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

Recently, the Company has devoted a substantial
number of resources to research and development to bring the Ubiquitor and its App to full production and distribution. We anticipate
that the sales and marketing involved with bringing the Ubiquitor to market will require us to hire a number of new employees in
order to gain traction in the market. We intend to introduce the Ubiquitor in smart home installations to reduce costs and increase
functionality, as well as implement the Ubiquitor device in greenhouses and other agricultural warehouses that require regulation
of light, humidity, moisture, and other measurable scientific units required to create optimal growing conditions.

Our universal smart development protocol
focuses not only on the design of the hardware and software modules but also on the design of the overall universal smart instruments
system, guided by the principles of structure, universality and modularity.

Our Ubiquitor device is a fully modular
system with a universal sensor node and gateway system that uses a computer or mobile device as the output display module responsible
for displaying the readings of various sensor nodes. We have completed an initial production run of prototype Ubiquitor devices
and intend to proceed into full-scale production. The Ubiquitor’s sensor analytics system integrates event-monitoring, storage
and analytics software in a cohesive package that provides a holistic view of the sensor data it is reading.

The physical hardware consists of:

We believe the Ubiquitor device can connect
up to thousands of potential sensor nodes, and integrate data using embedded software to display the data and all analytics onto
a digital screen (desktop, smartphone or mobile device displays) using a Wi-Fi connection. As disclosed in our patent application,
we have already tested up to 256 sensor instrument readouts. Most types of nodes and probes can connect to the hardware. If the
sensor size is bigger than the standard probe size, it is possible to simply use a USB cable to connect the probe and the hub.
All data and analytics are displayed on a single screen, with tools that record and keep track of all measurements, and sort and
display analytic information in easy-to-read charts.

The Ubiquitor is a general platform that
collects data in real time, up to 100 Hz per second; and thus, is intended to be adapted to many industrial uses.

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

We have not yet started research and development
of a second generation Ubiquitor device, but once we demonstrate the market for this product, we intend to begin such research
and development. Currently our research and development is focused on concepts we can implement in the current first generation
Ubiquitor device.

Research and Development Efforts of
Power Line Communication

Power Line Communication (“PLC”)
is a communication technology that enables sending data over existing power cables. One advantage of this technology is that PLC
does not require substantial new investment for its communications infrastructure. Rather, PLC utilizes existing power lines, thereby
forming a distribution network that already penetrates all residential, commercial and industrial premises. Accordingly, connectivity
via PLC is potentially the most cost-effective, scalable interconnectivity approach for the IoT. We believe PLC can be an integral
part of our communication infrastructure for the IoT, which enables reliable, real-time measurements, monitoring and control. A
large variety of appliances may be interconnected by transmitting data through the same wires that provide electrical energy.

Wireless networks
allow multiple users to access large amounts of information without the hassle of running wires to and from each IoT device (See
“Risk Factors” above). The 5G cellular network, for example, promises exciting advances for telecommunication service
providers, but the implementation of the 5G network will be challenging. The implementation will require building out dense, low-latency
edge networks in ways that are affordable, secure and easily maintainable. 5G antennas will be able to handle more users and to
transmit more data, but they will have a shorter transmission range. 5G networks will also require frequencies of up to 300 GHz.
This requirement means wireless carriers will need to bid for the costly higher spectrum bands to roll out their respective 5G
networks. Generally speaking, wireless networks are typically slower and more expensive than existing wired networks and extremely
susceptible to interference from radio signals, radiation, walls and other forms of interference. Additionally, wireless networks
may be accessed by any device within range of the network’s signal, making the information transmitted on a wireless network
susceptible to access by unauthorized recipients. We are currently developing a wired alternative to wireless networks that utilizes
installed power lines to transmit information. Our PLC technology uses an ultra-narrow band spectrum channel of less than 1 KHz
to establish a long-distance link between transmitter and receiver. Thus, we believe that our proprietary ultra-narrow band PLC
technology will offer a promising alternative to wireless networks and provide the backbone communication infrastructure for IoT
devices.

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

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

We are performing research and development
with the intention of inventing our own ultra-narrow band PLC technology that attempts to tackle two challenges: 1) overcoming
interference caused by electronic noise on the power line system; and 2) bandwidth. Preliminary internal testing suggests that
we have achieved noise rejection and interference suppression at five orders of magnitude better than traditional PLC technology.
We believe our ultra-narrow band PLC technology shows robustness against noise and interference, based on our internal testing
where we found no detectable interference occurring when six industrial blowers, notorious for causing electrical noise, and a
large air conditioning unit were connected to an electrical line passing a control signal. By comparison, a small air dryer is
able to cause interference in legacy PLC systems. State of the art PLC technologies developed by other companies may offer sufficient
bandwidth, but they cannot effectively deal with the interference of electric noise on the system. However, in our preliminary
internal testing, we have been able to increase bandwidth to 4 megabits per second with the potential for more, while simultaneously
effectively dealing with electrical noise and interference. Furthermore, such data transfer rates were delivered at a bandwidth
of less than 1000 Hz, thereby achieving a bandwidth efficiency (measured as bits per second per Hz) greater than 4000. For comparison
purposes, 4G cellular networks have a bandwidth efficiency of less than 6 due to their requirement of larger bandwidth resources.
The demand for bandwidth resources will only grow with the upcoming 5G and proposed 6G networks. Accordingly, further research
of our PLC technology is warranted as it shows promise for increased data transfer rates at a lower cost than either of the 5G
and proposed 6G networks, particularly given such networks’ requirements for costly new infrastructure and bandwidth resources.
Based on the promising results of our internal testing, we have begun designing a proprietary PLC microchip and have set an intended
launch date for 2021.

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

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

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

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

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

Intellectual Property Protection

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

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

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

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

Competitors

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

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

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

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

Market Potential

We believe that wireless universal smart
technology will play a critical role for traditional instrument manufacturers, as it is too expensive and difficult to develop
for medium or smaller companies. The cost factor is the first consideration when deciding whether a company wants to develop smart
wireless technologies and implement them in their products or use them in their field testing. We also hope to play a role in academic
laboratories, particularly with smaller academic laboratories who are sensitive to price.

Results of Operations

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

Revenue, Cost of Sales and Gross Profit

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

Operating Costs and Expenses

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

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

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

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

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

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

Net Losses

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

Liquidity and Capital Resources

Working Capital

Cash Flows

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

Cash Flows from Operating Activities

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

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

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

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

Cash Flows from Investing Activities

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

Cash Flows from Financing Activities

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

Going Concern

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

Off-Balance Sheet Arrangements

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

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.

FOCUS UNIVERSAL INC. AND SUBSIDIARY

FOR THE YEARS ENDED DECEMBER 31, 2020,
AND 2019

Index to the Financial Statements

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

Opinion on the Financial Statements

We have audited the accompanying consolidated
balance sheets of Focus Universal, Inc. (the “Company”) as of December 31, 2020 and 2019, the related statement of
operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred
to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for
the years then ended, in conformity with accounting principles generally accepted in the United States.

Basis for Opinion

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

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

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

Substantial Doubt about the Company’s
Ability to Continue as a Going Concern

The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the
Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ BF Borgers CPA PC

BF Borgers CPA PC

We have served as the Company’s auditor
since 2017

Lakewood, CO

March 23, 2021

FOCUS UNIVERSAL INC.

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

FOCUS UNIVERSAL INC.

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

FOCUS UNIVERSAL INC.

FOR THE YEARS ENDED DECEMBER 31, 2020
and 2019

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

FOCUS UNIVERSAL INC.

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

FOCUS UNIVERSAL INC.

DECEMBER 31, 2020 AND 2019

Note 1 – Organization and Operations

Focus Universal Inc. (“Focus”)
was incorporated under the laws of the State of Nevada on December 4, 2012 (“Inception”). It is a universal smart
instrument developer and manufacturer, headquartered in the Los Angeles, California metropolitan area, specializing in the development
and commercialization of novel and proprietary universal smart technologies and instruments. Universal smart technology is an off-the-shelf
technology utilizing an innovative hardware integrated platform. The Focus platform provides a unique and universal combined wired
and wireless solution for embedded design, industrial control, functionality test, and parameter measurement instruments and functions.
Our smart technology software utilizes a smartphone, computer, or a mobile device as an interface platform and display that communicates
and works in tandem with a group of external sensors or probes, or both. The external sensors and probes may be manufactured by
different vendors, but the universal smart technology functions in a manner that does not require the user to have extensive knowledge
of the unique characteristics of the function of each of the sensors and probes. The universal smart instrument Focus developed
(the “Ubiquitor”) consists of a reusable foundation component which includes a wireless gateway (which allows the instrument
to connect to the smartphone via Bluetooth and WiFi technology), universal smart application software (“Application”)
which is installed on the user’s smartphone or other mobile device and allows monitoring of the sensor readouts on the smartphone
screen. The Ubiquitor also connects to a variety of individual scientific sensors that collect data, from moisture, light, airflow,
voltage, and a wide variety of applications. The data then sent through a wired or wireless connection, or a combination thereof
to the smartphone or other mobile device and the data is organized and displayed on the smartphone screen. The smartphone or other
mobile device, foundation, and sensor readouts together perform the functions of many traditional scientific and engineering instruments
and are intended to replace the traditional, wired stand-alone instruments at a fraction of their cost.

Perfecular Inc. (“Perfecular”)
was founded in September 2009 and is headquartered in Ontario, California, and is engaged in designing certain digital sensor products
and sells a broad selection of horticultural sensors and filters in North America and Europe.

AVX Design & Integration, Inc. (“AVX”)
was incorporated on June 16, 2000 in the state of California. AVX is an internet of things (“IoT”) installation and
management company specializing in high performance and easy to use Audio/Video, Home Theater, Lighting Control, Automation and
Integration. Services provided by AVX include full integration of houses, apartment, commercial complex, office spaces with audio,
visual and control systems to fully integrate devices in the low voltage field. AVX’s services also include partial equipment
upgrade and installation.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

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

Going Concern

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

Principles of Consolidation

The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiaries, Perfecular Inc. and AVX Design & Integration.
Focus and Perfecular, collectively “the entities” were under common control; therefore, in accordance with Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805-50-45, the acquisition
of Perfecular was accounted for as a business combination between entities under common control and treated similar to a pooling
of interest transaction. On March 15, 2019, Focus entered into a stock purchase agreement with AVX whereby Focus purchased 100%
of the outstanding stock of AVX. All significant intercompany transactions and balances have been eliminated.

Segment Reporting

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

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

Use of Estimates

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

The actual results experienced by the Company
may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the
estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying financial
statements include the lease term impacting right-of use asset and lease liability, useful lives of property and equipment, useful
lives of intangible assets, allowance for doubtful accounts, inventory reserves, debt discounts, valuation of derivatives, and
the valuation allowance on deferred tax assets. The Company regularly evaluates its estimates and assumptions.

Cash

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

Accounts Receivable

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

Allowance for doubtful accounts

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

Concentrations of Credit Risk

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

Inventory

Inventory consists primarily of parts and
finished goods and is valued at the lower of the inventory’s cost or net realizable value under the first-in-first-out method.
Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value,
if lower. Inventory allowances are recorded for obsolete or slow-moving inventory based on assumptions about future demand and
marketability of products, the impact of new product introductions and specific identification of items, such as discontinued products.
These estimates could vary significantly from actual requirements, for example, if future economic conditions, customer inventory
levels or competitive conditions differ from expectations. The Company regularly reviews the value of inventory based on historical
usage and estimated future usage. If estimated realized value of our inventory is less than cost, we make provisions in order
to reduce its carrying value to its estimated market value. As of December 31, 2020 and 2019, inventory reserve amounted to
$ 70,562 and $71,414, respectively.

Property and Equipment

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

Long-Lived Assets

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

Intangible Assets

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

Goodwill

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

Share-based Compensation

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

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

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

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

Fair Value of Financial Instruments

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

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

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

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

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

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

Revenue Recognition

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

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

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

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

Cost of Revenue

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

Research and development

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

Related Parties

The Company follows ASC 850-10 for the
identification of related parties and disclosure of related party transactions. Pursuant to ASC 850-10-20 the related parties include:
a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election
of the fair value option under the Fair Value Option Subsection of ASC 825–10–15, to be accounted for by the equity
method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed
by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with
which the Company may deal if one party controls or can significantly influence the management or operating policies of the other
to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other
parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership
interest in one of the transacting parties and can significantly Influence the other to an extent that one or more of the transacting
parties might be prevented from fully pursuing its own separate interests.

The consolidated financial statements shall
include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other
similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of
consolidated financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s)
involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for
each of the periods for which income statements are presented, and such other information deemed necessary to an understanding
of the effects of the transactions on the consolidated financial statements; (c) the dollar amounts of transactions for each of
the periods for which income statements are presented and the effects of any change in the method of establishing the terms from
that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented
and, if not otherwise apparent, the terms and manner of settlement.

Commitments and Contingencies

The Company follows ASC 450-20 to report
accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which
may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The
Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss
contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings,
the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of
the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.